 It is London in 1852 and reigning opera singer Johanna Wagner is engaged in a dispute with a concert hall owner. it is Los Angeles in 1984 and pop recording artist Tina Marie Brockert (professionally known as Teena Marie) is engaged in a dispute with Motown Record Corporation. The apparent distance between these matters has been bridged by California appellate court Judge Earl Johnson who has ruled that a clause in Teena Marie's contract with Motown giving Motown the option to pay her $6,000 per year would not support the issuance of an injunction to restrain Teena Marie from breaching the exclusivity clause of the contract.
To begin at the beginning - in 1976, that is, not the early 1850s - Teena Marie entered into contract with Motown Record Corporation and Jobete Music Company as a recording artist and songwriter. Each contract was for an initial period of one year and granted the companies six options to renew the contracts for one year periods on the same terms as set forth in the initial contracts. Each contract contained an exclusivity clause providing that during the term of the contract, including any renewals, Teena Marie would not perform singing or songwriting services for another employer. And, most significantly, the contracts provided each company with the option, exercisable at any time, to pay Teena Marie "compensation at the rate of not less than $6,000 per annum."
According to the court's report, prior to 1981, Teena Marie wrote songs for Jobete and recorded four successful albums for Motown. Her album "It Must Be Magic" achieved gold record status.
However, in May 1982, Teena Marie advised Motown and Jobete that she no longer would perform under the contracts, which "purportedly" were due to expire in April 1983, and gave written notice to the companies of her rescission of the contracts. In August 1982, Motown and Jobete sued Teena Marie for breach of contract and sought injunctive and declaratory relief. In September 1982, the companies exercised their options to pay Teena Marie at the rate of $6,000 per year. But in November 1982, Teena Marie notified the companies that she had signed a recording contract with another company.
The trial court granted the companies a preliminary injunction which restrained Teena Marie from performing as a singer or songwriter for any other employer until April 9, 1983. The contracts at issue expired in April 1983 and Teena Marie now records for CBS Records.
Notwithstanding the fact that the contracts expired indeed, even though the parties settled their dispute - the appellate court rejected a motion to dismiss the case filed by Teena Marie's attomey, Donald Engel, and reversed the decision of the trial court.
Judge Johnson first set forth the relevant statutory provision, Civil Code section 3423 which provides, in part, that an injunction cannot be granted to prevent the breach of a contract, "other than a contract in writing for the rendition or furnishing of personal services from one to another where the minimum compensation for such services is at the rate of not less than six thousand dollars per annum and where the promised service is of a special, unique, unusual, extraordinary or intellectual character, which gives it peculiar value, the loss of which cannot be reasonably or adequately compensated in damages in an action at law, the performance of which would not be specifically enforced."
The court pointed out that the question of whether an option to pay a performer at the rate of $6,000 per year satisfies the statutory requirement of minimum compensation to support the issuance of an injunction never has been addressed by an appellate court during the sixty-five year life of the code section. Thus, although April 9, 1983 has passed for most of us, the court determined that the appeal of the matter was not moot, because the case, in addition to presenting an issue of first impression, was found to be a proper subject for the court's attention for several reasons: because the question of whether the preliminary injunction prohibited Teena Marie from recording or otherwise using songs produced or conceived on or before April 9, 1983 was not resolved; because Teena Marie may be entitled to recover for any damages caused by the injunction; and especially because the issue was one of public interest, affecting a large segment of California business, and is an issue which is likely to recur yet evade judicial scrutiny since disputed contracts on most occasions would expire pending appellate review.
Judge Johnson therefore proceeded to review the history of the minimum compensation requirement of section 3423 and its relationship to the long-standing principle of equity that a contract to perform personal services cannot be specifically enforced. Lumley v. Wagner, 42 Eng.Rep. 687 (1852), was the case that created a narrow and "not warmly embraced" exception to this principle. The case involved a well known opera singer, Johanna Wagner, who had entered into a contract with an individual known as Lumley to perform at Her Majesty's Theater in London. The contract called for Wagner to perform twice a week for three months at the rate of 100 pounds per week; Wagner apparently also agreed not to perform elsewhere during the time of her engagement at the theater. The court would not specifically enforce the affirmative covenant requiring Wagner to perform at Lumley's theater, but did agree to restrain the alleged breach of the negative covenant not to perform elsewhere. Judge Johnson pointed out that courts at the time distinguished Lumley v. Wagner on the ground that the services of an exceptional artist, and a considerable amount of money, were involved.
When the California Civil Code was adopted in 1872, it did not include a Lumley exception to the rule prohibiting the specific performance of personal service contracts. However, in 1919, the California Legislature amended section 3423 to enable a party to obtain injunctive relief to prevent the breach of a personal service contract where a $6,000 minimum annual compensation clause was included in the contract, if the service was "of a unique character the loss of which cannot be adequately compensated in damages."
The first of only two cases considering the $6,000 requirement was Foxx v. Williams, 244 Cal.App.2d 223 (1966), in which comedian Redd Foxx brought an action for an accounting, and for declaratory and other relief against the distributor of his record albums. The company cross-complained for injunctive relief to prevent Foxx from breaching the exclusivity clause of his contract.
The trial court granted an injunction restraining Foxx from making recordings for any other company so long as his royalties under the contract equaled or exceeded the sum of $3,000 for each six month royalty period. But the appellate court found that since the royalty payments were entirely contingent upon sales of Foxx' albums, and therefore did not guarantee that Foxx would receive any money while the injunction was in effect, the royalty clause did not meet the statutory requirement for injunctive relief.
In MCA Records, Inc. v. Newton-John, 90 Cal.App.3d 18 (1979), MCA succeeded in obtaining an injunction to prevent Newton-John from breaching the exclusivity clause in her contract with MCA. Newton-John had contracted to record and deliver to MCA two albums a year for two years, and at MCA's option, additional albums in three periods of one year each. MCA agreed to pay royalties and a nonreturnable advance of $250,000 for each album recorded in the initial two year period and $100,000 for each album recorded in the option year. Newton-John was required to pay recording costs out of her advances, and she argued that this obligation reduced the $100,000 payments in the option years below the $6,000 minimum required for the company to obtain an injunction. The appellate court, however, upheld the trial court finding that after deducting recording costs, Newton-John still was likely to net at least $6,000 per year, and that she controlled whether the $6,000 was received. Foxx was distinguished on the ground that the contract in Foxx lacked any means whereby Foxx would be guaranteed a $6,000 annual payment.
The result of these cases, stated Judge Johnson, was that record companies sought to include a clause in their contracts giving them the right at any time during the contract term to agree to pay the artist minimum compensation at the rate of $6,000 per year. Thus, "if the option clause meets the statutory requirement of minimum compensation, the company can buy its insurance policy on the courthouse steps on its way to seek an injunction." But the view that the actual payment of $6,000 at any time meets the statutory requirement is erroneous, warned Judge Johnson - the contract itself must provide for the payment of this minimum amount.
An interesting issue that was raised but not decided by the court, given the ruling that the requirements of section 3423 were not met, was the question of whether the provisions in the Motown and Jobete contracts for setting off compensation independently, would have required the refusal of injunctive relief. The Motown recording contract provided: Any amounts paid under [the $6,000 compensation clause] may be credited against monies thereafter payable to you pursuant to this or any other agreement between [Motown] and you, or between [Motown's] associated, affiliated, or subsidiary corporations and you." The songwriting contract with Jobete contained almost the same language. Thus, if Teena Marie received $6,000 in 1982 from Jobete for songwriting, she might be guaranteed no compensation from Motown for recording. In fact, Teena Marie did perform production and technical services for the companies. Again, if the compensation for these services totaled $6,000 per year, Teena Marie might well have received no payments under the "cagily drafted option clauses" of the songwriter and recording contracts.
And so, Judge Johnson arrived at the heart of the matter - that agreeing to payment at the rate of $6,000 per year is a "threshold requirement for admission of the contract into the class of contracts subject to injunctive relief under the statute." The option clause did not qualify the Motown/Jobete contracts for this class of contracts since it was analogous to the contingent payment arrangement rejected in Foxx and as such "It is nothing more than a new arrangement of an old song."
One nicety of this entire caper, which the court did not ignore, was the "magic" of the $6,000 figure. When section 3423 was amended in 1919, the sum of $6,000 was significantly higher than the average national wage and probably was equivalent to setting the minimum compensation figure at $100,000 today. According to Judge Johnson, the legislature, by establishing this figure and by referring to the "special quality of services," indicated an intent that injunctive relief not be available against a performer, however capable, who had not yet achieved distinction, i.e., a person of "star quality." The option clause would "totally wash ... away" this aspect of the injunctive statute, stated the court.
Judge Johnson concluded by cautioning that above all, a minimum standard of fairness must be met as a condition to granting an injunction to enforce the exclusivity clause in a personal service contract. The $6,000 compensation requirement serves as a counterweight to balance the economic coercion available to an employer in the form of injunctive relief. But the $6,000 option clause would allow record company employers to avoid the payment of minimum compensation "while retaining the power of economic coercion" - coercion which might discourage an artist from advancing his or her career with a more receptive employer.
Therefore, the Motown and Jobete contracts were found insufficient to support the issuance of an injunction restraining Teena Marie from performing for other employers, although the companies may seek damages from Teena Marie for the alleged breach of the exclusivity clause.
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