Loeb & Loeb is pleased to announce that the California Court of Appeal ruled in favor of its client, CBS Studios, Inc., in a contract dispute brought by talent agency Rebel Entertainment Partners over the court-oriented television show, Judge Judy.
In 1995, Richard Lawrence, a talent agent whose agency later became Rebel, represented two producers of the show featuring Judy Sheindlin, a New York family court judge. The show was sold to CBS’ predecessor, Big Ticket. Big Ticket agreed to pay Lawrence’s agency an upfront percentage of the budget and a backend 5 percent of the show’s “Defined Proceeds.”
Every three years, Sheindlin presented CBS with a new, non-negotiable salary request. Sheindlin told CBS that if her demand was not met, she would terminate their relationship and produce Judge Judy herself. In 2009, after one such request, CBS doubled Sheindlin’s salary to $45 million, three years later increasing it to $47 million, making her the highest paid host on television.
CBS allocated Sheindlin’s entire compensation as a cost of production, which reduced Rebel’s defined proceeds to a negative balance, effectively stripping Rebel of its 5 percent participation receipts. Consequently, Rebel sued CBS for breach of contract and breach of the implied covenant of good faith and fair dealing, and sought an accounting. It alleged that CBS’ allocating Sheindlin’s entire compensation as a cost of production instead of attributing some of it to backend profit participation was in bad faith and violated its obligation to act reasonably and consistent with customary practice in the U.S. television industry.
Subsequently, CBS moved for summary adjudication, arguing that it could not have been unreasonable for CBS to agree to Sheindlin’s non-negotiable salary demand, because she had the “unique ability to end the ‘juggernaut’ show simply by walking away from it.” The Los Angeles County Superior Court granted CBS’ summary judgment in April 2020, finding that the network properly allocated the pay increase as an expense. Rebel thus sought appeal before the California Court of Appeal.
In this latest ruling on July 30, 2021, the Court of Appeal affirmed the lower court’s decision, noting, among other things, that CBS acted in good faith and didn't have a choice other than to meet the judge's salary demand.
"Rebel lost benefits under the agency agreement not because of any action by CBS, but because Sheindlin demanded a large salary," the opinion said.