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June 2, 2009

Digital Media Law: Judge Denies SAG President Injunction Against SAG; President to Appeal (Feb. 5, 2009)

Filed under: Entertainment — showbizreporting @ 3:32 am
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Judge Denies SAG President Injunction Against SAG; President to Appeal

http://digitalmedialaw.blogspot.com/2009/02/judge-denies-sag-president-injunction.html

A judge today denied a temporary restraining order sought by Screen Actors Guild President Alan Rosenberg and three other board members against their own union, thus allowing negotiations with the studios to proceed. The judge ruled that the SAG moderate majority was within its rights when it replaced its National Executive Director and negotiating committee last month by using a written assent document instead of an actual board meeting. Rosenberg’s lawyer said he would appeal immediately.

The ruling, by California judge James C. Chalfant, leaves in place the new team without restrictions. Indeed, Back Stage magazine’s Blog Stage is reporting that SAG-AMPTP talks are tentatively set for Feb. 17-18, less than two weeks from now. However, a SAG spokeswoman told me that there are no confirmed dates for talks. I asked whether she could confirm that there would be talks at all (i.e., but that the dates were not yet set), but she had no comment on this. An AMPTP spokesman said his organization had no comment.

In any case, resumption of talks would be a smart move for the SAG moderates and the studios, because a judge would probably be less inclined to prevent scheduled talks than to maintain a status quo where talks were frozen. However, the move would not be without risks for the AMPTP, since a legal cloud remains over the negotiating committee. Nonetheless, the appeals process will likely be short—less than two weeks—and the appeals judges are likely to defer to the original judge’s ruling. I have recently blogged on the possible issues and scope of negotiation.

Also upcoming is a SAG national board meeting this Sunday, Feb. 8, at which the moderates are expected to try for a re-do of the assent, this time in a meeting: i.e., re-oust Allen, and again replace the Negotiating Committee by a Negotiating Task Force. If successful—i.e., if they can overcome the likely parliamentary maneuvering by Rosenberg and his Membership First allies—the action would probably render the lawsuit moot, since the actions would then have been taken in both a written document and a meeting.

The court arguments focused on the issue of the moderates’ replacement of the negotiating committee. Also discussed was the portion of the assent prohibiting anyone other than interim NED David White and new chief negotiator John McGuire from speaking on behalf of the Guild, effectively depriving Rosenberg of a role as an official spokesperson for the Guild.

Interestingly, Rosenberg’s lawyers presented no arguments on the issue of unseating White and McGuire and restoring ousted NED / chief negotiator Doug Allen, and one of Rosenberg’s lawyers told me this was a secondary issue. This implies to me that Rosenberg’s lawyers have little confidence that they could reverse these personnel decisions, at least not in these early stage proceedings. Even if the matter had been discussed, it seems unlikely the judge would have undone the personnel decisions, since doing so would cause administrative chaos in the Guild and would also upend the lawsuit itself, since Allen would presumably decide not to fight the suit. Also, almost all of the alleged harm described in the original complaint relates to negotiations. Finally, it’s hard to see why Allen would want to return to SAG, since his contract is being paid out.

Another ruling by the judge retained as defendants the 41 board members who signed the assent, as well as SAG itself. However, they are sued in their capacity as agents for the union, and thus are unlikely to face personal liability. Indeed, the suit does not seek damages from anyone—the board members or SAG—and asks only for injunctions (three type, of increasing duration—a TRO, a preliminary injunction, and a permanent injunction).

Even if the appeal is denied, Rosenberg and his allies may be able to drag out the lawsuit until the SAG election cycle starting in July, then attempt to reclaim the board in the elections, which close in September. However, it is not clear whether they can do so. If they lose once or twice more in the preliminary stages of the case, they become less likely to prevail later.

Thus, there is considerable pressure on SAG moderates and the studios to close a deal before July, and on SAG moderates to close a deal with David White and persuade him to go under contract as permanent, not interim, National Executive Director, if he is willing to do so.

The next phase of the lawsuit, after the appeal, is likely to be a request for preliminary injunction. It will probably be heard by Chalfant also, whose view of the issues may (but need not) remain the same, unless the appeals court instructs him otherwise or the legal briefs take a dramatically different tack.

Later phases will be heard by a different, “all-purposes judge,” specializing in trials (whereas Chalfant specializes in preliminary matters regarding injunctions). That judge, who is not yet determined, may have an entirely different view of the issues, and would probably not be bound by Chalfant’s determinations.

This entire process seems unlikely to inhibit the commercials contract negotiations, which are the subject of a joint SAG-AFTRA board meeting this Saturday, Feb. 7, and which are scheduled to commence in a few weeks. The Joint Policy Committee (JPC), representing the advertisers and ad agencies, has not raised any public objection to negotiating, and SAG and AFTRA have both stated that they expect commercials negotiations to proceed.

The judge’s ruling on the issue of negotiating committee vs. task force was based on two findings: First, he found that under state law the written assent could be effective based on a simple majority, rather than requiring agreement by all 71 members of the SAG board, as Rosenberg contended. In so doing, the judge essentially found that the unanimity statute Rosenberg relied on, California Corporations Code sec. 7211(b), was trumped by sec. 7150(a), which gives an organization wide discretion in adopting bylaws. This decision somewhat surprised me, since Rosenberg’s statute addresses the matter more specifically. That said, I understand that SAG presented other arguments in its briefs, which could support the judge’s result even though he didn’t cite them.

The judge then addressed a second objection presented by Rosenberg’s lawyers, which was that even if non-unanimity was conceded, the threshold should be a 2/3 majority, rather than a simple majority. The Rosenberg argument is based on a section of the SAG bylaws that requires a 2/3 majority if the national board wishes to replace a member of a committee. This argument, if sustained, would have been fatal for the moderates, since they only have a 52.52% majority. However, the judge ruled that another section of the bylaws, which says that committees serve at the pleasure of the board, allows the board to dissolve a committee altogether and replace it with a task force, or perhaps even with an altogether new committee with the same functions.

For the above reasons, the judge found that Rosenberg had not shown a likelihood of success on the merits—i.e., in the ultimate lawsuit. Such a showing is a requirement for issuance of a TRO. However, the judge did find that Rosenberg had satisfied the other requirement, which is a showing of irreparable harm. He did not give a reason for this finding, and there was no discussion of it, or of the harm to the membership and industry of the continuing failure to achieve a contract. In any case, Rosenberg’s burden was to satisfy both requirements. He failed, and therefore the TRO was not granted.

As to the issue of the assent’s limitation on who may speak for the Guild—which Membership First has characterized as a “gag order”—the judge’s reasoning was that this was not a gag order at all, since Rosenberg is not barred from speaking in his personal capacity. Rather, the judge saw the issue as one of authority—i.e., who has authority to speak for the organization.

In my opinion, this ruling does not take into account the difference between a membership organization, such as the Guild, where the members expect the president (as one of only two nationally-elected officers) to speak for them, and a conventional corporation. Indeed, a related point is that, in another part of the discussion, the judge had to ask about the function of the NED. Also, as Steve Diamond has blogged, the muzzling was heavy-handed from the start. On the other hand, the judge’s ruling does prevent the chaos that could result from having dueling spokespeople, i.e., Rosenberg vs. White. And, White has permitted Rosenberg to use the Guild’s email system, with Rosenberg noting in his email to members that he was speaking on his own behalf, not the Guild’s.

The hearing lasted about an hour, and was in depth. The lawyers for both sides seldom stumbled, and the judge asked generally incisive questions. The audience included Membership First partisans Rosenberg, Guild 1st VP Anne-Marie Johnson, and board members Kent McCord and Eugene Boggs; and, from the opposing faction, Unite for Strength leader Ned Vaughn.

Another hearing had taken place two days earlier, but the request for TRO was dismissed that time by the same judge, for procedural reasons. I will post or link to today’s legal documents when available, so check back later.

Here’s some further background information. This is based on the legal papers filed on Tuesday, so there could be differences in the revised papers filed today but not yet available.

Parties—Plaintiffs

The plaintiffs—Rosenberg, plus 1st VP Anne-Marie-Johnson and board members Diane Ladd and Kent McCord—are suing on behalf of themselves and “derivatively” on behalf of SAG itself. This is akin to a shareholders derivative suit.

Note, btw, that ousted National Executive Director Doug Allen is not a plaintiff.

Parties—Defendants

The defendants include 41 board members, which are (I believe) the board members who signed the written assent.

Also a defendant is SAG itself, which means that SAG, in a sense is suing itself. This reflects the fact that the dispute is really an attempt by individuals to determine who controls the organization.

Finally, another set of defendants are 20 “Doe defendants.” This is a reference to “John Doe”—i.e., these are unknown defendants who committed unknown action that the plaintiffs might wish to add to their lawsuit later. Doe defendants are very common in a lawsuit such as this. There may not turn out to be any people that plaintiffs wish to add to their suit, but they are inserting these placeholder defendants just in case.

Relief Sought—Monetary

The complaint does not ask for damages. However, it does ask for attorneys fees and costs (such as filing fees and the like). In most lawsuits, the prevailing party—i.e., the winner—does not get awarded their legal fees. However, the rules might be different in shareholders derivative suits (I don’t know), which this suit is analogous to. So, if the plaintiffs ultimately prevail, they might have a chance of getting the court to order the defendants (i.e., SAG, but almost certainly not the board members individually) to pay the plaintiffs’ legal fees. I don’t know.

Also, of course, if the plaintiffs prevail, or even if they don’t, they will probably make a board motion at some point that the Guild should voluntarily reimburse their legal fees even if the court doesn’t order it. If they have control of the board, such a motion would pass, of course.

An obvious question is who is paying for all this right now. SAG is paying for the defense, but I have no idea if the plaintiffs are paying their own fees and costs or if someone else is.

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