In the Open Internet Era, Handshake Deals Are Disappearing

A person's word may be their bond, but in most locales now, only if it's in writing.

Sara Randazzo reports in the Wall Street Journal:

A California judge’s ruling in a case pitting Johnny Depp against his longtime lawyer is prompting a reassessment of the handshake-deal culture. The judge found that a verbal agreement entitling Mr. Depp’s lawyer to a percentage of his client’s earnings isn’t valid because it wasn’t put in writing, as required by California law. Most business lawyers insist on written agreements as a form of protection for both sides in the deal. “Hollywood departs from this prudent approach.”
A California judge’s ruling this week in a case pitting Johnny Depp against his longtime lawyer is prompting a reassessment of the handshake-deal culture that is still pervasive in some corners of Hollywood.
The judge found that a verbal agreement entitling Mr. Depp’s lawyer to a percentage of his client’s earnings isn’t valid because it wasn’t put in writing, as required by California law. Mr. Depp sued Jacob Bloom last year, seeking to recover what the lawsuit estimates to be $30 million in fees paid to him since 1999.

The victory for the “Pirates of Caribbean” star is expected to change how lawyers and actors formalize their contracts, entertainment attorneys said. It could also prompt other actors dissatisfied with their representatives to pursue similar legal claims.
“Everyone’s exposed,” said one veteran entertainment attorney.
Lawyers, agents and other kinds of representatives in Hollywood often maintain long relationships with actors and directors that begin informally and become deeply personal. Oral agreements remain common, lawyers said, even as other kinds of Hollywood deal making—for instance, when a studio hires an actor or director for a movie or TV show—require terms in writing.
“Napkin deals are actually when we’re getting formal,” said Schuyler Moore, a Hollywood deal lawyer. Mr. Moore said his firm, Greenberg Glusker, has a policy of putting contracts in writing and he expects other firms to start doing the same. Such agreements, he said, typically call for lawyers to be paid 5% of a performer’s earnings.
Adam Waldman, one of Mr. Depp’s lawyers in the pending case, said he believes the ruling will “create major change in Hollywood.” Mr. Bloom, whose law firm was also named as a defendant, and his counsel in the case didn’t respond to requests for comment. In court filings, Mr. Bloom, a prominent Hollywood lawyer, denied the allegations against him and said Mr. Depp validated the oral agreement by continuing to request his legal services.
California law requires attorneys who represent clients on a contingency-fee basis to put their contracts in writing. In his Tuesday opinion, Los Angeles Superior Court Judge Terry Green said Mr. Depp’s oral agreement with Mr. Bloom qualified as a contingency-fee arrangement because the lawyer was paid based on the actor’s business success. Without a written record of the contract, the judge said, Mr. Depp has the right to invalidate it.
The judge’s ruling doesn’t necessarily require Mr. Bloom to forfeit the tens of millions that he has been paid. Under California law, he is entitled to seek reasonable compensation for his time now that the verbal contract has been voided. In court filings, Mr. Bloom said he spent thousands of hours working on dozens of matters for Mr. Depp.
Each side also continues to press claims against the other that weren’t resolved by Tuesday’s ruling.
Mr. Depp’s complaint, filed in October, claims the actor wasn’t well-versed in legal matters or finance and relied on his advisers to manage his affairs. By the time he hired Mr. Bloom, he had already achieved fame from such movies as “What’s Eating Gilbert Grape” and “Edward Scissorhands.”
A 2014 study by Jonathan Barnett, a professor at the University of Southern California’s Gould School of Law, noted that most business lawyers insist on written agreements as a form of protection for both sides in the deal. The study, which analyzed the legal risks of soft contracts in the entertainment realm, added dryly: “Hollywood departs from this prudent approach.”
Diane Karpman, an expert on legal ethics, said “we’re special” is a refrain she has often heard from Hollywood lawyers over the years when giving presentations on ethical duties. “They’ll say, that’s the rule, but that doesn’t apply to us,” she said.
Tuesday’s ruling was the latest twist in a public feud that Mr. Depp has waged against his former handlers. In July, he settled a legal dispute with his ex-business managers at the Management Group, whom he accused of causing him to go into debt and effectively squander more than $650 million. The firm denied the allegations and blamed the actor’s “selfish, reckless and irresponsible lifestyle.”