SAG-AFTRA Responds to Foreign Royalties Lawsuit

Responding to a lawsuit filed Friday against SAG-AFTRA regarding its foreign levies program, the union told The Hollywood Reporter that it had not yet been served with the suit but that “the claims as presented in the plaintiff’s earlier correspondence have been thoroughly reviewed and are completely without merit.”

The union added that it would “vigorously respond in the appropriate forum in due course.” The suit was reportedly filed by former SAG president Ed Asner and others. Counsel for the plaintiffs did not respond to a message left Friday afternoon.

Foreign levies (also called foreign royalties) result from sums that collection societies in certain countries collect based on various government regulations. The societies then remit a portion of the U.S.-destined payments to the DGA, SAG-AFTRA and WGA for payment to individual “authors” (i.e., writers and directors) and performers – both union members and non-members.

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Another portion of the collected monies is paid to the U.S. studios or producers, who under U.S. law and customary entertainment contracts are deemed the authors of the movies, television shows and other audiovisual works at issue. The fact that monies are split between the studios and the individuals is a consequence of balancing the contrasting U.S. and foreign definitions of “author” and was arrived at in agreements between the guilds and studios in the early 1990s.

The SAG-AFTRA royalties collected as of mid-2011 totaled under $21 million, or less than one-fifth of what the WGA and DGA collected. That’s due in part to the fact that fewer countries provide for performers to receive foreign royalties than do for authors. But, according to the report, today’s lawsuit alleges that SAG-AFTRA has improperly withheld funds and stonewalled requests for information about $110 million held in trust by the union.

In essence, the unions have contended that without their willingness to step up and take on the collecting and disbursement role, all of the collected monies would have gone to the studios and producers, while litigants have contended that the unions cut a bad deal with the studios (i.e., that more or all of the monies should go to talent) and that they have done a poor job administering, accounting for and disbursing the sums they do receive.

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Foreign royalties are distinct from foreign residuals. The latter are computed according to the terms of the collective bargaining agreements between the unions and studios. As confusing as residuals – and especially foreign residuals – can be, foreign royalties are even murkier.

Whether the unions even have the right to collect such royalties, let alone on behalf of non-members and/or for movies and TV shows that aren’t under their jurisdiction, was the subject of three state-court class-action lawsuits – one against each union – filed in the mid-2000s.

Those lawsuits were settled, with the unions permitted to make collections and disbursements, subject to reporting. Today’s suit, filed in federal court, apparently would undo that settlement, at least as regards SAG-AFTRA, since reportedly seeks appointment of “an independent body” to collect and pay foreign levies received in the U.S.

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