Groundhog Day: Preparing for a WGA Strike
The potential WGA strike provides a good opportunity to review force majeure clauses and attitudes towards them.
Ten years ago, film and TV writers of the Writers Guild of America (WGA) engaged in a strike that lasted 100 days and caused devastating effects to the industry. The latest union contract expires on 1st May 2017, and members of the WGA have again voted by an overwhelming margin (96%) to take to the picket line if there is no resolution of the current open points of negotiation concerning pay and healthcare benefits. This could have a significant consequence on anyone involved in TV and film production with a US party or US law agreement, especially for those who did not change their agreements or attitudes towards force majeure clauses in the interim.
During the 2007 strike, parties on all sides were forced, often for the first time, to review the force majeure clauses in their agreements to determine whether the strike provided risk or protection depending on one's particular circumstances. Despite the fact that many found themselves on the wrong foot because of the effect of these clauses, our impression is that negotiating an appropriate force majeure clause has dropped significantly down the list of contractual priorities.
What is fairly certain is that if the clock strikes 6:00 a.m. on Groundhog Day once again, producers will use a strike to trigger "force majeure" clauses if they can in order to limit their downside from the inability to produce and deliver projects.
By way of background, a force majeure clause allows a party to unilaterally excuse its non-performance of a contract (and in some cases to terminate a contract) if a contractually enumerated circumstance beyond the control of the party occurs (which could include war, riot, act of god, or indeed a strike but often includes an ambiguous catch-call category as well) that causes one or both parties to be unable to fulfil their respective obligations under the contract. In 2007, the "circumstance" of WGA strike action caused writers and producers to be unable to comply with their contractual obligations, which led many of the affected parties to take advantage of those force majeure clauses that included or arguably included, strikes. To be clear, whether the force majeure clause lists "strikes" or contains broad catch-all language that sweeps strikes in, it is safe to assume that if a WGA strike is called, parties will attempt to use the strike to avoid contractual obligations if they can.
In light of the lessons from the 2007 strikes and imminent 2017 action we urge producers to review their current force majeure provisions in writer, production and distribution agreements. Consider taking legal advice in advance of the upcoming strike action to determine the availability and extent of force majeure risk and/or protection in light of your particular needs and place in the content development and distribution pipeline.
Secondly, use the opportunity to re-evaluate company attitudes towards the negotiation of force majeure provisions going forward. Many people wrongly assume that force majeure is a boiler plate provision that is not worth arguing over. However, given what happened during the last strike this couldn't be further from the truth.
For example, when negotiating with a writer, a producer should seek to agree with the writer to vary the WGA basic agreement by specifically including strike action in the definition of force majeure events. The operative part of the force majeure clause should then make it clear that the producer has the right to suspend for a period of time after commencement of the strike action, following which, the producer has the option to terminate the agreement.
A producer's position will need to be reviewed and potentially recalibrated when negotiating with distributors and other counterparties, and based on its unique circumstances decide whether or not to expressly exclude strike action from the force majeure clause in a particular agreement.
Even if a producer concedes that a strike is a force majeure event when a counterparty insists on including it, the producer should try to ensure that such strike action does not provide an automatic termination option, or alternatively, add a condition that there is a period of suspension before termination of the agreement, to allow for a reasonable length of time for good faith discussions to take place between the parties. One of the main issues that producers faced in 2007 was that once this strike took hold, deals were automatically terminated and voided obligations to pay producers without any opportunity to negotiate a less drastic result.
If it feels like 5:59am on February 2nd please reach out to anyone on the Fieldfisher Media team if you have questions about Force Majeure or any other implications of a Writers Guild action.