Sage Steele Loses Claim That Her Agents Didn’t Properly Protect Her Free Speech Rights

From the California Department of Industrial Relations Labor Commissioner in Creative Artists Agency v. Steele, handed down in August but just posted on Westlaw (for more on Steele’s lawsuit against ESPN, see this post and this later article about the case being settled):

Creative Artists Agency, LLC (“CAA”) filed a Petition on September 14, 2022. CAA alleges that … Sage Steele … failed to pay commissions for a procured multi-year television hosting contract with ESPN….

This case involves whether CAA did enough to protect Steele’s interests in a public relations crisis. Steele appeared on a podcast and stirred controversy through her comments. CAA stepped in to negotiate with her employer. After a week of back-and-forth, CAA secured an optimal result: Steele kept her lucrative job, without suspension or dock in pay, for the remaining 32 months on her contract. But it came at a cost: she apologized to make peace.

Steele then learned about her free speech rights and saw a missed opportunity. She contends that CAA failed her at this critical moment by not exploring a way forward that avoided an apology. In her view, CAA walked away from both its promise and its duty to her. She concludes that CAA should have done better, so she did not have to pay what she promised to pay. Accordingly, she stopped paying commissions.

But CAA met Steele’s stated goal at the time—to preserve her job. And Steele’s retrospective view of what CAA should have done stretches beyond the deal they made.

Steele is not excused from her end of the bargain….

In the summer of 2021, ESPN mandated that all employees vaccinate from COVID-19 by October 1, 2021. On Steele’s request, Kramer [her agent] investigated whether her employment contract allowed ESPN to enforce this policy and whether she could get an exemption. Kramer consulted with CAA legal experts to review Steele’s employment contract, but he exaggerated to Steele that he would get the “head of CAA legal” to do it. He returned with some answers: ESPN could enforce its vaccine policy, but Steele could request an exemption. Steele was disappointed with this news: she reiterated her desire to leave ESPN “While still getting a good portion of my contracted money.” Nearly three years remained on her ESPN contract….

Steele reluctantly complied with her employer’s vaccine mandate. Shortly afterwards, on or around September 17, 2021, she appeared on a podcast without ESPN approval. There, she expressed her misgivings with her employer’s vaccine mandate and commented on some other hot-button issues. The podcast aired in late September 2021….

Steele’s podcast comments led to internal and external controversy. From September 28 to October 5, 2021, Kramer monitored the situation, guided Steele’s conversation with ESPN, and vigorously negotiated, to the word, a joint public relations response with ESPN. His efforts yielded an apology that Steele reviewed and approved, published on ESPN’s website and sent to 6 media outlets. ESPN did not suspend, terminate, or deny payment to Steele as a result….

Kramer continued procuring future employment for Steele and pivoted to conservative media for new opportunities. However, by December 2021, Steele’s marketing opportunities had dried up, signaling similar concerns for her employment prospects…. In August 2023, Steele announced on a social media platform that she had settled a free speech lawsuit with ESPN and decided to leave her employment there….

Steele fails to show that the scope of CAA’s legal services extended to free speech rights. She knew that Khan [her initial agent] was a transactional attorney and would use that experience in negotiating contracts. But Khan never represented that CAA’s legal services went any further. Steele also knew that, when questions of a contract’s legal interpretation arose, CAA reviewed them for her. Both forms of legal services focus solely on contract law. They go no further. Therefore, Steele lacked a reasonable belief that CAA would provide her free speech legal counsel….

CAA contends that it met its end of the bargain [and didn’t breach any duties owed to Steele] by procuring and servicing the ESPN contract. Steele contends that CAA failed to service that contract by failing to either push back on the need for an apology or advise her to seek legal services.

A person can only rescind or abandon a contract for a breach that goes to the “root of the consideration.” The primary job of a talent agency is to obtain work. In this context involving a high-profile, lucrative, multi-year hosting gig, the “root of the consideration” was to get the work, then preserve it amidst a public and internal relations crisis….

Khan procured the ESPN contract by negotiating 2016 and 2017 amendments that extended Steele’s ESPN tenure through June 2024…. Steele also cannot reasonably dispute that Kramer “serviced” the ESPN contract. She had a contract that would pay through the end of June 2024, but also had a brewing conflict with her co-host, Kevin Negandhi. From when Kramer stepped in to replace Khan in August 2020, Steele expressed a desire to leave ESPN on good financial terms—in her words, “While still getting a good portion of my contracted money.”

In the ensuing months, Kramer provided the following services:

– He navigated a work-around for Steele’s ongoing conflict with co-host Negandhi, securing a hosting gig for the same show at a different time slot, along with her own one-on-one interview show;

– He reviewed her contractual rights with respect to ESPN’s mandatory vaccine policy and navigated potential exemptions; and

– He monitored the internal and external outcry arising from her September 2021 podcast appearance and vigorously negotiated an apology.

The results speak for themselves: ESPN did not terminate, suspend, or withhold wages from Steele because of her unauthorized and controversial podcast appearance. She retained the full rights to her dream job for the remaining 32 months on the contract. The root of her deal with CAA was to get, then keep, her work at ESPN, not to protect her free speech rights….

Steele suggests that CAA could have done better in at least two ways: exploring a refusal to apologize and comparing the resolution of Jalen Rose’s public relations crisis. Both arguments speculate, at best, that these actions would yield a better result.

First, Steele argues that had CAA truly been loyal, it would have pushed back on an apology. But CAA correctly notes that Steele’s only stated expression at the time was to preserve her financial rights under the ESPN contract. Steele does not explain how refusing to apologize would better serve her interests. Presumably, violating an employer’s rule by making an unapproved appearance, then refusing to apologize for the controversy caused by that appearance, would not better serve Steele’s interests in preserving her ESPN contract.

Second, Jalen Rose’s public relations crisis appears to have happened in late November, more than a month-and-a-half after ESPN published Steele’s apology. Steele also does not explain how Rose’s situation resembles hers, or how he secured a better outcome.

CAA correctly argues that preserving that contract while Steele found a way out was her stated goal at the time. CAA met this goal. Steele does not establish that any of CAA’s actions or omissions closed the door to a better option. Therefore, they did not matter…. CAA did not materially breach its fiduciary duty to Steele….

For the reasons above, the Labor Commissioner determines that Petitioner Creative Artists Agency, LLC is entitled to unpaid 10% commissions plus interest for earnings arising from or connected with … [Steele’s] employment with ESPN ….

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