THE BENEFITS OF MEDIATION AND ARBITRATION FOR DISPUTE RESOLUTION IN ENTERTAINMENT LAW

Jason Aylesworth

Litigation requires a huge investment of time and money for an uncertain verdict. Clients in the entertainment industry must also risk irreparable damage to their reputation. Gossip websites such as TMZ, E! and omg! exploit and sensationalize even minor disagreements which celebrities then have the additional burden to publicly defend. Once a celebrity commences litigation; it is practically guaranteed that the court filings will appear on The Smoking Gun website.

Any litigator will attest that litigation has become a lengthy and expensive proposition. It is a stressful process that destroys relationships. As some disputes will inevitably arise, lawyers seeking to best serve their clients must consider other forms of dispute resolution in order to avoid much of the delay, expense and disruption of traditional litigation. Mediation and arbitration, both of which are responsive to party needs in a way that is not possible in a court proceeding, are two of the most frequently utilized forms of dispute resolution. They have particular applicability in the field of entertainment law. Consider a screenwriter who was not given the proper credit in an upcoming film release. Would a court be able to quickly resolve this non-monetary dispute as efficiently as an arbitration hearing could? How about the bookwriter, composer and lyricist that collaborated on a musical that is about to move into a Broadway theatre, only to learn that the director who developed the piece at a hole-in-the-wall theatre demands part of the author’s share in a profit pool? Would a judge with no knowledge of the industry be as helpful as a neutral third party who could be chosen by all of the parties involved?

Mediation and arbitration are no longer alternative dispute resolution mechanisms, but have become common in the resolution of commercial and non-commercial disputes between and among business entities and/or individuals. Mediation and arbitration are routinely incorporated into contracts as the method of choice for resolving disputes that may arise in the future. They are also routinely used after problems arise and the parties seek an appropriate means to resolve their disputes. We will explore the benefits of incorporating the following dispute resolution endgame provision into an agreement between parties in the entertainment industry:

“Any claim, dispute, misunderstanding or controversy or charge of unfair dealing arising under, in connection with, or out of this Agreement, or the breach thereof, shall be submitted to mediation, before resorting to arbitration.”

Many agreements expressly provide for alternative options in resolving conflicts. We will explore the benefits in choosing a path as written in the provision above, where the parties attempt to resolve the dispute in mediation first, before proceeding to arbitration, to encourage parties in the field of entertainment to draft such provisions.

Mediation

Mediation is the process in which parties engage a neutral third party to work with them to facilitate the resolution of a dispute. The focus is on resolving the dispute, rather than winning the dispute. The advantages of mediation include the following:

1. Opportunity to Listen and Be Heard. Parties to a mediation have the opportunity to directly air their views and positions, in the presence of their adversaries. The process can thus provide a catharsis for the parties that can engender a willingness to resolve the differences between them. Moreover, since parties are heard in the presence of neutral authority figures, the parties often feel that they have had “their day in court.” In the entertainment industry, there are lots of egos at stake. Clients that have suffered may want an opportunity to tell their story, and clear up any misrepresentations that are exploited to the public.

2. Preserving an Existing Relationship. The litigation process can be very stressful, time consuming, costly and often personally painful. At the end of litigation, the parties are often unable to continue or restart a relationship. In contrast, mediation disputes can be resolved in a manner that saves a business or personal relationship that; ultimately, the parties would prefer to preserve. Many relationships in the entertainment industry are of a collaborative nature, and it is pretty common for the parties in dispute to have had some success in prior artistic collaborations. If the creative parties are able to overcome the hurdle of the dispute through mediation, there is the potential that the parties can continue producing successful artistic endeavors.

3. Creative Thinking and Problem Solving. Litigation can never resolve both parties’ issues in a way that is simultaneously favorable to both parties. In a mediation, all parties involved can brainstorm together to find solutions that address most, if not all, of the issues that are presented in the mediation. As stated earlier, people in the entertainment industry are creative by nature, and are known to think outside of the box. Mediation should be the least foreign process to anyone involved in any aspect of the entertainment industry.

4. Avoid the Uncertainty of a Litigated Outcome. Resolution during mediation avoids inherently the uncertain outcome of litigation and enables the parties to control the outcome. In the event that the mediation does not resolve all of the issues, which are then left to be settled in arbitration, both parties may have a better understanding and more realistic assessment of the value of their position in their dispute. A mediator without any stake in the outcome or advocacy bias can be an effective “agent of reality” in helping the parties to be realistic as to their likely litigation or arbitration alternative.

5. Confidential Process and Result. Mediation is covered in private. Only the mediator, the parties and their representatives participate. The mediator is generally bound not to divulge any information disclosed in the mediation. Moreover, confidentiality agreements are often entered into to reinforce the confidentiality of the mediation. Furthermore, the parties may agree to keep their dispute and the nature of the settlement confidential when the matter is resolved. The drama that may play out in a private mediation is essentially protected from becoming a soap opera over the internet.

6. Less Emotionally Draining. Since mediation can be conducted sooner, more quickly, less expensively and in a less adversarial manner, there typically is much less of an emotional burden on the individuals involved than proceeding in a burdensome and stressful trial. Furthermore, proceeding through trial may involve publicly reliving a particularly unpleasant experience, or exposing an unfavorable business action which gave rise to the dispute. This is avoided in mediation.

7. Less Financial Burden. By resolving disputes earlier in mediation rather than later in litigation, parties can save tremendous sums in attorney’s fees, court costs and other related expenses. Particularly for new artists, filmmakers and producers who are just making ends meet to support their craft, most of them do not have a reserve account to fund litigious battles.

8. Control by the Parties. Each dispute is unique, and the parties have the opportunity to design their own unique approach and structure for each mediation. They can choose the mediator who has the experience and knowledge they require, and, with the help of the experienced mediator, plan how the mediation should proceed and decide what approaches make sense during the mediation itself.

9. The Mediator Plays a Crucial Role. The mediator’s goal is to help the parties settle their difference in a manner that meets their needs and is preferable to the litigation alternative. An experienced mediator can serve as a sounding board, help identify and frame the relevant interests and issues of the parties, help the parties test their case and quantify the risk/reward of pursuing the matter, and, if asked, provide a helpful and objective analysis of the merits to each of the parties, foster and even suggest creative solutions, and identify and assist in solving impediments to settlement. This is often accomplished by meeting with the parties separately in private caucuses, as well as in a group, so that all participants can speak with total candor during the mediation process. The mediator can also provide the persistence that is often necessary to help parties reach a resolution.

10. Mediation Helps In Complicated Cases. When the facts and/or legal issues are particularly complicated, it can be difficult to sort them out through direct negotiations, or during trial. By contrast, mediation provides an opportunity to break down the facts and issues into smaller components, thereby enabling the parties to separate the matters that they agree upon, and those that they do not yet agree upon. The mediator can be indispensable to this process by separating, organizing, simplifying and addressing relevant issues.

11. Expeditious Resolution. The mediation can take place at any time. Since mediation can be conducted at the earliest stage of a dispute, the parties avoid the potentially enormous distraction from their businesses and the disruption in their personal lives that results from protracted litigation.

12. The Pro Se Litigant. Mediation can be very helpful when a party does not have an attorney and is therefore representing him/herself pro se. Court litigation can be very difficult for the pro se litigant who is unable to navigate the complexities of the court process and trial. Dealing with a pro se litigant in court can also create difficult challenges for the party that is represented by counsel. However, in mediation, the parties can more easily participate in the process and benefit from the involvement of an experienced mediator.

13. Parties Retain Their Options. Since resolution during mediation is completely voluntary, the option to proceed thereafter to trial or arbitration is not lost in the event the mediation is not successful in resolving all matters.

Arbitration

Arbitration for the most part is an abbreviated trial. It is a process in which parties engage either a third party neutral arbitrator or a panel of three arbitrators to conduct an evidentiary hearing and render an award in connection with a dispute that has arisen between them. Even after a mediation where most of the issues have been resolved, parties may still have certain impediments that they could not overcome and were stuck at an impasse. Since such impediments are nevertheless a small portion of the scope of the original dispute, arbitration would be the appropriate forum to reach a quick verdict. The advantages of arbitration in lieu of litigation include the following:

1. Control. Both parties can design the process to meet the needs of the parties involved, including choosing the arbitrator or panel of arbitrators. Parties cannot choose a judge when they are entering the arena of litigation. Moreover, parties can select arbitrators that may have expertise in the specific area of dispute, which arbitrator may have a better basis of judging issues on the merits rather than a justice who may only have a basic general knowledge of what is customary in that particular industry. In addition, the parties will also have input in scheduling the arbitration hearing at a time that is convenient to everyone involved. Litigation does not offer parties a mutual calendar that takes in consideration everyone’s obligations.

2. Speed and Efficiency. Disputes in arbitration tend to arrive at a conclusion much sooner than in litigation. Arbitrations can commence and conclude within months, and often in less than a year. It is rare for cases in litigation to be resolved within a year, and that does not even factor in appeals which can stretch the period of resolving disputes to a number of years.

3. Economical. The arbitration process can result in substantial savings of attorney’s fees, court costs and other related expenses because the arbitration process generally does not include time consuming and expensive discovery that is common in litigation (e.g. pricey motion practice, costly depositions and very extensive e-discovery).

4. Finality. In court proceedings, parties have the right to appeal the decision of a judge or the verdict of a jury. In contrast, the grounds for court review of an arbitration award are very limited. The award of an arbitrator is final and binding on the parties.

5. Privacy. Arbitrations are conducted in private. Only the arbitrators, the parties, counsel and witnesses attend the arbitration. Confidentiality of the arbitration proceedings, including sensitive testimony and documents, can be agreed to in advance by the parties. In contrast, court proceeding are generally open to the public. Moreover, the parties suffer less damage to their potentially ongoing relationship in the entertainment industry since the format in a private arbitration is less adversarial. Finally, the awards could be made confidential, so outsiders cannot make presumptions on winners or losers.

Not giving a client the option of choosing which process to use in resolving a dispute can be a costly disservice. Most parties cannot afford the time and money spent drudging through a grueling and contentious marathon to resolve the dispute. Attorneys should direct their efforts to resolving a dispute in mediation, rather than wasting resources to achieve a result that may ultimately burn bridges. Litigation is counterintuitive to creative people. While talented artists and producers may fight for their artistic beliefs and convictions, most have accepted that theirs is a collaborative process. That same spirit of collaboration can and should be extended to the resolution of disputes.

Contact

Mark D. Sendroff, Esq.
msendroff@sendroffbaruch.com

Jason P. Baruch, Esq.
jbaruch@sendroffbaruch.com

Jason Aylesworth, Esq.
jaylesworth@sendroffbaruch.com

Carter Anne McGowan, Esq.
cmcgowan@sendroffbaruch.com

Sarah M. Sheppard
Paralegal
ssheppard@sendroffbaruch.com

Theresa Rose
Office Assistant
trose@sendroffbaruch.com

Candice Owens
Financial Administrator
cowens@sendroffbaruch.com

Contact Info

Sendroff & Baruch, LLP.
1500 Broadway, Suite 2201
New York, NY 10036-4015
Phone: (212) 840-6400
Fax: (212) 840-6401