Taming the paper tigers

MEDIA LAW IS NOT JUST ABOUT HEADLINE COURT CASES INVOLVING A-LIST CELEBRITIES.

STEPHEN WARD LOOKS AT PRIVACY, DEFAMATION AND CORPORATE LAW AND EXPLAINS HOW MEDIATION AND CONDITIONAL FEE AGREEMENTS HAVE CHANGED THE FACE OF THIS PRACTICE AREA

Media law cases often make big headlines.

None more so than Catherine Zeta-Jones's efforts to assert a right to privacy at her wedding.

Last year, there were other high-profile cases seeking to protect information about supermodel Naomi Campbell's medical treatment and footballer Gary Flitcroft's adultery.

Chris Evans is slugging it out with Scottish Media over a compensation package with millions at stake.

John Cleese was prepared to fight all the way against the London Evening Standard over a point of reputation which, while hurtful, was hardly a matter of life and death.

Media lawyers seem busier than ever, so it came as a shock when City firm DJ Freeman, the firm behind some of the most successful libel defence trials in recent years, announced it was pulling out of the sector altogether (see [2003] Gazette, 20 March, 8).

But then libel is only one side - albeit the most prolific - of a diverse practice area.

Jonathan Goldstein is the chief executive of Olswang, which has a large media practice and is hiring 38 partners and fee-earners from the DJ Freeman media and property teams.

He says that despite the high-profile cases, recent years have been difficult, although the last one was better than either of the previous two.

'The way we've covered media hasn't changed for years.

We started from a different cultural perspective - covering film and TV production and distribution agreements and all sorts of arrangements of distribution which go on in the digital age.

'We also had the whole intellectual property spectrum, so we've always had a very broad offering - from corporate deals, across to joint ventures with people like the BBC and Time Warner and others from the music and publishing and television worlds.'

Mr Goldstein is not letting the gloomy corporate climate affect his outlook: 'We decided very many years ago that to focus on this industry we needed to provide a full service and that included corporate finance.

'There's no doubt the corporate markets have been depressed in the last year or so but you can still generate the right levels of business if you have the right clientele.

I think we've been lucky in the last couple of years that the transactions we have been involved in have kept a lot of people busy over a period of time.'

Indeed, despite the downturn there are still corporate deals for the taking, such as the recent role Olswang won acting for Kleinwort Capital on its possible acquisition of a stake in Hat Trick Productions, after Macfarlanes was conflicted out.

Other recent corporate media deals include: Mayer Brown Rowe & Maw acting for publishers James Reed & Partners on the 63 million share capital issue of Reed Executive, advised by Clyde & Co; London firms Marriott Harrison and Collins Benson Goldhill providing corporate and property advice respectively to independent cinema company City Screen on its acquisition of Oasis Cinemas, advised by Harbottle & Lewis; and Halliwell Landau advising Entertainment Now, which has entered into an agreement with Granada TV to produce a live stage show of 'Stars in Their Eyes', on its admission to the OFEX exchange.

Charles Martin, a corporate partner at Macfarlanes operating in the sector, says media is a 'very broad church', ranging from film, music and publishing through to marketing and advertising, 'which after all provide much of the funding for media companies'.

He says: 'It's attractive for a number of reasons: media companies expand rapidly and are frequently involved in mergers and acquisitions.

The businesses start out quite small and then get absorbed by - or absorb - other companies.'

An example is last month's 35 million acquisition by a small listed magazine company, Incisive Media, of specialist financial information provider Risk Waters Group.

Macfarlanes acted for Incisive.

It also acted last year for private equity house Candover Investments on its sale of Regional Independent Media to Johnston Press for 560 million.

Candover is only one of the private equity houses which is looking closely at the media sector, according to Mr Martin, who cites Warburg Pincus, HG Capital, Kleinwort Benson and Cinven as other examples.

Mr Martin acknowledges that the media sector - with its strong reliance on consumer spending and advertising levels - tends to track the main economy, but he insists that the downturn does not turn off the deal tap.

He says: 'Downturns do mean that there is less scope to sell, but they create buying opportunities for equity houses - because the prices become more attractive.'

The relatively small number of firms specialising in media incorporate it into their businesses in different ways.

For some, such as Harbottle & Lewis, which is representing Chris Evans, it is primarily a branch of entertainment.

Others - notably Olswang - offer media as part of a full service of corporate media takeovers, intellectual property and film rights as well as newspaper and magazine publishing.

In some it is the dominant character of the firm - David Price, a niche firm is almost exclusively media libel, while in others such as Farrer & Co, media is one of 13 roughly equally prominent groups in the firm.

If defamation generates more news coverage than the corporate media work, the picture is no rosier there, practitioners say.

Most firms doing libel work cover defendants and claimants alike, although some - including London-based Schillings - specialise in claimants.

Alasdair Pepper, partner at leading libel firm Peter Carter-Ruck & Partners, says newspapers are trying to drive down costs.

Gazette media law columnist Amber Melville-Brown, a partner at Schillings, says that, as in other sectors, media companies may be taking more in-house - which also reduces defendant libel work.

And in the core media work of defamation, the trend towards long, expensive high-profile cases masks the fact that fewer cases are prolonged to a settlement at, or near, the court door.

David Price says: 'Probably the same number of people as ever are being libelled, but they are just being sorted out more quickly.' His firm has adapted and probably increased its share of a diminishing market by being small, combining barristers, solicitors and solicitor-advocates in one practice, and through innovative fee structures, offering rare defendant conditional fee agreements (CFAs) as well as claimant CFAs.

These are both a threat and an opportunity to media lawyers' businesses.

Mr Price says they are becoming an indispensable part of litigation.

'Clearly, if you want to survive doing claimant work, you've either got to have a rich clientele, or you do CFA cases.

As time goes on, people with a lot of money are going to want CFAs.

They will ask why they should take all the risk.'

CFAs open a new market: clients who once could not have afforded to sue.

'The main thing conditional fees mean is that newspapers can no longer write anything they like about people who haven't any money,' he says.

Mr Pepper - whose firm pioneered much of the CFA work in this field - says: 'A whole range of people who previously couldn't afford an action now have access to justice.' His firm has conducted hundreds of CFA cases.

These CFAs may have generated more claims, but they have also had the effect of shortening and reducing the volume of litigation.

Speaking with his defendant's hat on, Robert Clinton, senior partner at Farrer & Co, whose clients include The Sun, the News of the World, the Telegraph and the Financial Times, says: 'A claimant will almost inevitably get a 100% uplift on a libel case - by their nature they are regarded as inherently high risk.'

This means, he says, that the defendant knows the claimant's costs will be running at 800 an hour, putting pressure on the editor or defence lawyer to avoid risks in the first place, and to settle more quickly after a claim.

'The pressure to settle has always been there, but the CFA has made it 100% worse.'

Mr Pepper says after-the-event insurance has so far proved elusive, but Mr Price says he has just secured an exclusive cover arrangement from Litigation Protection.

The Woolf reforms to civil justice have undoubtedly affected the culture of defamation negotiations, law firms say.

Mr Clinton describes a growth of case management which has coincided with the appointment of two experienced libel counsel to the bench - Mr Justice Gray and Mr Justice Eady.

'Active case management now pressed on the judges gives them a greater degree of hands-on control,' he says.

And they are operating within the context of a pre-action protocol introduced three years ago which spells out timings and encourages discussion and settlement.

The Defamation Act 1996 introduced the 'offer of amends'.

Under section 2 of the Act, defendants who have mistakenly libelled somebody can attempt to extricate themselves from litigation at an early stage by making an offer to apologise, pay a sum of damages and the costs of the claimant.

If the claimant accepts, the terms can be agreed or decided by the court.

If the claimant refuses, the defendant can rely on the offer as a defence at any subsequent trial.

Ms Melville-Brown's colleague Martin Cruddace represented John Cleese against Associated Newspapers, publishers of the Evening Standard.

She says: 'It is a tool that the newspapers are more likely to use now that some judicial guidance has been given, notably in the Cleese case.'

Mr Cleese said that an offer of amends by Associated was insufficient in light of the damage done by a critic who alleged that his career was on the slide, and he asked the court for higher damages and costs (see [2003] Gazette, 6 March, 26).

Mr Justice Eady found in Mr Cleese's favour, and said a sensible course of action after an offer of amends would be for a meeting to take place round the table, if practicable, without the parties going straight to the court for directions as if a contested hearing were inevitable.

This should signify a spirit of compromise on both sides.

Mediation is also increasingly used to produce early settlement, using the Dunnett v Railtrack plc (in administration) (see [2002] Gazette, 7 March, 5) judgment last year, which means a successful side that has refused the offer to mediate may face higher costs if it wins, Mr Clinton says.

If defamation business is waning, the recent headline cases show privacy, as a development of the law of confidence, is a potential growth area.

The biggest victory for privacy came probably in the High Court ruling last month that Hello! magazine - advised by City firm Charles Russell - breached the commercial confidence of Michael Douglas and Catherine Zeta-Jones, advised by Theodore Goddard (now Addleshaw Goddard), by publishing pictures of their wedding reception taken secretly by a guest.

This came despite the fact that the actors had already sold pictures of the event to the rival OK! magazine.

There is some dispute among lawyers as to how far the court went in establishing any privacy law.

For example, Ian De Freitas of Berwin Leighton Paisner, says that the ruling establishes no right to privacy; rather the existing laws on breach of confidence were found to offer adequate protection.

However, Myles Jelf of London IP firm Bristows contends that by doing so, the court indicated that the law of confidence amounted to the same thing as a privacy law.

Mr Price says that further attempts by clients to establish a right to privacy will not fill the place of the declining defamation business for lawyers.

He says: 'If you want to protect your client's interest, there is something inconsistent between privacy and a legal claim.

All you end up doing is disseminating it far wider without the vindicating effect of a libel where you can actually come out and say it was untrue.

With privacy, the information is usually true but you want to keep it private.'

It is also high risk for the client.

He adds: 'If you go for an injunction and don't get it, you'll end up with 30 or 40 times the publicity.

That's great if you want to appear in the House of Lords and argue about the finer points of privacy, but where it gets the client I'm not sure.'

Mr Goldstein is bullish about the future of the corporate media world and maintaining enough work for Olswang's increased headcount of media lawyers.

He contests the notion that media as a whole is a declining area.

'You can't write off a whole sector of business.

You wouldn't write off property as a sector,' he says.

For the future, the successful firms will not just be the safe pairs of hands which give sound legal advice and mount a spectacular show trial, but the ones which adapt constantly to the changing law and market - and the media market requires the utmost flexibility.

Stephen Ward is a freelance journalist