Don’t be surprised if a villain with the last name of Birotte begins to show up in screenplays in the not too distant future. A Los Angeles federal judge dismissed eight of the 14 claims the Writers Guild of America East and West filed against the major three talent agencies – WME, CAA and UTA. The countersuit, filed last fall, is part of a broader battle over the practice of packaging.
The battle ignited a year ago when the WGA imposed new rules for talent agents that represent guild members. The agencies balked at the guild’s effort to ban packaging and agencies having ties to production entities, which led to the mass firing of thousands of agents by WGA members in April 209 and sparked the current litigation in Los Angeles federal court.
In his ruling against the guild, U.S. District Judge André Birotte ruled the dismissed claims:
- Lacks antitrust standing to pursue their federal price-fixing claim;
- Lacks organizational standing to bring claims for breach of fiduciary duty and constructive fraud on behalf of their members;
- Lacks Article III standing to bring an Unfair Competition Law cause of action on their own behalf;
- Failed to plead racketeering activity;
- Failed to state claims upon which relief can be granted with respect to its group boycott claims.
Birotte also dismissed the guild’s racketeering allegations, which claimed that packaging fees they received were “illegal kickbacks” from the studios. The core purpose of anti-kickback provisions of the Labor Management Relations Act, he found, “is to prevent corruption of employee representatives who are chosen by, and have a statutory duty to represent the interests of, other employees. As the Agencies correctly argue, although the LMRA has been on the books for over seventy years, Section 302 has been applied only to kickbacks made to union leaders or union-managed retirement funds. Further, (the guilds) have made no showing that prohibiting studios from paying packaging fees to the Agencies furthers the LMRA’s core purpose of ‘preventing corruption of employees representatives who are chosen by . . . other employees.”
The judge’s ruling is seen as a setback for the WGA’s cause in the legal arena. In granting the agencies’ motion to dismiss the guild’s federal price-fixing claim, the judge wrote that the agencies contend that allegations made by the WGA East and West, which are the counterclaimants in the suit, even if accepted as true, “demonstrate that Counterclaimants (the guilds) do not participate in the same market as the Agencies and suffer derivative injury only. In particular, the Agencies contend that Counterclaimants’ allegations demonstrate that they neither buy nor sell packages, and that they do not otherwise participate in any market in which packages are bought and sold.”
“In opposition, Counterclaimants do not argue that they buy or sell packages, or that they participate in the talent representation market where packages are bought and sold. Indeed, Counterclaimants’ allegations unambiguously demonstrate that studios—not the Guilds or their writer-members—purchase packages from the Agencies, and that the Agencies and their non-party competitors sell packages to the studios. The core of Counterclaimants’ per se price-fixing claim is that ‘rather than compete with each other, the Agencies and their co-conspirators have instead collusively agreed to propose the same packaging fee terms to [production] studios.’
The injuries Counterclaimants allege—that writer-members suffer decreased profit participation, decreased employment opportunities, decreased production quality, and that the Guilds receive lower union dues while expending money to inform their members of the harms of packaging and publicly advocate against the practice—all derive from the allegedly higher prices paid by production studios that employ writers.”
Agencies and Guild React
Of course both the three majors and the Writers Guild issued different, yet expected, responses to the decision
“The WGA’s claims against the major talent agencies were gutted today by the federal court. This is a resounding victory for CAA, UTA and WME,” the three agencies said in a joint statement. “What has become crystal clear is that David Young, David Goodman and this WGA leadership have led thousands of writers over a cliff, wasted their member dues on failed lawsuits, and left them without agents to represent and advocate for them for more than a year.”
WGA West president David A. Goodman responded in a statement, saying the WGA’s claims will be supported by further evidence.
“We obviously would have preferred a complete victory. But the court’s decision assures that the Guild’s core claims, namely that packaging is a breach of fiduciary duty and that agencies have committed antitrust violations by fixing the price of those packages, will be explored through discovery, and ultimately in court. That’s what we wanted. There remain six powerful claims in our lawsuit that we will pursue, and discovery is underway. We are confident that the evidence uncovered in this process will support the claims detailed in our lawsuit,” he said.
Goodman is referring to the judge’s decision to deny a motion filed by WME, CAA and UTA to dismiss the guild’s Cartwright Act price-fixing claim and will allow several individual plaintiffs to pursue their claims in court, including:
- Their individual claims of breach of fiduciary duty.
- Their individual Unfair Competition Law claims.
- Barbara Hall’s breach of contact claim.
The judge noted that “California requires a high degree of particularity in the pleading of Cartwright Act violations . . . and therefore generalized allegations of antitrust violations are usually insufficient.” Here, the guilds alleged that “in or around 1995-1996, and continuing through to the present,” with the exact start date unknown, the Agencies and their coconspirators entered into a continuing agreement to fix and maintain the 3-3-10 packaging fee structure and to charge the same base license fees to studios.”
The judge also noted that the WGA alleges that “this price-fixing conspiracy was set in a meeting by Lee Gabler of CAA and Ari Emanuel of then Endeavor and now WME, and that the Agencies have maintained this price-fixing conspiracy by sharing competitively sensitive information when they jointly package television series.
Earlier in January, the judge held that the agencies made a credible case that the boycott violates antitrust law by stifling competition in the market for writer representation. Birotte also found that the WGA had “expressly permitted” packaging fees for the last 40 years — a point the guild disputes.
That defeat is frustrating to those who question the WGA’s strategy of taking on the agencies at a time when it is also facing a tough contract renegotiation cycle with the major studios. A heated exchange between the WGA and the Alliance of Motion Picture and Television Producers (AMPTP) which resulted in potential contract negotiation talks being called off.