On March 18, an arbitrator ordered a signatory to the SAG 2009 Commercials Contract — Talent Direct (“TD”) — to pay additional pension and health contributions to the SAG-Producers Pension and Health Plans (the “SAG Plans”) after allocating less than the amounts set forth in the Allocation Guidelines.  This arbitration ruling is the first of its kind since the institution of the Allocation Guidelines in 2009.

On March 15, 2007, model/performer Andy Lucchesi (“Lucchesi”) entered into an agreement with the clothing company, Tommy Bahama, for the right to feature Lucchesi in print ads, TV commercials, and in-store promotional materials (the “2007 Agreement”).  Tommy Bahama engaged Talent Direct (“TD”) to serve as signatory and to make P&H contributions pursuant to a 10% allocation to covered services.  Following a dispute with the SAG Plans as to the appropriateness of the 10% allocation in the 2007 Agreement, in January 2009 TD and the SAG Plans entered into a settlement agreement providing for a 20% of the model/performer’s total compensation was allocated to covered services (the “Settlement”).  On April 16, 2009, Lucchesi and Tommy Bahama entered into a new contract (the “2009 Agreement”) for the right to feature him in print ads, TV commercials, and in-store promotional materials.  Relying on the Settlement, the 2009 Agreement provided for a 20% allocation to covered services.  Months later, the 2009 Commercials Contract was made effective on April 1, 2009.  Under the Allocation Guidelines added to the 2009 Commercials Contract, Guideline B requires a 40% allocation to covered services for multiple service contracts if the performer’s principle income is derived from modeling services.  Because the model/performer worked primarily as a model, SAG-AFTRA believed that the 40% allocation should be applied.  TD denied any contribution beyond the original 20% allocation insisting that the Settlement took precedence over the Allocation Guidelines. The arbitrator held that the Settlement was limited to resolution of the allocation dispute of the 2007 Agreement, and that it did not contain language that provided for a 20% allocation in future contracts.  Therefore, the arbitrator sided with SAG-AFTRA and held that the model/performer was entitled to the 40% allocation, along with liquidated damages for late payment.

This case is the first decision to be handed down by an arbitrator regarding interpretation of the 2009 Allocation Guidelines.  This decision serves as an important reminder that settlements of prior allocation disputes may not necessarily be relied upon in determining future allocations, and that much depends upon the specific language of the settlement agreement.  It also seems as though the arbitrator did not engage in any analysis of whether a 20% allocation was fair and  reasonable based upon the services rendered/rights granted under the 2009 Agreement.  In fact, the arbitrator even acknowledged that no covered services were even rendered by Lucchesi under the 2009 Agreement.  Nonetheless, the arbitrator held that “[t]he most reliable indicator of mutual intent is the words used by the parties in their labor contract.”  The arbitrator then applied the language of the 2009 Allocation Guidelines and held that “[t]he 40% allocation sought by [SAG-AFTRA] is required by Section 46.E of the [2009 Commercials Contract].”