A bill aimed at regulating self-dealing transactions among the majors cleared its first hurdle in the California state Senate with its passage Tuesday by the Senate Judiciary Committee.
The bill, sponsored by Sen. Sheila Kuehl (D-Los Angeles) and supported by the Writers Guild of America, would mandate that the majors pass the “fair market value” sniff test on all transactions between related entities of a conglom (Daily Variety, Feb. 26).
Effort stems from the long line of lawsuits filed by third-party profit participants alleging studios breached fiduciary duties by selling pic and TV program rights to sibling divisions for less than the properties would fetch on the open market. Profit participants could be short-changed in such transactions; in addition, some residual and health and pension fund contributions to unionized showbiz workers are determined by the total revenue generated by a project.
The bill does not lay down penalties or procedures for studios to follow in related party transactions other than to say a property should sell for the price it would command in an auction on the open market.
Kuehl said she was open to discussing the best way to address the issue with the majors, which are opposed to the bill, but “for now fair market value is the right phrase to use,” she said. “We need this kind of protection.”
If passed, the bill would give profit participants and others who think they’ve been wronged in a transaction cause to pursue civil damages.
Senate Bill 1765 was passed on a 3-1 vote by the committee after a nearly hourlong hearing at which WGA West prexy Patric Verrone and veteran showbiz litigator Larry Stein testified in support of the legislation. Vans Stevenson, senior veep of state government affairs for the MPAA, was among the opponents who spoke at the hearing.
Stevenson called the vote “regrettable.” The proposed legislation, he said in a statement, “would criminalize legitimate business decisions by producers of movies and TV programs as they seek to generate revenue created for producers and talent alike.”
Also Tuesday, the WGA coordinated a dozen workers from reality skeins including FremantleMedia North America’s “American Idol” and Mark Burnett Prods.’ “Are You Smarter Than a 5th Grader?” to file claims for as much as $500,000 in unpaid overtime with the California Division of Labor Standards Enforcement. WGA said the state agency would next sked meetings between the staffers and the production companies to determine the merits of their claims.
WGA’s advocacy on the overtime front is part of the guild’s larger bid to organize selected production staffers on nonscripted skeins, many of whom have complained of long hours and harsh working conditions on top reality shows.