Backers of a California Senate bill to legislate Hollywood deal making have quietly dropped criminal penalties while retaining civil penalties for anyone who undersells movies or TV shows

By Alex Ben Block

HOLLYWOOD, CA (Hollywood Today) 4/11/08 – There will be no executives going to the big house for underselling TV shows and movies to aftermarkets, even in the unlikely event California Senate Bill 1765 becomes law. Criminal penalties that were part of the “Fair Market Value” bill now headed for the California state Senate have been dropped, according to John Kosinski, Director of Government Affairs for the Writers Guild of America West.

“On Tuesday,” he says, “they removed criminal penalties from the bill and agreed to provide just for civil penalties,” which would keep Hollywood ‘s top executives out of California state penal environments like the one pictured. Their crimes would not likely be considered serious enough to be “put behind bars,” as in a movie, just incarcerated as in the photo. Which would be worse for a studio executive used to high living?

The fair market value legislation was introduced by Senator Sheila Kuehl (D-Los Angeles) and coauthored by State Senators Darrell Steinberg, Gloria Romero, Carole Migden, Elaine Alquist and Assembly Members Fiona Ma, Sandré Swanson, and Mike Davis.

Dropping the criminal penalties also meant that instead of going into yet another state Senate (Appropriations) committee for clearance, the bill is expected to go straight to the floor of the full Senate for a vote, probably by the end of May, if not before.

Kosinski says everyone at the session on Tuesday when the bill cleared the Senate Judiciary committee knew the criminal penalties were being cut out, even though it was not reported that way. In fact, the day after the hearing, Variety ran a story that quoted an MPAA executive complaining about the criminalization aspect of the legislation.

Per Variety April 8: “The proposed legislation, (Vans Stevenson, the MPAA’s Sr. VP of state government affairs), …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.”

Dropping the criminal penalties is expected to make the bill more palatable to other legislators, the backers hope. Kosinski said the WGA, along with the Teamsters and others are now actively lobbying members of the Senate. They continue to face unrelenting opposition by the major studios and networks, and other business lobbying groups.

The bill’s backers always knew criminal penalties wouldn’t be included in the final draft even as they wrote the bill, insists Kosinski, but the authors wanted to throw in everything possible to start. They always knew, says Kosinski, that it would be a process of paring down the bill to what worked best.

Another reason the criminal aspect of the legislation was deleted says Kosinski, is that the backers believed in the end “no D.A. was going to sue over criminal elements so we negotiated and revised.”

Still, this legislation is needed, says Kosinski, to “create a deterrent” against a handful of big companies who dominate show business. He believes it will deter them from abusing their power by forcing employees to give up their right to sue.

There have already been many suits and as a result, the latest studio contracts force both sides to agree on an arbitration system in place of the right to sue, which Kosinski says is not adequate to ensure profit participants and the guilds get all the money they have coming. This bill, he says, would supersede those private contracts.

In past years profit participants in many shows did sue. They already had that right and still do. It might take years and cost millions to take on a studio, but a number of cases have been filed and all settled out of court. If this became law, it would still be up to individuals who felt wronged to sue, but civil penalties might be greater.

The concentration of the entertainment industry into six or eight large companies has limited the number of places that actors, writers, directors and other creative personnel can work. That gives the studios great leverage and opens the door to abusive behavior. That is true, and that is why this bill illuminates a real problem.

It is inevitable with an oligopoly there is self-dealing. These companies and a few favored players participate iin a kind of internal book keeping roulette in which the house wins and everyone else fights for scraps.

However, this bill also represents government interfering in business practices between private parties that normally would not be illegal..It creates a fuzzy definition of fair value, which will lead to legal challenges if it ever passes. There is also the chance for a backlash with studios and networks simply cutting out most everyone from any profit participation because that would eliminate all lawsuits.

These private contracts were fully negotiated by studios and their employees. These show creators or actors or movie directors signed deals with their eyes open and an attorney or their side. They have long since cashed their paychecks. Now they want the right to sue outside the terms of their contract over the back end participation.

Those people are being bullied by big companies that try to squeeze the last nickel out of every deal, say proponents. “If you want to run a show in Hollywood,” says Kosinski, “you must sign over your right to sue.”

Kosinski says dropping the criminal provisions was an olive branch to the big studios, who the bill’s backers welcome to discuss better language and more clear definitions of ‘fair value’ and how to determine it. So far the studios have sent spokesmen to denounce the bill and have remained adamantly opposed, refusing to hold talks.

What this bill is not, insists Kosinski, is an attempt by the WGA to get done with legislation what it could not accomplish at the bargaining table during the recent 100 days strike – to insert the concept of fair market value into the movie and TV contract. It was inserted into some of the new media portion of the contract.

However, the MPAA in a statement after the bill cleared the Judiciary committee clearly disagreed, and felt that is exactly what this is about: ““Of equal concern, this bill would essentially force a legislative ‘do-over’ of the collective bargaining agreement that settled the writers’ strike, which cost the California economy $2.5 billion. Writers and producers made an extraordinary effort to reach a fair deal that put an end to that work stoppage. Enabling the Writers Guild to do an end-run around the collective bargaining process would set a dangerous precedent for future labor negotiations.”

So it remains highly unlikely dropping criminal penalties will bring the studios running to join in the debate. “It was a compromise at the end of the day,” recalls Kosinski of the session last Tuesday in Sacramento. “We don’t want to fight with the studios. We want to work with them.”

In reality, the studios will not touch this with a ten foot boa constrictor, except to nuke the effort from a distance. Even if this bill makes it through the Senate, and then the state Assembly, it still faces the Terminator . Republican Gov. Arnold Schwarzenegger has been consistently pro-business and is unlikely to sign this into law in the face of fierce opposition from the studios, networks, most Republican legislators and business groups.

Kosinski doesn’t agree that it is inevitable Schwarzenegger will kill the bill. He says the backers will take it one step at a time. They have gotten the bill out of committee and gained attention. Now they need added support. He says they will take their case to the Governator when that time comes.

Kosinski and I still disagree about the basic premise of legislation that would override private contracts. I find it hard to work up too much sympathy. Many of these deals are with highly compensated individuals who have already been paid millions on the front end of the deal, and a portion of that has already gone to fill guild health and pension plans.

That doesn’t matter, says Kosinski, because the economic bedrock of show business for the last 40 years has been the system of residuals and profit payments. Creators have the right, he says, to expect to share in the back end success of their shows in full measure. And only when they get all they deserve will the guilds and unions get their full share of the proceeds, so backers will now take their battle onto the floor of the California state Senate.