Judge Judy Keeps $45 million salary. She ain't playing.

[Tiredretiredlawyer]

https://www.hollywoodreporter.com/tv/tv ... 234991870/

The full opinion on CBS's Motion for Summary Judgment is in the article. It is well-written.

Judge Judy’s $47M Salary Isn’t Excessive, Appeals Court Agrees
CBS wins the first appellate round in a legal battle now in its sixth year.

The suit came from Richard Lawrence’ Rebel Entertainment Partners, the successor-in-interest to the agency that originally packaged Judge Judy. For the agency’s work, Lawrence was forever entitled to 5 percent of Judge Judy‘s net profits, and further, there would be no deductions for sums paid to other profit participants. As such, Sheindlin’s lucrative salary provoked grievance. Was she taking salary in lieu of profits in order to screw Lawrence? An accounting expert testified that a decade ago, other top TV stars like Jay Leno and David Letterman were getting no more than $28 million annually and so anything above this amount was a disguised profit payout. The litigation caused Sheindlin to explain herself in a Hall of Fame worthy deposition, and the trial judge ultimately came to the conclusion of no bad faith in the salary number since Sheindlin had CBS over a barrel.

This dispute is part of a multilayered one that also includes spinoffs and a library sale.

Rebel argues CBS acted in bad faith by failing to ask whether Sheindlin would accept her demanded compensation in some form of a high-level participation percentage, such as a first-dollar gross participation, which Rebel argues would be just as reliable as a salary. It argues that no evidence established that Sheindlin would have rejected such an arrangement. Assuming for the sake of argument that some form of non- production compensation would have been as reliable as a salary,

14 a matter on which the record is silent,3 the undisputed evidence was that Sheindlin brooked no counterproposals, but instead made demands on a take-it-or-leave-it basis, saying, “This is not a negotiation.” The only time she was presented with a counterproposal, she rejected it unread. No principle or authority obligated CBS to cajole Sheindlin into considering counterproposals.

Rebel argues it was unreasonable for CBS to “permanently manipulate[] Costs of Production.” But there is no evidence CBS did so. The agency agreement provided that amounts paid for the services of performers constituted production costs. Sheindlin demanded payment for her services. That payment was therefore made a production cost by the agreement, not by CBS. Rebel argues that CBS failed to follow the television industry’s customary practices by “combining Judge Sheindlin’s existing salary with what would ordinarily be a conting

► Show Spoiler

CBS moved for summary adjudication, arguing it could not have been unreasonable for CBS to agree to Sheindlin’s non- negotiable salary demand, because she had the “unique ability to end the ‘juggernaut’ show simply by walking away from it.” In support of the motion, Sheindlin testified in deposition that she conveyed her nonnegotiable salary requirements to CBS every three years, and told the company she would produce a court show herself if her demands were not met. CBS had been unable to “find another Judy,” and knew she could take Judge Judy to another producer, or produce her own court show. Sheindlin told CBS, “[t]his is not a negotiation,” and said, “You want it, fine. Otherwise, I’ll produce [a show] myself.”

She testified, “CBS had no choice but to pay me what I wanted because otherwise I could take it wherever I wanted.” On one occasion, an executive presented Sheindlin with his own proposal, sealed in an envelope. Sheindlin testified, “he came to the meeting at the Grill on the Alley, and I handed him my envelope, and he said, ‘Judy, I have my own envelope.’ And I said, ‘I don’t want to look at it.’ He said, ‘Why not? Maybe it’s more than what’s in your envelope.’ And I said, ‘Well, John, if I look at your envelope, it’s a negotiation. This isn’t a negotiation.’ And he put his envelope away and they gave me what I wanted.”

[KickahaOta]

Yeah, it's a great opinion. And it's a really fun look at show business dealmaking. But the issue was never about "Should Judge Judy get to keep her $45M (and later her $47M)?" As is so often the case, the issue is "How should that have gone on the show's books?"

To simplify the language in the article, in Hollywood deals for shows like this, you're either getting paid 'upfront' money -- you get paid first out of the money that the show brings in -- or 'backend' money -- you're getting paid a share of the profit that's left over after all the expenses of the show get paid out (including the upfront money) -- or both.

Being paid upfront is a bit like being a bondholder in a company. The upfront payout may not be big, but it's much more secure -- you're first in line to get paid.

Being paid on the backend is more like having an option to buy the company's shares. The option may be hugely valuable if the company does well, but it's worthless if the company's share value drops. Actually, being paid on the backend is worse than being an option holder in a company, because if you're an option holder you at least know that the company wants you to succeed -- the company wants its share value to go up, and if they succeed, you win. But dividing up the earnings of a show is a zero-sum game; every dollar you get is a dollar that someone else doesn't get. And studio/production company accountants can be wizards at finding expenses to charge against a show, so that even hugely successful shows wind up generating little or no paper profit to be split up at the back end. So there are constant disputes about how the accounting should have been done.

In this case, the plaintiffs were getting paid 3% upfront (3% of the money taken in by the Judge Judy show), and 5% of the backend profits. They got their 3% upfront; but thanks in huge part to Judge Judy's payout, the backend profit pool was zero.

The plaintiffs argued that CBS acted in bad faith and unreasonably by treating Judy Sheindlin's $45M (and later $47M) annual payout as entirely up-front money After all, even megastars like Leno and Letterman made much less up-front. The more typical approach would be to pay Sheindlin, say, $22M up-front, and then a giant percentage of the backend profits. And so, even though CBS didn't do that, the good-faith, reasonable approach would have been for CBS to account for that money as if it had been split that way. And that would have meant that plaintiffs would have gotten at least something at the back end.

CBS replied, and the judge agreed, that it was entirely reasonable for CBS to account for it all as up-front money, because CBS had zero leverage over Sheindlin's salary demands. Sheindlin wanted her money, all of it, up front, take it or leave it. And if CBS didn't give her that money, there was no reason for her not to go elsewhere. Even a megastar like Leno or Letterman takes a risk when changing networks; will the audience follow? Will the new network be as effective at attracting the celebrity guests that a high-budget late-night show needs? But none of those risks applied to Sheindlin. The Judge Judy show is syndicated; the TV stations paying for the rights to run the show weren't going to change their minds if the same show started being syndicated by a different company. And the litigants to appear on the show wouldn't be any harder to find either.

So, although the opinion doesn't phrase it in this way, CBS had two choices:

• Accept Sheindlin's demands, and produce and syndicate the show. Rebel gets its 3% upfront, and nobody gets any backend money.
• Reject Sheindlin's demands. Sheindlin walks and the show ends. Rebel gets nothing upfront and nothing in backend money.

Which makes "accept Sheindlin's demands" seem like a pretty reasonable choice.

[Tiredretiredlawyer]

Thanks, Kick! Interesting show business money dealings.