By: Alyssa Levy
Force Majeure clauses have some inherent irony- they call upon the contract drafter to include language to excuse nonperformance of parties when an uncontemplated event or circumstance occurs, rendering performance impossible or impracticable. However, often times in order to be enforceable, the contract must have specifically mentioned the unexpected circumstance or event that the parties now need relief from. Further, before the onset of COVID-19, many industries either chose not to include force majeure clauses in their contracts or did not find them particularly useful. Now, we know how essential these clauses are.
On Monday, June 8, 2020, the American Bar Association held an online webinar entitled “No Lights, No Camera, No Game: Force Majeure Events & the Impact on Future Entertainment and Sports Negotiations.” Hosted by Mark Tratos, founding shareholder of Greenberg Traurig, the webinar explored how unions and guilds across the sports and entertainment industries have made use of and plan to use force majeure clauses in their collective bargaining agreements (CBAs) and other union contracts. The panel featured Heather Pearson, general counsel of the International Cinematographers Guild, Anthony Segall, general counsel of the Writers Guild of America West, Gregory Riches, Vice President and Legal Counsel for MGM Resorts and the Las Vegas Aces WNBA Team, and Roman Stoykewych, Associate General Counsel of the National Hockey League Players’ Association.
The industries represented at the webinar have been disproportionately impacted by the COVID-19 pandemic. While cinematography took a huge hit as demand for production essentially came to a halt, the writers guild has gotten by relatively unscathed as the increase in streaming services requires a steady influx of scripts. Las Vegas, a city reliant on entertainment, sports, and gambling, has been devastated, yet has seen glimmers of hope in the form of the UFC opening at private venues and the Golden Knights securing a new arena. Although the NHL was able to complete the majority of their regular season, it has not had any games, fans, nor revenue since March 12.
These unprecedented times have called upon unions and guilds in the sports and entertainment industries to reexamine their CBAs, both to see how they may already be protected from the catastrophic economic fallout and, retrospectively, examining what they should include in future drafting and bargaining. For example, the NHL’s CBA has no force majeure provision and dictates a salary cap system in which revenues are split 50/50 between owners and players. Thus, revenue loss from the halt in the season has resulted in direct loss of player compensation. The cinematographer and writers’ guilds both had no force majeure clause in their respective CBAs, although the latter had provisions in the event of a strike, and while a few members of both industries still had the ability to negotiate individual contracts, any force majeure clauses were given little thought during negotiations and certainly did not adequately cover the pandemic.
As for why these unions never addressed force majeure events, answers range from a lack of historical need to the fact that it is unlikely the clause would even provide protection from liability if an event is truly unforeseen. Across the board, the webinar speakers seemed to agree that it is difficult to have a black and white provision when the parties are engaged in relationship-based bargaining. There seemed to be a consensus amongst the webinar panelists that there is an institutional expectation for parties to work out their problems via bargaining rather than by invoking a standardized clause. All the safeguards in the world can be written into a contract, but when issues actually arise, these industries leaders emphasized that the parties involved must work out the issues amongst themselves.
This approach makes sense, as employers and employees have a mutual interest in negotiation. If parties have the flexibility to work out their own arrangements as issues come up, they’ll likely arrive at a more tailored solution than one inserted into a contract as a safeguard. Further, negotiation-based problem solving preserves relationships better and is often the best route when planning long-term. While it might be easy for parties to act in their individual financial interests, rational actors recognize the value in avoiding legal battles through compromise and solutions that avoid adversarial actions that rely solely on contractual clauses.
While each panelist agreed that force majeure clauses were not typically a major point of consideration before the pandemic, they each agreed that these clauses will be given much more consideration in contract drafting going forward. This was an interesting end to the conversation because prior to this ultimate conclusion, the conversation surrounding force majeure clauses was that they either a) were unlikely to cover the specific unpredicted circumstances, and thus, were not useful in practice, or b) were unlikely to be enforced in an effort to preserve valuable relationships via compromise. I suppose that these panelists see the value in having some contingency plan or semblance of predictability just in case a party is unwilling to compromise. Regardless, I think it’s a safe bet that the words “pandemic” or “infectious disease” are likely to appear in some capacity in all major contracts’ force majeure clauses going forward.