The California Court of Appeal today rejected Fox’s legal efforts to have the courts throw out Netflix’s long-running lawsuit challenging its employment contracts on free speech grounds.
Back in September 2016, Fox sued Netflix claiming it had illegally poached two of its executives and encouraged them to break their employment contracts. Netflix responded with a counter-suit soon after, arguing that Fox engaged in unlawful and anti-competitive business practices by locking its employees into restrictive fixed-term employment agreements that limit their job mobility.
The studio sought to have Netflix’s complaint thrown out as a free speech violation: arguing that the streaming service’s litigation hinged on protected communications with Fox’s lawyers as well as with its former employees, Tara Flynn and Marcos Waltenberg. (Courts permit the quick dismissal of lawsuits intended to silence critics, known in legal parlance as a SLAPP suit, short for strategic lawsuits against public participation.)
The Los Angeles Superior Court trial court denied Fox’s anti-SLAPP motion, finding Netflix’s suit hinged on restrictive employment agreements, not on threats from its lawyers to sue Netflix for poaching its employees. The state Court of Appeal agreed with the lower court’s ruling. (read it here.)
“The acts that supply the elements of Netflix’s claims are Fox’s alleged business practices of utilizing fixed-term agreements with allegedly unlawful and restrictive clauses and selectively determining which employees will be allowed to terminate those contracts early,” the appeals court judges found. “Netflix does not allege the cease and desist letter (or eventual filing of Fox’s complaint) supports any of its claims for liability.”
In the elongated court war on many fronts, Netflix issued a statement Friday applauding this latest decision.
“We appreciate the court’s careful consideration of the arguments and are pleased to see that the decision fully supports Netflix,” the company said in a statement. “Fox has prevented Netflix from litigating its challenge to Fox’s illegal employment practices, and this decision puts an end to that delay. This is an important case and we are encouraged that it now can move forward.”
Fox declined comment.
Today’s ruling has no bearing on the underlying suit, which was filed two years ago. The outcome of Netflix’s legal challenge to the enforceability of these agreements in California is especially relevant now, as Fox has agreed to sell much of its television and film business to The Walt Disney Co.
The combination of the two media companies is bound to displace studio employees — BTIG analyst Rich Greenfield estimated as that 5,000 or more jobs could be at stake. Some might want to jump before the axe falls.