Entertainment contracts with minors: clarification needed

The entertainment industry faces considerable issues in deals made with minor employees. A production entity puts time and effort into a piece of work, only to often later have the minor disaffirm the contract, leaving the entity high and dry. This makes knowledge and mastery of handling entertainment contracts involving minors crucial.

Christina Aguilera sued her ex-manager Steve Kurtz for allegedly taking more than 20 percent of her profits, stemming from an agreement she made when she was 17 that made Kurtz her personal manager. As a minor, LeAnn Rimes sued her father and also her co-manager for allegedly swindling at least $7 million of her earnings over a five-year period. Additionally, she later sued her record label to have her recording contract nullified as it was signed by her father and her mother while she was a minor.

Minors -- those under 18 in California -- do not have the capacity to enter into valid contracts. Fam. Code Section 6501. Exceptions apply regarding contracts made for necessities and other statutory exceptions. However, contracts related to a minor's business dealings (including involvement in entertainment productions and personal management contracts) do not generally constitute necessities. Berg v. Traylor, 148 Cal. App. 4th 809, 820 (2007) ("we cannot conclude that a contract to secure personal management services for the purpose of advancing [a minor's] acting career constitutes payment for the type of necessity contemplated by Family Code section 6712").

California law protects both entertainment entities and minors. California has streamlined the procedure of obtaining judicial approval of a minor's contract in the entertainment industry more than other jurisdictions, mainly due to the high volume of petitions the courts see. To begin the process, one files a petition for the confirmation of the minor's contract in Los Angeles Superior Court, Department 2. The contract at issue must be attached as an exhibit to the petition, and the petition must come with a separately filed proposed order. L.A. Super. Ct. R. 5.22. Once a contract is approved, the minor does not have the same ability to disaffirm the contract as they otherwise would -- within a reasonable time after reaching the age of majority -- and said approval extends to all terms and conditions of the contract. What constitutes a "reasonable time" depends on the circumstances of each case. Hurley v. S. Cal. Edison Co., 183 F. 2d 125, 132 (9th Cir. 1950). California does not limit the term of a minor's employment contract, but no personal service contract can exceed seven years. Lab. Code Section 2855.

One key provision of California law established to protect minors in the entertainment industry is the mandating of so-called "Coogan Accounts," which owe their existence to the case of Jackie Coogan, a child actor whose parents squandered the majority of his multimillion-dollar earnings. To prevent such inequity, once a contract has been judicially approved, a Coogan Account is set up where at least 15 percent of a minor's net earnings must be deposited to be held in trust for them until they reach the age of majority. This account must be set up by the parent or guardian, and withdrawals from the trust are not allowed unless authorized by court order. CFam. Code Section 6753(b). For the minors, once judicial approval is obtained, a trust account must be set up by their parent or legal guardian where at least 15 percent of their net earnings will be kept in trust for them until they reach the age of majority. Fam. Code Section 6752(b)(1).

There are two additional thorny issues regarding minors' agreements. First, in California, personal managers of minors run into trouble because courts will not approve those contracts as they are not considered employment contracts and, therefore, are not covered by California Family Code Section 6750. One possible solution that has been suggested is for personal managers to take their contracts to Probate Court for approval. If someone can be appointed to supervise the minor's activities (a parent or guardian ad litem), then the personal manager can also request that the guardian ad litem be allowed to reaffirm the management agreement between the personal manager and the minor. Whether this will work in practice is an open question.

In practice, entertainment companies commonly require the precautionary step that the parent or guardian of the minor sign a separate personal guarantee of the minor's contract, whereby the parent approves the same and accepts liability if the minor disaffirms the agreement. In this manner, the entertainment company hopes the parent will encourage the minor not to disaffirm the agreement, because the parent has independent liability for the minor's breach or disaffirmation of the entertainment contract. Raden v. Laurie, 120 Cal. App. 2d 778, 783 (1953) ("We find no merit in the claim that the disaffirmance of the agreement by the minor operated to terminate the obligation of [the parent who was also a signator to the agreement]"). This is a strong deterrent for minors to disaffirm, assuming they care about the financial well-being of their family. Of note, Civ. Code Section 3344(a) permits a parent or guardian to grant consent for use of a minor's statutory right of publicity without court approval.

Second, the guidelines as to how a court determines whether or not to approve a contract are murky, "The court may consider whether the terms of the contract are reasonable in the light of the then financial and educational interests of the minor as well as the proper development of his talents and his chances for success in the profession." Warner Bros. Pictures v. Brodel, 31 Cal. 2d 766, 775 (1948). In deals that meet traditional models, they do not present impediments to approval and but for emerging areas, such as influencers and the internet, this could be problematic. The content of one's contract may also be a determining factor in deciding whether to approve a contract. For example, assume a minor is in a film that is X-rated and/or might contain nudity or content that is arguably pornographic. Would a court approve such a contract? And would a court allow it to be enforced?

While significant steps have been taken to protect both the interests of the entertainment industry and of the minors employed by the industry, clarification is needed on the judicial standards for approving these employment contracts, and legislation needs to be pursued or an appellate decision needs to be handed down to protect personal managers who are unfairly terminated because of their inability to get their contracts judicially approved.

Associate counsel Daniel B. Lifschitz and ABOTA Fellow Jenny Volanti assisted in writing the article.