CAA, WME and the WGA East and West have recently filed a flurry of motions in advance of next Friday’s hearing on the agencies’ request for a preliminary injunction that would end the guild’s boycott against them. In its latest filing, CAA says that, for the Writers Guild, the ongoing dispute is no longer about reaching a deal but has morphed into an “animus-driven revenge campaign” that seeks to put them out of business.
In a reply in support of the preliminary injunction, CAA told a federal judge today that it seeks the injunction because “in the last month, the Guilds’ unlawful boycott of CAA has transformed into an animus-driven revenge campaign that is devoid of any legitimate labor-relations purpose and threatens permanent and irreversible damage to CAA’s business. In November 2020, CAA agreed to the same ‘Franchise Agreement’ that the Guilds signed with other talent agencies. Yet the Guilds still boycott CAA, while franchising CAA’s direct competitors (UTA and ICM) on the same terms being denied to CAA. The Guilds encourage writers to sign up with conflicted, unlicensed managers, because, as the Guilds admit, they ‘need to use managers as leverage against CAA.’ The Guilds have decided, out of personal animus admitted by the Guilds’ chief negotiator, to boycott CAA, regardless of CAA’s agreement to the Guilds’ terms, in an effort to destroy CAA’s business.
“Maintaining a group boycott in these circumstances is not a legitimate labor purpose,” CAA added. “The Guilds do not benefit from any ‘labor exemption’ to the antitrust laws. Nor may the Guilds take advantage of the anti-injunction provisions of the Norris LaGuardia Act (NLGA), particularly since they previously admitted that this is not a NLGA case. And even if the NLGA did apply, CAA easily qualifies for a NLGA injunction.
“CAA’s consent to the Franchise Agreement is the core issue before the Court. But the Guilds barely address it. Instead, the Guilds amalgamate CAA with WME (which has distinct issues). The Court should not be distracted. CAA seeks a narrow preliminary injunction, enjoining the Guilds from continuing the boycott given CAA’s agreement to the Guilds’ own terms. The Court should grant the injunction.”
The dispute arose in April 2019, when the WGA ordered its members to fire their agents who refused to sign the guild’s Code of Conduct, which banned packaging fees and agency affiliations with related production companies. Since then, every major agency except CAA and WME have signed a modified code that phases out packaging fees and reduces ownership interests of production companies to just 20%.
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The WGA has argued in court filings that CAA and WME are more conflicted than the other agencies that have signed its franchise agreement because they have more entangled relationships with corporately affiliated production entities: CAA with wiip and WME with Endeavor Content.
CAA, however, told U.S. District Court Judge André Birotte Jr. today: “The core fact before the Court is this: CAA has agreed to terms that in all material respects conform to the Guilds’ Franchise Agreement. CAA has expressly agreed to sign an unmodified version of the Franchise Agreement. The only difference between CAA and other agencies the Guilds have franchised is that CAA has taken steps that are far more protective of conflict-of-interest concerns than other Guild-franchised agencies: in addition to irrevocably committing to selling its interest in its ‘affiliated’ production company (wiip) to the level required by the Guilds, CAA has also taken steps, until that sale is complete, to put its entire interest in wiip into a blind trust that CAA does not control.”
The WGA has argued that “the trust is not actually blind; there is no time limit on the trustee’s disposition of the trust asset; there is no limitation on who may purchase the asset; and the Guilds were not consulted on the trustee’s selection.”
The WGA also has issues with TPG VI, the giant equity firm that has a majority shareholder stake in CAA, saying that the agency’s “insistence that the 20% provision apply only to a single, specific TPG fund, especially because nothing would prevent TPG from merely transferring its ownership interest in wiip from the specified TPG fund to a different fund.
“These are the only reasons the Guilds offer as to why they have not accepted CAA’s agreement to their own terms,” CAA told the judge today. “But these are not legitimate objections. The whole point of the blind trust is that it gives CAA no control over, involvement with, or information concerning wiip until its interest is sold to meet the Guilds’ ownership-cap requirements.
“CAA has less involvement with an affiliated production company, during that sell-down period, than agencies like UTA which the Guilds have franchised. Agencies like UTA may, right now, continue to actively manage an up-to-20% interest in production companies, and the Guilds accept this. Until its sale is completed, CAA does not even have visibility into – much less control over – wiip’s operations. Thus, the trust is truly ‘blind,’ and the timing issue is a non-issue.
“Beyond that, the commitment to a sale is irrevocable and fully delegated to a trustee entirely outside of CAA’s control. The trustee is an unimpeachably respected attorney who primarily represents writers and in no sense represents or works for CAA. The Guilds do not suggest otherwise.”
“Nor does anything about TPG VI, CAA’s ultimate majority investor, change the picture,” CAA argued. “The Guilds’ stated concern about ‘transferring’ wiip’s ownership to another TPG fund is frivolous. CAA has specifically told the Guilds that CAA’s and any TPG-related entity’s holdings will not exceed 20% in the aggregate.
“The Guilds do not even address CAA’s evidence that (a) the only fund invested in CAA, TPG VI, has already agreed to cap its holding of any affiliate production company (when combined with CAA or any CAA affiliate) at 20%; and (b) that as a matter of law, fiduciary duties preclude TPG VI’s investment in CAA from being managed for the benefit of other TPG funds that might (hypothetically) invest in a film production company. The Guilds have no legitimate objection concerning TPG, and barely argue otherwise. Instead, the facts show that the Guilds’ real reasons for continuing the boycott are far from high-minded, namely a ‘power’ grab and the intense personal animus towards CAA executives that the Guild’s negotiator confessed to Ronald L. Olson.” Olson is CAA’s negotiator in the talks that have, to date, failed to produce an agreement on a deal that would allow CAA’s writer-clients to return to the agency.
CAA said that the WGA has violated antitrust law by combining with showrunners and talent managers to further its boycott of the agency.
“The Guilds’ refusal to cease the boycott, despite CAA’s agreement, by itself violates the antitrust law. The Guilds’ combination with showrunners and managers – non-labor parties – is another violation.
“The Guilds assert that because so-called ‘showrunners’ (i.e., managers of the production of a television program who are members of the Guilds) do some writing, the Guilds’ combination with them is fully exempt from antitrust scrutiny. But the Guilds obscure the issue with showrunners. First, as WME explains in its own reply brief, the Guilds admit that some showrunners do no writing at all, or only very limited writing. Second, showrunners, even when they do (in part) act as writers, also are separately compensated as producers for managing a television show’s budget, staff, and production. The Guilds have barred CAA from representing showrunners in negotiations even over producer compensation that the Guilds cannot regulate. That constitutes combination with a non-labor party.
“Unlike most employees in most industries, showrunners receive two forms of compensation for separate functions delineated in their contracts with their employers, the production studios. Generally, writing services are identified as part (but only part) of showrunner compensation. The Guilds provide union representation, collect union dues, and receive pension contributions based only on the work done for writing services. Showrunners do not pay Guild dues based on the income they receive as producers; producer compensation is not controlled by the relevant collective bargaining agreement with the studios, the Minimum Bargaining Agreement (MBA); and the Guilds do not have authority to negotiate producer wages for showrunners, or anyone else.
“By rule, compensation to a writer-producer for producing services cannot displace payment for writing services, because the Guilds’ MBA aggressively preserves separate writing compensation for the writing services a writer-producer does. While the Guilds’ MBA provides minimum payments for a writer-producer’s writing services, it makes clear that those are not wages for producing, or wages that can be offset by the wages a writer-producer receives for producing.
“Here, the Guilds have not only barred CAA from representing showrunners as writers. The Guilds have also barred CAA from representing showrunners even in wage negotiations with studios over producing services as to which the Guilds have no collective-bargaining authority. Even if a showrunner wants to have her agent negotiate with a studio solely for payments for producer work – i.e., compensation for things that are indisputably outside the Guilds’ collective bargaining agreement, like setting a television show’s budget – the Guilds purport to bar CAA from representing showrunners in those negotiations.
“Nothing suggests a union may regulate an agent’s negotiation of wages that are separate from the wages and working conditions over which the union does have collective-bargaining authority. In (the court case) H.A. Artists, the issue was the talent agencies negotiating above-scale wages for actors for acting services—the very same area in which the union represented the actors.
“In American Federation of Musicians v. Carroll, the Supreme Court permitted a musician union’s combination with orchestra leaders, but only because that combination was designed ‘to protect the wage scales of musicians,’ i.e., the labor services the union did represent. And in Home Box Office, Inc. v. Directors Guild of America, the issue was the Directors’ Guild’s combination with independent-contractor directors – but only for performing directing services. None of these cases suggests that a union may act to regulate agent negotiations of wages in areas outside a union’s authority (e.g., H.A. Artists does not bar the actors’ union from representing actor-directors as directors).
“Rather, the Carroll test set forth by the Supreme Court for ‘non-labor parties’ is tied directly to the wages the union is allowed to regulate, and those wages alone. As this Court held, to the extent that showrunners’ ‘employment does not have a direct or substantial effect on Defendants’ members’ wages’ then showrunners are non-labor parties.
“Here, there is no real question that insofar as they are being compensated for producing services, not writing services, showrunners do not compete with writers over wages for writing. A producing wage is not a writing wage. The Guilds’ own declarations concede that much of showrunner compensation is for these producing services. Expert analysis concurs – showrunners receive enormous compensation, in many cases the bulk of their compensation, for producing, not writing. That compensation cannot, by definition, displace the writing wages the Guilds have authority to regulate, because it is a payment for a different thing. Yet under the Guilds’ boycott, CAA is still not able to represent writer-producers in negotiations with studio employers for purely non-writer compensation. That, under the law, is not subject to the “statutory” or “non-statutory” labor exemptions.”
CAA also has issues with the WGA delegating authority to talent managers – who are not licensed by the state nor franchised by the guild – to procure work for agentless writers. In March 2019, before WGA members fired their agents en masse, the guild issued a formal written statement “authorizing managers and lawyers who represent WGA members to procure employment and negotiate over-scale terms.”
The Gersh agency signed the guild’s modified franchise agreement in January 2020, but now David Gersh, the agency’s co-president, has submitted a declaration in support CAA’s reply for the preliminary injunction. Gersh, who is not a party to the lawsuit, said that in July of this year, he called WGA West executive director David Young “to discuss the Guilds’ dealings with managers, and specifically the Guilds’ continued delegation to unlicensed and un-franchised managers of the right to perform the functions of agents who are licensed under the Talent Agencies Act.”
Gersh says he told Young “that it is unfair to the franchised talent agencies that the Guilds are permitting and encouraging these un-franchised and unlicensed managers to procure employment for Guild members, and that my franchised agency is losing clients to these managers. Mr. Young responded to me that he had been thinking about this issue, that he understood the concern, and that the Guilds are close to doing something about it.”
Not having heard back from Young, Gersh said he called him again in August and brought up the same issue. “Mr. Young advised that the Guilds are not ready to withdraw their delegation to the managers, because the Guilds need to use the managers as leverage against WME and CAA.”
CAA also said in today’s court filing:
“There can be no serious dispute that managers are non-labor parties. Prior to the Guilds’ illegal boycott, managers did not – and still cannot without violating the law – represent ‘union members in the sale of their labor.’ They are not permitted to perform the function of procuring employment for their clients – the Talent Agencies Act reserves that function to agents.
“Managers often serve as producers on a client’s project, thus functioning both as managers and employers. The Guilds argue that the Guilds’ delegation of bargaining authority makes managers labor parties. But that argument presumes the result – managers are not authorized under law to procure or bargain for employment, and thus cannot lawfully be designated for that purpose by the Guilds.
“The Guilds resort to the preposterous argument that their actions do ‘not constitute a combination between the Guilds and managers.’ The facts prove otherwise. The Guilds concede that they have authorized managers to procure employment for WGA members, set up a service to connect managers and WGA members for this purpose, and provided managers with indemnification for the managers’ violation of the Talent Agency Act.
“Under the law, the Guilds’ offer and the managers’ acceptance of each of these actions is sufficient to establish a ‘combination.’ Moreover, the Guilds’ own chief negotiator has admitted that they are combining with managers, despite the managers’ own conflicts of interest, because they ‘need to use managers as leverage against WME and CAA.’
“The Guilds’ combination with these managers was plainly non-traditional, and when a union uses non-traditional means to achieve even legitimate goals, its actions warrant heightened scrutiny and the union must demonstrate those means are ‘necessary.’ The Guilds make no attempt to justify why combining with managers was ‘necessary’ to accomplish their union objectives. In fact, the Guilds are simply allowing conflict-of-interest concerns with managers go unchecked in order to ‘leverage’ CAA and WME.”
CAA also told the judge that without an injunction to end the dispute until if and when the case goes to trial, the harm being done to it by the boycott will be “irreparable.”
More from the filing:
“There should be no dispute that, without an injunction, CAA is being severely harmed in a way that can never be repaired following trial. Agents know their clients’ work ethics, habits, families, tastes, and communication styles, and their ability to both get their clients work and develop projects depends on a client’s personal trust, often developed over years.
“The Guilds’ suggestion that writers would easily return to CAA agents after these intensely personal relationships have been severed, following years or more of litigation, simply because they might have a theoretical legal right to do so, defies gravity. Once writers have moved on to other agents (or unlicensed managers) to form new and different personal bonds, CAA’s important client relationships are lost for good.
“Nor is the harm limited to CAA – talent far outside the WGA’s purview, such as actors, directors, and others who benefit from CAA’s close relationships (e.g., the ability to knit ideas into a successful creative work based on connections and conversations) are unable to fully do so.
“These kinds of harms are precisely the harms that courts have long considered ‘irreparable.’ The Guilds are wrong to say that an antitrust injunction requires possibility of ‘extinction’ of a business. The threat of being driven out of business is sufficient to establish irreparable harm – not that it is required. In any event the boycott is forcing CAA out of the writer-representation market.
“Nor could CAA have brought its motion earlier. The Guilds had not rejected CAA’s agreement to their full terms until November, 2020, days before the motion was filed. And the irreparable harm began recently, when the Guilds franchised with CAA’s competitors, like UTA, sending CAA’s clients to competing agencies while making clear that the Guilds would irrationally refuse to franchise CAA, no matter what CAA does.
“Finally, CAA’s requested injunction could not be narrower…All CAA is asking is that the Court order the boycott to end as to CAA given CAA’s agreement to the Guilds’ own terms. CAA asks for nothing more than to be allowed to comply with the Guilds’ own requirements pending trial. CAA will gain no ‘competitive advantage’ from this (but it will avoid the severe competitive disadvantage the Guilds are attempting to impose). The Guilds claim a potential harm to ‘solidarity,’ but ignore that the Guild’s solidarity has already achieved its legitimate objectives as to CAA. The Guilds, for apparently ego- and animus-based reasons, want to prevent CAA from signing on to their own Franchise Agreement. But CAA’s doing so is not a harm to the Guild, to writers, or to anyone else. The injunction CAA seeks would do no more than end the boycott while CAA complies with the Guilds’ own terms.”
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