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Economic Damages - A Case Study: The Actor

Expert Witness: Kathryn Arnold
The large majority of lawsuits that involve individuals in the entertainment industry revolve around lost wages or fees. These claims often allege millions of dollars in lost earnings depending on the role the person plays within the industry. Given the exorbitant amount that some actors, writers, directors and producers earn, it’s easy to understand how often these claims get made. However, the operative word in this scenario is some.

The question one should ask is how do you best determine whether a particular individual should be categorized into that rare group of earners? In other words how do you determine whether the claim is purely speculative or can be proven within a reasonable degree of certainty?

When investigating lost wages claims, one must understand that the entertainment industry is nothing like the traditional job market. A lawyer, banker, or accountant will have tax statements that show their earning capacity to date, and they can expect their salary to increase as they steadily progress up the ladder and gain vital experience
and contacts.

This is not the case in the entertainment industry. Due to the volatile nature of the business, many outside factors affect one’s marketability and earning capacity. As a matter of fact, in some positions, particularly with the actor, there is no guarantee that you will ever get another job, especially not a better paying job than the last one. There’s a reason why the phrase, “You’ll never work in this town again,” was coined in this industry. The competition is stiff, buyer’s tastes shift on a dime and there are thousands of people ready to pounce on your position at any given moment. Additionally, so many people are party to the decision making process that one can be weeded out of contention for countless reasons entirely out of one’s control and unrelated to one’s talent or ability.

Million dollar earners are rare and even rarer still are those that can earn that type of income consistently over a long period of time. It is critical to look at: 1) The earnings history and work consistency of the plaintiff; 2) Awards or accolades that may boost future earnings; and 3) Comparable earning capacities of the individual’s peers. This last point is crucial because it is important to compare apples to apples in terms of actual work history and money earned. The amount of money the Plaintiff thought they would make throughout their career, based on self-comparisons with high achieving players of similar age and looks (the case of an actor) does not often play out in real life to their satisfaction. How many good-looking young talented actors achieve the career status of Julia Roberts or Tom Cruise?

Let’s take a look at a class action lawsuit that included an actor as a Plaintiff, indicating that his career was brought to a premature end due to certain health issues allegedly caused by products of the Defendants and believed he incurred damages in the following areas:

- Work Stoppage as an actor in feature films and television
- Economic Loss of between $10,814,191 and $35,206,874

It was my opinion that the Plaintiff did not incur economic damages in the amounts listed above due to any alleged injury by Defendants. Rather, a myriad of other factors, including but not limited to career choices, acting talent, stiff competition and the volatility in the industry, contributed to Plaintiff’s inability to gain significant work and earn income in the amounts stated above.

Many elements play into an actor’s success, and a successful career is a combination of talent, good looks, good management, and often times just plain luck. Creating a noteworthy career as an actor is a dicey and difficult journey. The road is fraught with many obstacles and pitfalls that one must overcome to be successful. The choices one makes and the response within the industry contribute to an actor achieving, or not achieving, critical and/or financial success.

The Defendant claimed he was an “A List” actor and should have earned fees commensurate with the leading stars in Hollywood. An “A list” actor can be loosely defined as an actor, who by virtue of being in a film can cause the film to be financed or “Greenlit.” Greenlit is a term used by studios and financiers when enough essential elements are in place that the project is deemed ready to go into production and the funds are released to produce the film.

Examples of “A List” actors would be Bradley Cooper, Brad Pitt, Tom Cruise, Jennifer Lawrence, Sandra Bullock, Julia Roberts among others. Prior to becoming “A List,” these actors achieved a certain amount of success. Measures of this type of success can include:

• A leading role or strong supporting role that earned positive reviews in major consumer and trade publications
• A significant role in a hit film
• Nominations
• Awards
• Invitations to premiere film festivals (such as the Cannes Film Festival.)
• A succession of roles in films immediately following their break out performance (The “honeymoon phase.”)

Defendant had neither a leading role in a hit film, nor a significant role in a Studio project. Many of the roles he listed as key roles in his career were rather small. Although the Plaintiff acted in popular films, he did not play a pivotal role in the success of those films. His roles were not indicative of a person on the “A List,” not even en route to the “A List,” nor an indicator that he would be guaranteed a role that would garner wages of $1 Million or more per year. Additionally, the fact that after the small roll in a blockbuster film he did have, he was not offered roles in major films, or leads with established directors, which demonstrates his “A List” stature was only in theory.

Another indicator of success is when an actor receives nominations or awards. At the time of this case, the Plaintiff had not received a significant nomination or award for any of his performances, nor had he received an official invitation to represent his films at any of the significant festivals.

In the Plaintiff’s reports, the damage calculations listed above were based on a significant fee base of $1 Million to $3 Million per year and a consistent work schedule over the span of 30 years, that is outside the realm of the typical working actor. These fees are certainly not fees that Plaintiff had ever earned, nor came close to earning in any of the jobs he took pre or post incident.

Million dollar fees being earned with consistency over a 20 plus year career are unique to only a select few such as Tom Cruise, Bruce Willis, and Julia Roberts—those actors who have achieved world-wide recognition and are duly paid for such status. Even those actors do not work every year, year in and year out. Thus it is highly speculative that any actor would receive a million dollar salary consistently. Without a meteoric rise in popularity and recognition, without any fee precedent set, nor acting contracts in place outlining a fee structure of that magnitude, there is no basis to believe that the economic damages Plaintiff was asking would have been earned.

The career of a working actor, known or unknown is quite sporadic and unpredictable. Rarely does a career consist of working 50 weeks a year, from the age of 18 until the age of 65. Many “working” actors may work a lot one year, and then not work at all in another year. Some may go several years without work, even though they are auditioning, and then get a job that can carry them financially for several years. Others do not work very much at all, and must rely on other forms of income to survive. The lean years can be mixed in with good years, and one can never be sure when or where the next job will come from.

To highlight the reality of what was going on in the Defendant’s career; one needs to look at what he was actually paid for the films he acted in during his healthy years.

• $125,000 for a leading role in a lower budget studio film
• $175,000 for small role in a studio film
• $7500 per episode for recurring role in a popular television series

These are solid figures but nothing near $1 Million per project or year. The Defendant acknowledged that he made very little money on the series, particularly in comparison to the other “bigger” stars on the show. It is common in the television industry for leads in Network shows to earn between $15,000 and $25,000 per episode, even if one is not a big star.

The maximum Defendant ever made on a film was $300,000 on indie horror film. He was paid that due to his cult status from the television series and he had some “Q” overseas. Fees of $1 Million or more for Defendant were extremely speculative in nature and were not based on any fact or precedent. Additionally, Defendant did not have any projects or offers in the pipeline that would lead one to assume he would have been paid that fee in the future.

Fees don’t escalate solely because someone believes you have talent. Hollywood doesn’t work like that. You may get a great role, but you won’t be paid large dollars until you have proven yourself at the box office. Every monetary decision is driven by revenues. If the production company or Studio believes they will get a substantial return on the movie, they will set a fee structure that is commensurate with their projected revenue. It is a step-by-step process, based on box office receipts and ratings of a particular television show. On each successive project, an actor is normally paid the same rate or a little more than the previous project he/she worked on. In some rare cases, a fee can skyrocket if the last project was a huge success, but the majority of actors never enjoy this kind of success. Conversely, if a film doesn’t do well, one’s fee can come down and create a new and lower precedent for that actor. Fee structures rise and fall with market demand. They are not set in an arbitrary manner without box office receipts to support it.

Rave reviews of a film or consistently good reviews over time can help an actor’s career and push him/her towards the “A List,” ultimately affecting his/her fee structure. Reviews reflect the perception of the buying audience, as well as the powerful marketing forces such as newspapers and magazines, which can have a strong impact on fees. On the flip side, bad reviews of a film, or bad reviews of a performance, particularly from well-known magazines and newspapers, can shatter any career, even for those with promising beginnings.

Additionally, bad box office performance of a film can also have a negative impact on an actor’s career. If this happens more than once, it can even derail it. In Defendant’s case, two of his bigger films did poorly at the box office, which didn’t bode well for his future earnings potential.

At the end of the day, the judge dismissed the lost earnings claim because it was just too speculative. Many working actors face the same hurdles when making a damage claim.

Certain key elements need to be examined within the specific context of the individual case and its particulars, in order to determine the viability and merit of the claim. Because the industry can provide such high paydays, and the career trajectory of certain rare individuals can be so meteoric, it is enticing for a person, with even a little bit of experience or credibility, to assume that they will be the next big thing. A single successful project, a few good reviews or a string of good references, do not automatically translate into future box office success or consistent high salaries. It’s important to do extensive due diligence and work with professionals in the industry who have significant experience in the related field to help you navigate the wild and wooly world of film.

©Kathryn Arnold, 2015

While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.

ABOUT THE AUTHOR: Kathryn Arnold
Kathryn Arnold has 20 years experience in the film production and distribution arenas. Having worked in the studio and independent worlds, Ms. Arnold understands the inner workings of the industry, its standards and practices, financing and the economic complexities involved. She has provided expert testimony and consultation on cases regarding economic damages from copyright infringement, breach of contract, personal injury, wrongful death, and economic downturn. Clients include Gibson, Dunn & Crutcher; Haynes & Boone; Shook, Hardy & Bacon, Dummit, Buchholz & Trapp; Hosp, Gilbert, Bergsten.

Copyright Kathryn Arnold

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.For specific technical or legal advice on the information provided and related topics, please contact the author.

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