Thursday, March 10, 2011

Sheen v Warner Bros. - another example of a termination dispute

Following on from my previous post concerning the Fevola settlement and termination payment dispute, I saw in an article published on 8 March 2011 in the Herald Sun and SMH that Warner Bros. is terminating Charlie Sheen's contract. Unsurprisingly, Mr Sheen is alleging wrongful termination.

This is another good example of what occurs when one party is seeking to end a contract as a result of the other party's behaviour, and the other party is resisting that act. Like my previous example, Warner Bros. and Mr Sheen are concerned with the payment consequences of the termination: that is, if Warner Bros. has the right to terminate the contract, then it does not have to make any further payments to Mr Sheen under the contract; if Warner Bros. does not have this right, Mr Sheen has the right to elect to sue Warner Bros for the balance of payments due under the contract. Substantial amounts are involved here, as Mr Sheen is allegedly paid $2million per episode under this contract. As such, there is a lot of pressure on Warner Bros. to get its claim right.

In a letter leaked to the website TMZ, Warner Bros is said to have terminated the Sheen contract for 'incapacity' and 'default' based on 'Mr Sheen's ongoing conduct, statements and condition'.

The termination events are alleged to include the following:
  • Mr Sheen's condition which triggers a term allowing termination for uncured incapacity or a serious health condition lasting more than 10 consecutive days.
  • Mr Sheen's condition and the effect on the show, which triggers a term allowing termination for Force Majeure. Specifically, Warner Bros. says that it was prevented from producing the show for reasons beyond its control.
  • Mr Sheen's condition and the effect on the show which is in default of a term requiring Sheen to perform his material obligations to the best of his ability.
  • Mr Sheen's derogatory public comments about the show and the staff, which is in default of a term which requires a person to obtain Warner Bros' consent before making public comments about on the show.
  • Mr Sheen's condition, conduct and public admissions of his conduct which is in default of a term which requires Sheen not to commit an act which involves a 'felony offense involving moral terpitude'.
Mr Sheen has claimed that this termination in wrongful and that, as a result of the wrongful termination, Warner Bros. is required to pay to him, amongst other things, the balance of the payments under the contract.

It will be interesting to see the outcome of this dispute, particularly whether it proceeds to trial or is resolved beforehand. Also, if it proceeds to trial, will Mr Sheen persist with his antics in Court when those antics will probably not be helpful to his own case?

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