GNC learns costly lesson about the value of good con­tract management

Contract management can be expensive, but lack of it can be even more costly.  General Nutrition Centers (GNC) was given a painful lesson in this truth to the tune of a $1.1 million jury verdict — which could have been much higher.

In Olive v. General Nutrition Cen­ters, Inc., No. B279490 (Cal. App. Dec. 27, 2018), the plaintiff, a model and actor, appealed the damage award for being too low; the appeals court affirmed the judgment below, and also affirmed denial of the plaintiff’s claim for attorney fees. The case arose because GNC’s outside photographic agency shot photos of some 16 models that GNC used in an ad cam­paign. Among the models was one Jason Olive, who was paid $4,000 for a three-hour photo shoot and for the right to use his likeness for one year (a “model release”), with GNC also having an option to extend the model release for one additional year.

In a classic example of things falling through the crack, GNC did not keep track of when the model releases expired; neither did GNC’s photo­graphic agency, which by then was no longer doing work for GNC.  Con­se­quent­ly, when GNC’s ads continued to feature the likenesses of sev­er­al of the models, including Mr. Olive, it was for longer than the agreed period covered by the model releases.

GNC settled with the other models for between $5,000 and $32,000 each in exchange for five-year extensions of their model releases; Mr. Olive, how­ever, held out for more. Rejecting an eventual GNC offer of $150,000, he sued GNC, under a California statute, for mis­ap­pro­pri­­a­tion of his likeness.

GNC admitted liability; the lawsuit was about the proper measure of dam­ages. Mr. Olive initially asked for some $55 million, but the jury awarded him a total of $1.1 million. This was far less than what Mr. Olive had sought, but it was still far more than what GNC had paid any of the other models — and far less than GNC might have paid if it had insisted on the perpetual right to use the models’ likenesses, as pointed out by Santa Clara Law professor Eric Goldman, who explains the case in detail at his Technology and Marketing Law blog.