We have received some questions on how existing allocation disputes in multi-service celebrity endorsement deals should be resolved in light of the procedures adopted in the new Collective Bargaining Agreement (“CBA”).

As you are fully aware, the determination of appropriate allocations of compensation between covered and non-covered services in multi-service contracts and the process to resolve disputes in that regard have been major issues between the Unions and the Industry for many years. Controversies and disagreements over allocations have resulted in litigation and substantial costs for all the participants, and the previous procedure left Producers at a distinct disadvantage. The prospect of litigation under federal pension laws and the remedies afforded the Pension Plans under those laws created an uneven playing field. The new procedures create a more balanced approach considerably more favorable to Producers.

At the negotiations of the new CBA, the Industry pressed for a more precise methodology to determine allocations and a dispute resolution format that precluded the Plans resorting to litigation under ERISA until such time as the Unions and the Producer either agreed on an allocation or settled a dispute through an expedited arbitration procedure. The Industry took the position that such an approach was mandated by the decision in the arbitration brought by the JPC against SAG over resolving disputes over allocations. The Unions and Industry also agreed on a set of Guidelines that are presumed safe harbors, although that presumption is rebuttable should the Unions show adequate reason to disregard them.

Since the Industry and Unions did not address whether the new procedures should be retroactive, they are not binding on either Producers or the Unions with respect to disputes that arose prior to adoption of the new CBA. That said, however, it seems logical that the new provisions should apply to existing allocation disputes, including the agreed-upon Guidelines, for the following reasons:

  1. The decision of the arbitrator and the U.S. District Court in the action between the JPC and SAG clearly provides that arbitration is the method to resolve disputes. The arbitrator held and the U.S. District Court confirmed the arbitrator’s opinion that such a conclusion was mandated by the language contained in the then current CBA. Since this holding interprets the language contained in the previous CBA (and, by extension, the same language in prior CBAs), the requirement to arbitrate disputes applies to all pending allocation cases. While one could argue that the expedited process agreed upon under the CBA is not retroactive, I believe that process is fair and reasonable and ought to be the approach taken by the parties. Otherwise, any arbitration will be complicated and expensive, as well as subject to appeal if the Unions feel they didn’t get enough.
  2. Whether the old, unpublished, allocation guidelines or the new formal Guidelines should apply in such disputes is unclear. What is clear, however, is that the Industry never agreed to the old guidelines. The formal Guidelines in the new CBA, however, reflect an agreement arrived at through the collective bargaining process and, as such, represent a set of mutually acceptable criteria between the Unions and the Industry. As such, it seems abundantly logical that they ought to apply to existing disputes. Also note that the new Guidelines recognize that there may be disputes that do not fall under any of the specific guidelines. In those instances, the parties are free to either agree to an alternative solution or to submit a dispute to arbitration.
  3. All future disputes will be governed by the new provisions and the Guidelines. Positions contrary to the new provisions taken in the future by either the Industry or Unions will set no precedent. As such, is makes sense to take advantage of the efficiencies and economics now embodied in the CBA and resolve old cases with due consideration of the newly bargained for procedures.

Of course, no one is in a position to bind any Producer to adopting the new procedures with regard to existing disputes. Each Producer must make a decision under the facts and circumstances of their specific case.