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hilbert90

In Iowa

Member Since 2003

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Friday Sep 30, 2005

Sep 30, 2005
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SG attempts to restrain California competition through bogus, and unenforceable contracts and threats of litigation

This is a simple issue under California law for two reasons. First, the contract does not contain a "negative" covenant not to work elsewhere. Those exclusivity contracts without such a provision are, and have always been in all jurisdictions, unenforceable. It dates back at least to an English case called Lumley.

Second, even if there were a negative convenant, the provision would be unenforceable because of a specific California statute passed by the California legislature. The following discussion appears, and is illuminating, in a case involving an entertainment contract:

Motown Record Corp. v. Brockert
160 Cal.App.3d 123, 207 Cal.Rptr. 574
Cal.App. 2 Dist., 1984.

It explains quite well that the contract has to GUARANTEE at least $6000 per year in compensation:

When the California Civil Code was adopted in 1872 it did not include a Lumley exception to the rule prohibiting specific performance of personal services contracts. Section 3423, as originally enacted, provided, "An injunction cannot be granted: ... 5. To prevent the breach of a contract, the performance of which would not be specifically enforced." (Farnum v. Clarke (1906) 148 Cal. 610, 615, 84 P. 166.) After discussing the Lumley line of cases and another line of cases holding to the contrary, the court in Anderson v. Neal Institutes Co. (1918) 37 Cal.App. 174, 178, 173 P. 779 observed:
"Subdivision 5 of section 3423 is free from ambiguity or uncertainty. It clearly declares as the law in this state the rule laid down in one of two opposing lines of authority ... that the court will not interfere by injunction to prevent the violation of an agreement of which, from the nature of the subject, there could be no decree of specific performance."
A year after Anderson v. Neal Institutes was decided, the California Legislature amended section 3423 to allow a limited version of Lumley. (Stats. 1919, c. 226, p. 328, 1.) As originally introduced, the legislation would have prohibited an injunction "[t]o prevent the breach of a contract, other than a contract in writing for the rendition or furnishing of personal services from one to another, the performance of which would not be specifically enforced." The original bill was amended to add the stipulation "where the minimum compensation for such service is at the rate of not less than six thousand dollars per annum." (Italics added.) It was amended again to require that the promised service be of a unique character the loss of which cannot be adequately compensated in damages. (J. of the Sen., Forty-Third Sess. (1919) pp. 534, 1255, 1349.)
**579 In the 65 years since the current version of section 3423 (Fifth) was adopted only two cases have interpreted the $6, 000 minimum compensation requirement: Foxx v. Williams (1966) 244 Cal.App.2d 223, 52 Cal.Rptr. 896 and MCA Records Inc. v. Newton-John (1979) 90 Cal.App.3d 18, 153 Cal.Rptr. 153.
Comedian Redd Foxx brought an action for an accounting, declaratory and other relief against the recording company which was distributing his albums. The company cross-complained for injunctive relief to prevent Foxx from breaching the exclusivity clause of his contract. The trial court granted the injunction restraining Foxx "from making sound recordings for any other person ... so long as royalties earned by [Foxx] under the contract ... equal or exceed the sum of $3000 [for each six-month royalty period]." (Id. 244 Cal.App.2d at p. 230, 52 Cal.Rptr. 896.) On appeal the appellate court found the royalty payments were entirely contingent upon sales of Foxx' albums and, therefore, did not guarantee Foxx would receive any money while the injunction was in effect. (Id. 244 Cal.App.2d at p. 236, 52 Cal.Rptr. 896.)
*131 "[T]his royalty contract does not meet the requirements of the injunction statute even though it should ultimately appear that the royalties earned, over any given period, should exceed the rate of $6, 000 per year.... [] The Legislature has concluded that an artist who is not entitled to receive a minimum of $6, 000 per year by performing his contract should not be subjected to this kind of economic coercion." (Ibid.)


The courts are extremely hostile to these types of contracts. Be that as it may, since California law is clearly on point, I take the threat of legal action as anti-competitive, warranting a suit, if not a counter-suit were one to be filed, under federal and state antitrust laws (clearly they are trying to limit competition by Godsgirls, as well as constrain the ability of individual models to compete). Treble damages are usually warranted, as well as injunctive relief.


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