Decoding the Dispute Resolution Clause of Art & Entertainment Contracts
Imagine you are an artist that has an exclusive relationship with a particular gallery. The gallery and artist are to split any proceeds from sale of works 50/50. The gallery is to show the artist’s works in three shows every year. The artist is to produce 20 works for the gallery every year. In year one, the artist only produces 15 works. In year two, the gallery only shows the artist’s work in two shows. The artist is upset, but the artist also fell short on his own promise.
Say you’re a video editor hired for post-production on an independent film that’s anticipated to receive a lot of buzz at the festivals next year. It was negotiated for your credit to appear in the end titles of the film. The movie debuts, and your credit line is nowhere to be seen. On the other hand, the producer tells you he didn’t think your work was up to snuff and he’s upset because you were late on meeting your deadline.
Lastly, envision yourself as a stuntman who was hired to do aerial tricks for the next installment of Pirates of the Caribbean. The studio promised you a safe working environment and a capable stunt coordinator. Unfortunately, a mishap occurs, and you fall from the top of a pirate ship’s main topmast. The studio says you were negligent, but you claim the studio failed to provide functioning equipment.
How are the parties to resolve their disputes?
If you’re in the arts or entertainment industry, you’re making contracts all of the time. Sometimes you might not even realize that you are making a binding agreement, since contracts may be implied or oral, or even formed through a string of email messages (which is a topic in itself). For the purposes of this article, the discussion is focused on expressly written contracts and some of the boilerplate language contained within.
Read the Boilerplate Language
Contracts are organized in a way where the material terms appear upfront. This means elements that are normally considered “deal breakers” will be on the first page, such as compensation or scope of services. Towards the back of the contract, just before the signature page, is the boilerplate language (e.g., Choice of Law, Notices, Assignment, etc.). These are terms that weren’t necessarily negotiated, but are still present in your agreement. These boilerplate terms seem boring and unimportant when you’re excited about the new gig you just landed. You may just feel lucky to have the job! Then the day comes when you have a problem. Your producer doesn’t give you proper credit. Your paychecks are continuously late. You were never reimbursed for substantial travel costs. How do you resolve these issues?
First, look to that contract you signed. Then, go to that back page and look at the language that you previously ignored. Within these standard terms you will often find “Dispute Resolution” clauses. The header may be just that, or the provision will be named “Alternative Dispute Resolution” or “Arbitration” or “Mediation” or “Resolution of Claims.” Whatever the title, the central effect of such clauses is to predetermine how the parties are to deal with their conflicts once they arise.
Normally, when one party breaches a contract, the other aggrieved party is entitled to take action against the breaching party in court. Thus, the significant impact of dispute resolution provisions is that the parties are waiving their right to trial. Instead of lawsuits, the parties are bound to resolve conflicts in the manner stated in the contract. This could mean arbitration, mediation or negotiation. These alternative mechanisms for dispute resolution are often a friendlier and cheaper way of sorting things out than litigation. Yet, depending on the situation, they’re not always the best choice.
Litigation is generally something people seek to avoid. It can be expensive, time consuming, and emotionally draining. It’s also unpredictable, since a case is never closed until a judge or jury decides the outcome. Moreover, courts adjudicate largely in black and white. Generally, one party wins while the other loses. Lawsuits also entail exposure, as court documents are part of the public record.
For these reasons alone, it makes sense why it has become standard practice for a producer or gallery to demand that claims be resolved outside of the courtroom. Studios or well-known galleries do not want to finance a risky lawsuit, nor do they want the negative press.
Still, litigation has its merits. On occasion, the principles at stake (whether for justice or money) are worth the risk and burden.
Arbitration operates outside the government court system, so it tends to be less formal. It is generally conducted with a panel of multiple arbitrators who take on the role of a judge and render a decision that is binding. Although the process is sometimes adjudicated by a single arbitrator, the most common procedure is for each side to choose an arbitrator, then those two arbitrators select a third arbitrator. Decisions are then made by majority vote.
In comparison to litigation, there is less paperwork, and generally greater emphasis on the substance of the disputed matters. One of the strongest selling points for arbitration is its confidentiality. Though less than a cost of a trial, arbitration is typically more expensive than mediation.
Additionally, arbitration is flexible – since it is part of the contract, its terms can be negotiated. In many cases, parties agree that arbitration will be submitted to a particular organization for resolution (such as the American Arbitration Association, JAMS, IFTA or California Lawyers for the Arts Dispute Resolution Services) will appoint the arbitrator when and if a dispute arises.
Arbitration may be desirable when parties need a definitive outcome one way or the other, but in a time-frame that is shorter than a court schedule. Like litigation, arbitration ensures that there will be some outcome, but the parties lose control, so the outcome is not necessarily any more satisfactory than one rendered by a court.
A drawback of the process is that the arbitrator may not be required to adhere to the law. The judge is often a retired government judge or lawyer, yet not all arbitrators have this background. Another drawback is that there is no written opinion. This means the arbitrator’s decision has little significance as precedent for the parties or others to follow in future situations.
Many think of arbitration and mediation as synonymous. They are similar in that they are alternatives to traditional litigation, and sometimes they are used in conjunction with litigation (opposing parties may first try to negotiate, talks fail, then they move forward to trial). Both arbitration and mediation engage a neutral third party to oversee the process, and they both can be binding. Although, its most common to employ mediation as a non-binding process.
Unlike arbitration, mediation is more commonly done with a single mediator versus a panel. The mediator does not “judge” the case, but simply helps facilitate discussion and eventual resolution of the dispute. Mediation also tends to be more versatile than arbitration. It permits the parties to control the outcome, even though it does not guarantee a final resolution. The process can also foster creative solutions because the parties can take into account non-monetary considerations. Rather than focusing on past conduct and grievances, the parties can move away from the adversarial positions and reorient themselves towards a win-win resolution.
In comparison to arbitration or litigation, mediation is convened more quickly, and typically is resolved within a day or two. However, a fast-track approach isn’t always the best way to arrive at a fair outcome. The parties may want more time to articulate their viewpoint or to learn the other side’s perspective. Additionally, because of its non-binding characteristic, mediation does not prevent a party from later changing their mind.
What’s the Resolution?
Referring to the above examples, it’s probably not worth it for the gallery and the artist to go to court. The harm to the artist for having one less exhibit of his work and the harm to the gallery for undelivered pieces are both speculative. It’s also not likely that the value of the artwork justifies the cost of a trial. Moreover, the gallery may be able to afford a lawyer, but the artist may not. Arbitration may not be a good fit either, since it’s still a costly process. Plus, there is the concern that the arbitrators do not understand the intricacies of artist-gallery dealings. Mediation is favorable because it’s the least formal and adversarial, thus allowing for the possibility that the artist and gallery can maintain a working relationship.
In regards to the film editor and the producer, these parties may prefer arbitration. They’re not as concerned with preserving a friendly relationship, but they still need a quick resolution. Moreover, the producer really wants to avoid any bad press in light of the building buzz before festival season.
The dispute between the stuntman and the studio is likely ripe for litigation. The stuntman is injured severely enough that he’s out of work for at least a year and his medical bills may cause him to take out a second mortgage. The stuntman also wants to ensure such accidents don’t happen to similarly situated individuals in the future. Thus, there is a need for precedent and publicity. Likewise, the studio may consider this lawsuit worth the risk and burden. On the chance they can win this case, they too will have precedent in their favor. Furthermore, both parties would want a decision in their favor to be binding.
To conclude, “Alternative Dispute Resolution” provisions are very common in art and entertainment contracts. Though the language may seem standard or customary, it is in a talent’s best interest to consider whether mediation or arbitration is truly the best method to resolve any potential disputes.