Berg v. Traylor

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The Case: Berg v. Traylor (PDF)

Berg v. Traylor is a 2007 Appelate Court Case in California. The court’s decision on this case is a precedence setting one for all child actors and their parents. The primary issues are

• Talent management contracts and who signs them,
• A child’s right to disaffirm their contract,
• The potential conflict of interest between the parent and child,
• …and who is responsible for payment of commissions when the contract is “disaffirmed”.

Disaffirmance is the process of canceling a contract by reason of “infancy” (ie. the child was too young to be legally bound to a contract). When a minor disaffirms, it is as if the contract never existed—it is erased.

Craig Lamar Traylor (IMDb) was a young actor best known for his role in the Fox television show, Malcolm in the Middle (http://imdb.com/name/nm0871493/). His mother, Meshiel Cooper Traylor, signed a two page management contract with talent manager Sharyn Berg (Sharyn Talent Management) in January 1999. The agreement was for 3 years at 15% commission. The contract specifically stated that any action Craig “may take in the future pertaining to disaffirmance of this agreement, whether successful or not” would not affect Meshiel’s liability for any commissions due to Berg. In other words, Meshiel would owe the money, even if Craig bowed out of the agreement.

During the next 2 years, there was no dispute about the manager’s work product. She advised the family, coached Craig, took him to auditions, even loaned them money.

In June 2001 (2 1/2 years into the 3 year agreement), Craig obtained a recurring role on Malcolm in the Middle. On September 11, 2001, Meshiel sent a certified letter to Berg stating that while she and Craig appreciated her advice and guidance, they no longer needed her management services and could no longer afford to pay the 15% commission, since they owed taxes. Berg responded by informing the Traylors that they were in breach of their management contract.

In 2004, Berg filed suit against the Traylors, seeking her commissions. The court battle lasted 4 years and the Traylors employed 4 different law firms during that time. The Traylors missed court dates and deadlines multiple times. No guardian ad litem (a court appointed person commonly assigned to represent a child in a lawsuit) was appointed for Craig.

For most of that time it looked like Sharyn Berg, represented by attorney Brad S. Kane, was winning the case. An arbitration award was issued in 2005, awarding Berg commissions and interest of $154,714.15, repayment of loans of $5,094, attorney fees of $13,762, and $405,000 for commissions on Craig’s future earnings. The end, right? No. Just when they thought the case was over….

In August, 2005, attorney Robert Pafundi was retained by the Traylors. He recognized that no one had addressed Craig’s right to disaffirm the contract, and immediately filed a “Notice of Disaffirmance of Arbitration Award by Minor” which not only disaffirmed the original management contract, but also disaffirmed the arbitration award, and accused Sharyn Berg of practicing as an unlicensed talent agent. The case took on a new direction.

Eventually, the judgment was reversed and Craig was released from his contract. In March of 2007, the court stated that Craig DID have a right to disaffirm because he was a child, BUT Meshiel was liable for the commissions. In other words, the mother is left holding the financial bag, to the tune of more than half a million dollars!

The court also made a strong statement in regard to who is watching out for the child’s best interests. Judge Doi Todd states:
“Where our difficulty lies is in understanding how counsel, arbitrator and the trial court repeatedly and systematically ignored Craig’s interests in this matter. From the time Meshiel signed the agreement, her interests were not aligned with Craig’s. That no one—counsel, the arbitrator, or the trial court—recognized this conflict and sought appointment of a guardian ad litem for Craig is nothing short of stunning. It is the court’s responsibility to protect the rights of a minor who is a litigant in court.”

The Context of Prior Laws Protecting Child Performers

California has the most complex set of laws for child performers in the nation. When viewing Berg v. Traylor it is important to remember that some of those laws were affecting this case:

1. The Coogan law was amended in 2000 to state that ALL the earnings belong to the child. Not just the 15%–all of it
2. The law allows any child (under 18) to disaffirm (get out of) their contracts. It is believed that children are not capable, by reason of their “infancy” to enter into a binding contract. Because most employers, agents and managers in the entertainment industry realize this, it has become common for them to attempt to bind the child to the contract in some way either by:
   • Getting “court approval” of the contract. Employers typically do this. Obtaining court approval involves the employer (a studio usually) filing papers with the court, asking a judge to look at the contract and decide that it is “fair” and in the best interest of the child. This process often takes 9 months or more, and parents may not even be aware it is happening. Employers do this to protect their investment—they don’t want a child starring in a feature film, for example, to block the distribution of the film because they “disaffirmed” their employment contract: *if a contract is court-approved, the child cannot disaffirm it.”
     OR
   • Attempting to have the parent sign a contract rider or a clause in the contract (similar to what Meshiel Traylor signed) that says IF the child disaffirms, the parent will be responsible for the contract.
3. The law makes a clear difference between agents and managers. Agents are regulated by the Talent Agency Act. Their activities are limited to avoid conflicts of interest. In exchange, agents have the right to procure employment and the right to have their contracts with children court approved. Managers, on the other hand, are only minimally regulated by the state in California, and their right to have contracts approved has been repeatedly denied by the court.
4. Children who earn their own money, as child actors do, are not exempt from paying taxes. The IRS will commonly send bills to a child throughout their career, and they can go after the parent before the child is 18. But they really put the pressure on the child when they turn 18, knowing that their trust money will become available to them at this point. This can result in a child losing all their trust account savings to a large tax bill.

As a Parent of a Young Performer, What Does Berg v. Traylor Mean to Me?

Simply: you can be held liable for your child’s contracts and you could end up owing HUGE amounts of cash—not your child, YOU. This is particularly scary considering many parents own a home and have significant assets that could be taken from them, in order to satisfy the debt.

This case could mean:

• You and your child have an inherent conflict of interest if your child’s contract includes a “parent clause”.
• A guardian ad litem must be appointed for any legal proceedings if the parent or child have different interests. A “guardian ad litem” is an impartial person, appointed by the court ONLY for the purposes of that case.
• A child may disaffirm or void their agency/manager contracts unless the contract is court approved.
• Disaffirmed contracts are void from inception, so minors may be awarded their commissions back from the manager.
• Parents may still be held liable for their child’s commissions, even if the child disaffirms the contract.

Other Cases that May Affect Kids Who Want to Void Their Contracts

In January 2008, the California Supreme Court issued a decision in Blasi vs. Marathon Entertainment. Rosa Blasi (Strong Medicine) attempted to exit her management contract by stating the manager illegally acted as a unlicensed talent agent by procuring employment. The court ruled that although Marathon did violate the law (Talent Agency Act) by procuring employment, that doesn’t necessarily allow Blasi to void the entire management agreement. Then the court referred the case to the Labor Commission to decide which pieces of the contract are “severable”. http://reporter.blogs.com/thresq/2008/01/decision-reache.html,

In August 2008, Vanessa Hudgeons (High School Musical) was being sued by her manager/music producer, Johnny Vieira, for $5M after she attempted to disaffirm her contract 9 months after turning 18 (remember parents…you could be facing responsibility AFTER your child turns 18). Mr. Vieira claimed that he is entitled to 50% of her recording earnings, as per the contract that he says was court approved. He is also suing Vanessa’s father, Greg, for defamation.  The legal battles have continued back and forth since, with Hudgeons claiming that Vieira was still using her name to sell his business.  Reuters: Disney Star Vanessa Hudgeons Sued

Ms. Hudgeons was also sued by her attorney, with whom she had a contract for 5% of her earnings. She tried to disaffirm that contract as well, but ended up settling out of court in January 2008.
http://www.eonline.com/uberblog/b56908_hudgens_gets_schooled_in_contract_suit.html
http://www.tmz.com/2008/08/11/hudgens-accused-of-being-a-big-stiff/
http://www.tmz.com/2007/09/18/vanessa-hudgens-stars-in-high-school-lawsuit-ical/

Tips for Parents of Child Actors

1. Make sure you really understand the contract you sign. It is highly advised that you take management contracts, since they are non-standard and not regulated by the State, to a lawyer for review.
2. Do the math. Make sure you can afford to hire a manager. By the time you take 15% Coogan, 10% agent, 30% taxes, 2% union dues, and 15% to the manager, there isn’t much left for real expenses. When a child is successful, it gets worse—publicists, lawyers, security and more. Taking on a manager is a CHOICE (you must have an agent to get work in California, but not a manager). Don’t sign unless you can afford it. Consider negotiating for a percentage less than 15% when you reach a certain level of income.
3. Plan for success. Many parents enter into management contracts thinking “15% of nothing is nothing”. In other words, they believe that the manager is willing to work for free now, so if they generate any success it’s better than the “nothing” they have now. Do not make this mistake! Instead, imagine success: that your child will be a series regular on a network show. Will you be comfortable giving $5000 a month to this manager, when your child is working consistently? What will this manager be able to do for you then? Make wise choices about the kind of manager you are hiring, and consider if they will be able to grow with you.
4. Beware of managers from out of state who tell you that they have “Hollywood connections” and try to get you to sign a contract in another state. It is extremely rare that managers from outside California have the professional knowledge and connections to provide appropriate services in L.A or N.Y. And if you have a contractual dispute, it will be further complicated by the state laws in your home state which aren’t set up to protect child actors.
5. Look for the parent clause. Sometimes it is a statement within the contract. Sometimes it is a separate rider that you sign, attached to your child’s contract. If you signed one of these, you can be held personally liable for your child’s commissions.
6. Look for information about court approval. Is this manager or agent going to attempt to get a court approval? Are you signing away your right to be present if they do? Most studio employment contracts will be court approved. Agents have the express right to court approve contracts. Managers, thus far, do not have the right to court approve. Watch for that clause.
7. Make sure to have appropriate income tax withholding throughout the year, and file and/or pay taxes on time! Children must pay their own taxes on their own individual returns (not piggy backed onto the parents). One of the reasons children typically try to exit their management contracts is because they owe money elsewhere (to the IRS) and are in a financial bind.
8. If you sign a management or agency contract, and the representative has provided the services they agreed to, PAY THEM THEIR COMMISSION. No more, no less. It is your responsibility to be a good steward of your child’s money. The money they earn is 100% theirs (perhaps philosophically and legally in California), and it is your job as trustee to spend it wisely. Part of the job is honoring the contracts you sign on their behalf. If an agent or manager is not doing their job, that is another story, but deciding to renege on contract simply because you don’t want to pay is dishonorable, unprofessional and “stagemomish”.
9. Look for an “out” clause in the contract before you sign the contract. Prevention is the best cure. Envision a prenuptial agreement for your new “marriage” to the agent/manager. Many agent/manager contracts have other ways to terminate such as “30 days notice by either party”, “no work for 190 days”, a “key manager clause” (when your manager leaves the firm, you can terminate your contract), or the representative not living up to very specific job duties defined in the contract. Make sure you have a way out in case the representative doesn’t do their job.
10. If you get into a possible disaffirmance situation, consider alternatives that may protect the parents’ interests as well:
    Arbitration. Many contracts have arbitration clauses within them.
    Just ask…explain your position to the representative and see if you can come to a NEW agreement. Less commission (not every manager takes 15%–suggest 10%, or not taking commissions on commercial or voiceover)
    File with the Labor Commission instead of filing a lawsuit. The Labor Commissioner has “exclusive jurisdiction” for Talent Act issues (agency disputes, or whether a manager “procured employment”. To look at the kinds of issues they deal with, see here: http://www.dir.ca.gov/dlse/DLSE-TACs.htm 
11. Seriously consider hiring a lawyer to look at your management contract. SAG-AFTRA has a member benefit that offers one hour legal consultations. Most entertainment attorneys will review a basic contract for a one time fee. If you should get into a conflict, seek out a qualified ENTERTAINMENT attorney. Look for key words in their qualifications such as minors, entertainment, artist management contracts, etc. This is a very specialized area of law, so make sure you have someone who understands the particular issues regarding professional child actors.