Friday, June 29, 2012

Litigation v. Arbitration

Photo District News ran an article this morning about a Los Angeles based photographer named David Strick who is caught between a rock and a hard place in his attempts to sue The Los Angeles Times for copyright infringement.

The facts, according to the article, are that for a number of years Mr. Strick had a contract with the Times to provide photographs from various entertainment productions which would be used around the time the productions were released. The contract ended, Mr. Strick's lawyer told the Times they could not use the images that had been sent to them by FTP after the contract terminated. The photographs were used. Mr. Strick sued for copyright infringement, but the Federal District Court for the Central District of California in Los Angeles dismissed the case because of an arbitration clause in the contract. Then Mr. Strick's arbitration claim was dismissed because he had failed to file for arbitration within a 90 day window after the precipitating event, as specified by the arbitration rules.

For as long as I was an active member of the American Society of Magazine Photographers, and probably even now, the ASMP sample contract forms specified arbitration as the means of dispute resolution between photographers and clients for most complaints. I believe the same held true for the Graphic Artists Guild forms as well, and for many of the generic forms available to photographers and artists.

As soon as I saw the results of this language in practice as a lawyer, I changed my forms and advised my clients to do the same thing. Arbitration, especially if you can specify using an organization like the California Lawyers for the Arts, can be a useful means of dispute resolution sometimes. But it has become a huge barrier for most artists, especially those who live in California, where an arbitration/mediation component is part of almost every legal proceeding anyway and private arbitration becomes far more expensive than that used during the course of regular litigation, as Mr. Strick learned. Mr. Strick was required to use JAMS, which, apparently, was specified by the Times contract. His costs to get to his arbitration dismissed on a technicality were $20,000 in shared arbitration costs. Ugh.

Mr. Strick describes himself as the less powerful party to the contract, and that's no doubt true. He did have the power to say "no" to the terms and walk away. I do suspect that his access to the subject matter was a reason he got the gig in the first place, so maybe "no" would have turned in his favor. Most photographers (and frankly, other creators) I've known in my life are so insecure that they are afraid to use that word. The people I know who have used it are generally the most successful.

Mr. Strick's predicament shows the biggest flaw in agreeing to arbitration: you will be held to it, even when, as in copyright infringement, you have denied yourself some really important remedies (statutory damages &  attorneys fees to the prevailing party if copyright formalities have been followed.) Copyright infringement has a 3-year statute of limitations from the time that Mr. Strick learned of the infringement. The 90-day window of the arbitration agreement is unusually short, and if Mr. Strick had been out of the country, for example, and did not learn of the infringement until a year later, he no doubt would have been similarly barred from relief.

A court will look at a contract and assume that all parties are on an even playing field. In fact, they usually are not and the big corporation has an extremely unfair advantage over an individual. There have been cases where arbitration clauses are thrown out by the courts as coercive and this one appears to thwart the interests of justice. But Mr. Strick isn't a consumer, he's a business, and he should have paid more attention to the paperwork. He may be very right that this would not have happened if the people who initially brought him in for this work were still with the Times, but they are not, and contracts should be written with that anticipation.

Litigation is no fun and should be avoided if at all possible. But you need to protect yourself for the worst-case scenario. Review the terms of your own paperwork carefully and give careful thought to removing language about arbitration for dispute resolution. Or perhaps you should consider making arbitration the choice for contractual disputes or for below a certain monetary limit of damages but leave litigation as the forum for copyright infringement (sometimes courts have a hard time parsing that one, you should be warned.) Even filing an arbitration dispute can be much more expensive than filing a lawsuit. Remember that if you file in California, you will probably see some kind of alternative dispute resolution inserted into the process (if you are lucky, the matter will settle there) and you won't have to pay for a court appointed arbitrator or mediator out of pocket like you will if you start with JAMS.

If you are in love with arbitration or mediation anyway, try to specify California Lawyers for the Arts as your dispute resolution organization. It will certainly be cheaper and faster than JAMS and the arbitrators may actually know something about the business of photography or the other arts.

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