How Johnny Depp Could Soon Disrupt Hollywood Dealmakers

Johnny Depp and Jake Bloom - Split - Getty - H 2017
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On Wednesday, Johnny Depp will bring to a Los Angeles judge an issue that could wreak havoc across Hollywood. The star actor recently settled his big lawsuit against his former management firm, but he's still in court with the lawyer who negotiated most of his work for the past two decades. That would be Jake Bloom, whose other clients include Jerry Bruckheimer, Nicolas Cage, Ron Howard and Martin Scorsese. Depp alleges that he and Bloom have been together since 1999 on basically a handshake basis, and that without a written contract, he's entitled to recover more than $30 million in fees. And if the actor succeeds, Depp's lawyer Adam Waldman quite legitimately predicts it could render void decades of similar handshake agreements across the industry. But will Depp prevail?

The key to understanding the fight is not so much a focus on whether Depp and Bloom had an oral agreement, but whether Bloom's entitlement to a percentage of Depp's income amounts to "contingency" arrangement. That's because of a provision in California business and professions code that requires that an attorney get a written contract when a client is being represented on a contingency basis.

When it comes to litigators, those who try cases in court, there's not much ambiguity about the meaning of "contingency." For example, see those lawyers who agree to represent clients for a fixed percentage of the winnings in lawsuits. But as Bloom's own attorney told the judge in a court brief this month, there's never been a case that has addressed whether the percentage fee agreements used by transactional lawyers in the entertainment industry fall within the contingency-fee statute. That is, until now.

Bloom alleges that Depp has "ratified" the fee arrangement, and for that reason, Depp's early bid to win the case fails. In support of the argument, not to mention a reason why this dispute will impact others in Hollywood besides stars and their lawyers, Bloom points to an assertion that Depp made against his former managers. In Depp's complaint against The Mandel Company, the actor alleged that the firm "failed to obtain and maintain written agreements with critical service providers, including, but not limited to, a written agreement with [his] entertainment attorneys who were paid tens of millions of dollars in contingent fees without the statutorily prescribed written contract or agreement."

Since Bloom continued to do work for Depp months after this allegation was made in January 2017, and given that Depp accepted such legal services, Depp blessed the arrangement, Bloom argues.

If that doesn't work, Bloom will need to show that Hollywood's percentage fee deals aren't contingency fee deals. Here's the case that Bloom is making...

"A contingency fee agreement provides an attorney with clearly defined, limited goals for the attorney to accomplish," writes Bloom's attorney Peter Kennedy at Reed Smith. "This concept is again more easily articulated in the litigation context: a plaintiff's attorney sets out to either win or settle a case."

As for the non-litigation context, Kennedy offers the example of a property investor hiring an attorney to refinance debt to stop a pending foreclosure. That's an example of a "clearly defined, limited goal."

Now, what do attorneys like Bloom do for their star clients?

"In the entertainment industry, actors such as Mr. Depp build a reputation off their performances and often have long-term career goals and public relation strategies," continues Kennedy. "Bloom Hergott offers clients a holistic approach that incentivizes both a client and an attorney to develop a mutually beneficial relationship that can last an entire career instead of just a series of 'one shot' transactions. ... This goal — advancing a client's career through legal services — is not a clearly defined, limited goal. It is broad and open-ended."

Bloom's attorney continues that it is hard to be binary when it comes to the legal services provided to Depp. It can't be reduced to a description of "successful" or "unsuccessful" when negotiating such things as Depp's approval rights, credits or insurance coverage. The brief adds, "And how would assisting Mr. Depp with his personal problems allow Bloom Hergott to claim any level of 'success' entitling it to a contingency fee?"

It doesn't end there. Bloom also points to the lack of downside risk. A contingency-fee litigator who loses a case might not be paid. A law firm hired to negotiate with creditors may fail. But when work can't be pigeonholed as either a "success" or "failure," is that a mark of something less than contingent?

"Some jobs are taken by a client to advance his or her artistic goals, and some jobs are taken to advance commercial goals," states the Bloom brief. "The amount of an actor's revenue, viewed with no context, could not, should not, and is not used as the sole determinant of a client's 'success' or 'failure,' nor, for that matter, the 'success' or 'failure' of the attorney who negotiated the deal."

That, at least, is Bloom's case for the "holistic" view of entertainment law that takes the relationship between stars and their clients outside of a contingency marriage. When Depp's attorney shows up at a hearing on Wednesday, he'll likely point to tangible points of success and failure that make or break Hollywood Power Lawyers.

If Bloom fails on these arguments, he'll at least be attempting to retain $30 million in fees on the basis that he did perform services for Depp, and with a claim of quantum meruit, he deserves adequate compensation.