Stanford Law School - Robert Crown Law Library

Written by: Marin Babb

CASE BRIEF
Facts

• Actress Rosa Blasi* entered an oral contract with Marathon Entertainment, Inc.** in 1998 to have Marathon serve as her personal manager. In exchange for managing and promoting Blasi’s career, Marathon was to receive 15% of her earnings from entertainment employment. Blasi subsequently obtained roles in films and television, including a leading role on the television series Strong Medicine.
• According to Marathon, in 2001 Blasi stopped paying Marathon a commission. She later terminated her contract with Marathon and notified them that John Kelly, the licensed talent agent who had served her during her contract with Marathon, would become her new personal manager.** *
• Marathon sought to recover the commission it claimed it was owned for Blasi’s role in Strong Medicine. Marathon sued Blasi for breach of oral contract, quantum meruit, false promise, and unfair business practices.

*See The Internet Movie Database at http://www.imdb.com/name/nm0087726/ about Blasi’s background and career.
**A company profile for Marathon Entertainment, Inc. and Rick Siegel, Blasi’s former manager, is available at http://www.manta.com/coms2/dnbcompany_678njj.
***See Background: Personal Managers and Talent Agents below for explanations and commentary on the role of managers and talent agents.

Procedural History

• Labor Commission Proceedings: Blasi obtained a stay of action, then filed a petition with the Labor Board Commissioner, alleging that Marathon had violated the Talent Agency Act (“Act”) by obtaining employment contracts for her without a license. The Labor Commissioner found in Blasi’s favor and voided the parties’ contract, barring Marathon from recovery.
• Trial Court: Marathon appealed the Labor Commissioner’s ruling for a trial de novo in the California Superior Court. It added declaratory relief claims challenging the constitutionality of the Act. Blasi moved for summary judgment, claiming Marathon’s violation of the Act had voided their entire contract. She did not argue or produce evidence that Marathon had specifically obtained the Strong Medicine contract illegally. The trial court granted summary judgment to Blasi and invalidated the personal services contract as illegal in violation of the Act.
• Court of Appeals: The Court of Appeals reversed in part. It agreed that the Act applied to personal managers, but it found that the law of severability of contracts could apply to the parties’ agreement. If the law of severability applied, Blasi could be liable to Marathon for commission owed based on the services it lawfully performed for her.

Issues
The California Supreme Court granted review to determine:
i) whether the Talent Agency Act applies to personal managers; and if it does, then
ii) whether the law of severability could preserve the lawful parts of the parties’ personal management contract.

Legal Rules

• Talent Agencies Act, California Labor Code §§ 1700-1700.47.
  http://www.leginfo.ca.gov/cgi-bin/calawquery?codesection=lab&codebody=&h...
  The Talent Agencies Act prohibits any person from engaging in the “occupation of a talent agency without first procuring a license therefor from the Labor Commissioner.” § 1700.5.
• Law of Severability of Contracts, California Civil Code § 1599. (See also §§ 1595-1598.)
  http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=01001-02...
  The common law of severability of contracts indicates that if a contract has both a legal and an illegal object, “the contract is void as to the [unlawful object] and valid as to the rest.” § 1599.

Analysis and Conclusions

• Issue 1: Does the Talent Agencies Act Apply to Managers?
  The Talent Agencies Act prohibits any individual or entity from acting as a talent agency, i.e. from procuring employment for an artist, without a license. As the Court notes, the Act “regulates conduct, not labels; it is the act of procuring (or soliciting), not the title of one’s business, that qualifies one as a talent agency and subjects one to the Act’s licensure and related requirements.” Marathon Entertainment, 42 Cal. 4th (emphasis in original). Managers, like anyone else, may not procure or solicit employment for artists without a license.
  Conclusion: In this regard, the Talent Agencies Act does apply to regulate managers.
• Issue 2, Part a): May the Law of Severability Apply to a Personal Management Contract?
  “Civil Code section 1599 grants courts the power, not the duty, to sever contracts in order to avoid an inequitable windfall or preserve a contractual relationship where doing so would not condone illegality.” Marathon Entertainment, 42 Cal. 4th at 992 (citing Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal. 4th 83, 123-124). The Court rejected arguments that the legislative intent or public policy involved in management contracts indicates that management contracts should always be voided in their entirety if the manager illegally procures employment for an artist.
  Conclusion: The option to fully void the contract is available, but not mandatory. “[L]ikewise, severance is available, but not mandatory.”
• Issue 2, Part b): Could the Law of Severability Apply to Preserve This Contract?
  A court may apply severance if it is in the interest of justice to do so. If the central purpose of the contract was an illegal one, it should not be upheld. If the illegal provision was not central to the main contract, the lawful portions may be upheld. (Recall that Blasi did not plead specific facts as to whether her Strong Medicine contract in particular was procured illegally, or what portion of Marathon’s services was illegal. See Procedural History above.) The Court notes that “[t]he doctrine is equitable and fact specific, and its application is appropriately directed to the sound discretion of the Labor Commissioner and trial courts in the first instance.” Marathon Entertainment, 42 Cal. 4th at 998.
  Conclusion: A genuine issue of material fact remains as to whether the doctrine of severability can and should apply to this particular contract.

Final Disposition
The Court of Appeals judgment is AFFIRMED and the case is REMANDED for further proceedings consistent therewith.

BACKGROUND: PERSONAL MANAGERS AND TALENT AGENTS
As summarized by Law Student. See also “Background,” Marathon Entertainment, 42 Cal. 4th at 983-86.
Artists may have both a personal manager and a talent agent. The talent agent’s job is to solicit and procure employment contracts for the artist. In California, the agent must have a license from a labor commission to do this. Agents are also regulated by the talent guilds.
Managers, in contrast, do not need a license to practice, and they are not regulated by the guilds. Managers’ duties vary based on their relationship with each artist. They may counsel an artist on which roles to take or advise him about his future career path. Unlike agents, managers may work as producers (and get compensated as such) on projects involving their clients. Managers may not procure employment for their clients; that would mean they were acting as agents, and they would need a license to do that. California law provides a “safe harbor” if a manager works in conjunction with a licensed agent to obtain employment for their shared client. See Marathon Entertainment, 42 Cal. 4th at 985.

Articles and Sources
Law Offices of Green & Green, “What You Really Need to Know About Managers and Talent Agents.”
This article provides a useful summary of the distinction between managers agents. Note, however, that it was published in 2000. Its commentary on managers losing all of their commissions if they ever act as an agent, even if the talent agent services were “only incidental to other services provided as a manager,” may be called into question by Marathon’s holding. Under Marathon, a case-by-case determination would be appropriate to consider whether the manager’s contract could be severed to preserve its lawful portions.
http://www.musiclawyer.com/lib/needknowtamgr1.html
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LAW STUDENT ANALYSIS
Marathon Entertainment, Inc. v. Blasi is a significant decision for players in the entertainment industry, as evidenced by the volume of articles and blog commentary referencing the case. The opinion essentially stands for two points of law. First, managers are subject to restrictions of the Talent Agencies Act when they procure or solicit employment for artists. This holding, standing alone, should come as no surprise. As the Supreme Court noted, California courts and the Labor Commission have consistently held that managers who act like agents, even occasionally or in ways incidental to their managerial duties, violate the Act and can have their contracts declared invalid. See Marathon Entertainment, 42 Cal. 4th at 986-87.
The second point is that managers who have violated the Act may have the lawful portions of their contracts severed and enforced. The upshot of this ruling is that the Labor Commissioner, in reviewing a dispute, cannot simply “default” to voiding a manager’s contract when the manager is found to have violated the Act. Rather, it must analyze on a case-by-case basis whether severability is appropriate. The Labor Commissioner does not have to resort to severability, but it cannot refuse to consider it as an option.
This clarification of the law protects managers who may have engaged in some employment procurement, but who mostly followed the law and performed only managerial tasks. However, it may also create more work for the Labor Commissioner, who must now be sure to use the case-by-case analysis for every dispute. Severing a contract in which compensation is based on a flat percentage fee for unspecified services could get complicated, despite the Court’s decision that such a fee structure does not bar severability. See Marathon Entertainment, 42 Cal. 4th at 997. If the artist promised the manager a 15% fee for his services, and the manager performed both managerial and agency services on a particular project, it may be difficult to determine the appropriate compensation under the severed contract. In addition, the possibility of severance may weaken the deterrence factor for managers who might engage in occasional procurement. On the other hand, the fact that the Supreme Court chose not to overrule Yoo v. Robi, 126 Cal.App.4th 1089 (2005), or Chiba v. Greenwald, 156 Cal. App.4th 71 (2007), indicates that managers still do risk losing out on their whole contract if they violate the Act.
My personal take: This is an interesting case, and a great example of the challenge that comes with trying to craft a rule that appropriately punishes wrongdoing and is feasible to administer.