EXCLUSIVE: While expanding Broadway’s boundaries, Scott Rudin is reining in his investors.
The daring and powerful producer is requiring backers to sign away their right to criticize him and the plays and musicals that they’re capitalizing. The unusual provision appears in recent prospectuses obtained by Broadway Journal. It prohibits investors from making “negative remarks orally or in writing in any medium,” including social media, about him, his show or his business practices.
The gag is in effect for the April 2017 revival of Hello, Dolly!, starring Bette Midler, and for Rudin’s risky slate last season: the George C. Wolfe musical Shuffle Along; Ivo van Hove’s experimental revival of Arthur Miller’s The Crucible; Blackbird, with Jeff Daniels playing a pedophile; and Stephen Karam’s Tony Award-winning, star-free drama The Humans.
The muzzle on investors never expires, according to the papers, which were supplied by the office of New York Attorney General Eric Schneiderman. The state oversees theater financial offerings. (Documents weren’t available for this story for all of Rudin’s recent shows, including The Front Page.)
While standard in employment and severance agreements, non-disparagement is rarely required of investors of any kind, lawyers and academics who reviewed the documents said. The 58-year-old Rudin and his executive producer of three years, Joey Parnes, declined to comment through a spokesman. Their lawyer, Scott Lazarus, didn’t return calls. The restriction appears to be something new: It’s not found in papers for older Rudin shows, such as 2015’s Skylight. Parnes included a non-disparagement clause in his 2016 musical Bright Star, but not for 2013’s A Gentleman’s Guide to Love & Murder.
The provision aims to prevent backers, which can exceed 100 per show, from undermining advertising or word of mouth. Rita Gunther McGrath, a professor at Columbia Business School, called the clause “odd” because it’s against one’s interest to badmouth an investment. It may be intended to make one think twice before posting anything even remotely negative online. “Social media has this incredible amplifying effect,” said Gunther McGrath, who focuses on strategy and innovation. “What you don’t want as a producer is a black mark that pops up anytime you get looked up.”
Rudin investors we reached said they weren’t aware of the clause — which appears at the end of a roughly 33-page prospectus. While criticizing the strong-willed producer or his work has never been a recipe for getting stakes in his sought-after shows, the gag could discourage angels from merely trading notes. “How do you do your due diligence if people can’t talk freely?” asked Rita Tobin, a New York employment lawyer, litigator and critic of non-disparagement clauses.
Courts have established that anyone can waive their free speech rights, with some limitations, said Lincoln Bandlow, a Los Angeles-based First Amendment and entertainment lawyer with Fox Rothschild LLP who teaches media law at the USC Annenberg School for Communication and Journalism. Non-disparagement clauses have been ruled invalid when they are deemed counter to public policy, such as impeding whistle-blowers. And they’re difficult to enforce, a criticism that Bandlow directed at the Hello, Dolly! clause. “It’s extremely vague and incredibly broad,” he said after reviewing it. (See accompanying story for the text.)
Rudin investors have also had to sign away some bragging rights. Only those with above-the-title billing — producers — can publicize their stake in a Rudin show. Investors without producer billing cannot “hold themselves out as a producer or investor of the Broadway production in playbills and/or any other promotional and/or advertising materials of other productions or elsewhere,” according to the Rudin prospectuses. (The minimum investment he accepts is $25,000 or $50,000, depending on the show, although he has the right to make exceptions.)
The muzzling underscores that Broadway backers enjoy more cachet than control. Invitations to opening nights and occasionally Tony Awards come their way. But attending some advertising meetings is the chief management perk of Broadway’s top investors and money raisers, and even that’s off-limits on Rudin shows.
And when an investor goes rogue, it’s Rudin himself as the “managing member” who determines whether the comments were “disparaging,” according to the agreements. If so, the investor is given a written warning. If in Rudin’s opinion there’s been further mudslinging, the investor is deemed in breach of the agreement. The dispute could then go to an outside arbitrator. A penalty isn’t specified, although according to the Dolly prospectus, any future investing offers with Rudin would be revoked. One upside of the clause for investors is that other backers aren’t allowed to disparage them. But it doesn’t appear to restrict Rudin’s speech.
The catalyst for the provision is unclear. Some in the industry say that the lawsuit following the 2012 collapse of Rebecca: The Musical highlights the risk of errant speech. Rebecca producer Ben Sprecher alleged that his press agent, Marc Thibodeau, derailed a promising show by urging a Florida investor via anonymous emails not to get involved. Sprecher’s suit against Thibodeau is scheduled for trial in State Supreme Court in Manhattan in early 2017. Thibodeau’s lawyers described the press agent as a whistleblower who saved an investor from spending millions of dollars “on a production that was thoroughly infected with fraud.” Separately, two years ago, embarassing emails that Rudin himself exchanged were aired following a hack of Sony Pictures.
Nell Minow, a pioneer in shareholder activism, said the risk is negligible that a wayward Broadway investor could do damage. “I think it’s overzealous lawyering,” she said of the non-disparagement clause. “I understand that show business has ‘show’ and ‘business,’ but there’s no excuse to forget the primary purpose of art, which is freedom of expression.”