January 13, 2010
Conan's Contract Conundrum
Posted by Erik Gerding

Why couldn't NBC have pulled this stunt with Jay Leno and Conan O'Brien while I was still teaching Contracts?  It makes for a really juicy monologue (I mean discussion) in the classroom.  According to media reports, Conan's contract with NBC specified that he would host the "Tonight Show" but didn't specify when the show would be aired every night. (Incidentally, does anyone know if the contract is floating around cyberspace?)

Now NBC wants to move his show back to 12:05 and move Leno to 11:35 to placate network affiliates who are upset with ratings.  Conan then rejected this move in a letter yesterday.

The issues -- did NBC breach the contract?  (That will be a hard argument see below

If Conan walks to Fox, is he in breach and can NBC enjoin him?  If there is a financial settlement, does NBC pay Conan, or does Conan/Fox buy Conan out of the contract?

Conan is in a pickle because allegedly the contract doesn't specify when his show is to air.  If he cared about that so much, he should have negotiated for it, particularly since there was so much drama about NBC keeping Leno on for an show earlier in the evening.  (Of course some of that drama may have unfolded after Conan signed the contract.)  On the other hand, the timing of when a show airs is everything in the t.v. business, a point Conan makes...

The one document we do have, Conan's letter to "the people of earth", makes for interesting reading in a Contracts class.  Note he doesn't threaten to leave work, which might be a breach.  Note he also talks about how NBC's move would destroy "The Tonight Show":

I sincerely believe that delaying the “Tonight Show” into the next day to accommodate another comedy program will seriously damage what I consider to be the greatest franchise in the history of broadcasting. The “Tonight Show” at 12:05 simply isn’t the “Tonight Show.”...

I cannot express in words how much I enjoy hosting this program and what an enormous personal disappointment it is for me to consider losing it. My staff and I have worked unbelievably hard, and we are very proud of our contribution to the legacy of “The Tonight Show.” But I cannot participate in what I honestly believe is its destruction. Some people will make the argument that with DVRs and the Internet, a time slot doesn’t matter. But with the “Tonight Show,” I believe nothing could matter more.

It looks like Conan had more than his jokewriters help him with this bit.  Again, note how he frames this not as him walking away, but him considering losing the show. 

The letter seems to set up an argument that NBC is not allowing him to host the "Tonight Show" because a show at 12:05 is not the "Tonight Show." 

Is there a contract law strategy behind NBC's moves?  Clearly, they aimed to keep the names of the "Jay Leno Show" and "The Tonight Show" to avoid hurting their legal position with Conan.  The timing of the shows -- at 11:35 and 12:05 -- might have been chosen to avoid moving the two performers back to the same exact slots they had before, which would help Conan's argument that NBC breached.

Conan may not have the strongest legal arguments, but he still has leverage.  Legal uncertainty hurts both parties.  A media circus on Conan's status will only help NBC's ratings for a while - they can help Conan and Fox in publicity for a lot longer.  Part of this stems from the fact that Jay Leno -- who is staying at NBC -- can't and won't milk this for laughs much longer if at all.

Will his contract lawyers now have to vet Conan's monologue? 

At the same time Conan and Fox have to do an elaborate dance to avoid looking like they are entering into direct discussions, which would give NBC a quiver of new arguments (tortious interference with contract among them).

This, as Triumph the Comic Insult Dog would say, is a great set of legal issues for me to poop on.

Addition:  One final note.  If Conan argues that "The Tonight Show" is not the "Tonight Show" he will likley need to rely on extrinsic or parol evidence to go beyond the ex plicit language of the contract to aid in contract interpretation.  If the contract is governed by California law, he is in luck, as California has traditionally been more open to parol evidence (see the famous 1968 Pacific Gas case, which is now a Contract case book staple.  You know - the one in which Justice Traynor talks about how the meaning of contract language varies with social context and in which he refers to, among other things, Swedish practices against witchcraft).  Although there are hints that California courts may be stepping away from this more loose interpretation of the parol evidence rule.  See e.g. Dore, 39 Cal.4th 384 (2006).

Another addition:  Check out Larry Cunningham's great contract analysis of this story over at Concurring Opinions:

http://www.concurringopinions.com/archives/2010/01/contract-law-issues-in-the-conan-nbc-affair.html#more-24018

Larry has a history of insight into high profile contracts cases; he was a frequent commentator in the press on Contract law issues when the AIG bonus issue was the hot topic.

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