Earlier this year, several agents from CAA made headlines by leaving the powerhouse agency for smaller rival UTA. It was the largest mass exodus of agents from CAA since 1995. Two days later, CAA filed a lawsuit in Los Angeles Superior Court accusing UTA and two agents of conspiring to interfere with CAA’s contractual relationships. CAA also filed claims in arbitration against three other agents. The dispute has consistently been in the news in the entertainment community since it began in April.
Now, the legal community is taking notice of the splashy case. During a case management conference on Monday, attorneys for UTA told Los Angeles Superior Court Judge Lisa Hart Cole that UTA plans to seek summary judgment on what is known as the “seven-year rule” or “De Havilland Law.” For California lawyers, this is major news.
The “seven-year rule” is a statute that provides for a seven-year limit on the period for which an employee can be bound by an enforceable contract of employment, and a contract for the rendition of unique personal services may not be enforced against the performer beyond that period. See Cal. Labor Code § 2855(a). The term is seven calendar years – not seven years of actual service. It is a mandatory statute; courts have no discretion with respect to its enforcement. And, this statute cannot be waived or contravened by private agreement. The full text of the “seven-year rule” is available here.
UTA’s attorneys are planning on using the oft-forgotten the “seven-year rule” to invalidate CAA’s contracts with the agents by arguing the contracts were invalid because the length of the contracts exceeded seven years, in violation of California law. If UTA’s argument prevails, the case against the agency and agents will completely unravel.
CAA maintains that the contracts were valid because the agents entered into renewal agreements over the years, which constituted new contracts and did not exceed the seven-year time frame. This issue – whether each renewal agreement constitutes a new contract to re-start the “seven year” clock – is one that has not yet been adjudicated in a published California case. And, it is this issue that the entertainment and legal communities will keep a close eye on, as a decision will have tremendous effects on how agreements are negotiated…and re-negotiated