Indie Law: Our Entertainment Law Expert Pulls Your Legal Questions From The MM Mailbag

For this edition of Indie Law, we asked readers to send us their burning legal questions to be answered by our long-time favorite independent film counselor, David Pierce of the Pierce Law Group in Beverly Hills.

First, we’ll address Unions: You can’t violate Taft-Hartley laws with them, and can’t get distributors interested in your film without them.

Q: I’m in pre-production on a SAG ultra-low budget film. The first 10 minutes of the film are to be filmed in ancient China and the rest of the movie is set in modern-day L.A. I heard from a friend that SAG wouldn’t allow any filming to take place outside of the country—that it would all have to be filmed in the U.S., so we can’t film part in China. Is that true?

A: SAG-AFTRA will gladly allow any American-based producers who sign on to the union’s Basic Agreement to film anywhere in the world with their talent, assuming the rules of the Basic Agreement are observed.

Likewise, producers based outside the U.S. can also utilize SAG-AFTRA actors, provided that if those foreign producers film within the U.S. they adhere to the rules of the Basic Agreement. Alternatively, if the foreign producers are filming on foreign soil, special rules known as “GR-1,” foreign production rules will apply. SAG-AFTRA therefore makes it easy for producers—no matter where they’re based or where they plan to film—to utilize SAG-AFTRA talent.

However, all of the above referenced situations presume that the Basic Agreement is applicable to the film. So if you’re a producer utilizing one of the assorted alternative agreements that SAG-AFTRA has created for low-budget moviemaking, a number of differences apply between the rules governing the assorted Low Budget Agreements and the Basic Agreement. One of these differing rules is that if you’re going to utilize one of the SAG-AFTRA Low Budget Agreements, all filming must occur solely within the United States. If a producer attempts to film in a foreign country while using a Low Budget Agreement, that producer will be in violation of the eligibility terms of that agreement and SAG-AFTRA can declare that the preferential fees and actor rates contained within the agreement no longer apply. In such a case, the producer will be held to the full acting fees and rates established under the traditional Basic Agreement.

SAG-AFTRA can likewise impose the Basic Agreement rates in the event the production goes over budget beyond the maximum cap permitted under the assorted Low Budget Agreements. Far too many novice producers fail to fully understand the importance of the maximum budget caps that must be adhered to in order to take advantage of the assorted Low Budget Agreements. And that can often lead to dire consequences for the producer who is suddenly faced with a union demand that all of the actors receive retroactive payments to match the Basic Agreement’s minimum rates.

SAG-AFTRA has an assortment of Low Budget Agreements that provide for reduced rates and relaxed union rules for situations when a film falls under the maximum dollar amount permitted by the assorted agreements. It offers five alternatives to its Basic Agreement for Theatrical films. These include:

1. Low Budget Agreement: Governing films with budgets less than $2.5 million which increases to $3.75 million if the “Diversity-in-Film” criteria applies.

2. Modified Low Budget Agreement: Governing films with budgets less than $700,000 which increases to $1,050,000 if the “Diversity-in-Film” criteria applies.

3. Ultra-Low Budget Agreement: Governing films with budgets less than $250,000.

4. Short Film Agreement: For projects under 40 minutes in length with budgets less than $50,000.

5. Student Film Agreement: For projects that are a part of an accredited school’s curriculum with budgets less than $35,000.

Producers should fully understand which SAG-AFTRA contracts are best for their needs and all of the rules that are connected with each of those contracts. Remember: Just because your best friend made a film under the Modified Low Budget Agreement doesn’t automatically mean that your particular situation will permit you to utilize that agreement.

Regarding the situation in which you need to film the opening 10 minutes in ancient China, your friends are correct: If you are planning on shooting your film under the Low Budget Agreement (i.e. budgets of under $2.5 million or $3.75 million if the Diversity-in-Casting Incentive is met) then as stated above you will not be able to travel outside the U.S. with your actors to shoot. So, you’ll need to be creative. First, let’s recognize that unless you have a working time machine to travel to ancient China, you won’t be actually filming in “ancient China.” Even modern China doesn’t look like ancient China, so even if you were in China, you’d still need to rely on some heavy-set dressings, costumes, and set construction.

Distribution rights-holder Amazon first announced that it would only release moviemaker Todd Haynes’ (L) 2017 feature Wonderstruck digitally… unless fans pressured the company to put it on DVD and Blu-Ray. Image courtesy of Amazon Studios

As a producer working on a low budget, this is not the only area in which you will likely need to “cheat the shot” to stay in your budget. If moving up to the SAG-AFTRA Basic Agreement is not a viable alternative for permitting you to film in China, then to “cheat the shot,” you might consider:

1. Looking for U.S. locations that can be made to look like ancient China;

2. Sending a second unit without U.S. actors to China and filming some establishing shots there; or

3. If you really need to save money, simply purchasing the needed establishing shots of China from a stock footage company.

Any of these methods will allow the filming of your opening scenes set in ancient China to occur right here in the good ol’ U.S. of A with the actors performing their services either in a heavily set decorated location, or perhaps a green screen. When money is scarce, your creativity needs to be in abundance.

Finally, note that it is always possible to ask SAG-AFTRA for a waiver or variance that would permit you to achieve your needed filming. However, those decisions are highly discretionary and obtaining SAG-AFTRA’s consent is not something that should be thought about at the last minute. Remember, if you can afford to pay your actors the full SAG Basic Agreement Rates, then SAG-AFTRA will gladly allow you to film anywhere in the world with the union’s actors.

Q: How do the Diversity-in-Casting bumps work on SAG-AFTRA Low Budget Agreements?

A: Great question, and a wonderful complement to our first question.

As set forth above, SAG-AFTRA offers five alternatives to its Basic Agreement for Theatrical films. In an effort to promote diversity in moviemaking, SAG-AFTRA has included provisions in two of their Low Budget Agreements that serve as an incentive to encourage low-budget moviemakers and casting directors to creatively employ diverse, multicultural actors. (Does the Day Player in the role of the doctor in scene 25 really need to be a white male? Why not cast a Latina?) To encourage these casting decisions, SAG-AFTRA will permit those working within the confines of the maximum budget caps on low-budget films to significantly exceed those caps if the producers meet the requirements for the Diversity-in-Casting Incentive (also referred to as the “diversity bump”).

These significant increases to the maximum budget caps apply only to the Low Budget Agreement and the Modified Low Budget Agreement. There is no diversity bump for the Ultra-Low Budget, Short Film, or Student Film Agreements.

The threshold maximum budget caps will increase for the Low Budget and Modified Low Budget Agreements if the production meets the following “diversity incentive” criteria:

1. A minimum of 50 percent of the total speaking roles are cast with: A. Women B. Senior performers (60 years or older) C. Performers with disabilities, and/or D. People of color; and

2. A minimum of 50 percent of the total days of employment are cast with performers who are: A. Women; B. Senior performers (60 years or older); C. Performers with disabilities; and/or D. People of color; and

3. A minimum of 20 percent of the total days of employment is cast with performers who are people of color.

So, if you’re doing a 20-day shoot and have 50 cast members with speaking parts, then you can take advantage of the diversity bump if you’ll those 50 speaking parts with at least 25 actors who are either women, over 60 years old, performers with disabilities, or people of color.

In addition, on at least 10 of the 20 days of filming the production must utilize actors who are women, over 60 years old, performers with disabilities, or people of color.

Finally, the production must ensure that on at least four days of shooting, there are people of color on the set with speaking parts. In addition, a single person cannot be counted in more than one category. In other words, a 60-year-old Asian woman is only counted as satisfying one diversity criteria, not three.

If this criteria is met and the producer has applied for the diversity bump before commencing principal photography, then the budget can be increased from $2.5 million up to $3.75 million under the Low Budget Agreement. If the Modified Low Budget Agreement is being utilized, that agreement can be upped from $700,000 to $1,050,000.

Remember: You can only qualify for this diversity bump if you apply prior to the first day of principal photography and SAG-AFTRA grants approval based on the above criteria (which will later be verified when SAG-AFTRA reviews the Day Out of Days that are submitted to it after filming is complete).

Determined to find it a physical release, director William Friedkin famously sued Universal and Paramount over the domestic rights of his 1977 feature Sorcerer. Image courtesy of Paramount Pictures / Universal Pictures

Q: How does a moviemaker get the rights back for his or her film after its release?

A: Generally, the distribution agreements you’ll have for your film are merely licenses to distribute the film for a specific term of years. When the term ends, the distributors’ right to distribute the film ends and the rights automatically revert back to the moviemaker.

Nothing special needs to occur, but it is prudent to file a notice of expired distribution deal with the copyright office so there’s a clean, easily understandable chain of title on file demonstrating that all rights fully revert back to the moviemaker. Regardless, you should always read (and negotiate) your distribution agreements carefully to ensure that the distributor did not put in some strange provision that alters the general rule that once the distribution agreement ends, all rights automatically revert back to you.

There are also a number of ways to negotiate a distribution agreement when it comes to the issue of how and when you get your rights back. For example, often there will be a benchmark performance obligation placed on a sales agent who is given the right to sub-license the distribution rights to assorted territories around the world. A sales agent could have a seven-year term, during which time she has the exclusive rights to license the film to other countries. A performance obligation could be placed into the contract that reads: “If the Sales Agent has not engaged in at least $500,000 in gross sales by the end of Year One of this Agreement, then the Producer has the right to have the term immediately end and all rights revert back to the Producer subject only to the sublicenses lawfully sold to territories prior to Producer providing notice of their right to terminate the Sales Agency Agreement.”

Or, you could tie the benchmark to how much money you actually receive from the sales agent, such as: “If the Producer has not received a minimum of $200,000 in money actually paid by Sales Agent by the end of Year Two of this Agreement, then the Producer has the right to have the term immediately end and all rights revert back to the Producer subject only to the sublicenses lawfully sold prior to the Producer giving notice.”

It’s best when negotiating distribution agreements to try and negotiate the smallest terms of years that you can obtain. Another thing many producers forget is that there are actually two different time-frames referenced in all Sales Agency Agreements wherein the sales agent is permitted to sublicense the film to distributors in other territories. First, there’s the term of years that is in place for how long your contract with the sales agent lasts, and then there’s the term of years for which the sublicenses can last.

For example, you could have a seven-year term in which the sales agent has the right to find distributors around the world and license your film to them. When the sales agent in turn licenses the film to a particular territory, that license might be for 10 or even 21 years.

Sales agents may also toy with unknowing producers. They may try to insist on having a mortgage of copyright on your film that allows them to continue to collect revenues long after the Sales Agent Agreement has ended, and continue until such time that the sales agent has recouped whatever money it claims to have put into its distribution efforts, plus interest.

There are countless ways a producer can be taken advantage of by even the simplest of sales agent or distributor agreements. Even if you can’t get these provisions changed, there’s value in knowing what they mean, so you can decide whether the deal is worth it or if you should continue to look for a different sales agent. Find more questions and answers at MovieMaker.com, and if you have a legal question you don’t mind all of MovieMaker’s readers reading it (we omit identifying names to protect both the guilty and innocent), drop us a line in our online comments section. MM

David Albert Pierce, Esq. is MovieMaker’s resident legal expert. He is the Managing Partner of Pierce Law Group LLP, a seven-attorney entertainment law boutique which handles all transaction and litigation matters that may confront independent producers. This article appears in MovieMaker’s Summer 2019 issue. Featured image courtesy of Shutterstock.

2 Comments

  1. Michele Cannon

    October 22, 2019 at 1:56 pm

    Dear Rik. An unhinged producer who worked during 3 months 11/2014-2/2015 of pre-production of my short film and made everyone’s life a living hell eventfully left the project. Three months later, pre-production commenced again under a formed LLC with personnel and monies that I (solely) put up. The production (I) ran out of money and the raw footage sits on a hard drive to this day. In 6/2019, the unhinged person sued me in small claims court (Brooklyn, NY) and won the maximum amount of 5K claiming breach of contract, loss of wages, slander, etc. None of this is true. She had to leave, no one could deal with her and how could I pay someone to abuse me and everyone else? Makes no sense.

    There is a working contract between her and myself and my co-director in the event she had finished the film, she would have been entitled to 33 1/3 of the PROFITS. There are no profits and no film. The $5K in the contract referred to money I committed to putting up for PRODUCTION COSTS, not to line anyone’s pockets. After all is said and done, I spent 40K and I still don’t have a film. So how on earth could she be entitled to anything? This is a money grab.

    Moreover, the Judge said and I quote film is not her area of expertise but that she had heard enough and threw the book at me!!!

    Rik, I am appealing but this proposes a dangerous precedent. Some crazy person wants to work with you but their antics require that they can’t be attached to your project but years later they sue.

    I might add that the contract we all did have together says: No one is entitled to monetary compensation until after all expenses have been paid and the percentage of return stems from PROFITS.

    My film was a SAG Ultra Low Budget Agreement. Should I get SAG involved?

  2. Rik Deskin

    August 25, 2019 at 8:57 am

    The SAG-AFTRA Short Film Agreement is now only used in the 48 Hour Film Project. The SAG-AFTRA Short Project Agreement is now in use since last Summer. For more info: https://www.sagaftra.org/production-center/contract/886/getting-started

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