Selecting an attorney, or attorneys, to work with throughout the moviemaking process is one of the most important decisions you’ll make.
Likewise, investing in the right attorney can ultimately net great dividends and actual cost savings to your production far beyond your dreams. When the producer/attorney relationship works, it’s a beautiful thing. A skilled attorney can prove to be your true consigliere and most cherished asset during the production process.
The first thing to understand is there are at least three distinct attorney functions for any film project. Sometimes one attorney or law firm can wear many different hats and fulfill all three functions. Other times, different attorneys fill these three different roles during different stages of production. The three functions are: Financing Counsel, Production Counsel, and Distribution Counsel.
Financing Legal Work
During the entity formation and financing stages of your production, you will need skilled legal Finance Counsel. Such work is separate from production counsel. Simple things like entity selection can be deceiving. Generally speaking, a Limited Liability Company (LLC) provides the optimal choice of entity for film production. However, a LLC is not always the right choice. If you film in New York, a C-corporation instead of a LLC may actually be the entity necessary to best recover NY tax credits and to obtain those credits in a timely manner to meet your cash flow needs. Out-of-the-box online corporate formation services, or a rookie attorney not familiar with the odd, sometimes nonsensical rules that govern the timeline for recovery of tax credits in relation to your cash flow needs for those tax credits, won’t provide you with that information. And without having that info from the start, you won’t realize how screwed you are until it’s too late to make corrections.
Likewise, a company like LegalZoom, or a less savvy lawyer who perhaps holds him or herself out as a film attorney merely because they “love films,” will not understand the unique revenue waterfall that needs to be incorporated for illustrating how investors will recoup their investment and earn a profit. The explanation for how profits are calculated for a single purpose production entity is quite different than the explanation for how profits are calculated for any other type of company that may manufacture or sell ice cream, clothing, or gym memberships.
These are just two examples of why you need experienced finance counsel to guide you through the maze of financing and entity formation issues. They are proof positive that you’re not paying your legal Finance Counsel just to file a form and set up the production entity. Rather, you’re paying them to ensure that the entity is customized for the needs of your financing, the production itself, and its financiers. Even more importantly, legal finance counsel will ensure that you properly comply with the lawful ways to accept money, and recommend the right terms to offer the wide assortment of financiers that you may approach.
Production Legal Work
Once you’re funded, you’ll need Production Counsel. Again, you don’t pay Production Counsel just for fill-in-the-blank cast and crew contracts—you pay them to ensure that those forms are tailored for your production, much like a physician ensures that mixing your prescription medications won’t result in an allergic reaction.
In determining how much Production Counsel should cost, you’ll need to do a breakdown of your script in the same way you’d do a breakdown for any other line item. How many actors will you have? How many locations? What unique clearance issues can you expect to have if there are name brands essential to your script? Are there stunts? Is there nudity? How many unions are involved, and which ones? Are any of the actors children? What type of post-production activities touch upon legal issues? Is there a composer? Will there be a soundtrack? Will you want production counsel to assist in delivering the film to the distributor? All of these questions, and many more, translate into specific legal needs, and therefore, specific attorney time.
Any line producer who fails to conduct a legal breakdown of your script, and instead just slaps down $10K on the legal line as a percentage of the overall budget is one you should quickly fire—or better yet, never hire in the first place. Prefixed, percentage-of-budget legal cost allocation is a red flag indicator of a line producer who has failed to do a script breakdown, who has probably never worked previously in a meaningful way with qualified Production Counsel, or worse, who thinks he can ameliorate your concerns by slapping down the number he or she thinks you want to hear, so his or her cookiecutter budget works on paper. Producers fail to recognize this red flag, and this results in actual costs being disproportionate to the improvised “budget” those producers are provided. When this method of cutting corners is used for itemizing line item costs, you’re more or less guaranteed to encounter overruns during production, and massive extra expenditures during postproduction—a time when the line producer or UPM has long since left the picture.
This is not to say that you can’t move forward with some type of cost-sensitive line for Production Counsel services. If you only have a certain small dollar amount for Production Counsel, you’ll first need to consider what type of film you’re making. Certain scripts demand heavy lawyering. Just as each location adds a certain extra layer of costs to a film, so too does the addition of more legal issues arising from the unique needs of your script and production. If you have kids in your script, but your budget is too small to pay for a studio teacher and for court ratification of the child actor contracts, then you shouldn’t be producing such a movie on such a small budget. And if you’re willing to give a less-experienced attorney a chance, you might get a modicum of legal know-how that will protect you more than having no attorney, but you might also later pay for your novice attorney’s learning curve. (It’s often not a question of what the novice knows, but of what the novice doesn’t know.)
Distribution Legal Work
Once your feature is complete and you’re fortunate enough to obtain distribution, employing Distribution Counsel to negotiate your deal with the distributor is one of the wisest spends you’ll make during a phase of production in which money is likely at its scarcest. Distribution contracts can be complex, and the simple ones can often be more deceiving than the complex ones. The sly genius of a simple contract—or even something described as a “deal memo” that promises to later be negotiated to a more formal agreement—is that it can set you up to give away some material terms without even knowing it, and those who sign it may not see an opportunity to revisit and negotiate those unwittingly agreed-upon terms. Remember: Just because a “producer’s rep” or sales agent may be spectacular at landing a deal doesn’t mean they are equally spectacular at understanding the legal minutia of that deal. Securing Distribution Counsel is crucial to guiding you through that shark tank.
Finding Firm Footing
While Financing Counsel, Production Counsel, and Distribution Counsel have three specific functions, some firms, and even a few lawyers, are skilled in all three areas. Be sure to ask questions before selecting the attorney or attorneys you ultimately use. Attorneys are not fungible—each of us have different skill sets, rates, and bedside manners with clients. Check references. Inquire as to whether they have malpractice insurance, and whether that insurance covers the particular niche in which you are employing them. Shockingly, many who claim they perform finance work do not in fact carry film finance malpractice coverage.
Insist on knowing what services you’re getting for the price you’re paying. There are horror stories from producers who’ve opted for a cheaper Production Counsel attorney, only to discover that the Production Counsel attorney would regularly respond to questions by stating, “You didn’t pay for that as part of Production Counsel, it will cost extra.” Others may say, “You only paid for contract forms and my drafting of those forms. I’m not going to provide advice beyond that.” If that is in fact what you contracted to receive, then fantastic, but ask questions before you begin and know those answers from the start.
Finally, don’t forget the distinctions between film finance, production, and distribution legal work. Often a producer will receive better service if he or she selects a full-service, quality firm and pays for all three branches of counsel at the outset.
A good legal team is with you from the earliest stages of development, to distribution, and beyond. Few if any of your other crewmembers will be with you through the entire production process in the way a trusted attorney will. MM
This article appears in MovieMaker’s Summer 2018 issue. Featured image illustration courtesy of Shutterstock.