Under-the-radar legal battle boosts lawyers, erodes agents

Attorneys could potentially play an even larger role in business negotiations because of a recent series of legal skirmishes rooted in Hollywood deal making. The agents are not happy.

Here’s the background:

In a one-sentence edict, the California Supreme Court on June 30 refused to review an appellate court ruling that a non-lawyer agent dealing with attorneys on proposed contracts and redlining agreements was practicing law without a license.

Should lawyers be involved in negotiations over real estate deals? Retail sales? A building contractor’s agreement with subcontractors such as roofers and plumbers?

That decision from the 2^nd District Court of Appeal upheld a previous trial court decision in a case called Bacall vs. Shumway.

In that case, an attorney who was also an artist’s manager changed his status with the state bar to “inactive” without telling his client and continued to do deals.  The client eventually found out and sought to terminate the contract on grounds of fraud, among other things. 

Although the dispute was rooted in the degree of involvement lawyers should or shouldn’t have in negotiations between performers’ agents and producers, it could  evolve into broader issues.

For instance, should lawyers be involved in negotiations over real estate deals? Retail sales? A professional athlete’s contract? An actor’s agreement? A building contractor’s agreement with subcontractors such as roofers and plumbers?

“Someone might say it might have applications beyond the entertainment industry,” says James Fitzgerald, an Encino attorney who won the appellate court case. 

“I’m sure there are people who will try to extend it to wider areas. I’m not sure how successful they might be,” Fitzgerald said in a telephone interview. Fitzgerald cautioned that widespread changes in the way business is conducted in California are probably not on the immediate horizon.

 Rick Siegal, a personal manager, isn’t buying it.

“Now you’re going to have to use a lawyer for everything … It is now California law that only lawyers can negotiate, ” he said.

Siegal said that the legal outcomes could lead to such absurdities as a customer who is not a lawyer walking into a candy store to buy a piece of candy for someone and, by seeking to negotiate a discount on the candy, to be guilty of practicing law without a license

“The Legislature has to take action to define what activities should and should not be mandatory for participation by lawyers.” — Rick Siegal

If 400 extras are hired for a super-colossal film epic, then attorneys will have to be hired to oversee 400 employment contracts.

“Most likely, sooner versus later, general contractors and architects will successfully complete a project, but instead of receiving the balance due, (they)will face a lawsuit, based on claims that by negotiating written contracts without a law license, as the homeowner’s representative with the electricians, landscape architect, pool construction engineers, plumbers, and carpenters, they engaged in the unlicensed practice of law,” he argued in a friend of the court brief.

The refusal of the California Supreme Court to review the case means the 2^nd District Appeals Court ruling stands   

“There are a host of considerations” involved in a decision by a high court not to take a case,” Fitzgerald pointed out, and the refusal isn’t necessarily a matter of the merits.  

Given that they had no luck in the courts, might the losers in the legal battles now seek changes in state law that would, in their eyes, remedy the situation?

“I think anyone who saw this would say ‘Wait a minute,’” Siegal said.

“The Legislature has to take action to define what activities should and should not be mandatory for participation by lawyers.”