24 Feb ENFORCING MINORS’ CONTRACTS IN THE ENTERTAINMENT INDUSTRY
A basic guide for producers and content creators.
By: Marc Jacobson, Esq.
If you hire young talent in the entertainment industries, be sure their contracts are enforceable.
Imagine you are in charge of an entertainment company. You shoot your film/TV show, release your recording, or pay an advance for a music or book publishing agreement, and later, even years later, you get a letter in the mail from the minor with whom you signed an agreement, that says “I disaffirm my contract with you” along with a check for the money you paid to that talent. With that simple letter, the talent has effectively made the assets created by that talent worthless to you, potentially rendering your use of those assets unlawful. You will need to stop using the film or TV show, or edit out that minor actor’s scenes, or stop releasing the record or using publishing assets you thought you bought. The loss of income to the talent is tiny compared to the cost the entertainment company will incur to change its position because of the loss of rights to those assets.
There is a modest cost to assuring that these contracts are not subject to disaffirmance, and that the entertainment company gets the benefit of its bargain. Remember, the premise is that since minors do not have the legal capacity to sign contracts, the contracts are not binding on the minor. New York and California have well defined court procedures for securing approval of minors’ contracts in the entertainment industry, but many states do not, while other states do not require judicial approval for the contracts to be enforceable.
In New York, contracts with minors for anything other than the minor’s necessities, such as food, clothing and shelter, are voidable by the minor. There’s a whole body of law surrounding what happens when the minor tries to back out of the deal, but in New York, like in California, there is a special proceeding by which an entertainment company can secure judicial confirmation of the contract, making the contract no longer subject to disaffirmance.
While some entertainment companies think a “parental guarantee” makes the agreement enforceable and think it renders the agreement not subject to disaffirmance, the law in New York expressly contradicts that notion. In fact, New York’s General Obligations Law states that if the entertainment contract is one which the court has jurisdiction to approve, no parent is liable if he or she signed the contract or as a guarantor, unless the contract is approved by the judge. While there are nuances to that statute, as applied to these agreements, the simple rule is that a parental guarantee does not work in New York.
In securing judicial approval in New York, the minor and his or her parents must appear in court, and testify briefly about the contract, how the production treated them and that they understand the meaning of the contract. The minor’s education requirements during production are addressed, as well as the term of the contract. In New York, the term of the contract generally may not exceed three years. The parents will state whether the minor was paid, and whether a portion of the payment, normally 15% of the gross income, was set aside for the minor’s benefit under the court’s control into a “Coogan Account.” In limited circumstances, other types of minor’s trust accounts may be used in certain states. Coogan Accounts provide that withdrawals may only be made from the account with the court’s permission and then only for certain limited purposes. When the child turns 18, the money becomes available to the minor. This account was named for the minor actor Jackie Coogan (who later portrayed Uncle Fester on The Addams Family). His parents took his money from his acting work when he was a minor, and so the law, originally passed in California, was later passed in New York requiring the creation of these separate, restricted accounts.
In California, only contracts to employ the minor may be approved by the court. So, contracts between the minor and her agent or manager, are not eligible for judicial approval in California. In New York, on the other hand, agreements where the minor employs an agent or manager may be judicially approved, as well as agreements where the minor is engaged to provide services or create assets. In California, no in person court appearance is required by either side, and there is a seven-year maximum term on any contract receiving approval. California also requires that 15% of the minor’s gross income be deposited into a Coogan Account.
In New York, counsel appears in court for the entertainment company. While having a representative from the entertainment company present at the court hearing is always a good idea, it is not a requirement to secure judicial approval. Frequently, the parents and the minor appear without counsel.
In New York County (Manhattan) Supreme Court, one judge is assigned to hear all these cases, and she makes the proceedings friendly and cordial. Because the proceedings involve a minor, the courtroom is sealed so that only the participants in this case are present during the hearing. If requested, the entire record may be sealed, so that none of the papers filed, including personal information, can be seen by the public. This process of sealing the record is challenging, but very important.
In New Jersey and Georgia, for example, there is no statutory authority for a separate proceeding to secure judicial approval of a minor’s contract. But in Georgia, if the contract is signed as part of the minor’s trade or business, the contract is enforceable, and no proceeding is necessary. In the absence of a similar statute in New Jersey, and the absence of a special proceeding, the producer may run the risk that the minor disaffirms the contract up to the time the minor reaches the age of majority, or shortly thereafter.
As you embark on your entertainment industry project, and engage with minors, make sure those agreements are enforceable. It is not hard, it is a little bit of a pain, but in the long run, it is worth the trouble.