Dan Rather v. CBS Contracts Story Omitted from Redford’s “Truth”

Dan Rather v. CBS Contracts Story Omitted from Redford’s “Truth”

Dan Rather v. CBS Contracts Story Omitted from Redford’s “Truth”

Robert Redford’s latest film, Truth, dramatizes the last stand of newsman Dan Rather, longtime face of CBS News until fired for a controversial 2004 broadcast about President George W. Bush. The film, which debuted this week at the Hamptons Film Festival in Long Island, New York and opens October 16, is based on the book by Rather’s producer, Mary Mapes, and is therefore biased. It is nevertheless a rich story, with Redford playing Dan Rather and Cate Blanchett portraying Mapes (all pictured nearby). The true story culminated, moreover, in a fight between Rather and CBS about contract interpretation, although neither the book nor the film delves into this important topic.

Amid a heated 2004 presidential election, on a CBS 60 Minutes broadcast of September 8, 2004, Dan Rather questioned President Bush’s service in the Texas Air National Guard during the Vietnam era. Rather implied that Bush exerted political influence to avoid that era’s military draft by entering the Guard, and then receiving special treatment to skip military duties. A media melee followed Rather’s show. Bush supporters challenged its accuracy, the authenticity of documents used, and Rather’s journalistic integrity, which many believed was compromised by bias against President Bush.

After investigation, CBS disavowed the broadcast and, two weeks later, an emotional Dan Rather apologized for it on national television. But CBS and Dan Ratherdisagreed on the overall journalistic quality of the broadcast and what to do about it. Rather identified important accurate facts in the broadcast, obscured by the firestorm, and urged a defense of those whose reputations, including his and Mapes, the broadcast imperiled.

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For its part, CBS emphasized the journalistic lapses and wanted to let it go at that. Believing CBS was most interested in the politics of good relations with the White House, as Bush was running for reelection in a heated contest against Senator John Kerry, Rather retracted his apology and claimed CBS fraudulently induced it. The day after President Bush won reelection, CBS told Rather it planned to remove him from his coveted spot as anchor of the CBS Evening News—a stinging rebuke. Rather’s last broadcast as anchor was March 9, 2005.

During the next 15 months, through May 2006, CBS kept Rather on its payroll, paying his salary of about $125,000 per week ($6 million annually). CBS gave him irregular appearances on CBS programs covering less significant stories, and his former television profile diminished. He rarely appeared on the network’s big-time shows such as 60 Minutes. Worse, CBS prevented him from pursuing jobs with competing networks or other media. Rather claimed that CBS marginalized him by giving him limited staff and editorial support; rejected most of his story proposals and aired those it accepted at off-peak times; denied him the chance to appear as a guest on other programs; and generally prevented him from refurbishing his reputation.

When CBS terminated Rather in May 2006, Rather claimed breach of the contract the two had since 1979 and had amended in 2002. In Rather’s interpretation, the 2002 additions to their contract addressed what CBS had to do if it removed him as News anchor: either appoint him as a regular correspondent on 60 Minutes or both (a) immediately pay the full balance due under their contract and (b) let him work elsewhere. Dan Rather alleged that CBS breached because it did not appoint him correspondent, merely paid his regular weekly payroll through mid-2006, and barred him from seeking other employment.

In contrast, CBS interpreted its actions as complying with the contract. It acknowledged the 2002 terms Rather pointed to, but stressed another broader feature of the original 1979 contract called a “pay-or-play clause.” CBS could discharge all obligations under the contract simply by paying Dan Rather the agreed weekly compensation. Nothing required CBS to use Rather’s services, whether as News anchor, 60 Minutes correspondent, or anything else. True, the 2002 additions said if Rather was removed as News anchor CBS would reassign him to 60 Minutes. But the pay-or-play clause meant that even if CBS removed him and did not reassign him, it was not required to release him from the contract or accelerate that compensation.

The two key contract clauses were thus inharmonious with one another. CBS explained the importance and rationale of the pay-or-play clause in business and editorial terms. It called “absurd” the notion that a network would cede to a reporter editorial authority over who would be on what program, as anchor or correspondent, or what stories would air. Dan Rather emphasized the clauses specifically addressing what would happen if CBS removed him as News anchor and did not reassign him as 60 Minutes correspondent: the contract would end, he would receive an accelerated salary payout, and could work elsewhere. Meeting CBS’s business and editorial accounts of the bargain, this interpretation doesn’t cede network power to a reporter. Instead, it reflects the elevated status of the person, and terminates the bargain if that status is discontinued.

In the end, the court adopted a literal approach, viewed the pay-or-play provision as controlling, and sided with CBS. The pay-or-play provision, paraphrased as follows, was clear and unqualified: Nothing obligates CBS to use Rather’s services or broadcast any program, and CBS fully discharges its obligations by paying Rather’s compensation. In contrast, the removal and reassignment clause Dan Rather emphasized was qualified, fronted by the provision: “except as otherwise provided in this contract.” The court took that as telltale language of intent: that any conflict between the two provisions was to be resolved in favor of the pay-or-play provision.

But it was a close call. The pay-or-play clause dated back to 1979 and is a standard clause in many industries, including broadcast and general entertainment. While it is clearly important to protect networks like CBS from ceding managerial control to staff, employees who accumulate power through notoriety can gain negotiating leverage in their contracts. The 2002 changes were made when Dan Rather personified the network and enjoyed commanding stature—perhaps not on par with his predecessor, Walter Cronkite, but close. It wouldn’t be surprising for the network to cede the little that Rather’s interpretation of the contract suggested: keep him in high-level posts or let him out and accelerate his pay.

Under the court’s and network’s interpretation, though, the contract’s language, “except as otherwise provided,” rendered the whole of that provision meaningless. It’s hard to imagine that the two parties took the trouble of writing those clauses with the intention of giving them no meaning. Still, such recurring phrases provide recognizable cues to judges trained to detect certain intent and meaning in them, and people handling contracts are expected to understand that. Don’t expect much from the book or film Truth about these points, however, as both show little understanding of contracts, and limited interest, preferring the drama of politics and broadcasting over the sober terms of deals.

Lawrence Cunningham is a professor at George Washington University whose forthcoming books include the second edition of Contracts in the Real World: Stories of Popular Contracts and Why They Matter, which includes this story and fifty more.

Sources: Dan Rather v. CBS Corp., 68 A.D.3d 49, 886 N.Y.S.2d 121 (N.Y. App. Div. 2009). This discussion is based on both the court’s opinion in the case and the briefs filed by the parties.

Photo Credit: by Andrew Walker (Variety)

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Larry is a professor of law at the George Washington University Law School. He joined the GW Law School faculty in 2007, having previously taught for 6 years at Boston College (where he served a 2-year term as Academic Dean) and for 8 years at Cardozo (where he served a 5-year term as Director of the Heyman Center on Corporate Governance). He also taught courses at many other schools in the US and abroad, including Central European University, Columbia University, Hebrew University, University of Navarra, and Vanderbilt University. Before entering academia, he practiced corporate law for 4 years at Cravath, Swaine & Moore. He earned his BA from University of Delaware and his JD magna cum laude from Cardozo. Larry writes extensively in corporate and securities law, with a special emphasis on law and accounting and investor perspectives. He teaches courses in those fields as well as Contracts. He has published a dozen books and 50 law review articles. His recent books include: Contracts in the Real World: Stories of Popular Contracts and Why They Matter (Cambridge University Press 2012), The AIG Story (Wiley 2013), The Essays of Warren Buffett: Lessons for Corporate America (Carolina Academic Press 2013), and Berkshire Hathaway’s Value of Values (Columbia University Press 2014). Areas of Interest: Accounting, Auditing, Contracts, Corporate Law, Finance, Investing, Legal Education, Securities Regulation

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