Personal Managers Amicus Brief by SAG-AFTRA

No. 13-55545 IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT NATIONAL CONFERENCE OF PERSONAL MANAGERS, INC. Plaintiff—Appellant, v. EDMUND G. BROWN, JR. ET AL, Defendants—Appellees. ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA THE HONORABLE DEAN D. PREGERSON, JUDGE, PRESIDING DISTRICT COURT CASE NO. CV 12-09620 DDP (RZX)

Brief of Amici Curiae in Support of Defendants-Appellees by Screen Actors Guild - American Federation of Television & Radio Artists, Directors Guild of America, Inc. and Writers Guild of America, West, Inc.

ANTHONY R. SEGALL ROTHNER, SEGALL & GREENSTONE 510 S. Marengo Avenue Pasadena, CA 91101 Telephone: (626) 796-7555 Fax: (626) 577-0124

DUNCAN W. CRABTREE-IRELAND DANIELLE S. VAN LIER SCREEN ACTORS GUILDAMERICAN FEDERATION OF TELEVISION AND RADIO ARTISTS 5757 Wilshire Blvd., 7th Fl. Counsel for Writers Guild of America, West, Inc. Los Angeles, CA 90036 Telephone: (323) 549-6627 DAVID B. DREYFUS Facsimile: (323) 549-6624 DIRECTORS GUILD OF AMERICA, INC. 7920 Sunset Boulevard Counsel for SAG-AFTRA and Los Angeles, CA 90046 Counsel of Record for Amici Telephone: (310) 289-2012 Counsel for Directors Guild of America, Inc.

TABLE OF CONTENTS TABLE OF CONTENTS ....................................................................................... i TABLE OF AUTHORITIES ................................................................................ ii CORPORATE DISCLOSURE STATEMENT .................................................... iv STATEMENT OF COMPLIANCE WITH RULE 29(c)(5) .................................. v CONSENT OF THE PARTIES ............................................................................ v INTEREST OF THE AMICI ................................................................................ 1 SUMMARY OF ARGUMENT ............................................................................ 4 ARGUMENT ....................................................................................................... 7 A. Agents and Managers Play Important, but Distinct, Roles in the Entertainment Industry................................................................................ 7 1. Agents Hold the Keys to Artists’ Careers Opportunities ......................... 7 2. Managers Counsel and Guide Artists’ Careers ........................................ 9 B. The Talent Agencies Act is a Remedial Law Intended to Protect Artists from Those Who Could Take Advantage of Them ............................................ 11 1. History of the Talent Agencies Act ........................................................12 2. The California Entertainment Commission Concluded that, for the Protection of Artists, Anyone Who Procures Employment for Artists Must Be Licensed ..................................................................................14 3. The Talent Agencies Act Clearly Regulates the Procurement of Employment ..........................................................................................18 4. The Unions Regulate Their Members’ Agents Under a Robust Set of Rules that Augment and Supplement the Talent Agencies Act ...............20 5. The Law Regulating Procurement of Artists’ Employment is Clear .......21 C. Personal Managers Take a Calculated Risk When They Engage Without a License in an Agent’s Licensed Activity ................................................... 22 1. Unlicensed Employment Procurement is Not a New Issue .....................22 2. The Risks Managers Face are Less Severe Post-Marathon ....................24 3. Similar Regulatory and Enforcement Principles Are Used in Other Professions.............................................................................................26 CONCLUSION .................................................................................................. 30

TABLE OF AUTHORITIES CASES Baron v. Los Angeles, 2 Cal.3d 535 (1970) ...........................................................27 Buchwald v. Superior Court, 254 Cal. App. 2d 347 (1967) ............................. 12, 13 Cal. Lab. Code §1700.26 ......................................................................................19 Greenlake Capital v. Bingo Investments, 185 Cal. App. 4th 731 (2010)................29 Marathon Entertainment Inc. v. Blasi, 42 Cal. 4th 974 (2008) ....................... passim MKB Management, Inc. v. Melikian, 184 Cal.App.4th 796 (2010) ........................29 Park v. Deftones, 71 Cal. App. 4th 1465 (1999) .............................................. 11, 23 People v. Merchants Protective Corp., 189 Cal. 531 (1922) .................................27 Venturi & Co. v. Pacific Malibu Dev. Corp., 172 Cal. App. 4th 1417 (Cal. Ct. App. 2009) .................................................................................................................29 Waisbren, v. Peppercorn Productions, Inc., 41 Cal. App. 4th 246 (1995) ....... passim Yoo. v. Robi, 126 Cal. App. 4th 1089 (2005) ..........................................................23 STATUTES Cal Bus & Prof Code § 6000, et seq. .....................................................................27 Cal. Bus. & Prof. Code § 2052(a) .........................................................................26 Cal. Bus. & Prof. Code §10130 ....................................................................... 27, 28 Cal. Bus. & Prof. Code §10131 .............................................................................28 Cal. Bus. & Prof. Code §6125 ...............................................................................27 Cal. Lab. Code §1700.15 ......................................................................................18 Cal. Lab. Code §1700.21 ......................................................................................19 Cal. Lab. Code §1700.23 ......................................................................................19 Cal. Lab. Code §1700.24 ......................................................................................19 Cal. Lab. Code §1700.26 ......................................................................................19 Cal. Lab. Code §1700.27 ......................................................................................19 Cal. Lab. Code §1700.4 .................................................................................. 13, 18 Cal. Lab. Code §1700.44 ......................................................................................14

Cal. Lab. Code §1700.6 ........................................................................................18 Cal. Lab. Code §1700.7 ........................................................................................18 OTHER AUTHORITIES Cal. Entertainment Comm’n Rep., May 23,1985, Cal. Doc. E2035 R4 1985 . passim Devlin, Comment, The Talent Agencies Act: Reconciling the Controversies Surrounding Lawyers, Managers, and Agents Participating in California's Entertainment Industry, 28 Pepp. L. Rev. 381 (2001) .................................. 12, 13 Flores, Note, That’s a Wrap! (Or Is It?): The Unanswered Questions of Severability Under California’s Talent Agencies Act After Marathon Entertainment, Inc. v. Blasi, 97 GEO. L.J. 1333 (2009) .................................. 8, 10 O’Brien, Comment, Regulation of Attorneys Under California’s Talent Agencies Act; A Tautological Approach to Protecting Artists, 80 CAL. L. REV. 471 (1992) .......................................................................................................... 8, 10, 13, 14 Zelenski, Note, Talent Agents, Personal Managers, and Their Conflicts in the New Hollywood, 76 S. CAL. L. REV. 979 (2003) ................................................ 8, 9, 10 CALIFORNIA LABOR COMMISSIONER CASES Kesha Rose Sebert pka Ke$ha v. DAS Communications, Ltd., No. TAC 19800 (Cal. Lab. Comm’n Mar. 27, 2012) ............................................................................26 Plana v. Quinn, No. TAC 15652 (Cal. Lab. Comm’n Feb. 24, 2012 .....................26 Solis v. Blancarte, No. TAC 27089 (Cal. Lab. Comm’n Sep, 30, 2013) ................26 Yoakam v. The Fitzgerald Hartley Co., No. TAC 8774 (Cal. Lab. Comm’n Jan, 11, 2010) .................................................................................................................26

iii

CORPORATE DISCLOSURE STATEMENT Pursuant to Rules 26.1 and 29(c) of the Federal Rules of Appellate Procedure, Amici provide the following disclosures of corporate identity: Amicus Screen Actors Guild-American Federation of Television and Radio Artists certifies that it is a Delaware non-profit corporation doing business as a labor organization; it does not offer stock; and it has no parent corporation. Amicus Directors Guild of America, Inc. certifies that it is a California nonprofit corporation doing business as a labor organization; it does not offer stock; and it has no parent corporation. Amicus Writers Guild of America, West, Inc. certifies that it is a California non-profit corporation doing business as a labor organization; it does not offer stock; and it has no parent corporation.

STATEMENT OF COMPLIANCE WITH RULE 29(c)(5) Counsel for the parties did not author this brief. The parties have not contributed money intended to fund preparing or submitting the brief. No person other than amici curiae, their members, or their counsel contributed money that was intended to fund preparing or submitting the brief.

CONSENT OF THE PARTIES In accordance with Ninth Circuit Rule 29-3, Amici have sought the consent of the parties to file an amicus curiae brief. Counsel for the parties have consented to the filing of this brief.

INTEREST OF THE AMICI Amicus Screen Actors Guild-American Federation of Television and Radio Artists (“SAG-AFTRA”) is the nation’s largest labor union representing working media artists. SAG-AFTRA represents over 165,000 actors, announcers, broadcasters, journalists, dancers, DJs, news writers, news editors, program hosts, puppeteers, recording artists, singers, stunt performers, voiceover artists and other media professionals. In 2012, SAG-AFTRA was formed through the merger of two labor unions: Screen Actors Guild (“SAG”) and the American Federation of Television and Radio Artists (“AFTRA”). SAG-AFTRA members are the faces and voices that entertain and inform America and the world. SAG-AFTRA exists to secure strong protections for media artists. Amicus Writers Guild of America, West, Inc. (“WGAW”) is a labor organization and the collective bargaining representative of approximately 11,000 professional writers in the motion picture, television and new media industries. The WGAW’s mission is to protect the economic and creative rights of the writers it represents. Amicus Directors Guild of America, Inc. (“DGA”) was founded in 1936 to protect the economic and creative rights of Directors. Over the years, its membership has expanded to include the entire directorial team, including Unit Production Managers, Assistant Directors, Associate Directors, Stage Managers,

and Production Associates. DGA’s over 15,000 members live and work throughout the United States and abroad, and are vital contributors to the production of feature films, television programs, documentaries, news and sports programs, commercials, and content made for the Internet and other new media. DGA seeks to protect the legal, economic, and artistic rights of directorial teams, and advocates for their creative freedom. Through their internal regulations and agreements with non-profit trade associations, such as the Association of Talent Agents (“ATA”) and National Association of Talent Representatives (“NATR”), the Unions extensively regulate the relationship between their members and agents who represent them. With limited exceptions, each Union requires that talent agents who represent its members be franchised by the Union. The Unions’ regulations establish standards of conduct and include conditions and limitations that augment and supplement provisions in the Talent Agencies Act (the “Act”). They also create standard form contracts for talent representation and impose limits or prohibitions on agents’ economic interest in production activities. While the Unions do not regulate their members’ relationships with personal managers, SAG-AFTRA recently released a draft “Personal Manager Code of Ethics and Conduct” (“Managers Code”) and has begun soliciting input from the manager community. The Managers Code is an effort to recognize the role

managers play in the industry and to formalize relationships between SAGAFTRA and the managers who represent its members. The Unionsâ&#x20AC;&#x2122; ability to protect their members is dependent on strong and uniform enforcement of laws like the Talent Agencies Act. Only a few states have substantive regulations to govern the artist-agent relationship. In all other states, the Unionsâ&#x20AC;&#x2122; members have only the Union franchises for protection. If unregulated persons are allowed to perform the same functions as agents, without the same regulation, this intricate framework will start to decay. California is a leader in regulations related to the entertainment industry; if its regulations fail, other states are sure to follow. Accordingly, the Unions and their members have a fundamental interest in ensuring these protections are not eroded and have an interest in this litigation.

SUMMARY OF ARGUMENT The entertainment industry is unique in many ways. It attracts diverse participants – from wide-eyed aspiring actors1 who hope to be the “next big thing” to unscrupulous individuals who prey upon artists’ hopes and dreams.2 The industry is founded on creativity and the desire to create art and entertainment but is supported by financial motives. Sometimes, these elements do not mix properly and the desire for profit overwhelms any good in the relationship. Working artists typically rely on a small army of people to support their careers – an army that varies in size as the artist’s career develops. Agents find and secure job opportunities and negotiate its terms; personal managers counsel and guide artists, often advising on which job opportunities to pursue; business managers assist with financial management; attorneys provide legal services; publicists promote the artist and guide him in his dealings with the media; and the applicable Union provides benefits and protections, including minimum standards for wages and working conditions. Each support function plays a particular role in 1

In 2011 approximately 88% of SAG-AFTRA members earned twenty five thousand dollars ($25,000) or less from their work under SAG-AFTRA freelance contracts, while less than two percent (2%) had freelance earnings in excess of two hundred thousand dollars ($200,000). The earnings figures include all income under SAG-AFTRA freelance contracts, including residuals. 2

It is not uncommon for actors, in particular, but also some writers, directors and members of film and television crews, to work long hours and under poor conditions, for little or no compensation, simply to get a foot in the door in the hope of building a career. 4

an artist’s career. Some of the role differentiation arises from the individuals’ skills; others are the result of regulatory schemes designed to protect the artist. The unique nature of the entertainment industry, particularly the mechanisms by which artists obtain employment and the brief duration common to most industry jobs, gives those gatekeepers to employment immense power. Few artists are in a position to scrutinize or challenge those who hold control over their employment opportunities. For these reasons, and in light of recurring abuses at artists’ expense, the California Legislature has long recognized the need for regulation of those who hold such power: the procurers of employment; the agents. The Talent Agencies Act and the Unions’ franchise systems are critical to protecting vulnerable individuals in an environment where aspirants will do almost anything to “make it big.” These protections help balance the power between artists and their representatives. Although an agent is technically retained by the artist, most artists are not in a position of power vis a vis their agents. To the contrary, the agent holds the keys to the actor’s career and is in the position to come between an artist and his work. Accordingly, agents are strictly regulated. Agents’ conduct and their relationships with their clients are strictly regulated by the Talent Agencies Act, which provides that only licensed talent agents may procure employment on behalf of artists. The Act, and decades of cases interpreting it, sets forth a functional test for determining who is a talent

agent and, thus, who must be licensed. The test is simple – one who procures employment for an artist is an agent, irrespective of his title, and he must be licensed as such. This bright-line functional test is critical to the efficacy of the Act and to protecting artists. Functional tests defining the bounds of a regulated profession are not unique to the Talent Agencies Act. Several other professions, notably law and real estate, utilize similar conduct-based tests to determine who falls within the licensing structure’s purview. Personal managers take a calculated risk when engaging in activities covered by the Act. Although the consequences can be severe, there is little to no regulatory oversight of managers’ activities and disputes typically arise only when the manager-client relationship deteriorates. Even in such cases, the manager’s unlawful activity can be severed from the rest to allow compensation for the lawful acts.

ARGUMENT One may envision celebrities when thinking of artists in the entertainment industry; but the primary beneficiaries of the Act are those who are, or who aspire to be, working artists. It is these individuals who are most vulnerable to abuses by their advisers. Most advisers are reputable and act in the artist’s best interest. But some provide services at rates and under conditions that are unfavorable and unfair or seek to take advantage of vulnerable artists. Many advisers provide valuable guidance and counseling services to artists. This guidance may be especially valuable to those artists who do not understand the ins-and-outs of the industry and career they have chosen. But that guidance and counseling must be offered within the boundaries of the law. A.

Agents and Managers Play Important, but Distinct, Roles in the Entertainment Industry Agents and managers are two of the most important representatives in an

artist’s career. Agents are the gatekeepers to an artist’s employment, serving as the middlemen between artists and their potential employers and negotiating the terms of that employment. Managers counsel and provide guidance on the course of an artist’s career, including on the selection of other advisers and job opportunities. 1.

Agents Hold the Keys to Artists’ Careers Opportunities

The most important role an artist’s agent plays is that of intermediary to potential employment. Agents are the middlemen between artists and potential

employers, responsible for submitting their clients for job opportunities and negotiating the terms of their employment. Flores, Note, That’s a Wrap! (Or Is It?): The Unanswered Questions of Severability Under California’s Talent Agencies Act After Marathon Entertainment, Inc. v. Blasi, 97 GEO. L.J. 1333, 1337 (2009). They solicit film and television engagements and live appearances or might aid an artist in licensing rights to his or others’ creative works. Id. The agent’s primary function is to market the artist’s talent and get him the best possible deal. O’Brien, Comment, Regulation of Attorneys Under California’s Talent Agencies Act; A Tautological Approach to Protecting Artists, 80 CAL. L. REV. 471, 478-9 (1992). Artists are typically employed on individual short-term projects for a variety of employers rather than establishing long-term relationships with a single employer. Zelenski, Note, Talent Agents, Personal Managers, and Their Conflicts in the New Hollywood, 76 S. CAL. L. REV. 979, 981 (2003). Accordingly, agents work to establish relationships with a multitude of employers, negotiating the best possible terms each time. Id. “Generally speaking, an agent’s focus is on the deal: on negotiating numerous short-term, project-specific engagements between buyers and sellers.” Marathon Entertainment Inc. v. Blasi, 42 Cal. 4th 974, 983 (2008) (citing, Zelenski, 76 S. CAL. L. REV. at 981).

Agents are typically paid a commission on their clients’ gross earnings. Zelenski, 76 S. CAL. L. REV. at 981. Consequently, an “agent’s livelihood depends on cultivating valuable connections on both sides of the artistic labor market.” Marathon, 42 Cal. 4th at 983 (citing, Birdthistle, A Contested Ascendancy: Problems with Personal Managers Acting as Producers (2000) 20 Loyola L.A. L. Rev. 493, 502-03). Because agents’ earnings are dependent on their clients’ transitory employment, they have incentive to represent a large number of clients and to obtain for them as much work as possible. Zelenski, 76 S. CAL. L. REV. at 981. But the nature of this relationship has potential to put the agents’ self-interest in conflict with their clients’. Id. Accordingly, the relationship between talent agents and their clients is regulated. 2.

Managers Counsel and Guide Artists’ Careers

Personal managers play an important role in an artist’s career. Typically having fewer clients than an agent, they are often an artist’s trusted adviser, providing counsel and carefully guiding his career. Managers invest time, and sometimes money, in the hope their clients will eventually be successful. Managers traditionally “oversee the artist’s day-to-day activities as well as develop long-term strategies for the artist’s career growth, counseling in the selection of job material, other personnel to be employed by the artist, and the proper vehicles for showcasing or promoting the artist’s talent.” Flores, 97 GEO.

L.J. at 1338. They “work in conjunction with other third-party handlers and advise [the artist] on career decisions… they [also]…. oversee the deals that have been brokered by [the artist’s] agents.” Zelenski, 76 S. CAL. L. REV. at 982. “The essence of their service… is counseling the artist in the development of his/her professional career” and their fees reflect not only the value of an intangible service but the greater risk which is assumed by the personal manager in the eventual artistic success of their clients.” Cal. Entertainment Comm’n Rep., May 23,1985, Cal. Doc. E2035 R4 1985 at p. 9. As the “personal manager” title indicates, the relationship between an artist and his manager is often personal as well as professional. Managers may advise on or manage the artist’s finances or may even lend the artist money in times of need. O’Brien, 80 CAL. L. REV. at 482. The manager may advise on and serve as a liaison with the artist’s other representatives. Id. And a manager may serve as an artist’s confidante or personal advisor, helping to manage personal relationships and other aspects of an artist’s life. Id. In essence, the personal manager helps give the artist room to be an artist. Id. The case law recognizes this role. “The primary function of the personal manager is that of advising, counselling [sic], directing and coordinating the artist in the development of [his] career.” Waisbren, v. Peppercorn Productions, Inc., 41 Cal. App. 4th 246, 252 (1995) (quoting O’Brien, 80 CAL. L. REV. at 481-482).See

also Marathon, 42 Cal. 4th at 982; Park v. Deftones, 71 Cal. App. 4th 1465, 146970 (1999). “They advise in both business and personal matters, frequently lend money to young artists, and serve as spokespersons for the artist. Park, 71 Cal. App. 4th 1470 (citing Waisbren, 41 Cal. App. 4th at 259). Managers “typically accept a higher risk clientele and offer a much broader range of services, focusing on advising and counseling each artist with an eye to making the artist as marketable and attractive to talent buyers as possible….” Marathon, 42 Cal. 4th at 983-84. Lacking regulatory hurdles, and because they have a “greater degree of involvement and risk, managers typically have a smaller client base and charge higher commissions than agents [and] may also produce their client’s work and thus receive compensation in that fashion.” Id. B.

The Talent Agencies Act is a Remedial Law Intended to Protect Artists from Those Who Could Take Advantage of Them The Talent Agencies Act is a remedial statute that strictly regulates talent

agents’ conduct and their relationship with their clients. Like many other professional licensing statutes, it provides a detailed regulatory and licensing structure and includes various protections against misconduct by talent agents. Pursuant to the Act, only licensed talent agencies may procure employment on behalf of artists. The Act, and the cases interpreting it, sets forth a functional test for determining who is a talent agent and, thus, who must be licensed. The test is

simple – if one procures employment for an artist, he is an agent, regardless of what title he assumes, and must be licensed as such. The Act strictly regulates talent agents to ensure the welfare of artists. See, Waisbren, 41 Cal. App. 4th 246. It is a remedial law, designed to correct past abuses, that was enacted for the protection of artists. Buchwald v. Superior Court, 254 Cal. App. 2d 347, 350-351 (1967). As such, it should be liberally construed to promote its general intent. Waisbren, 41 Cal. App. 4th at 254, (citing Henning v. Industrial Welfare Comm., 46 Cal. 3d. 1262 (1988)). The provisions plaintiffsappellants point to as vague are broadly crafted to ensure the Acts protections are directed at regulated actions, not simply job titles. 1.

History of the Talent Agencies Act

Procurement of artists’ employment has been regulated for nearly a century. The Private Employment Agencies Law of 1913 included the first regulations aimed at protecting artists’ from abuses at the hands of their representatives. Devlin, Comment, The Talent Agencies Act: Reconciling the Controversies Surrounding Lawyers, Managers, and Agents Participating in California's Entertainment Industry, 28 Pepp. L. Rev. 381 (2001). These regulations were incorporated into the California Labor Code when the Artist Managers Law was enacted in 1937. Id. The “artist manager” was added in 1943 and then, in 1959,

was separated from that Act into its own section. O’Brien, 80 CAL. L. REV. at 49394. The California Legislature repealed certain provisions in 1967 but left the regulation of artist managers in the Labor Code. Devlin, 28 Pepp. L. Rev. at 387. From 1943, when first added to the Employment Agencies Act, until 1978 when the law was renamed the Talent Agencies Act, “artist manager” was defined as: “[A] person who engages in the occupation of advising, counseling, or directing artists in the development or advancement of their careers and who procures, offers, promises or attempts to procure employment or engagements…” Buchwald v. Superior Court, 254 Cal. App. 2d 347, 350 fn.2 (1967) The Act was renamed the Talent Agencies Act in 1978. O’Brien, 80 CAL. L. REV. at 494. The term “talent agent,” was, and still is, defined as: “[a] person or corporation who engages in the occupation of procuring, offering, promising or attempting to procure employment engagement for an artist or artists.” Cal. Lab. Code §1700.4. The definition allows that a talent agent “may, in addition, counsel or direct artists in the development of their professional careers.” Cal. Lab. Code §1700.4. While the early definition was broad, the post-1978 definition made clear that the Act’s regulatory focus was on the act of procuring employment, with recognition that those who procure employment – talent agents

– may also incidentally engage in other activities related to artists’ professional careers. The Legislature made several amendments to the Act in 1982 including creating certain safe harbors. Particularly, the Legislature added a safe-harbor provision for unlicensed individuals, such as personal managers, to work “in conjunction with, and at the request of, a duly licensed and franchised talent agency in the negotiation of an employment contract.” Cal. Lab. Code §1700.44. At the same time, it created the California Entertainment Commission (the “Commission”) to study the Act and, if applicable, to suggest changes. O’Brien, 80 CAL. L. REV. at 494-5. 2.

The California Entertainment Commission Concluded that, for the Protection of Artists, Anyone Who Procures Employment for Artists Must Be Licensed

The California Legislature created the California Entertainment Commission in 1982 to study the laws and practices of California and other states relating to the regulation of artists’ agents and representatives. Waisbren, 41 Cal. App. 4th at p. 256. The Commission consisted of the Labor Commissioner, three talent agents, three personal managers, and three artists, ensuring that all affected parties had a voice in the process. Cal. Entertainment Comm’n Rep. at pp. 1- 2. The Commission’s 1985 report formed the basis for the 1986 amendments to the Talent Agencies Act. Waisbren, 41 Cal. App. 4th at 258.

In its report, the Commission addressed six principal issues, two of which are particularly relevant. Those three issues are: “1.

Under what conditions or circumstances, if any,

should a personal manager or anyone other than a licensed talent agent be allowed to procure… employment or engagements… for an artist without being licensed as a talent agent? … “5.

Should the entire Act be repealed and/or should there

be a separate licensing law for personal managers? …” Cal. Entertainment Comm’n Rep. at p. 5. The Commission’s conclusion was clear – the Act regulates procurement of employment and, to protect artists, anyone who procures employment must be licensed, regardless of job title. Specifically, the Commission concluded that “personal managers or anyone not licensed as a talent agent should not, under any condition or circumstances, be allowed to procure employment for an artist without being licensed as a talent agent,” other than as already permitted by the Act. Cal. Entertainment Comm’n Rep. at p 6. Although its response was clear, “[w]hen, if ever, may a personal manager or… anyone other than a licensed Talent Agent, procure employment for an artist” without a license was the “principal, and philosophically the most difficult issue”

in the Commission’s meetings. Cal. Entertainment Comm’n Rep. at p. 7. Recognizing the managers’ contention that sometimes they engage in “limited activities which could be construed as procuring employment,” activity that is “only a minor and incidental part of their services to the artists,” the Commission did attempt to formulate a compromise to allow limited unlicensed procurement activity. Id. at 9-11. The Commission considered exempting “casual conversations” regarding an artist or manager involvement in contract negotiations, as well as exemptions where no fee or commission is charged. Id. at p.10-11. Nonetheless, the Commission concluded that the prohibitions against unlicensed procurement must remain total and without exceptions. Id. at p. 11. After attempting to craft a compromise, the Commission concluded that: “the prohibitions of the Act over the activities of anyone procuring employment for an artist without being licensed as a talent agent must remain, as they are today, total. Exceptions in the nature of incidental, occasional or infrequent activities relating in any way to procuring employment for an artist cannot be permitted: one either is, or is not, licensed as a talent agent, and, if not so licensed, one cannot expect to engage, with impunity, in any activity relating to the service which a talent agent is licensed to render. There can be no ‘sometimes’ talent agent, just as there can be no ‘sometimes’ professional in any other licensed field of endeavor.” Id. at 11-12. The Commission also deemed it unnecessary to license personal managers because the act of procurement is regulated, not the person. It concluded that,

“[f]or the protection of artists, anyone who procures employment for an artist should be licensed.” Id. at p. 30. The Commission opined that any licensing scheme for personal managers would be needlessly duplicative with the Act, reiterating that “[i]t is not a person who is being licensed…: rather, it is the activity of procuring employment.” Id. at p. 20. The Commission took into careful consideration the interests of agents, managers, and artists, and acknowledged the long-standing tensions between the roles of agents and managers. It concluded that the Act was clear and meaningful and that any acts of procurement without a talent agency license, no matter how “incidental, occasional or infrequent” are prohibited. This view – that a license is required for procurement activities – was recognized as the intent of the Legislature and expressly adopted by the Waisbren court, and has remained the prevailing law to date. Waisbren, 41 Cal. App. 4th at 259. As the court noted, “[b]y creating the Commission, accepting the Report, and codifying the Commision’s recommendations in the Act, the Legislature approved the Commission’s view” that one cannot be permitted to procure employment for an artist without a license, and that “the Act imposes a total prohibition on the procurement efforts of unlicensed persons. Id. (citing Cal. Entertainment Comm’n Rep. at p. 11) (emphasis in original).

This recognition by the Commission, by commentators, and by case law puts managers on notice of the role they are legally permitted to perform and the lines they are not permitted to cross. 3.

The Talent Agencies Act Clearly Regulates the Procurement of Employment

Under the Act, anyone who seeks to procure employment for an artist, irrespective of title, must be licensed as a talent agent. The Act is clear in that regard,3 as are decades of administrative and judicial decisions interpreting it. The Talent Agencies Act provides a comprehensive regulatory scheme for the licensing of talent agents.4 Pursuant to the Act, in order to obtain a talent agency license, the agent must submit a detailed application plus fingerprints and an affidavit of good moral character. Cal. Lab. Code §1700.6. The agent must also obtain and submit a surety bond (or acceptable alternative) in the amount of fifty thousand dollars ($50,000). Cal. Lab. Code §1700.15. The Labor Commissioner has the authority to investigate a talent agency prior to granting a license. Cal. Lab. Code §1700.7. 3

The Act defines “talent agency” as “a person or corporation who engages in the occupation of procuring, offering, promising, or attempting to procure employment or engagements for … artists…” Cal. Lab. Code §1700.4. The Act defines “artists” to include a range of individuals in the entertainment industry, including actors, radio artists, directors, writers, and “other artists and persons rendering professional services” in the entertainment industry. Id. 4

Similarly, each of the Unions has its own regulatory scheme for the franchising of talent agents. The Unions’ requirements are often parallel to the Act’s regulations and, in some instances provide for stricter scrutiny of and additional assurances from the applicant agent. 18

The Act provides for oversight of licensed talent agents. Under the Act, an agency must seek and obtain Labor Commissioner approval of all forms of contracts to be used in contracting with its clients and must obtain Labor Commissioner approval prior to transferring any interest in the agency. Cal. Lab. Code §§1700.23, 1700.30. Additionally, the agency must file its schedule of fees and must maintain certain records5 that are subject to inspection by the Labor Commissioner. Cal. Lab. Code §§1700.24, 1700.26, 1700.27). For the protection of artists, the Act also prescribes certain protections and penalties. It requires that talent agents maintain a client trust account and that all funds received and held on behalf of an artist be deposited into that account. Cal. Lab. Code §1700.25. Any such funds must be paid over to the artist within a specified time frame and a specific dispute resolution mechanism is codified in the Act in the event the agent does not comply. Id. The Act also provides a mechanism whereby the Labor Commissioner can suspend or revoke a license for an agent’s misconduct. Cal. Lab. Code §1700.21. This critical enforcement mechanism is notably absent with personal managers. Another fundamental and crucial protection encompassed within the Act, but absent among the unlicensed, is the surety bond mandated as a prerequisite to

These records include a list of the agent’s clients and records pertaining to the work procured on behalf of those clients, including the client’s earnings and fees received by the agent. Cal. Lab. Code §1700.26. 19

licensure. The surety bond ensures that artists who suffer monetary loss due to an agent’s mishandling of client funds will be able to find some redress. The process of claiming against the bonds is relatively quick and simple and allows the artist to recover some or all of his mishandled funds.6 If an unlicensed individual mishandles artists’ funds, the only remedy is litigation – a costly and often slow alternative with no guarantee of recovery, even if the artist obtains a judgment in his favor. Many artists do not have the wherewithal to pursue their remedies through the courts, leaving them twice victimized. 4.

The Unions Regulate Their Members’ Agents Under a Robust Set of Rules that Augment and Supplement the Talent Agencies Act

As a complement to the Act’s licensing and regulatory requirements, the Unions extensively regulate the relationship between their members and the talent agents who represent them.7 Chief among these regulations is the requirement that talent agents who represent their members be franchised. 8 These franchise

SAG-AFTRA, for example, assists its members in making claims against surety bonds in appropriate situations. There have been several instances where claims have totaled tens of thousands of dollars and at least one recent incident in which the misappropriated funds amounted to several hundred thousand dollars. 7

SAG, Codified Agency Regs., rule 16(g); AFTRA, Regs. Governing Agents, rule 12-C; DGA, Agency Agrmt.between Directors Guild of America and Association of Talent Agents; WGA, Artists’ Manager Basic Agreement of 1976. 8

Although SAG-AFTRA’s membership rules include a prohibition of its members working with agents who are not franchised, Screen Actors Guild had stayed enforcement of this rule for those members who are represented by ATA 20

agreements establish standards of conduct for agents and require compliance with certain conditions, limitations, and protections that augment and supplement the Act. 9 For example, the Unions’ franchises: authorize certain types of inspections of prospective agents, including site inspections; require the use of contracts promulgated or approved by the Union; limit commissions on certain income streams; and limit or prohibit financial interests that may pose a conflict of interest with an agent’s clients. Additionally, certain of the Unions may require the agent post additional surety bonds with the Union. The Act and the Union franchises include many protections for artists that unlicensed individuals avoid. Without the protections and remedies incorporated in the Act and the Union franchises, vulnerable artists may be without a remedy in instances of malfeasance. Moreover, each of the Unions’ franchise agreements incorporates an arbitration procedure that either the artist or the agent can institute when a dispute arises under the franchise. 5.

The Law Regulating Procurement of Artists’ Employment is Clear

and/or NATR-member agents pending further action, a policy which SAG-AFTRA has left in place for work under legacy-SAG agreements. The Basic Contract between SAG and the ATA and NATR, which governed the formal relationship between them, expired on or about October 20, 2000 and no amendment or extension has since been entered into, other than a fifteen (15) month period during which ATA and/or NATR-member agents maintained the status quo. 9

Each of the Unions requires that a talent agent seeking to represent its members have a valid license as a prerequisite to becoming franchised. 21

A court’s primary role in interpreting a statute is to effectuate the intent of the legislature.10 The Talent Agencies Act and decades of case law interpreting it are clear – one who procures employment for an artist is a talent agent and must be licensed as such. The California Entertainment Commission wrestled with possible compromises that would allow unlicensed individuals to engage in limited acts of procurement, ultimately finding that, for the protection of artists, there could be no compromise and the prohibition must be total. The Legislature adopted this finding in adopting the Commission’s report. Waisbren, 41 Cal. App. 4th at 258-59. It would not be appropriate for the court to disrupt that careful balance. C.

Personal Managers Take a Calculated Risk When They Engage Without a License in an Agent’s Licensed Activity 1.

Unlicensed Employment Procurement is Not a New Issue

Some personal managers engage in unlawful procurement activity and are, or reasonably should be, aware of the risks involved in their activity. PlaintiffAppellant’s own manager amici represent several high-profile examples. While some managers believe they should not be subject to the Act, it would be

The Legislature’s clear intent has been to strengthen the Act’s ability to protect performers against those who would seek to take advantage of them. On January 1, 2006, Senate Bill 184 took effect, raising the amount of the surety bond talent agencies must deposit with the California Labor Commissioner from $10,000 to $50,000. This sizeable increase in the State’s Talent Agency Bond underlines the Legislature’s intent to not only support the existing Act, but to strengthen its umbrella protection over artists in this State. 22

disingenuous for a talent manager of any experience to claim he is unaware that procuring employment for his clients subjects him to potential liability. The Act, its legislative history and decades of case law interpreting it make clear that procurement of employment by anyone other than a licensed agent is unlawful. Accordingly, until recently, courts have consistently held that under which managers engage in unlawful procurement are void ab initio. See, e.g.Yoo. v. Robi, 126 Cal. App. 4th 1089 (2005) (acts of procurement rendered contract between manager and singer void despite express recognition that manager was not an agent); Park, 71 Cal. App. 4th 1465 (personal managerâ&#x20AC;&#x2122;s unlicensed procurement of engagements for a band rendered the partiesâ&#x20AC;&#x2122; contract void); Waisbren, 41 Cal. App. 4th 246 (incidental or occasional acts of procurement by manager were sufficient to render the partiesâ&#x20AC;&#x2122; contract unenforceable). The calculated risk inherent in unlicensed procurement can be analogized to risks many drivers take. Many drivers do not abide by posted speed limits, recognizing that law enforcement does not have the means to stop every driver who exceeds it. They rationalize that even if caught, the penalties may not be so severe if they were not exceeding the limit by too much. The driver gauges the traffic and surroundings, estimating how fast he can go before he risks drawing attention to his vehicle. Similarly, many unlicensed and uninsured individuals

drive on a daily basis – whether out of convenience or necessity – trying to avoid law enforcement attention, knowing they risk a citation or worse. Just as speeding or unlicensed drivers know that an officer can be waiting around the next corner, personal managers know that each act of unlicensed procurement puts them at risk of being caught. Whether done for the client’s benefit or his own, the manager accepts the inherent risk. 2.

The Risks Managers Face are Less Severe Post-Marathon

The landscape for agent-manager disputes changed in 2008 when the Supreme Court of California held that a manager’s lawful acts can be severed from those, such as employment procurement, found to be illegal. In Marathon Entertainment v. Blasi, a management company sued its client for, among other claims, breach of an oral contract when she terminated the contract and ceased paying commissions. Marathon, 42 Cal. 4th 974, 981. The actress claimed Marathon violated the Act by soliciting and procuring employment on her behalf without a license. Id. The Labor Commissioner voided the contract ab initio and barred the manager from recovery. Id. After a trial de novo and subsequent appeal, the Court of Appeal concluded that the Act applied to personal managers but that the doctrine of severability, as embodied in Civil Code §1599, should apply to the controversy. Id. at 982 (citing Cal. Civ. Code §1599).

The California Supreme Court affirmed the lower court’s unanimous holding that the Act applied to personal managers. The court correctly noted that 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… requirements.” Marathon, 42 Cal. 4th at 986 (citing Cal. Civ. Code §1700.4, subd. (a)). Echoing the unanimous Court of Appeal, it held that “a personal manager who solicits or procures employment for his artist-client is subject to and must abide by the Act.” Id. (citations omitted). The Court recognized that management contracts could include both legal and illegal provisions. Noting that California had codified the common law doctrine that when “a contract has several distinct objects, of which one at least is lawful, and one at least is unlawful… the contract is void as to the latter and valid as to the rest.” Marathon, 42 Cal. 4th at 991 (quoting Cal. Civ. Code §1599). The Court noted that “[i]n deciding whether severance is available… ‘[t]he overarching inquiry is whether “the interests of justice… would be furthered” ‘by severance.’” Id. at 996 (quoting “Armendariz v. Foundation Health Psychcare Services, Inc., 24 Cal. 4th 83 at 124). If ‘the illegal provision can be extirpated from the contract by means of severance or restriction, then such severance and restriction are appropriate.’” Id. Noting that the “doctrine is equitable and fact specific,” the

Court deferred its application to the Labor Commission and the trial courts. Marathon, 42 Cal. 4th at 998. In the years since Marathon was decided, the Labor Commissioner has exercised her discretion to sever unlawful acts. See, e.g. Kesha Rose Sebert pka Ke$ha v. DAS Communications, Ltd., No. TAC 19800 (Cal. Lab. Comm’n Mar. 27, 2012) (applying the doctrine of severability to reduce a manager’s commission despite finding that the illegal activities “were substantial and significant”); Plana v. Quinn, No. TAC 15652 (Cal. Lab. Comm’n Feb. 24, 2012) (applying the doctrine of severability because the "management services took up the bulk of the relationship"); Yoakam v. The Fitzgerald Hartley Co., No. TAC 8774 (Cal. Lab. Comm’n Jan, 11, 2010) (applying the doctrine of severability upon finding that the procurement was collateral to the main purpose of an agreement and insubstantial). But see, Solis v. Blancarte, No. TAC 27089 (Cal. Lab. Comm’n Sep, 30, 2013) (finding no basis for severance where the central purpose of the parties’ agreement was illegal). 3.

Similar Regulatory and Enforcement Principles Are Used in Other Professions

Laws restricting activities to licensed professionals are not limited to the entertainment industry. The practice of medicine is restricted to licensed doctors. Cal. Bus. & Prof. Code § 2052(a) (“[A]ny person who practices or attempts to practice… any system or mode of treating the sick or afflicted in this state, or who

diagnoses, treats, operates for, or prescribes for any ailment… without having … a valid, unrevoked, or unsuspended certificate… is guilty of a public offense”). Real estate brokers are similarly licensed. Cal. Bus. & Prof. Code §10130 (“It is unlawful for any person to engage in the business of, act in the capacity of, advertise as, or assume to act as a real estate broker or a real estate salesperson within this state without first obtaining a real estate license…”) And only lawyers licensed in the state may engage in the practice of law.11 Cal Bus & Prof Code § 6000, et seq. Notably the State Bar Act does not define “practice of law,” just as the Talent Agencies Act does not define “procure employment,” deferring to the common law and common sense. “(T)he Legislature… used the term 'practice law' without defining it. The conclusion is obvious and inescapable that in so doing it accepted both the definition already judicially supplied for the term and the declaration of the Supreme Court… that it had a sufficiently definite meaning to need no further definition.” Baron v. Los Angeles, 2 Cal.3d 535, 542-43 (1970). See also, People v. Merchants Protective Corp., 189 Cal. 531, 535 (1922) (quoting People v. Alfani, 227 N. Y. 334 (1919) (“The legislature is presumed to have used the words as persons generally would understand them… 'to practice as an attorney at law' means to do the work as a business which is commonly and usually done by 11

“No person shall practice law in California unless the person is an active member of the State Bar.” Cal. Bus. & Prof. Code §6125. 27

lawyers in this country.”). As with the Talent Agencies Act, these regulatory acts use a functional test, rather than one’s job title, to determine who falls within their purview. The efficacy of the Talent Agencies Act’s functional test can be seen in courts’ application of Marathon to other licensed professions. The holding – allowing the severance of lawful and unlicensed conduct – has been applied to compensation disputes in other regulated professions, notably real estate. California's Real Estate Law bears some similarity to the Talent Agencies Act, particularly in the functional test defining its coverage. It provides: "[i]t is unlawful for any person to engage in the business, act in the capacity of, advertise or assume to act as a real estate broker or a real estate salesman within this state without first obtaining a real estate license ...” Cal. Bus. & Prof. Code §10130. A real estate broker is: “a person who, for a compensation or in expectation of a compensation…does or negotiates to do one or more of” five listed acts. Cal. Bus. & Prof. Code §10131. Like the Talent Agencies Act, the definition is functional, providing that it is the acts performed rather than the individual’s job title that subject him to regulation. In Venturi & Company v. Pacific Malibu Development Corporation, the parties’ contract required the plaintiff to provide a range of services, some that require a real estate broker license, which the plaintiff did not possess. Venturi &

Co. v. Pacific Malibu Dev. Corp., 172 Cal. App. 4th 1417, 1421 (Cal. Ct. App. 2009). Citing to Marathon, the court recognized that some of the plaintiff’s actions may have been lawful without a license. Id. at 1423 (citing Marathon, 42 Cal. 4th at 980-81). Accordingly, it vacated the lower court’s grant of summary judgment for the defendant. Id. at 1425. Similarly, in MKB Management, Inc. v. Melikian, a property management company sued a property owner who failed to compensate it for services under the parties’ agreement. MKB Management, Inc. v. Melikian, 184 Cal.App.4th 796, 800 (2010). The defendants argued that the company could not recover because it did not possess a real estate broker license. Id. at 801. After a detailed review of the Blasi court’s severability analysis, the court determined severance was appropriate because some of the plaintiff’s acts did not require a license. Id. at 803-05. In Greenlake Capital v. Bingo Investments, the court once again undertook a detailed analysis of Marathon, as well as Venturi and MKB Management, to determine if a financial adviser who was not a licensed real estate broker could recover when some elements of the parties’ relationship required a license. Greenlake Capital v. Bingo Investments, 185 Cal. App. 4th 731 (2010). The court again remanded the case for a determination of whether severability was appropriate in the complicated factual situation where some acts may have been lawful without a license. Id. at 743.

As illustrated above, the Talent Agencies Act is hardly unique in using a functional definition to determine who falls within its purview. Individuals who represent artists can be either managers or agents, but they cannot be both. Each role has its limitations and its benefits. If one procures employment, they are considered agents and are therefore subject to the licensing requirements and other applicable restrictions and obligations found in the Act and the Unions’ franchises. Alternatively, they can forego the ability to procure employment and act as a manager, thus avoiding the licensing requirements, commission limits, and other restrictions and obligations that agents must abide by. CONCLUSION Courts have repeatedly upheld the constitutionality of the Talent Agencies Act. It may be that there are areas in which it can be updated to provide greater certainty. But the Act, and decades of interpretation of it, is clear that those who procure employment must be licensed or they risk consequences for their violation. As the Entertainment Commission clearly stated, “there can be no ‘sometimes’ talent agent, just as there can be no ‘sometimes’ professional in any other licensed field of endeavor.” Cal. Entertainment Comm’n Rep. at p. 11-12. If one seeks to procure employment for artists, he is an agent and must be licensed. If PlaintiffsAppellants believe that the Act has outlived its usefulness and should be repealed or amended, their remedy is to seek such changes through the democratic process.

For the foregoing reasons and those in the Appellee’s Brief, Amici respectfully urge this Court to affirm the decision below. Dated: December 13, 2013

Respectfully submitted, By: /s/ Duncan W. Crabtree-Ireland DUNCAN W. CRABTREE-IRELAND DANIELLE S. VAN LIER SCREEN ACTORS GUILD-AMERICAN FEDERATION OF TELEVISION AND RADIO ARTISTS Counsel of Record for Amici ANTHONY R. SEGALL ROTHNER, SEGALL & GREENSTONE Counsel for Writers Guild of America, West, Inc. DAVID B. DREYFUS DIRECTORS GUILD OF AMERICA, INC.

CERTIFICATE OF COMPLIANCE I certify pursuant to Federal Rules of Appellate Procedure 32(a)(7)(C) that the attached brief is proportionately spaced, has a typeface of 14 points, and contains 6,997 words, excluding those parts of the brief that the Rule exempts from the word-count limitation, which is less than the 7,000 words permitted by Fed. R. App. P. 29(d).

Dated: December 13, 2013

Respectfully submitted,

By: /s/ Duncan W. Crabtree-Ireland DUNCAN W. CRABTREE-IRELAND

CERTIFICATE OF SERVICE I hereby certify that I electronically filed the foregoing Brief of Amici Curiae in Support of Defendants-Appellees by Screen Actors Guild - American Federation of Television & Radio Artists, Directors Guild of America, Inc. and Writers Guild of America, West, Inc. with the Clerk of the Court for the United States Court of Appeals for the Ninth Circuit by using the appellate CM/ECF system on December 13, 2013. Participants in the case who are registered CM/ECF users will be served by the appellate CM/ECF system.

/s/ Duncan Crabtree-Ireland DUNCAN CRABTREE-IRELAND