Talent Agencies Act: Entertainment Lawyers Not Laughing

October 21, 2013
California Entertainment Lawyers are Not Laughing at the California Labor Commission

Entertainment litigators routinely use the Talent Agencies Act, California Labor Code 1700 to their advantage.   Disgruntled clients seeking to stiff former managers for money owed under percentage compensation agreements have made the Talent Agencies Act their first line of defense for many years.  For the first time, an entertainment lawyer has been held subject to the Talent Agencies Act, and his fee agreement with the client voided.  The reason?  The Commissioner found Blancarte’s services were rendered as an unlicensed talent agent in violation of the Talent Agencies Act.  

In September 2013, the Labor Commissioner ruled in Solis v. Blancarte that Los Angeles attorney James Blancarte had violated the Talent Agencies Act by “procuring employment” for his client without a talent agent license. As a result, Mr. Blancarte was ordered to forfeit his right to payment from his client.  His crime?   Doing the job he was hired to do—negotiate a contract as an entertainment lawyer. The ruling in Solis is not surprising, but the inevitable next step in a long line of rulings by what could be considered a power drunk California Labor Commission. Solis could turn out to be a defining moment in the rather long history of the California Talent Agenciy Act, Labor Code § 1700, since insiders say entertainment lawyers are preparing to storm Sacramento.

James represented Mario Solis in negotiations for his employment agreement as a CNBC sports reporter in exchange for 5% of the compensation received by Solis. This is a typical fee arrangement between entertainment attorneys and their clients. Many unknown entertainment clients readily enter into such fee arrangements, since they lack the ability to pay legal fees, yet desire expert representation from well-known attorneys in hopes of securing a better deal.

Century City Attorney Ed McPherson, who has also litigated actions involving claims of unlicensed procurement under the Talent Agencies Act, and authored articles on the subject,  Loyola Law Review says its time for a legislative change.

The Solis case exemplifies what is wrong with the interpretation of the Talent Agencies Act. It is difficult to imagine that the California Legislature intended that a group of people who do not even need a high school diploma or any sort of examination to obtain a license are better suited to negotiate complex talent deals than are individuals who have gone through a minimum of 19 years of school, and who have passed one of the most rigorous examinations in the country.

As early as 1987, my firm successfully used the statute to void a management contract in the U.S. District Court in Los Angeles for an Oregon recording artist signed to Arista Records. A New York manager sued our client for commissions in California. In that instance, I considered the result to be the fair one, since a New York manager chose a California court in which to sue an Oregon artist on a contract entered into at the time the manager was resident in New York. However, residency was not the determining factor. Instead it was a letter written by the manager shortly before the agreement was signed, in which the manager stated he would attempt to procure employment.

In a later case I argued before the California Court of Appeals, REO Broadcasting Consultants v. Martin, the client had represented himself in the Labor Commissioner hearing, but was held to have missed the deadline to file an appeal requesting a de novo hearing in Superior Court, within 10 days of the Commissioner’s determination. The Commissioner was so incensed by my client’s “in their face” tactics during the hearing, it not only ruled against him, the Commissioner failed to serve notice of the ruling.

The Court of Appeals held that filing the de novo request within 10 days is jurisdictional and REO had missed the deadline. It mattered not that the Los Angeles Superior Court Clerk was so unfamiliar with the procedure, it refused to accept REO’s initial filing which had been tendered in a timely manner even without knowing of the determination. By the time the Clerk finally accepted the Notice two days later, the 10 days had run. Of note is the fact that 1700.44(c) requires use of certified mail in cases where the Commissioner has determined there has been no violation and a hearing is unnecessary. On the other hand, following an actual hearing, the statute is strangely silent as to how the Commissioner must advise parties of its ruling other than “by mail”.

Like Solis, Cabot was held to have “procured employment” in violation of the statute when the artist’s out-of-state manager requested REO messenger a publicity kit to the Tonight Show in support of the manager’s efforts to book the artist on the show. REO’s entire contract was voided based upon this purported act of procurement.

Over the years there has been some judicial intervention restraining the Labor Commissioner’s ability to void every contract before it. In 1986, the legislature made permanent 1982 provisional amendments that eliminated criminal penalties, imposed a one-year statute of limitations, and established a “safe harbor” for managers to procure employment if they did so in conjunction with a licensed agent.

In 2008 the U.S. Supreme Court ruled in Preston v. Ferrer that the jurisdiction of the Labor Commission could be avoided where the fee contract contained an arbitration clause. This alone is the most poignant point for managers and those wishing to avoid use of the Talent Agencies Act to avoid payment of compensation. Include a solid arbitration clause for any disputes arising with regard to payments under the agreement.

In Marathon Entertainment, Inc. v. Blasi, 42 Cal. 4th 974 (2008) the California Supreme Court held that the common law doctrine of severability of contracts codified in Cal Civ. Code §1599 is available to allow compensation for services that were not related to the unlicensed procurement activities.

Cal Civ. Code §1599 provides: “Where a contract has several distinct objects, of which one at least is lawful, and one at least is unlawful, in whole or in part, the contract is void as to the latter and valid as to the rest.”

The Court went on to hold that while full voiding is still available, it is not mandatory. Likewise, severance is available, but not mandatory. If the central purpose of agreement is for procurement, or the representative engages in substantial procurement activities that are inseparable from management services, the court may void the entire contract. However, an isolated instance of procurement does not automatically bar recover for services that could lawfully be provided without a license.”

The story is not over. We trust Mr. Blancarte has timely filed his appeal with the Superior Court and we will hear more on the plight of the California entertainment lawyer as unlicensed talent agent.

By Cheryl Hodgson