In the court of public opinion, Disney may well lose its battle with Scarlett Johansson. But the legal question is important, carrying implications for business well beyond the borders of the Marvel Cinematic Universe and the actor who has for more than a decade portrayed the character known as Black Widow.
Johansson claims that the Walt Disney Co. breached her contract last month when it released the eponymous film simultaneously in movie theaters and on the Disney+ streaming service. Because her compensation depends in large part on how well the film does on the big screen, Johansson argues, the availability of the movie at home reduces her potential earnings.
The lawsuit has fans in a whirl, but the fundamental issue arises constantly. Compensation is frequently contingent on a future event, often called a “trigger”: hitting a sales target, closing a deal, selling a certain number of books. Does the party making the payment have an obligation to allow the triggering event to take place?
Consider a real-estate associate who’s promised a bonus if she hits $2 million in annual sales. When she reaches $1.5 million, can the employer reassign her to a desk job to avoid paying the bonus? Probably not. Such conduct might once have been tolerated, but nowadays most courts would say that the company is acting in bad faith if its only motivation is preventing her from reaching the bonus trigger.
Now consider a professional football player who will receive a bonus of $2 million if he is on his team’s roster on the first day of the National Football League’s year, which typically falls in March. In February, the team cuts the player to avoid paying the bonus. Should the player sue (or file a grievance), he’ll lose.
What’s the difference between the cases? The court would say that the associate and the real-estate company signed the contract against a shared assumption that she would have the opportunity to try to earn the bonus. The bad faith comes in violating that assumption simply to keep from paying the bonus. The NFL player, on the other hand, signed his contract against a quite different background: both parties knew that professional teams regularly cut players to avoid paying “roster bonuses,” a practice that the collective bargaining agreement seems to take as a given. Thus cutting the player to prevent him from earning the bonus violates no underlying assumption.
Critics of the “good faith” standard consider it too amorphous, giving judges near-unfettered discretion to rewrite agreements. But the standard is enforced nevertheless, and film studios have more than once been successfully sued for breaching it. California courts have allowed suits to go forward even on such seemingly abstract grounds as the claim that a studio failed to consider fairly films submitted under a development deal.
Like the examples of the professional athlete and the sales associate, Johansson’s case will turn on a determination of exactly what background assumption the parties shared. In her complaint, she alleges that the parties understood that the contractual promise that “Black Widow” would enjoy “wide theatrical release” meant that the film “would remain exclusively in movie theatres for a period of between approximately 90 and 120 days.” She asserts that this was the industry standard and Marvel’s own practice. By releasing “Black Widow” on Disney+ at the same time it entered the theaters, according to this argument, the studio violated this shared assumption.
Good faith, according to Johansson, would have meant negotiating a settlement before shifting “Black Widow” to a simultaneous theatrical and home video release. She points out that Warner Bros., prior to moving all 2021 films to joint release, shelled out a reported $200 million in deals with various stars whose compensation was linked to how their films performed in theaters. Disney, she says, refused to discuss the matter.
Still, there’s a peculiarity to Johansson’s claim. She’s not suing Marvel. She’s suing Disney, which, she argues, committed a tort by inducing its subsidiary to act in bad faith. Others have noted how unusual it is to claim that a company induced a breach by its own subsidiary — the company and the subsidiary are more commonly treated as a single entity — but Hollywood battles proceed along their own curious byways, and when the dust settles everybody has to work together.
To prevail under California law, Johansson must show that Disney intended to induce Marvel to act in bad faith. The complaint tries to meet this requirement in part by arguing that the compensation of high-ranking Disney executives turns on the growth of Disney+, thus putting them at cross-purposes with her.
A statement from Disney calls the lawsuit “especially sad and distressing in its callous disregard for the horrific and prolonged global effects of the COVID-19 pandemic.” If this approach presages the studio’s legal defense, we can expect Disney to argue that its motive for the joint release of “Black Widow” was entirely benign: to avoid inducing large numbers of theater-goers to risk infection rather than staying safely at home. Not a bad argument, either — although modern scholars might reply that the court should still decide which party to the contract should bear the pandemic risk.
In short, both sides make good points.
Want a prediction of the outcome? Here’s one: By the dawning of autumn in the September twilight, the case will have been settled. In an industry so sensitive to image, protracted legal wrangling helps nobody. And a year hence, whether movie theaters are booming once more or sitting empty, nobody will remember that this dispute took place.
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