I discussed this case on my other platform about three months ago. The parties have recently resolved their matter through settlement. Nevertheless, I think it is worth republishing the article here on fashionentlaw.com for your benefit.
I could be having the worst day, literally. But, the moment legal drama hits across my desk or I get off work and begin scanning the daily news for stories to share with you all, I COME ALIVE i.e. “wide awake” when I see that legal drama. What an exciting case, bad for the litigants but great for the lawyers, and great in illustrating some of the discussions we have had here on AML and continue to.
Technically, I should file this case under the heading of “fashion law” and it should be published on my other platform, but since Katy Perry is known for her music, we will discuss it here on AML!
Here’s the deal. The Plaintiff is the manufacturer of hair styling products under the company called GHD, headquartered out of the UK.
According to GHD, here are the facts as alleged in their complaint filed on April 11th, 2013 in a Los Angeles US District Court:
- On February 10th, 2011, they entered a written agreement with Katy Perry in which Katy agreed she would endorse GHD’s hair styling products for two years. This agreement was done through Perry’s loan out company called “Killer Queen.” AML people reading this, Nollywood actors, actresses, and all talents in general, “Loan Out” companies are actually commonplace in the entertainment industry here in the USA.
- How it works: A talent does not directly sign a deal with companies that desire his/her services. Instead, they incorporate themselves by setting up loan out companies. They are usually the sole members of their loan out companies. This then gives them the tax advantages they seek. The company/employer who seeks to work with the talent now contracts directly with the talent’s company, which the talent typically owns 100%. So, in this instance, GHD contracts with Killer Queen to hire Katy Perry, exclusively, as a brand ambassador for their line of products.
- The two year endorsement deal was for $4.5million dollars. Specifically, in exchange for the $4.5million GHD was giving Perry, Perry agreed to sell what is essentially her right of publicity to GHD. They bought the right to use Perry’s endorsement, name, signature, biographical materials, likeness, and photograph in GHD’s marketing materials. They also bought the right to sponsor Perry’s 2011 tour dates in the UK, Ireland, Australia, and New Zealand.
- As to the duration of the contract: It was a 2year contract but the 2 years began on the first date GHD issued any publication, press release, announcement or exploitation of the materials until the second contract year, 24months later. The parties could also exercise an option to extend the initial term for one additional year.
- The parties agreed that the option had to be a mutual agreement and also be in writing. Further, if they chose to exercise that third option contract, GHD would pay Perry $3million dollars.
- What do you think happened? Well, in September of 2012, prior to the expiration of the contract, GHD says it contacted Perry to renew the contract for 1.5 years. Perry wanted a different term and in fact wanted a fourth (4th) option. Supposedly, there was a back and forth deal making negotiations and according to GHD, they never signed anything with Perry and did not have a definitive from her.
- Meanwhile, in the midst of all the back and forth, GHD said it had done a survey to see how Perry held up with as a GHD brand ambassador. The result, they claim, was dismal and she no longer had much clout and in fact Europe, their main market, was no longer feeling Perry like that. Given they never signed the third option contract, GHD said, “odabo (goodbye), it’s been real and they moved on.” Aha! We have a problem! Where are the lawyers????!
- GHD said when they said “Odabo! (goodbye), Perry’s crew basically “copped” an attitude and began threatening to sue. They threw a lawyer at them that they know means business. They also claimed Perry even had the audacity to claim that they entered the third option contract and it was for $6.5 million for 2.5years. Talk about being delusional, at least from the way GHD’s complaint reads. They say, look, in fact, the agreement had a clause that said any changes to the contract must be in writing and must be signed by both parties. So, how exactly would we get into a $6.5 million dollar contract with you and not have it in writing??? !!!
- GHD claims the parties fulfilled the terms of the agreement. The agreement subsequently expired and they decided not to renew the contract. Simple.
- Now check it folks. This is where it gets real interesting. GHD fearful that Perry would sue them, decided to make the first move by suing for a “declaratory” judgment, asking for a jury trial and demanding $1million + from Perry.
- Well, Perry responds. She essentially says, “What are you all smoking over there? Whatever it is, it is messing with your brains. Also, understand this. This is no love relationship. I understand what it feels like to get screwed and I’ll be damned if I let you screw me over. HELLO! I’m WIDE AWAKE!” She countersues for $6.5million dollars. Yup! We have a problem. Somebody call the trial lawyers.
- Perry says, first we had a contract. We may have been negotiating but we ultimately reduced it to writing in a “short form” agreement i.e. a contract with the essential terms that is short and to the point. We had the intentions for a “long form” contract i.e. the contract that goes from L.A to New York, wraps around the UK, passes Johannesburg and finally lands in Lagos. Yeah, the very looooooooooooooong contract that gives everyone a headache. We never got to draft the long form contract but we had the short form. So, you breached the contract. Second, assuming you want to claim that there was no contract, why the heck are you still using Perry’s image all over the web space for marketing/advertising and promoting your products? They sue under the theories of a breach of an oral contract, a breach of her right of publicity right and California Civil Code section 3344.
From Nigeria to America and all the various countries in between, it is no news that celebrities are a necessary evil (depending on who you are), to get your merchandize moving off the shelves and to have an even wider reach. But, what are some of the pitfalls? Let’s look at the claims from each side.
THREE KEY THINGS TO FOCUS IN ON HERE FROM THE GHD COMPLAINT
- Declaratory Relief: If someone threatens a suit and you know you are not in the wrong, you can beat them to the punch and sue for a court to essentially exonerate you. Think of it as living in an African village and you have a neighbor going around telling everyone you stole their goat meat. You can run off to the Chief of that village, ask him to call all the elders and villagers, listen to your story and adjudicate/rule that you never stole the goat meat, that way you put the matter to rest, once and for all. Same exact concept here, only we are in a courtroom.
- Statute of Frauds Defense: GHD brings this defense up. In the US, under basic contract law, certain kinds of contracts MUST be in writing. What are these kinds of contracts?
- Contracts where performance cannot be performed in one year, although there is an exception for contracts with indefinite durations
- Contracts involving a transfer of an interest in land
- Contracts where an executor or administrator promises personally to pay estate debts
- Contracts where the goods involved are for $500 or more
- Otherwise, a Defendant can claim statute of frauds.
- Contracts involving surety promises i.e. pay debt of another
GHD claims $6.5million to be performed in 2.5 years and you ain’t got it in writing? Really? Puhlease!
They also sue under California Civil Code 1698(c) which requires a writing as it incorporates the Statute of Frauds requirement.
Now AML people, if you are negotiating a celebrity endorsement deal and you are the company, look at the facts carefully and the complaint here and that is what you should not do. Also, for my AML African readers with sooooooooo many questions about what a sample endorsement deal looks like, click here to view the GHD complaint which has a sample endorsement deal contract i.e. the original contract Perry signed.
TWO-THREE KEY LESSONS TO LEARN IF YOU ARE THE TALENT LIKE KATY PERRY
- Breach of Oral Contract: AML entertainment lawyers, you all know what it is like negotiating a deal and how long the email thread becomes. To make it easy to keep up with your negotiations, feel free to start a new email with a new subject heading. Also indicate in that email with clear language whether the contract you have is a binding “short form” legal agreement, if you intend it to be. In a day where parties can sign electronically for a contract they seek to enter into, it may be hard for Perry to prevail on this particular claim, given the facts.
- The Right of Publicity and the Section 3344 violations: This to me are Perry’s strongest of claims. I conducted an interview back in 2011 on this topic. It is worth revisiting. Also check out Perry’s response here and learn, if you are the talent, what not to do.
Have a great day folks!