After a stinging loss in federal court two weeks ago, the WGA has filed its first amended complaint in its ongoing legal battle with the Big 3 talent agencies over packaging fees.
The latest filing reframes many of the guild’s claims that U.S. District Court Judge Andre Birotte Jr. threw out on April 27, including his ruling that the guild “lacks organizational standing to bring claims for breach of fiduciary duty and constructive fraud on behalf of their members.” In its amended complaint, the guild asks the judge to “declare that packaging fees constitute a breach of the Agencies’ fiduciary duties to their writer-clients,” and that “the Agencies’ packaging fee practices constitute constructive fraud.”
Birotte also had ruled that the guild “lacks Article III standing to bring an Unfair Competition Law (UCL) cause of action on their own behalf,” but the guild is now urging him to “declare that packaging fees constitute an unfair and/or unlawful practice under California’s UCL because they breach the Agencies’ fiduciary duties to their writer-clients; constitute constructive fraud and deprive writers of loyal, conflict-free representation, divert compensation away from the writers and other creative talent that are responsible for creating valuable television and film properties, and undermine the market for writers’ creative endeavors.”
Big 3 Talent Agencies Seek To Limit Discovery Further In Legal Battle With WGA Over Packaging Fees
The judge had allowed the WGA to proceed with its price-fixing claim against WME, CAA and UTA for allegedly violating California’s Cartwright Act, and allowed several individual plaintiffs to pursue their claims in court, including their individual claims of breach of fiduciary duty and their Unfair Competition Law claims. The individual counterclaimants include Patricia Carr, Ashley Gable, Barbara Hall, Deric A. Hughes, Deirdre Mangan, David Simon, and Meredith Stiehm.
The guild, however, does not appear to have attempted to resurrect its “racketeering” and “group boycott” claims, which the judge had also dismissed. The guild, however, continues to accuse the Big 3 agencies of operating like a “cartel.” From today’s filing:
“Talent agencies have represented writers for almost a century. But what began as a service to writers and other artists in their negotiations with the studios has become an unlawful price-fixing cartel dominated by a few powerful talent agencies that use their control of talent first and foremost to enrich themselves,” the guild said in its filing today – an argument it has made throughout the year-long court battle.
“Historically, the agents whom writers retained were compensated by receiving only commissions on any payments made to the writers by studios for work that the agents helped them procure. By calculating the agents’ compensation as a percentage of the writers’ compensation, commissions aligned the interests of the agents with the interests of their writer-clients, as required by black letter agency law principles.
“Today, however, the three largest talent agencies make money not by maximizing their clients’ earnings and charging a commission, but by bundling the representational services sold to writers and other talent with services provided to studios and collecting what are known as ‘packaging fees.’ Packaging fee amounts are not directly tied to the Agencies’ clients’ compensation but instead come directly from television series and film production budgets and profits.
“The power exerted by the Agencies in Hollywood is enormous and pervasive. Even the Hollywood studios—powerful entities in their own right— agree to pay hundreds of millions of dollars in packaging fees annually to the Agencies for what, according to industry insiders, ‘amounts to extortion,’ because they are ‘afraid of not getting pitches and opportunities if they take a hard line against [packaging fees].’ The studios, like everyone else in Hollywood, ‘[are] afraid to challenge the agencies for fear of being blackballed.’
“The Agencies pursue packaging fees ‘über alles’ because the Agencies now make the vast majority of their revenues from packaging fees, which are far more lucrative than simple commissions.”
And as before, the WGA is also asking the judge to:
• Enjoin the Agencies from receiving any monetary payments or other things of value from any production company that employs any of its writer-clients;
* Require the Agencies to pay restitution to the Individual Counterclaimants in an amount equal to the funds that would have been paid to the Individual Counterclaimants in the absence of the Agencies’ unlawful and unfair packaging fees;
• Award the Individual Counterclaimants compensatory and punitive damages based on the Agencies’ breaches of fiduciary duty and/or constructive frauds;
• Award the Individual Counterclaimants treble damages for the Agencies’ violations of the Cartwright Act
• Award Counterclaimants their costs and attorneys’ fees;
• Award such further and additional relief as is just and proper.
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