The ruling (read it here) by U.S. District Court Judge Andre Birotte Jr. formally denied the defendants’ motion to dismiss, or in the alternative, motion for judgment on the pleadings. It followed from Birotte’s tentative ruling December 6 after hearing arguments from both sides in the high-profile guild-vs.-agencies battle.
It is a significant victory for the Big Three agencies in the long public and court battle over the past several months. The ruling is not appealable, meaning the case can move forward to trial after the discovery process. Both sides have suggested a trial could start in March 2021 and last 20 days.
In a joint statement, the three agencies said that “Despite every attempt by the WGA leadership to avoid judicial scrutiny of their illegal actions, today the Court ruled that the agencies may move forward with their antitrust claims against the Guild. The actions of this Guild’s leadership have exposed its members to significant legal and financial exposure. We will continue to take all steps necessary to defend our respective businesses and will aggressively move forward to address the issues in this litigation. While the legal process runs its course, we strongly believe it is in the best interests of writers to be represented by their agents.”
The agencies’ suits include claims that the WGA, in its eight-month campaign to end film and TV packaging, has restrained competition “on a staggering scale” through illegal means, including agreements with non-labor parties in service of a group boycott and “overly restrictive restraints in commercial markets that the union has no authority to regulate.”
The guild alleges that the three agencies’ packaging fee model violates federal antitrust laws and the Racketeer Influenced and Corrupt Organizations (RICO) Act. The WGA also claims that packaging fees violate the agencies’ fiduciary duty to their clients and constitutes “a system of illegal kickbacks and price-fixing under federal law.”
“A dismissal would have been welcomed, but we appreciate the court’s desire to have a more complete factual record,” the WGA said in a statement today. “We continue to move forward with our case and are confident that the evidence uncovered through discovery will prove the agencies’ conflicts of interest and breach of fiduciary duty that we have detailed in our complaint.”
The dispute began last April when the guild ordered all of its members to fire their agents who refused to sign its Code of Conduct, which banned packaging fees and agency ties to corporately affiliated production entities. In his 18-page ruling, which thoroughly summarized the dispute, the judge noted that the agencies alleged that the guild “combined with several purported non-labor groups, including (1) other talent agencies, (2) showrunners acting in a producer-only capacity who are thus exempt from the Minimum Basic Agreement (with the studios), and (3) unlicensed lawyers and managers.”
With respect to showrunners, who have been central players in the dispute, the judge wrote that “Plaintiffs (the agencies) allege that Defendants (the WGA East and West) have coerced showrunners into abiding by the Code of Conduct, prohibiting them from employing agents or agencies that receive packaging fees, even when the showrunners seek employment in their producing capacity only.
“Plaintiffs also plead sufficient factual allegations to raise a plausible inference that when showrunners seek employment in their producing capacity only, their employment does not have a direct or substantial effect on Defendants members’ wages.
“Plaintiffs allege that showrunners function as ‘CEOs’ of television series, that showrunners are responsible for hiring writing staff and all other critical personnel, that the ‘vast bulk’ of showrunners’ compensation derives from producing, not writing, services, and that showrunners function as independent contractors operating their own businesses. Plaintiffs further allege that when showrunners seek employment in their producing capacity only, they are not covered by Defendants’ Minimum Basic Agreement (with the studios), and that showrunners are purchasers of Plaintiffs’ talent agency services.”
In conclusion, he wrote that “Construing these factual allegations in the light most favorable to Plaintiffs, as required by both Rule 12(b)(6) and Rule 12(c) (of the Federal Rule of Civil Procedure), these allegations raise a plausible inference that Defendants have combined with a non-labor group in enforcing the Code of Conduct.”
In order to find for the guild and dismiss the agencies’ lawsuit, the judge said “a court must accept as true all material allegations in the complaint and must construe those allegations in the light most favorable to the plaintiff” – in this case, the agencies.
In denying one of the guild’s many motions to dismiss, the judge wrote that the agencies have alleged that the WGA’s “intent in adopting the Code of Conduct was to specifically harm Plaintiffs (the agencies) – to ‘conquer’ or ‘grab power’ from them – rather than to protect its members from conflicts of interest. Plaintiffs (the agencies) have further alleged that packaging presents numerous economic benefits to (the WGA’s) members, such that a restriction on packaging ultimately harms, rather than benefits, the members in question by reducing their opportunities for employment. These allegations, again construed in the light most favorable to Plaintiffs, raise a plausible inference that the Code of Conduct was a predatory device used by Defendants (the WGA) to injure Plaintiffs.”
In this same light, he also found that the agencies “have adequately pleaded sufficient facts showing an antitrust injury,” noting that because the agencies’ allegations “show that their injuries stem from the competition-reducing aspects of Defendants’ Code of Conduct — i.e., they are injured because Defendants’ Code of Conduct prohibits them and other non-compliant talent agencies from representing guild writers in the entertainment industry — the Court finds Defendants’ argument with respect to antitrust injury unavailing. For the reasons stated above, Defendants’ motion to dismiss or, in the alternative, motion for judgment on the pleadings as to Plaintiffs’ Section 1 Sherman Act claim, is DENIED.”
The two sides will meet next in court for a status conference on January 10, in which the judge will discuss the schedule leading up to trial, and on January 17, he’ll hold a hearing on the agencies’ motion to dismiss the counterclaims filed by the WGA.
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