Metoo-Can Lt Be LLP

Jeffrey T. Thayer is a Partner at Hawkins Parnell & Young #MeToo-Can lt Be LLP. His practice focuses on Complex Litigation, Automotive LiabilitY, lntellectual PropertY and Used as an Excuse? Business Law. He is a H graduate of the UniversitY of California at BerkeleY Frustration of Purpose E School of Law (Boalt Hall) and UCLA. To learn more: www. hpylaw.com/attorneys- and Other Theories M jefirey-thayer.html Natasha S. Chee is the Used to Excuse principal at the Law Offices of Natasha S. Chee. Her practice focuses on Performance in Entertainment, lntellectual V Property and Business Law. EIE She works with producers, f ilmmakers, musicians, Entertainment and content creators and tech companies. She graduated from Santa Clara University School of Law and UCLA. Business Deals To learn more: www. n t natashachee,com. Jeffrey T, Thayer and Natasha S, Chee nineteen. Amazon brought in a new studio head, who ith the rise of #MeToo and other socio-political did a double-take and decided to try to cut losses. Allen Wmovements, the entertainment industry is wran- disagreed, and filed suit for breach ofcontract.2 gling with how to deal with filmmakers and talent whose The case currently is pending in the Southern reputation instantly combusts. Case in point, Woody District ofNew York. Certain ofAllen's claims pertaining Allen and Amazon. ln 2017, Amazon agreed to a deal to the four movies globally were recently tossed, but the with the renowned auteur to release four feature films.r case is proceeding as to breach of contract allegations Amazon viewed this agreement as a significant part related to the movies individually.3 Amazon's legal team of a larger strategy to compete with Netflix and other has indicated they will likely be pushing an argument major distributors. Although allegations of sexual abuse for "frustration of purpose."4 Amazon's lawyer, Robert had dogged Allen for years, the claims did not appear to Klieger, stated, affect the negotiations at the time the two parties entered into their agreement. Amazon's performance of the Agreement As the social climate changed, however, Allen's became impracticable as a result ofsupervening adopted daughter, Dylan Farrow, continued to sound events, including renewed allegations against off on accusations of sexual abuse, and Allen made Mr. Allen, his own controversial comments refusal top talent comments on Twitter about #MeToo that drew unwanted and the increasing of to work him in attention. Stars of the first film covered by the deal, A with or be associated with any way, all Rainy Day in New York, began to distance themselves of which have frustrated the purpose of the from Allen and the film. It did not help that the film Agreement and support Amazon's decision to terminate it.5 centered on a relationship between an older man played by Jude Law, forty-four at the time of production, and Other studios have been grappling with similar a young woman played by Elle Fanning, who was then issues. In February 2019, Millennium Films halted California Lawyers Association . Business Law News 29 production on Red Sonja, which was to be directed by To prove the defense, the party asserting frustration Bryan Singer, who, similar to Allen, has been accused must demonstrate that: of statutory rape. Millennium's business model required 1. The frustration was so severe and harsh that the guaranteed distribution in the U.S. to make essential basic purpose of the contract was destroyed;e deals with foreign distributors, and no domestic label 2. The supervening circumstance or event was would touch the project. Unlike Allen, Singer's deal was unforeseen and not the fault of one of the parties;1O not "pay-or-play," and thus was easier for Millennium to walk away from.6 3. The frustration was of the type not regarded as In 2015, Spanish language network Univision within the risks that were assumed under the backed away from a fle-year, $13'5 million deal to contract;lland broadcast the Miss USA pageant after then-owner 4. The frustration was recognized by both parties to Donald Trump said he would be running for president the contract (that is, both parties' purposes were and derogatorily referred to Mexican immigrants as frustrated).12 "rapists." After Trump filed a $500 million lawsuit, Univision moved for dismissal, arguing that Trump In N akashima, plaintiffs FPI Development, Inc. and frustrated the essential purpose of the agreement by K.W. Hunt obtained an option to purchase and develop a insulting its core audience. golf course from Kenneth Earp, and assigned the "Earp "Frustration of purpose" as a defense to breach of option" to defendants Al Nakashima and George Price in contract suits is not new, and typically finds the most exchange for a promissory note. When defendants did not success in wartime or other times of great upheaval. The pay, plaintiffs sued. Among their defenses, defendants theory is that while both parties to a contract technically argued that there \ryas a failure of consideration because can perform their duties, as a result of unforeseeable plaintiffs breached a promise to pursue development of events, one party (using our initial example, Woody the property, and because the option stated that it could Allen) cannot give the other party (here, Amazon) the not be assigned without Earp's prior consent. benefit of what induced the parties to contract in the frst The defense hinged on the argument that the option place. In the Allen example, the "unforeseeable" event was essentially worthless because plaintiffs did not would be the #MeToo movement. develop the property, and Earp could reject a proposed Frustration ofpurpose has deep roots in legal history assignment. In rejecting defendants' first failure of but how well does it apply to modern cases presented in consideration argument, the court concluded that the the context of #MeToo or other contemporary social and relevant law pertained to frustration of purpose.r3 The political movements? court stated: When the frustration of purpose defense is We assume for the sake of argument that raised, California courts look first to see whether the defendants showed a triable issue of fact fundamental reason of both parties for entering into concerning the breach of the plaintiff's the contract has been frustrated by an unanticipated contract with Earp by the plaintiff and a supervening circumstance that substantially destroys the potential defense of Earp to performance value of the performance by the party standing on the under that contract. The fact that the plaintiff contract.T was in breach of its contract with Earp does Where, after a contract is made, a party's not amount to a frustration of the purpose of performance is made impracticable without the agreement. This fact would be material to his fault by the occurrence ofan event the non- such a defense if it were related to a refusal occurrence of which was a basic assumption by Earp to perform, a repudiation by Earp, on which the contract was made, his duty to or, perhaps, a demonstration that defendants' render that performance is discharged, unless abilify to exercise the plaintiff's option was or the language or the circumstances indicate the likely would have been prevented because of contrary.8 the prospect of such conduct by Earp.ra 30 Business Law News . California Lawyers Association The court rejected the idea that the option was doctrine. Softek argued that the supervening event was existence a potential worthless because "the mere of the decision by Policia to use a different program. This justifîcation perform that was not for Earp to refuse to decision was unforeseeable and, according to Softek, frustrated invoked would not establish a defense of frustration of the entire purpose of the licensing agreement. purpose."ls There was insufficient evidence that Earp Softek maintained that it was not reasonably would reject assignment-in fact, the available evidence foreseeable that Policia would fail to implement the suggested otherwise-and there was no showing any soffware, nor that the Puerto Rican Treasury Department frustration was substantial: "It is not enough that the would reverse its prior position that policia would be transaction [will] become less profitable for the affected permitted to use the PeopleSoft program to interface pafi or even that he will sustain a loss. The frustration with the Treasury Department's existing software. must be so severe that it is not fairly to be regarded as Softek noted that the contract expressly stated that the within the risks that he assumed under the contract."16 purpose of the agreement was to provide Policia with How can we apply this to current cases in the PeopleSoft's softwate, and it was not reasonable to entertainment industry? Let us take Allen's case. interpret the language of the contract as meaning that Nakashima tells us Amazon will have a difficult time Softek accepted the risk that Policia would decide not to establishing prongs (1) and (3) above-frustration so implement the software. I 8 severe and harsh the basic purpose of the contract was PeopleSoft contended, however, that the parties destroyed, and frustration of a type not regarded as expressly contracted with the awareness that Policia within the risks assumed under the contract. Amazon might not pay for the software, and that Softek expressly likely will lose profits from the #MeToo fallout, but assumed the risk of this eventuality by agreeing that is that "so severe and harsh the basic purpose of the "all payment obligations are noncancellable and contract was destroyed," or is it merely "less profitable?" nonrefundable" and by agreeing to "guarantee all And was the frustration truly unforeseen? After all, payment to PeopleSoft on behalf of itself and .

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