NFL Rookie Superstar May Want to Know When Term Sheets Are Binding

Marvin Harrison Jr. is a former Ohio State University wide receiver who was drafted 4^th overall in the 2024 NFL Draft by the Arizona Cardinals. “MHJ” is proclaimed by many to be among the greatest wide receiver prospects of all time. He earned the Biletnikoff Award this past year, awarded to the nation’s best college wide receiver. And it certainly does not hurt his stardom or merchandising potential that his father, Marvin Harrison Sr., is an NFL Hall of Fame wide receiver.

 

All of that to say – sports paraphernalia companies should be itching to sign MHJ to deals.

 

Earlier this month, May 2024, Fanatics informed the public that it wanted to do just that. However, instead of revealing lucrative and eye-popping terms, Fanatics sued MHJ and his LLC for claims including breach of contract, anticipatory repudiation, and tortious interference. The damages are likely in the range of millions of dollars.

 

The claims are rooted in MHJ’s alleged violation of a binding term sheet – sometimes labeled a letter of intent, agreement in principle, or memoranda of understanding. These documents outline the basic terms of an agreement and help parties streamline the completion of outstanding negotiable terms and conditions. While a term sheet, and even a “binding” term sheet, are often unenforceable agreements due to their nature of laying out terms and more so agreeing to agree, there are factors that may cause such a term sheet to become enforceable. Key considerations determinative of whether such a document is enforceable include, but are not limited to (1) whether the writing incorporates all essential terms of an agreement; and (2) whether there is offer, acceptance, consideration, intent to be bound, and all other requisite elements of a binding agreement. Term sheets will likely be non-binding where material terms are undecided or where the document expressly states a right to not be bound until a formal agreement is executed.

 

Fanatics is likely quite certain of its chances of success here, as Fanatics would probably prefer to avoid an ensuing, unintended narrative for future rookies to consider. Something, perhaps, along the lines of, “Don’t sign with Fanatics, they sue their players.”

 

The fallout of this lawsuit will likely affect how young sports stars, and perhaps many others, treat binding term sheets. Prospective signees may be further incentivized to agree in principle to only very loose and incomplete terms, firmly articulating a given terms sheet is not binding and remains subject to signing a more formal and complete agreement.

 

This case illustrates a lesson in factors that determine whether a term sheet may be binding, and it seems reasonable to expect a certain NFL rookie superstar to take note . . .

Cole Haaf, Attorney, BridgehouseLaw LLP, Charlotte, NC

Rideshare Drivers: Employees or Contractors?

On May 21, the California Supreme Court heard arguments that may determine the future of ridesharing in the state. Specifically, the Court is considering how rideshare drivers operating under Uber and Lyft should be compensated following the 2020 ballot measure known as Proposition 22.

The case is championed by the Service Employees International Union (SEIU) alongside four rideshare drivers who are challenging the constitutionality of Prop 22. The proposition was supported by nearly 60% of the state’s voters and effectively exempted app-based drivers from a state law that restricted the type of workers who could be classified as contractors rather than traditional employees. This is a critical distinction for workers and companies alike, as the classification determines whether a worker is entitled to overtime, benefits, minimum wage, and other protections that are not guaranteed to contractors. These considerations have dramatic effects on both the drivers’ ability to make a living and the companies’ bottom lines.

Prop 22 was heavily supported by app-based ridesharing companies who stated that without the measure, the increased compensation to drivers could make them reconsider whether they will continue operating within California. The terms of the passed proposition allow rideshare drivers to be classified as contractors, however only if the company meets certain compensation requirements. For example, the drivers must be paid at least 120% of the state’s minimum wage amount while passengers are in the car, and the drivers must also receive expense reimbursements and subsidies to pay for health insurance.

During oral arguments, the justices reminded the SEIU attorneys that the electorate and the legislature are required to share lawmaking powers under the state’s constitution. The justices further stated that if the legislature disagrees with the passing of Prop 22, lawmakers could choose to extend traditional employee benefits and protections to rideshare drivers anyway. However, lawyers from the SEIU pointed out that a provision within Prop 22 barring amendments would make this workaround difficult for lawmakers to accomplish.

California is not the only state dealing with the issue of how to classify rideshare drivers. The Minnesota legislature recently lowered the minimum wage amount that companies have to pay drivers. This decision followed threats from Uber and Lyft to stop providing services in Minneapolis after the city passed higher minimum wage requirements. Meanwhile, the Massachusetts Attorney General has initiated a lawsuit against Uber and Lyft alleging that the companies classified drivers as contractors to avoid having to abide by the state’s minimum wage and overtime laws.

Rulings from the California Supreme Court are usually issued within 90 days of oral arguments. So for now, sit back, buckle up, and consider tipping your driver!

Emiley Hatten, Law Clerk, BridgehouseLaw LLP, Charlotte

image: Freepik

New Copyright Laws Thanks to Spotify?

The music industry has always been on the frontline of change within the copyright realm. The fast-developing and ever-changing landscape has always been an issue to try and pinpoint the specific mechanism that should exist within the United States to protect this type of art. When trying to determine the protection a song receives, two different copyright points need to be included:

1.    As per section 102(a)(2) of the Copyright Act, musical works, including any accompanying words that include the lyrics, melodies, and harmonies are protected by themselves. This means that anything that can be fixed in writing (notes, lyrics, etc.) is protected by this section.

2.    As per section 102(a)(7) of the Copyright Act, sound recordings by themselves are protected. This means that the actual song that any person can listen to is protected in this regard. Generally speaking, the sound recordings are considered the “masters” of the songs.

To understand this more specifically, here are two examples:

1.    Dolly Parton in 1973 wrote and recorded the song “I Will Always Love You”. She, here, thus has the copyright over the song composition and the song recording that she produced. In 1992, with the film The Bodyguard, Whitney Houston released a cover version of the song. The song recording of Whitney, thus, is separate from the song composition and the original recording and is protected separately.

2.    Taylor Swift became the face of this separation when she started to re-record her original albums to get ownership of her recordings as she was only the owner of the songwriting portion of the songs as per the contract she signed when she was just starting. The “Taylor’s Version” albums have become massive hits for the singer and are solely owned by her.

With the development of different technologies, it has become more complicated to try and get the protection the copyright allows for these creations. Most recently, Spotify – the streaming giant – was sent a cease-and-desist letter from the National Music Publishers Association (hereinafter “NMPA”) and other songwriters’ groups over the newest video function and podcasts use of lyrics and the remix feature that enables subscribers to edit songs they like and, as a result, create a derivative work. The NMPA is accusing Spotify of copyright violations and should be paid for this type of use because they are using the lyrics – a separate copyrightable work – when using the recordings. Spotify has denied wrongdoing and has mentioned that they are a platform for licensed content and that they have a process for anyone to contact them if there is a belief that there is an unlicensed song.

This has gone a step even further as the NMPA has sent a letter to the leaders of the Judiciary Committee in the Senate and House of Representatives requesting a complete update on the Copyright Act on the topic of statutory license because according to them it “prevents private negotiations in a free market”. They mention that although the Music Modernization Act (MMA) has been very beneficial in certain updates based on the new landscape of the music business there are still changes that need to be done to protect songwriters.

It will certainly be interesting to see the position the House of Representatives and the Senate will take on this and whether there will be a new addendum to the Copyright Act in the near future.

Sources:

·     https://variety.com/2024/digital/news/spotify-copyright-violation-claims-lyrics-remixes-1236003575/

·     https://variety.com/2024/music/news/music-publishers-congress-overhaul-copyright-act-1236012128/

·     https://www.billboard.com/business/publishing/nmpa-copyright-act-overhaul-spotify-bundling-full-letter-congress-1235687539/

·     https://www.smoothradio.com/features/the-story-of/i-will-always-love-you-whitney-houston-facts-video/

·     https://www.today.com/popculture/music/taylors-version-meaning-swift-rerecording-albums-rcna98513

José Portabella Villela, Abogado, BridgehouseLaw LLP, Charlotte