CBS: Necessary And Ethical Dilemmas

For a company as big as CBS, I am pretty sure they have a legal department that designs their contract and reviews them all the time. Therefore CBS should be fully aware of the terms of the contract. However, having been part of the corporate world, I can see how an organization can become liable for an irresponsible action of one employee. From that context this could be an oversight of one person. In any case, CBS quickly was aware of the situation and willfully continued to act unethically. The actors' contracts stated that they are supposed to earn 5 percent of the net profits from merchandise if their image is the only one on the product. They are supposed to receive 2.5 percent of the profits from merchandise with a group image on

it. CBS has retained the right to deduct a 50 percent "handling fee" off the top. Just that clause makes me feel that CBS was willfully trying to not share its profits. Later CBS maintained that they owe the actors about $9,000 each for merchandise sold in for four years.

When the lawsuit was filed, CBS added that they have been working with the actors to resolve the royalty pay issues for some time. Meanwhile it looks like after the lawsuit was filed, CBS issued checks to the actors for the previous five years, which included a merchandise royalty share for those slot machines. Looking at all these factors, I feel like they were aware and were later starting to make a good faith effort in the eyes of people. Often the contracts are enforced and written in favor party responsible for writing the contract, so contracts may be biased toward one party. While this could seem unfair, I feel that in this way at least this helps us to get started a certain place. Once the initial contract is reviewed, the other party should take steps to eliminate these biases. They should make a list of changes, or modifications, which they would like to see, then discuss them with the other parties to the contract. As a result of this negotiation, they may be able to change the contract so the terms, or conditions, are more favorable to them. On the other hand the party that did not create the contract (employee, buyer etc) typically one who gets paid or receives something, has to make sure that the contact is

enforced. I don’t think it is unfair, infact I think it is better. They get to negotiate and also review the adherence of the contract which puts them in control of the situation
2 What language could have been included in the contract to make sure this problem didn’t occur?
To answer this question, I read the document filed in the court for this law suit. When I reviewed it in detail, I thought that some of them could be little bit more defined and specific. I will start with paragraph 32

FIRST CAUSE OF ACTION- DEFENDANTS' FAILURE TO PROVIDE REVENUE REPORTS - Paragraphs 1 through 48.
32. - Defendants agreed to pay Plaintiffs each time Plaintiffs' name, voice or likeness was used in connection with merchandising rights. Paragraph 18 of the Agreement sets forth Defendants' obligations concerning merchandising as follows:
Where Player's name, voice, likeness or endorsement used in connection with merchandising rights, Player will receive 5% of 100% of net proceeds, to be reduced to 2-1/2% of 100% if used in conjunction with name, voice, likeness or endorsement of other(s). We may first deduct 50% of gross as handling fee.
Having read the paragraph above – I would really change the handling fee sentences to reflect that CBS will only deduct the actual handling fee (if any)
34 - Defendants had exclusive control of the financial information necessary to determine whether Plaintiffs were owed money related to merchandise. Plaintiffs did not have access to this information. –
35 - It is the customary practice in the entertainment industry to provide periodic revenue statements when revenue had been generated relating to merchandise. Plaintiffs were aware of this custom and practice and relied upon. Defendants to provide revenue statements if funds were due to Plaintiffs.
Having reviewed the above statements (33 and 34) – I will definitely change the respective clause in the contract to reflect that actors will have access to all merchandise related accounting periodically and are able to monitor the merchandise

39 - Defendants have entered into tolling agreements such that the period of time for defining, calculating, or determining whether the applicable statutes of limitations have run shall not include any of the time from July 29, 2010 to the present. Having read paragraph 39 (above), I would remove information that is time bound in the contract for actors receiving benefits and make it open as long as profits are made.
47. - Defendants intention to always deduct "50% of gross as handling fee" regardless of the actual handling costs violates Defendants' Business Conduct Statement and constitutes a material breach of the implied covenant of good faith and fair dealing in the Agreement. Based on paragraph 47 I would clearly define the punitive damage for failure to act in good faith in dollar amount in the contract

SECOND CAUSE OF ACTION – (By Plaintiffs Against Defendants For Fraud by Concealment) – Paragraph – 49-55
Based on what I read from paragraph 49- 55 for second cause of action – The one thing I will change in the contract is that as long as CBS receives income from “happy days” directly or indirectly, they will disclose all “happy days” related account to the actors annually and CBS will not conceal any fact that can be construed as Fraud by the actors. If they do so, there will be a punitive damage of $ (defined) that will be paid to actors

TIIIRD CAUSE OF ACTION - (By Plaintiffs Against Defendants For Promissory Fraud) – Paragraph 56-62
Based on what I read from paragraph 56-62- for third cause of action, it only gives the option of disclosure in the event of act of sale. I would change it to periodic (annual or semi-annual) disclosure of accounts irrespective of the sale and failure to do so then actors will need to pay a $sum towards the perceived damage. This will make CBS more accountable
FOURTH CAUSE OF ACTION- (By Plaintiffs Against Defendants For Conversion) – Paragraph 63-68
Based on what I read from paragraphs 63-68 for fourth cause of action, to prevent the agony of filing law-suit, I would add a clause that failure to disclose intentionally or unintentionally, CBS will be need to pay a large amount of $ (will define the amount) to the actors