Big 3 Talent Agencies Seek To Limit Discovery Further In Legal Battle With WGA Over Packaging Fees

The WGA and Hollywood’s Big 3 talent agencies have filed supplemental briefs in federal court about the scope of discovery in their yearlong battle over packaging fees, with the agencies seeking to limit the mountain of documents the guild is still seeking even though U.S. District Court Judge Andre Birotte dismissed most of the guild’s claims against WME, CAA and UTA on April 27. The agencies declare the judge’s ruling a “resounding victory.”

“Discovery should be focused on the issues that remain in the case, and the Guilds should not be allowed to use disproportionate discovery as a cudgel to achieve other ends,” the agencies said in a new brief filed on Tuesday.

The WGA, in a court filing Tuesday, is sticking to its demand that the agencies turn over tens of thousands of pages of emails and other documents held by hundreds of the agencies’ current and former executives and agents that the guild says are still relevant to its remaining claims. These “custodians” of documents, wrote WGA attorney Casey Pitts, include “at least 206 at CAA – including at least 75 agents for writers, not including executives; 129 at UTA – including at least 55 agents for writers, not including executives, and 236 at WME – including at least 55 agents for writers, not including executives.”

The judge is allowing the WGA East and West to proceed to trial on their state Cartwright Act claim of agency price-fixing involving their standard 3-3-10% packaging fee formula, and on several other claims by individual named plaintiffs for breach of fiduciary duty, unfair competition and breach of contract. The guild has told its members that “We look forward to proceeding with discovery and then to trial.”

The two sides previously had submitted briefs about the scope of discovery only hours after Birotte threw out the guild’s claims for federal price-fixing, racketeering and group boycott, but the agencies now say that those briefs had been drafted before the judge’s April 27 ruling, and did not fully take into account the “eleventh hour” import of his ruling. The agencies now want an even narrower scope of discovery to match the far fewer claims they will have to defend against when the case goes to trial next March.

“This Supplemental Brief addresses the important impact of Judge Birotte’s April 27 order dismissing the majority” of the WGA’s claims “on the issues before the Court,” the agencies said in their latest brief. “The Dismissal Order, issued only hours before the finalized Joint Stipulation (on discovery) was to be filed, requires limiting discovery from the Agencies beyond what was discussed in the Joint Stipulation.

“Before the Dismissal Order was issued, and as explained in the Joint Stipulation, the Agencies offered to produce extraordinarily broad and costly discovery to meet the claims then present in the case, and to allow the Guilds to test their theory that a ‘systemic’ conflict of interest existed between talent agents and union-represented writers over the practice of agency packaging. Specifically, the Agencies had offered to produce: (1) their central files for every single active packaging deal over a four-year period, which include not only the terms of the deals, but external and internal correspondence regarding those deals, and (2) documents from 15 individual custodians per Agency – i.e., an additional 45 talent agents or agency executives.

“This proffered discovery completely belied the underlying premise of (the guilds’ and individual named plaintiffs’) instant Motion to Compel – the misleading assertion that the Agencies agreed to provide only ‘limited’ information about a ‘small’ number of packaging deals. Because of the Agencies’ offer, (the WGA’s) demand for additional electronic discovery from at least 105 additional, unnamed e-discovery custodians, at a staggering cost to the Agencies – demonstrated to be collectively in excess of $10 million above and beyond the millions of dollars the Agencies offered to incur in discovery costs – was spectacularly misguided and non-proportional. It clearly should have been rejected even if Judge Birotte had not issued the Dismissal Order.”

“This ‘eleventh hour’ development cannot be ignored, as the Guilds might prefer to do,” the agencies said. “Rather, the Dismissal Order has rendered the Agencies’ offer itself excessive and non-proportional to the remaining claims, because virtually all of the Guilds’ claims have been dismissed. Apart from the Guilds’ Cartwright Act price-fixing claim, all that remains are a few individual writers’ claims that they suffered a breach of fiduciary duty or constructive fraud on their own specific deals.

“The only claims and counterclaims remaining in the case that go beyond assertions of individual injury to individual writers are (a) the Agencies’ affirmative antitrust claim against the Guilds under Section 1 of the Sherman Act, and CAA and UTA’s secondary boycott claim against the Guilds under federal labor law; (b) a counterclaim by the Guilds and individual writers under California’s Cartwright Act that talent agencies have agreed to ‘fix’ the prices to studios for packaging fees; and (c) a completely derivative declaratory relief counterclaim.

“Most notable for present purposes, Judge Birotte’s Dismissal Order disposed of every one of the Guilds’ Counterclaims that relied on a theory of a systemic conflict of interest between talent agents and their writer-clients over packaging – dismissing with prejudice the Guilds’ claims for RICO, breach of fiduciary duty and constructive fraud on behalf of the Guilds’ 14,700 members, and violation of California’s unfair competition law.”

“The Guilds’ ‘conflict-of-interest’ Counterclaims are now gone, entirely,” he wrote. “Accordingly, there is no remaining counterclaim that supports (their) demand in the instant Motion to treat a broad range of additional talent agents at the Agencies as document custodians in order to broadly search for evidence of a conflict of interest between talent agents and writers.

“None of the remaining Counterclaims depend, at all, on any showing of a conflict of interest between talent agents and writers beyond the six individual writers who pursue these claims and their individual agents. In these changed circumstances, the Agencies’ prior offer to produce the entirety of their packaging files for active packaging deals is no longer warranted or fitting. Nor can it be argued, after Judge Birotte’s ruling, that (the guilds’) assertion that their ‘systemic conflict’ defense to the Agencies’ affirmative group boycott claim against the Guilds provides a stand-alone justification for the Agencies incurring the burden and expense of producing all of their centralized packaging files. As discussed in the Agencies’ portion of the Joint Stipulation, the relevance of the evidence from Agency files to such a defense is extremely limited.”

Noting that “although the timing of the current situation is unusual,” the agencies said that “it is undeniable” that their “prior proposal is no longer proportionate to the case’s actual needs in the wake of the Dismissal Order. Rather, in the current circumstances, the Agencies believe that discovery should be appropriately and proportionately limited as follows: (1) the Agencies will continue to produce ESI documents from 15 individual custodians from June 24, 2015, through the present date, including the individual talent agents for the individual Counterclaimants that relate to the claims left in the case; and (2) the Agencies will also produce documents from their central packaging files for: (a) any packaging deal involving an individual Counterclaimant, and (b) a meaningful and appropriate cross-section of additional active packaging deals from June 24, 2015, through the present.

“This proffered production is sufficient to permit an adjudication of whether any individual Counterclaimant’s deal manifests a breach of fiduciary duty or constructive fraud. It also permits discovery on the Cartwright Act price-fixing claim, which is premised on the notion that the Agencies have fixed the prices of all packaging deals at a uniform ‘3-3-10’ ‘price’ – in fact, as this discovery will reveal, packaging fees are neither fixed nor uniform.”

“Discovery as limited in this proposal is ample and appropriate,” the agencies said. “It provides the individual Counterclaimants all the discovery that they could have conceivably been entitled to had they brought their claims in their own separate lawsuits, instead of linking them to Guild claims that have now been dismissed. In addition, it provides all Counterclaimants, including the Guilds, with the appropriate discovery on the sole remaining antitrust claim (price-fixing under the Cartwright Act.

“If, indeed, the Agencies have been engaged in a price-fixing conspiracy – and the Agencies deny that contention – then the production of files relating to an appropriate cross-section of the relevant packaging deals, together with fifteen additional custodians per Agency, is more than sufficient to prove that.

“Accordingly, the Agencies’ production should be limited to that proposed above, tailored to make the burdens and costs on the Agencies proportionate to the more restricted scope of this case following the Dismissal Order.

“Alternatively, the Court should order the parties to meet and confer to arrive at an agreement regarding the appropriate scope of discovery, which should be more limited than the Agencies’ proposal in the Joint Stipulation. In all events, Counterclaimants’ Motion should be denied.”