How Does a Studio Protect Itself When the Hot Young Star it has Hired Starts Filming and the Deal Goes Awry?

By Bruce Sires

Your studio has hired one of the most sought after young minor actors to star in  the next blockbuster movie for the summer of 2013.  Not only that, but the studio has paid top dollar for this bankable up-and-coming young star.  The actor loves the script and particularly his part in it.  Because minors can unilaterally avoid (disaffirm) a contract, you've had the contract approved by the court.  Court approval of employment contracts for minors employed in entertainment will protect the studio.  And now, filming is about to start.  Of course, over the past six months the writers have been tinkering with the script, and when the minor actor, and perhaps his parents, see the re-write, they are beside themselves with the precarious scenes they have written for him.  All of the talk about how much these scenes will advance his career fall on deaf ears and both sides enter into lengthy settlement negotiations which result in a deal.  But, the attorneys in Business and Legal Affairs tell you that the statutes which allow you to have a minor's employment contract approved by the court to avoid disaffirmance do not apply to the settlement of a contract dispute.  Can you protect the settlement from disaffirmance?

Yes, you can.  There is a statutory procedure for the approval of settlements with minors, and there are form petitions and orders which must be used to obtain that court approval. This procedure protects both the studio from the minor's right to disaffirm and the minor by preserving the money or property received until the minor reaches age 18.  However, the forms, as you'd quickly discern, are designed for personal injury and medical malpractice settlements, not for contract disputes!  Because of this, the forms require fitting a square peg into a round hole and that requires the skill of a practiced expert.  In cases where the dispute cannot be settled by agreement and the matter is litigated in a civil action, the court hearing the suit may apply the same statute.  

Two other issues need to be considered before making the request to the court.  How will the court protect the money received until the minor attains age 18; and, when you're dealing with a popular and well known individual, how can you keep the actor's name out of the courtroom and the press?

The rules of court provide for filing under seal, so that the public documents have names and other identifying information redacted, such that only the judge, hearing the matter, will know the true identity of the minor and the minor's family.  The process is simple, but requires a lot of paper.  The petition is initially filed totally redacted, along with the complete, unredacted petition left with the court in a sealed envelope for the judge's eyes only.  The petition and envelope are accompanied by an application requesting the court to order the file sealed.  If granted, the public file remains redacted throughout the process, and the actual names are never publicly revealed.  If the application is denied, then the unredacted documents are taken out of the envelope, filed with the court and become public.

The money or other property to be paid to the minor is required to be placed in a protective account or trust for the minor's benefit.  The petition will include a request that the money be set aside:  (1) in a probate guardianship of the estate; (2) in a custodial account under the Uniform Transfers to Minor's Act; (3) in a blocked account, similar to a Coogan Trust account, with withdrawals made only upon court order; (4) in a special needs trust, where the minor has a disability; or (5) in a trust established by, or approved by, court order, and revocable by the minor upon attaining age 18.   In any event, the court retains jurisdiction over the trust until the minor attains age 18.  Not all of these options are available when the amount awarded to the minor does not exceed $20,000.  

These provisions provide employers of minors, not only in entertainment, but also sports, and not just movie studios, with a relatively straightforward procedure to make a settlement agreement permanent for the benefit of all the parties.  At the same time, they allow the court to approve a method to preserve the money for the minor.  Generally, the revocable trust discussed above will provide the most flexibility.  Seeking out experienced legal counsel to guide the parties through this process is essential. 

For more information on settling disputes under a minor's contract in entertainment and sports or any other related questions, please contact Bruce D. Sires.