March 10, 2011 6:12pm PT by Eriq Gardner, Matthew Belloni
Could Charlie Sheen's $100 Million Lawsuit Actually Go To Trial? (Analysis)
Now that Charlie Sheen has delivered his show-stopping $100 million lawsuit against Warner Bros. and Chuck Lorre, the Hollywood legal community is buzzing about whether the case could go to trial or if it will be decided by a private abritrator. Our sources suggest arbitration is the most likely forum for this dispute, but it's hardly a sure thing.
As we reported previously, Sheen's problem is that his contract with Warner Bros. Television includes a broad arbitration clause, and the studio has already submitted the quarrel to dispute-resolution service JAMS. We reported on Wednesday that the arbitration company has already opened up an inquiry by informing lawyers for WBTV and Sheen, and both sides have 14 days to submit their first written arguments. The case would be conducted privately, which, fortunately for WBTV, would occur away from the limelight and the sympathetic ears of potential jurors.
So the Sheen vs. WBTV case is almost certainly going to be private. But as Sheen's lawyer Marty Singer told us this morning, the actor wants these issues litigated publicly. Today's lawsuit against Lorre was the first step toward that plan. A suit against Lorre could conceivably be litigated in court. But he needs to get past the arbitration clause hurdle. Here's how he's trying:
Legal Jump #1: The Interference Claims
Sheen doesn't have any arbitration agreement with Lorre. In fact, he has no contract at all. Instead, Sheen argues that Lorre conspired to disrupt his contract with WBTV, in part by pushing the studio to disadvantage Men in favor of his other Warner Bros/CBS shows The Big Bang Theory and Mike & Molly because his deals for those shows are allegedly more lucrative.
"Sheen's lawyers will try to argue that this lawsuit arises out of the conduct of Chuck Lorre, who doesn't have a contract with Sheen," explains well-known entertainment litigator Larry Stein. "That way they hope the judge will keep this case separate," allowing Sheen vs. Lorre to play out in court (where Sheen could reveal potentially damaging company information) while Sheen vs. WB is handled privately.
Will it work?
The problem here is that the interference claim arguably arises out of the contract between WBTV and Sheen. WBTV "will no doubt file motion to compel arbitration," says Aaron Moss, chair of the litigation group at Greenberg Glusker. And case law we've seen suggests that courts often like to consolidate similar cases in one private arbitration.
In other words, the arbitration provision might cover Sheen's claims against Lorre as well.
Legal Jump #2: The Third-Party Beneficiary Claim
In the lawsuit, Sheen also takes another approach -- trying to claim that when WBTV and Lorre struck a deal with each other, they made promises that would benefit Sheen, promises that are now being unfairly broken.
According to Moss, this type of claim is typically seen in the insurance world. An insurance company might strike a deal with a policy holder that would pay out to another party. But, in those cases, the benefit is explicitly defined and both sides agree in writing about the intention to benefit the other person.
In the Sheen situation, the actor's lawyers will need to show evidence that the agreement between WBTV and Lorre was intended benefit to Sheen. "That's going to be tough to show," says Moss.
Sheen only needs to get a judge to rule favorably on one of two potential arguments. Either, the arbitration provision wasn't broad enough to cover an interference dispute against Lorre, or the agreement between WBTV and Lorre was intended partly for Sheen's benefit. Still, it's a bit of a long-shot.
Of course, most lawyers we talked to today believe a settlement would be the best course for both sides. But given Sheen's public conviction that he's been wronged, that seems unlikely for now.