UK: Media and Mediation: Contracts

This is the third in a series of articles highlighting the relevance of mediation in media disputes. As procedural pressures to consider this option increase, clients and lawyers in the sector should put themselves in a position to judge what it is worth.

I have previously looked at two specific areas within media where I believe mediation has a valid role to play. Here I wish to carry the principles into the more disparate area of contractual disputes and, finally, to draw together my position on ADR.

This article will look at two contractual angles

  1. Examples of contractual and quasi-contractual disputes when mediation should be favoured.
  2. The contracts within the commitment to mediate being
  • Clauses to place in contracts
  • Agreements to mediate
  • The end of the process -- Tomlin orders and similar.

The purpose of these articles, read together, is to provide both lawyer and clients with one perspective of the "usual disputes" they face within the industry. The question to answer is whether there is a recognisable dichotomy (from your particular position within the industry) -- those disputes when mediation makes strong sense and those where it is likely to fail.

Example 1 - Contract and IT

A is a software/IT supplier. It sells a system to B. There are the usual time schedules. There are the usual tests and logging processes culminating in the User Acceptance Test (UATs).

It starts to go wrong. Standing back from several such disputes I have seen, examples of the underlying reason for dispute may be:

A. A corporate shift or takeover has led B to change its mind about systems.

B. The in-house technical team of A is somehow failing, but blaming B’s team.

C. There are genuine faults or difficulties in the system.

The first two reasons are the type that can readily be hidden behind conventional litigation until commercial pressures on costs force a solution. Although parties may still keep their real agenda to themselves, I have seen examples of mediations where hidden agendas do emerge and can be dealt with. Even the final reason can take a great deal of time, expense and expense to identify or adjudicate upon. Mediation may be favoured purely on the cost/speed criterion.

Considering the effect of the delay which litigation creates, B is usually "held up" trying to continue with the old system while preparing to move into the new one. During the delay, A’s reputation within what may be a small market will be under the spotlight and potential customers, if they know anything of the problems, may be hesitating. In short, a case where delay is potentially costly for both parties.

Example 2 - Celebrity and Agent/other

For many media personalities the glare of publicity in a court action or the reports of a court action commencing may be the only sort of publicity that is unwelcome. If the dispute is one with an agent or with a past or prospective employer, the value of confidentiality may, in itself, be enough to commend mediation as the preferred route. That is not to say other criteria will not be relevant, the need to preserve relationships within the industry being prominent.

Example 3 - Music without contract

Informality sometimes surrounds and confounds songwriting and other areas of the music business. The drummer or session musician may contribute significantly to the product -- the record as released. There are many examples of the drummer being fired and/or the song doing better than expected. On advice, from agent or lawyer, the drummer/session musician brings an action to establish co-authorship.

Under the current law there is a fairly harsh 50/50 rule where, if a judge decides that there are co-authors and there is no specific agreement, then profits are split equally. This rule may be changed in the future but at present it is a strong incentive to the drummer to fight, and, equally for the defence to defend -- they have a lot to lose to someone they may consider to be a minor player.

There are several criteria that put this category of dispute firmly in the mediation camp. A day to assuage bruised egos combined with a sensible discussion of the profits of the work may well be of interest to all concerned.

Informality

Those within the industry will have their own examples of informality either being a godsend (because they secured a deal quickly without lawyers interfering) or a disaster (where they spent subsequent years disputing what they had actually agreed). Examples spring to mind from the world of film distribution and sport as well as the music and IT examples mentioned above. There are often good reasons for the informality -- deals are done at festivals or in other pressurised situations where there is no time for the usual legal exchanges.

Problems often emerge later when the initial deal -- whether typified as heads of agreement or otherwise -- moves through the business affairs departments of the companies concerned. Sometimes an agreement is signed that is stated to be "entire" and any negotiations or representations may be displaced. Often arguments of misrepresentation or other contractual doctrine will seek to dislodge the contract later signed. In other cases no agreement at all is signed by the time a dispute arises.

It is frequently a feature of such disputes that one side may have a multiplicity of technical doctrinal arguments that deny the spirit of any initial agreement or argue against commercial reality (or indeed commercial changes) that superseded the making of the deal. The arguments are about "rights" rather than current and future "needs". In mediation the agenda becomes less rights specific and remedies often move to more flexible formulas for resolution.

Contracts within mediation

If you are considering giving mediation more prominence in your working agenda, you may want to consider a number of aspects affecting your own contracts. These will include:

Mediation clauses -- in some industries (publishing) there is a private procedure for resolving disputes and clauses direct parties to that prior to any court proceedings. A great number of commercial agreements will have arbitration or similar clauses. If mediation is an option that you want to implant, then it is a clause that can be drafted to replace either of those mentioned. There will be choices within that clause. To make mediation mandatory may be a step too far -- the obligation to consider it and not unreasonably refuse to participate in, it may be advantageous.

Agreements to mediate – you will find that if you are involved in mediation the agreement which you are presented with may be a standard form (if mediating through one of the larger mediation bodies) but you will want to ensure it contains contractual confirmation of the elements that bring you to mediation the first place such as confidentiality and without prejudice status.

Settlement agreements -- In much mediation, the final agreement will be a consent order to take back to the court that is in control of existing litigation. In other pre-litigation cases, it will be purely a contract. One of the most significant features of settlements is that some elements may not even be contained in the agreement. It is sometimes the nonenforceable and creative remedy or promise which is the final "straw" that breaks the back of the litigation camel. The parties may agree to communicate in a different way in future or open up discussions for further business or arrangements. There may be some acknowledgement or even apology that falls well short of that which might be extracted in a libel action, but is nevertheless significant in the eyes of the recipient. All these are examples of dimensions to dispute resolution that are possible in mediation but not likely to be achieved through the adversarial system.

Conclusion

The civil procedure protocols have recently been amended to put ADR on the agenda in all disputes. That should be a spur to those involved in managing or running litigation to review those disputes under their control. Many lawyers may already be doing this -- but I have good evidence that some are not. In each of the categories I have looked at in these three articles, - Formats –Libel-Contract-Copyright, - there are strong commercial reasons for investing some time in looking at the alternatives to litigation. The growth of mediation is in line with the reforms seeking to prevent delay and congestion within the legal system. There are arguments against mediation and there will always be those who see it as an unnecessary diversion. My advice is to at least get to the position where you can make an informed decision from your particular viewpoint.

My belief is that within the media sector mediation is underused. It may have an optimum level where it will represent simply a fraction of dispute resolution as against litigated and other adjudicated results and those successfully disposed of by positional bargaining and negotiation. That level has not been reached. It is an important alternative in the process of development.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

© Sean Mc Ternan 2003.

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