David vs. Goliath, Dora the Explorer vs. Swiper the Fox, Caitlin Sanchez vs. Nickelodeon.
Since our passion is the drafting and negotiation of intellectual property-related contracts, when 14-year-old Caitlin Sanchez, the voice of the popular Dora the Explorer cartoon character, filed a lawsuit against the Nickelodeon cable network claiming that Nickelodeon and its affiliates have duped her out of millions of dollars in royalties and residuals by pressuring her to sign a “bizarre, impenetrable, unconscionable contract,” it tweaked our curiosity.
But was it really a bad contract, or rather bad negotiation that resulted in Caitlin getting a lot less money than she and her family expected?
To answer that question, we tracked down a copy of the agreement (“Agreement”) between Caitlin and Uptown Productions, Inc. (“Uptown”), the production company for the Dora program, and compared it to the allegations in the lawsuit complaint, filed by the law firm of Balestriere Fariello. (Agreement is here, complaint is here.)
And the comparison showed that the contract IS bad, but not confusingly bad, just transparently bad— extremely but obviously one-sided in Uptown’s favor. Despite that, Caitlin and her family signed the Agreement and several subsequent documents literally within minutes of receiving them, without negotiating or asking an attorney to assist them. That was akin to Dora the Explorer not chanting, “Swiper, no swiping!” when the larcenous fox was in plain sight.
In doing so, they made the same mistake that many artists, actors, musicians, designers, and other creative people make when they are approached by television, music, or theatrical producers—they silence their questions and sign, for fear of being ditched and missing their big break.
The framework for the Agreement between Uptown and Caitlin is that Uptown would pay for Caitlin’s exclusive services for seven episodes of the Fifth Cycle of the Dora series and would retain options for 10 episodes for each of the Sixth through Tenth Cycles of the show. Caitlin was to receive: a salary of $5,115 per episode (increasing 5% per cycle); plus residuals based on the number of re-broadcasts of the original episodes; plus merchandise license fees. She was also required to do a “reasonable” amount of promotional appearances and interviews.
(1) The complaint alleges: Nickelodeon “fail[ed] to fully compensate Caitlin for products she voiced, for which she is due a percentage of the products [sic].” Uptown has only paid Caitlin $9,636.39 in merchandising royalties to date, according to the complaint. Caitlin’s attorney claims that that is an absurdly low and definitely incorrect figure in light of the fact that Nickelodeon claims gross retail sales of $11 billion in Dora merchandise since 2002.
The contract states: Uptown “shall pay you 5% of 100% of the ‘net receipts’ actually received by [Uptown] from merchandising, should your name, voice or likeness be used alone in connection therewith, reducible to 2-1/2% of 100% if other artists are used…; ‘Net receipts’ shall mean the amount remaining after deduction of a distribution fee of 50% of the gross receipts actually received from agents and distributors; and all costs related to such merchandising use.”
Our take: Caitlin would get royalties based on only the subset of Dora merchandise that featured Caitlin’s voice or her actual (not Dora’s) image, and that the revenue stream on which the royalties would be calculated could be easily manipulated by Uptown’s “creative accounting.”
How do you say, “Swiper, no swiping!” in Swedish?
(2) The complaint alleges: Nickelodeon “fail[ed] to pay Caitlin residuals for at least 325 reruns of episodes, for each of which she should have been compensated at least her minimum exclusive fee of $5,115, or per industry-standard, as much as 5%-20% of Nickelodeon’s gross income from re-airing of episodes in which Caitlin performed. The underpayment is at least $1.6 million, and could be many multiple [sic] of that…” Caitlin’s attorney claims that she has not yet been compensated for cable residuals.
The contract states: “Domestic basic cable residuals shall be paid… at AFTRA [actors’ union] scale…”
Our take: without the AFTRA agreement, it is not clear from the face of the Agreement how much Caitlin should have been compensated for residuals, but the phrase “AFTRA scale” should have been a red flag that Caitlin would not be earning millions of dollars of residuals within a couple of years. According to the website bizparentz.org, there is a “special” AFTRA contract called the Uptown Agreement which is used especially for shows on the Nickelodeon and Disney channels. “It is a non-standard agreement with AFTRA that allows them to pay less per session fee (some as little as $341 for two day’s work) AND show the episode many, many times before even starting to pay residuals (at least year [sic]—sometimes never). This equates to extremely low pay overall. We all know how those outlets run their episodes hundreds of times, so we assume that our child will make big bucks.”
(3) The complaint alleges: Nickelodeon “forc[ed] Caitlin to complete… 103 promotional events, constituting at least 500 hours of work… For this work, Caitlin should have been compensated, at a minimum her implied, average hourly rate for episodes of $1,310.72, yielding, at least, $650,000 in underpayment.” Caitlin’s attorney claims that she was not compensated by Uptown for promotional appearances, except for a $40 per diem when on the road.
The contract states: Caitlin will perform “subject to [her] professional availability, a reasonable number of publicity sessions, personal appearances, interviews and still photography sessions.” The rider further states: “If Artist is required to render services in connection with promotional appearances, [Uptown] shall pay Artist an amount equal to the applicable AFTRA minimum session fee per day…”
Our take: again, even without the AFTRA agreement, the phrase “minimum session fee” should have been a red flag that Uptown would not pay a lot of money. And see above about the absurdly low “minimum session fee” under the Uptown version of the AFTRA agreement. In addition, the Agreement gave Caitlin the discretion to refuse promotional activities to the extent that they unreasonably interfered with her school or recreational activities.
According to the complaint, Caitlin and her parents were given only 22 minutes to sign the Agreement from the time that they received the complete, correct version—and they still beat the deadline. Furthermore, prior to signing, Caitlin’s mother asked her agent whether it would make sense to have an attorney review the contract, and he allegedly replied that there was “no time” for a lawyer to review it, and “no need,” because he regularly negotiated similar contracts with Nickelodeon. Presumably, even in the absence of an attorney, the agent should have at least been able to explain to Caitlin’s family what the AFTRA rates were for residuals and promotional appearances. According to the complaint, Caitlin’s mother asked the talent agency for a copy of the AFTRA agreement several times, but it never obliged. Given the multiple serious breaches of fiduciary duty that the complaint alleges against Caitlin’s agent, it is surprising that her attorney did not sue either the agent or the talent agency.
So what should Caitlin and her family have done? After all, would not Nickelodeon have dumped her if her parents or agent had asked to negotiate the contract?
Sadly, the answer is, probably not. No matter what a producer, record company, etc. claims, they will rarely dump you if you ask for an extra day or two to review an agreement, and ask a few clarifying questions before signing it. Perhaps Caitlin and her family could not be expected to know that when they signed the Agreement in April, 2007, but certainly after being stonewalled by Uptown and their agent, they should have asked an attorney to review their agreement before re-signing and reaffirming the Agreement to cure Uptown’s missed option deadline in January, 2009.
Takeaway: Don’t be a Dumb Dora. Before signing a contract with a producer, record company, or network, at least have an experienced attorney give it a quick review and tell you where the pitfalls are. Then you can make an informed decision whether to ask questions or request changes. Courts are not likely to be sympathetic to a later claim that you were duped, even if the contract is extremely one-sided.