#metoo—can it Be Used as an Excuse? Frustration of Purpose and Other Theories Used to Excuse Performance in Entertainment and Business Deals

• Publication year: 2019
• Author: Jeffrey T. Thayer and Natasha S. Chee

#MeToo—Can It Be Used as an Excuse? Frustration of Purpose and Other Theories Used to Excuse Performance in Entertainment and Business Deals

Jeffrey T. Thayer and Natasha S. Chee

Jeffrey T. Thayer is a Partner at Hawkins Parnell & Young LLP. His practice focuses on Complex Litigation,

Automotive Liability, Intellectual Property and Business Law. He is a graduate of the University of California at Berkeley School of Law (Boalt Hall) and UCLA. To learn more: www.hpylaw.com/attorneys-jeffrey-thayer.html

Natasha S. Chee is the principal at the Law Offices of Natasha S. Chee. Her practice focuses on Entertainment, Intellectual Property and Business Law. She works with producers, filmmakers, musicians, content creators and tech companies. She graduated from Santa Clara University School of Law and UCLA. To learn more: www.natashachee.com.

With the rise of #MeToo and other socio-political movements, the entertainment industry is wrangling with how to deal with filmmakers and talent whose reputation instantly combusts. Case in point, Woody Allen and Amazon. In 2017, Amazon agreed to a deal with the renowned auteur to release four feature films.¹Amazon viewed this agreement as a significant part of a larger strategy to compete with Netflix and other major distributors. Although allegations of sexual abuse had dogged Allen for years, the claims did not appear to affect the negotiations at the time the two parties entered into their agreement.

As the social climate changed, however, Allen's adopted daughter, Dylan Farrow, continued to sound off on accusations of sexual abuse, and Allen made comments on Twitter about #MeToo that drew unwanted attention. Stars of the first film covered by the deal, A Rainy Day in New York, began to distance themselves from Allen and the film. It did not help that the film centered on a relationship between an older man played by Jude Law, forty-four at the time of production, and a young woman played by Elle Fanning, who was then nineteen. Amazon brought in a new studio head, who did a double-take and decided to try to cut losses. Allen disagreed, and filed suit for breach of contract.²

The case currently is pending in the Southern District of New York. Certain of Allen's claims pertaining to the four movies globally were recently tossed, but the case is proceeding as to breach of contract allegations related to the movies individually.³ Amazon's legal team has indicated they will likely be pushing an argument for "frustration of purpose."⁴ Amazon's lawyer, Robert Klieger, stated,

Amazon's performance of the Agreement became impracticable as a result of supervening events, including renewed allegations against Mr. Allen, his own controversial comments and the increasing refusal of top talent to work with or be associated with him in any way, all of which have frustrated the purpose of the Agreement and support Amazon's decision to terminate it.⁵

Other studios have been grappling with similar issues. In February 2019, Millennium Films halted production on Red Sonja, which was to be directed by Bryan Singer, who, similar to Allen, has been accused of statutory rape. Millennium's business model required guaranteed distribution in the U.S. to make essential deals with foreign distributors, and no domestic label would touch the project. Unlike Allen, Singer's deal was not "pay-or-play," and thus was easier for Millennium to walk away from.⁶

[Page 29]

In 2015, Spanish language network Univision backed away from a five-year, $13.5 million deal to broadcast the Miss USA pageant after then-owner Donald Trump said he would be running for president and derogatorily referred to Mexican immigrants as "rapists." After Trump filed a $500 million lawsuit, Univision moved for dismissal, arguing that Trump frustrated the essential purpose of the agreement by insulting its core audience.

"Frustration of purpose" as a defense to breach of contract suits is not new, and typically finds the most success in wartime or other times of great upheaval. The theory is that while both parties to a contract technically can perform their duties, as a result of unforeseeable events, one party (using our initial example, Woody Allen) cannot give the other party (here, Amazon) the benefit of what induced the parties to contract in the first place. In the Allen example, the "unforeseeable" event would be the #MeToo movement.

Frustration of purpose has deep roots in legal history, but how well does it apply to modern cases presented in the context of #MeToo or other contemporary social and political movements?

When the frustration of purpose defense is raised, California courts look first to see whether the fundamental reason of both parties for entering into the contract has been frustrated by an unanticipated supervening circumstance that substantially destroys the value of the performance by the party standing on the contract.⁷

Where, after a contract is made, a party's performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary.⁸

To prove the defense, the party asserting frustration must demonstrate that:

1. The frustration was so severe and harsh that the basic purpose of the contract was destroyed;⁹
2. The supervening circumstance or event was unforeseen and not the fault of one of the parties;¹⁰
3. The...