A Ninth Circuit Court of Appeals panel has reversed a lower court’s ruling in an ongoing legal battle between Paramount Pictures and the American Federation of Musicians that could have far-reaching implications for the overseas outsourcing of film scores.

In reversing a ruling by U.S. District Court Judge Dolly Gee (read the decision here), the three-judge appellate panel ruled unanimously that Gee had erred in granting the studio’s motion for summary judgment. At issue is whether Paramount produced the 2017 film Same Kind of Different as Me, or merely served as its distributor, and therefore had no obligation to honor the union’s basic agreement to hire its members to work on the film, which was shot in Mississippi but was scored in Slovakia.

Paramount Pictures

“Paramount contends that it was only a ‘distributor’ of SKODAM (Same Kind of Different as Me). A jury may agree,” wrote Judge A. Wallace Tashima in his opinion for the panel. “But a signatory Producer who contracts to ‘distribute’ a motion picture is not, by virtue of that responsibility, exempt from the Basic Agreement. And under Article 3 (of the union’s contract), the Producer’s actions and contractual authority matter. Because AFM has raised a genuine dispute of material fact whether Paramount’s actions on SKODAM triggered its obligation under Article 3 to score the motion picture in the United States, the district court erred in granting summary judgment to Paramount on AFM’s breach of contract claim.”

Article 3 of the union’s contract – known as a work preservation provision – requires signatories like Paramount to score their films domestically. Paramount, however, argued that Article 3 violated the National Labor Relations Act’s “hot cargo” provision, which prohibits employers from entering into agreements to refrain from dealing in the products of another employer. Paramount claimed that the union’s breach of contract suit violated the “hot cargo” provision because AFM’s tactical objective was to force SKODAM Films, “a neutral employer,” to employ AFM musicians.

The appeals court, however, held unanimously that the “hot cargo” provision does not apply to valid work preservation agreements, and that Article 3 “is a valid work preservation provision” that forecloses the studio’s “hot cargo” defense.

The panel also concluded that based on the record, “there is a genuine dispute of material fact” whether Paramount’s connection to film triggered its obligations under Article 3 of the union’s contract. Specifically, the panel held that “a jury could conclude on this record that Paramount took actions to shoot the principal photography on SKODAM and had control over the hiring of scoring musicians.”

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In his written opinion, Judge Tashima went on to say that “there is record evidence that Paramount ‘made’ or ‘shot’ SKODAM; i.e., that Paramount was involved in hiring, budget, and shooting decisions related to principal photography. For example, Paramount’s head of casting ‘approved’ certain actors that (producer) Mary Parent selected for the picture. During principal photography, multiple Paramount employees reviewed the principal photography dailies, the daily film output from SKODAM’s shoot in Mississippi. After reviewing the dailies, a Paramount executive made suggestions to the SKODAM director relating to the ‘pace’ of shooting and specific scenes. Paramount was contractually entitled to approve the budget, screenplay, director, and lead cast under the co-financing and distribution agreement. By contract, Paramount also had ‘final say’ over material creative decisions relating to production.”

He also found that “there is record evidence that Paramount had authority over the selection of scoring musicians. For example, Paramount had the right to approve the composer, owned (deleted) % rights to soundtrack royalties, and signed off on the Composer Agreement, which warranted that the scoring of the picture would not trigger AFM’s rights. Paramount took other actions indicative of authority over the picture’s scoring. Spendlove, the Paramount music executive, called (composer John) Paesano to discuss the motion picture and test score. Paramount helped choose and price songs for the score. And Paesano’s representative reached out to Paramount regarding ‘union v. non-union recordings.’”

“On this record,” Tashima wrote, “a jury could conclude that Paramount exercised control over the composer and music contractor such that it had the requisite authority under Article 3 to preserve work for AFM’s scoring musicians.”

The case, which has been remanded back to the District Court, will no doubt be closely observed by other studios that outsource their film scores to non-union foreign nationals.