UTA Sues WGA For “Unlawful Group Boycott”, Seeks Injunction To Roll Back Guild Code Of Conduct – Update

By David Robb, Dominic Patten

UPDATED with WGA response, UTA statement: UTA has filed an antitrust lawsuit against the WGA East and WGA West, accusing the guilds of engaging in an “unlawful group boycott” against UTA and other talent agencies in the guild’s 11-week-old campaign to realign the agencies’ interests with those of writers. The suit, filed in U.S. District Court in Los Angeles, is similar to a suit filed by WME against the guilds on Monday.

Last week, the guild declared that its negotiations with the Association of Talent Agents had reached an “impasse” and now intends to pursue separate negotiations with nine of the industry’s top talent agencies, including UTA, WME, CAA and ICM Partners — which the guilds are suing for breach of fiduciary duty.

The bluntest aspect of UTA’s filing (read it here) Thursday has to be the request for an injunction that seeks to immediately roll back the WGA’s recently installed Agency Code of Conduct and return things to the status quo that existed before April and since 1976. Having said that, any U-turn will be several weeks before the tires are ever on the road as the courts typically move slow on such matters. Even with a preliminary injunction, which UTA could ask for, the guild still has about a month to respond, and both sides will seek discovery to look inside each other’s files for more details and possibly dirt.

Responding to the lawsuit today, the WGA said: “WME and UTA are correct; there are serious anti-trust violations taking place in Hollywood. But they are all being committed by the ATA and the eight members of its “bargaining” committee, and we will make their violations public in the next day or so.”

After filing the lawsuit, UTA CEO Jeremy Zimmer and co-presidents Jay Sures and David Kramer told their employees that “We have taken this step after very careful consideration and following exhaustive and unsuccessful year-long attempts to engage the WGA leadership in negotiations. It comes only after the WGA leadership’s repeated and highly aggressive actions against us and our fellow agencies, including ordering the mass firing of agents and filing unprovoked lawsuits against UTA and several others.”

“It’s important to note that this is in no way a reflection of how we view Guilds,” they said via email. “We are steadfast in our support for unions and celebrate the important role they serve, particularly for emerging and working artists. However, we believe writers are being poorly served by this WGA leadership—and UTA, like other agencies that have filed similar actions this week, has taken this step to protect our clients and our business. We have crafted this lawsuit in a way that addresses the WGA’s very specific behavior and actions.

“That said, patient, thoughtful negotiations marked by mutual respect and a willingness to compromise has been our strategy from day one, and that measured approach remains our preferred path forward. Even over the past weeks, as the WGA leadership continued to unnecessarily escalate this fight, we made additional efforts to engage them in good faith negotiations. Again, they said no—while again mischaracterizing our positions in insulting and inflammatory language. We remain convinced this contract disagreement should be solved through a good faith effort by both parties. But we need a good faith negotiating partner, and thus far, we have not had one.

“This is obviously an issue we are handling carefully and deliberately…This disagreement will eventually end, and we will get back to the business of what we do best: putting the interests of artists first and helping build careers for the long-term. Until then, we have no choice but to fight vigorously for the reputation and interests of UTA, as we would for any client.”

UTA’s jury-seeking suit is almost certainly to be linked with WME’s suit filed June 24 as well as with any actions CAA and ICM Partners put before the courts. Of course, it is important to note that this action is separate from required responses that the uber-agencies have to make to the WGA’s lawsuit filed in Los Angeles Superior Court on April 17.

To get a sense of the numbers in play, we hear 1700 clients have terminated UTA for writing services in the past several weeks since the WGA’s code was adopted and scribes pink-slipped their reps en masse.

UTA’s suit asking the court to declare that WGA’s bans on agency packaging and content affiliates, and concerted refusal to deal and group boycott to enforce these bans, is an illegal contract, combination, or conspiracy constituting an unreasonable restraint of trade in violation of the Sherman Antitrust Act, and “permanently enjoining the challenged conduct.” It also seeks “treble damages for the injury caused by WGA, in an amount to be proven at trial; awarding UTA its costs and attorney’s fees, in an amount to be proven at trial; awarding pre-and post-judgment interest at the maximum rate allowable.”

“On April 13, 2019, WGA radically upended over 40 years of settled, mutually-beneficial business relationships between Hollywood writers and the talent agencies that represent them,” today’s suit reads. “On that date, in what WGA (West) president David Goodman described as a ‘power grab’ designed to ‘divide and conquer’ talent agencies, WGA adopted and began to enforce a so-called ‘Code of Conduct’ that requires writers to fire the talent agents who refused to bend the knee to WGA’s demand that talent agencies abandon the agencies’ business practice of ‘packaging’ and their affiliations with content production companies. Writers who fail to follow the dictates of the WGA and refuse to join the boycott face discipline from WGA that could substantially and irreparably harm their careers. When it so acted, WGA placed the interests of a few well-heeled individuals above the interests of its membership. As explained below and as WGA has acknowledged, the vast majority of writers benefit from packaging arrangements by reaping the creative and financial rewards of writing engagements without having to pay a traditional 10% commission on their income to the talent agents who procured these engagements. Likewise, WGA undermined the interests of writers who benefit from the increased opportunities and more favorable economic terms offered to writers, directors, actors and other Hollywood talent by agency-affiliated production companies, when compared to the terms offered by the traditional industry television studios.

“More to the point, WGA not only acted contrary to the interests of writers, and other members of the Hollywood creative community, it also acted illegally. WGA has exceeded its lawful authority as a labor union by organizing an illegal group boycott against UTA and other talent agencies. WGA’s boycott, attempting to impose a blanket prohibition on talent agency packaging and agency affiliated production companies, undermines lawful competition and far exceeds any limited exemption WGA has under the antitrust laws. To the contrary, WGA’s ban has harmed competition in the packaging market and other markets that WGA has no authority to regulate, has harmed UTA and other talent agencies, and has harmed the very writer-members whom the WGA purports to represent. WGA’s group boycott is a classic, per se violation of the Sherman Act. UTA filed this suit to enjoin WGA’s illegal conduct and to recover treble damages for the harm WGA’s boycott has caused. UTA also seeks to recover its attorney’s fees and litigation costs in bringing this suit.”

The suit says that the “WGA is compiling a record of those members who fire their non-franchised agents, and those members who continue to work with their non-franchised agents. The latter group will be subject to discipline by a tribunal of WGA members, in what is likely to be an expedited process, and the penalty could be a significant monetary fine or expulsion from WGA. WGA members who choose to work with a non-franchised talent agent risk becoming blacklisted if they refuse to join WGA’s boycott. By reason of the above conduct, WGA has organized a group boycott in which all agency packaging and content affiliation have been banned, and both willing and coerced writer-members have agreed to boycott UTA and other talent agents who will not submit to WGA’s prohibitions on packaging and content affiliates. To date, over 1,700 of UTA’s writer-clients have terminated UTA due to WGA’s group boycott. WGA claims that, in total, 7,000 writers have terminated their agents as a result of WGA’s group boycott, representing approximately 80% of WGA writers represented at the time of the boycott. WGA has also combined with non-labor entities to facilitate and enforce its unlawful group boycott, including producers (showrunners), certain talent agencies, and lawyers and managers.

“First, WGA has combined with producers (showrunners) to enforce its boycott, demanding that showrunners refuse to do business with any agency that has not agreed to WGA’s Code of Conduct. Producers and showrunners (including those who may also act as writers) are non-labor entities because they oversee production on behalf of a production company and are responsible for hiring and supervising other talent, managing the budget, overseeing filming and post-production, and other tasks. Upon information and belief, some producers and showrunners have joined WGA’s ban, and have refused to accept packaging proposals from UTA and other non-franchised agencies. The WGA also has attempted to combine with production companies to enforce its boycott. To date, UTA is informed and believes that production companies have resisted joining the boycott on the grounds that it ‘would subject [AMPTP], the WGA and individual writers to a substantial risk of liability for antitrust violations,’ but that WGA continues to unlawfully threaten and pressure these production companies to join its unlawful group boycott.

“Second, WGA has entered into agreements with certain talent agencies that will agree to be bound by the Code of Conduct, that permit those agencies to represent WGA members while maintaining and enforcing the boycott against nonconsenting agencies. These agencies have obtained an anticompetitive advantage by virtue of their facilitation of the boycott, as such agencies may continue to represent writers and may poach clients from agencies that are currently subject to the boycott, while their competitors are excluded from the market.

“Third, WGA has combined with lawyers and talent managers to sustain its boycott and mitigate the harm that WGA’s actions have caused to its own members. Specifically, on March 20, 2019, WGA purported to temporarily authorize managers and lawyers to procure employment and negotiate overscale terms and conditions of employment for individual writers. But, under California, New York and certain other state laws, only licensed talent agents may lawfully represent writers in their individual negations with production companies. WGA’s purported act of ‘delegation’ has conferred an anticompetitive benefit on these unlicensed lawyers and managers, purportedly conferring on them non-existent authority to engage in representation without complying with the licensing requirements applying to licensed talent agencies and without competition from talent agencies that are subject to WGA’s group boycott.”

The lawsuit goes into great detail about its packaging practices and ties to related production entities, which are at the heart of the WGA’s suits against the Big 4 agencies. “UTA is involved in the process of developing television and film content, working closely with its clients to put together ‘packages’ of the key elements necessary to create new shows, including talent (such as writers, directors, and actors), scripts, and concepts. UTA pitches these packages, always with the knowledge and consent of its clients (including writers) to production companies, who purchase the package in exchange for a fee and use it as the core for a new show or film. When UTA receives a package fee from a production company, it forgoes charging a commission to its clients.

“In addition, in late 2018, UTA entered into an affiliation with Media Rights Capital (“MRC”), a production company, to increase competition with traditional studios and provide additional opportunities for UTA’s clients and other artists. The recent UTA-MRC affiliation, known as Civil Center Media, has consistently offered writers, directors, actors and others more favorable terms than those traditionally offered by Hollywood studios. No UTA client is pitched to MRC or Civic Center Media without his or her knowledge and consent. UTA’s relationship with Civic Center is always disclosed, as are options for employment with other studios, and UTA encourages its clients to retain independent attorneys to review deals with Civic Center (and, in fact, any other deal for the clients’ services). WGA has been aware of and has expressly agreed to the practice of packaging for over 40 years, and also permitted talent agencies to participate in content production. In 1976, WGA and the Association of Talent Agents, of which UTA is one of over 100 member agencies, entered into the Artists’ Manager Basic Agreement. The AMBA expressly permitted packaging, and did not prohibit agencies, like UTA, from affiliating with production companies. Until April 2019, WGA franchised UTA and other talent agencies to represent its members pursuant to the terms of the AMBA.

“UTA’s writer-clients also knew of, agreed to, and benefitted from packaging. UTA always discloses packaging arrangements to its writer clients (and other clients), and obtains their consent before submitting them for a packaged deal. If a writer or other client prefers not to participate in packaged shows or films, then UTA does not package that client and will instead charge a commission. WGA terminated the AMBA on April 12, 2019, and demanded that all previously franchised talent agencies agree to a new ‘Code of Conduct,’that imposed a blanket ban on packaging and agency affiliated content companies. UTA and over one hundred other agencies refused to capitulate to WGA’s ukase, and WGA subsequently instituted its group boycott against all noncompliant agencies. WGA’s boycott seeks to upend longstanding industry practices and has harmed UTA and the very members the WGA claims to represent.

“Packaging is a long-standing practice, dating back to at least the 1950s, through which talent agencies assemble a “package” of the key elements needed to produce a new television show or film, including talent (e.g., writers, actors, and directors), and associated intellectual property (such as scripts, treatments, and concepts), and then sell the rights to that package to a production company. In doing so, talent agencies provide a valuable service to production companies by facilitating the development of new content, while also benefitting agency clients. Writers—and the other talent who agree to be included in any series subject to a packaging deal— whether or not any individual was part of the original package—do not pay any commission to their agents (ordinarily up to 10%) in a packaged deal. Instead, the agency is compensated directly for the service it provides in the form of a packaging fee paid by the production company.

“Packaging arrangements are individually negotiated and vary significantly from package to package, as does the packaging fee. However, a packaging fee generally includes (i) an upfront license fee (usually a fixed dollar amount paid per episode) and (ii) a backend fee paying the agency a percentage of certain profits earned by the show. Packages have sometimes also included a deferred license fee, but such fees are increasingly rare and almost never result in any payment even when agreed to by the talent agency and production company. Backend fees are also rarely paid by the production company, as they are earned only on the few most successful shows. For example, upon information and belief, over the past 5 years, only about 5 series on the big four broadcast networks have achieved backend fees. WGA is thus wrong when it alleges that package fees invariably involve a “3-3-10” formula—3% upfront license fee, 3% deferred license fee, and 10% backend fee, for the reasons described above and because packaging fees are not typically calculated as a percentage of a show’s budget. UTA and other agencies generally provide ongoing services to a production company as part of a package deal. For example, UTA will often assist in developing the project after the package is purchased, and suggest staffing throughout the run of the show. 23. Packaging fees are paid per show, not per artist, and, as noted, UTA typically receives the same packaging fee regardless of how many of its clients are included in the initial package or are later hired to work on the packaged show. Hence, when UTA enters into a packaging deal with a production company for a project, it is assuming a large degree of business risk. For all except the rare successful show that earns significant backend profits, UTA’s packaging fee is often similar to (and in many cases significantly less than) what UTA would have earned from charging its clients a commission based on their earnings. Packaging is not the means by which talent agents negotiate the terms and conditions of writers’ employment. Rather, packaging negotiations generally focus on the terms of the production company’s bid for the show and the amount of the agency’s packaging fee. UTA separately negotiates client compensation, and such negotiations are completely independent from the packaging deal. Indeed, except for those clients who are part of the original package, most clients are hired (and their salaries and other terms negotiated) long after the packaging agreement has been negotiated. Throughout this process, UTA aims to negotiate the best possible terms for writers and all other clients it represents; UTA’s receipt or non-receipt of a packaging fee has no impact at all on the negotiation process, UTA’s vigorous advocacy on behalf of its clients, or the ultimate deal terms negotiated for the services of its clients, including, but not limited to, writers’ compensation.

“Packaging benefits UTA’s clients, including writers, both creatively and financially. For example, packaging increases output of television series and films by lowering the barriers to getting a new show off the ground, creating employment opportunities for writers and other artists that otherwise would not have existed. Upon information and belief, approximately 90% of new television shows are now packaged, and the number of new television series released each year has increased over 40% in the last five years. Packaging also benefits UTA’s clients by giving them an advantage in hiring. Writers (and other clients) included in a package benefit from the attractiveness of the package as a whole, and shows are more likely to be purchased by a production company when packaged. Similarly, UTA is better able to place writers and other UTA clients on shows that it has packaged, including because such show will already involve at least some UTA clients and studios look to the packaging agency to staff and help cast a show that the agency packaged. UTA’s involvement in packaging also increases the net compensation for the vast majority of writers and other UTA clients, as writers and other clients who are part of a packaged show pay no commission to UTA. Because a traditional commission is 10%, this savings is often significant, and provides a guaranteed benefit to writers and other clients regardless of the ultimate success of the show. 28. Despite its longstanding endorsement of packaging, WGA now claims that packaging always harms writers and creates a conflict of interest that incentivizes agents to maximize their own fee rather than writers’ compensation. This contention is false. UTA has every incentive to provide the best possible representation to its clients, most notably that any client who is not satisfied is free to leave (and will leave) UTA for one of hundreds of competing talent agencies. Packaging does nothing to change that incentive, and can even further align the interests of UTA and its clients by creating shared incentives for content creation.

“WGA’s claim that packaging creates a conflict of interest is also contradicted by decades of experience under the AMBA, which included a dispute resolution procedure for writers or the WGA to seek redress for any harmful conflict. See AMBA § 3, 8. Upon information and belief, not even one writer has ever filed a claim against UTA based on any claimed failure by UTA to act in her/his best interests, shattering WGA’s claim that packaging regularly harms writers. 30. The WGA’s notion that a long-standing, mutually-beneficial, commercial practice that everyone has always treated as something to be negotiated in good faith, has suddenly been discovered by WGA (a sophisticated party if ever there were one) to actually have been illegal all these many years, and that the agents who behaved in conformity with the WGA’s own agreement all this time now deserve to be punished for doing so, is so obviously preposterous that it cannot possibly be correct—and it is not.

“Pursuant to UTA’s affiliation with Media Rights Capital (“MRC”), known as Civic Center Media (“Civic Center”), UTA acquired a minority financial interest in certain shows produced and financed by Civic Center. UTA and Civic Center are separate companies, and operate independently of each other. UTA has no role in the management or operations of Civic Center, which is run entirely by MRC executives and maintains separate offices from UTA. To date, UTA’s arrangement with Civic Center has resulted in the production of at least one new television series, and several others have been sold to networks and are currently in development. UTA’s agreement with MRC/Civic Center is not exclusive. MRC/Civic Center is free to, and does, hire clients of agencies other than UTA and purchase shows not packaged by UTA (or co-packaged by UTA and another agency or agencies), just as it did before its agreement with UTA. Similarly, unless a client prefers otherwise, UTA continues to market packages and pursue employment for its clients with studios other than MRC and Civic Center. This is a competitive process and Civic Center obtains business from UTA or its clients only if it makes the best offer, and only if UTA’s clients agree to that offer. 33. UTA’s affiliation with MRC/Civic Center benefits writers and other UTA clients by expanding the output of television series, increasing competition with traditional production companies, creating new employment opportunities, and providing better terms to writers. For example, Civic Center offers better compensation to writers than traditional production companies, including higher wages, increased backend compensation, and better script fees. Civic Center also charges lower fees and pursues more lucrative distribution terms than traditional production companies, further increasing clients’ backend compensation. Upon information and belief, Civic Center’s presence in the market is forcing traditional production companies to improve their own offers to writers and other talent, increasing compensation and employment for UTA’s clients.

“Until it implemented its group boycott, and for the 40 plus years the AMBA was the operative agreement between the WGA and talent agencies, WGA did not prohibit talent agencies such as UTA from establishing affiliations with production entities. Although WGA now contends that entities such as Civic Center harm writers and create conflicts of interest, this is false. UTA’s affiliation with MRC/Civic Center is disclosed to all clients, and UTA obtains informed consent from its clients before pursuing any deal with MRC/Civic Center. Further, UTA maintains strict separation of agents from MRC/Civic Center and does not share confidential client information with Civic Center. UTA also encourages clients to obtain independent legal representation to review any deals with Civic Center, and conducts all negotiations with Civic Center at arms-length. Again, WGA’s notion that it has just recently discovered that these long-standing and properly disclosed practices are somehow actually illegal is utterly preposterous.”

This article was printed from https://deadline.com/2019/06/uta-sues-writers-guild-boycott-hollwyood-agencies-wga-1202638585/