Big 3 Agencies Claim “Resounding Victory” After Judge Dismisses WGA’s Antitrust Claims; Union Looks Ahead – Update

UPDATED with WGA statement, 8:56: Saying the WGA’s claims were “gutted,” Hollywood’s Big 3 talent agencies declared “a resounding victory” in a statement reacting to a federal judge dismissing huge chunks of the union’s antitrust lawsuit against them today.

In its own statement later, however, the WGA said it plans to fight on, saying, “The court’s decision assures that the Guild’s core claims … will be explored through discovery.”

Here are the sides’ dual statements. First is WME, CAA and UTA’s take:

“The WGA’s claims against the major talent agencies were gutted today by the federal court. This is a resounding victory for CAA, UTA and WME. The judge ruled that the WGA has no standing to bring most of its claims and further has rejected the Guild’s contention that packaging fees are a form of a kickback. What has become crystal clear is that David Young, David Goodman and this WGA leadership have led thousands of writers over a cliff, wasted their member dues on failed lawsuits, and left them without agents to represent and advocate for them for more than a year.

‘While the agencies value the WGA’s role, the Guild’s current leadership has overstepped, recklessly damaging personal and professional relationships and forcing agents to defend their integrity and their livelihoods against the Guild’s false claims and inflammatory rhetoric. Meanwhile, the agencies’ claims against the WGA move full steam ahead.”

Here is how WGA West president David A. Goodman reacted to today’s ruling:

“We obviously would have preferred a complete victory. But the court’s decision assures that the Guild’s core claims, namely that packaging is a breach of fiduciary duty and that agencies have committed antitrust violations by fixing the price of those packages, will be explored through discovery, and ultimately in court. That’s what we wanted. There remain six powerful claims in our lawsuit that we will pursue, and discovery is underway. We are confident that the evidence uncovered in this process will support the claims detailed in our lawsuit.”

In his stinging ruling handed down Monday (read it here), U.S. District Court Judge Andre Birotte Jr. allowed some lesser aspects of the union’s case to proceed, but he ruled that the WGA:

  • Lacks antitrust standing to pursue their federal price-fixing claim;
  • Lacks organizational standing to bring claims for breach of fiduciary duty and constructive fraud on behalf of their members;
  • Lacks Article III standing to bring an Unfair Competition Law cause of action on their own behalf;
  • Failed to plead racketeering activity;
  • Failed to state claims upon which relief can be granted with respect to its group boycott claims.

The judge, however, denied a motion filed by WME, CAA and UTA to dismiss the guild’s Cartwright Act price-fixing claim and will allow several individual plaintiffs to pursue their claims in court, including:

  • Their individual claims of breach of fiduciary duty.
  • Their individual Unfair Competition Law claims.
  • Barbara Hall’s breach of contact claim.

On January 6, the judge denied the WGA’s motion to dismiss the antitrust lawsuits filed against it by agencies, which means that all of their complaints can move forward. He heard oral arguments on the WGA’s motion to dismiss the agencies’ claims on January 24.

In granting the agencies’ motion to dismiss the guild’s federal price-fixing claim, the judge wrote that the agencies contend that allegations made by the WGA East and West, which are the counterclaimants in the suit, even if accepted as true, “demonstrate that Counterclaimants (the guilds) do not participate in the same market as the Agencies and suffer derivative injury only. In particular, the Agencies contend that Counterclaimants’ allegations demonstrate that they neither buy nor sell packages, and that they do not otherwise participate in any market in which packages are bought and sold.

“In opposition, Counterclaimants do not argue that they buy or sell packages, or that they participate in the talent representation market where packages are bought and sold. Indeed, Counterclaimants’ allegations unambiguously demonstrate that studios—not the Guilds or their writer-members—purchase packages from the Agencies, and that the Agencies and their non-party competitors sell packages to the studios. The core of Counterclaimants’ per se price-fixing claim is that ‘rather than compete with each other, the Agencies and their co-conspirators have instead collusively agreed to propose the same packaging fee terms to [production] studios.’ The injuries Counterclaimants allege—that writer-members suffer decreased profit participation, decreased employment opportunities, decreased production quality, and that the Guilds receive lower union dues while expending money to inform their members of the harms of packaging and publicly advocate against the practice—all derive from the allegedly higher prices paid by production studios that employ writers.

“Accordingly, because Counterclaimants’ allegations demonstrate that they neither buy nor sell talent representation services, and that their injuries are entirely derivative of the allegedly higher prices paid by production studios, Counterclaimants have not shown antitrust injury. The Court therefore GRANTS without leave to amend the Agencies’ motion to dismiss Counterclaimants’ first cause of action for per se price-fixing in violation of the Sherman Act.”

In a major decision favoring the guild, however, the judge ruled that the WGA’s price-fixing claim under California’s antitrust Cartwright Act can move forward. In denying the agencies’ motion to dismiss this aspect of the case, the judge noted that “California requires a high degree of particularity in the pleading of Cartwright Act violations . . . and therefore generalized allegations of antitrust violations are usually insufficient.” Here, the guilds alleged that “in or around 1995-1996, and continuing through to the present,” with the exact start date unknown, the Agencies and their coconspirators entered into a continuing agreement to fix and maintain the 3-3-10 packaging fee structure and to charge the same base license fees to studios.”

The judge noted that the WGA alleges that “this price-fixing conspiracy was set in a meeting by Lee Gabler of CAA and Ari Emanuel of then Endeavor and now WME, and that the Agencies have maintained this price-fixing conspiracy by sharing competitively sensitive information when they jointly package television series. Counterclaimants (the guilds) further allege that they suffered injury from this price-fixing conspiracy in the form of reduced compensation and employment opportunities, and reduced quality of talent representation services. Accordingly, Counterclaimants have pleaded specific factual allegations showing the formation and operation of a conspiracy, wrongful acts done pursuant to the conspiracy, and resulting injury, nudging Counterclaimants’ allegations across the line from conceivable to plausible. The Court accordingly DENIES the Agencies’ motion to dismiss Counterclaimants’ third cause of action for per se price-fixing in violation of the Cartwright Act.”

In granting the agencies’ motion to dismiss the guilds’ group boycott claim, the judge wrote that “To establish a per se violation of Sherman Act for an unlawful group boycott,” the WGA “must plead that there was a horizontal agreement among direct competitors.” He also noted that “mere participation in trade organization meetings where information is exchanged and strategies are advocated does not suggest an illegal agreement.”

Here, he wrote, the guilds allege that the agencies “have entered into a horizontal agreement to: (1) take a common stance with the Guilds in negotiations over a new franchise agreement, (2) refuse to negotiate with the Guilds on an individual basis, (3) threaten lawyers and talent managers with litigation, and (4) blacklist any agency that agrees to the Guilds’ Code of Conduct.” He noted, however, that the WGA’s specific factual allegations show only that the Association of Talent Agents, a trade association of talent agents, (1) stated its disapproval of talent agencies negotiating individually with the Guilds, (2) sent two letters warning of potential legal consequences of having talent managers or attorneys negotiate employment terms for Guild-members, (3) stated that agreeing to the Code of Conduct would hurt a talent agency’s business, and (4) distributed to ATA members one talent agency’s response to the Guilds’ request to negotiate individually.

“Rather than demonstrating a horizontal agreement among competitors, these allegations show, at most, participation by the Agencies ‘in trade association meetings where information is exchanged and strategies are advocated.’”

Further, the WGA’s “allegations that individual talent agencies refused to negotiate individually with the Guilds through similarly worded responses, does not plausibly allege a horizontal agreement among the Agencies,” noting case law that says that “Mere allegations of parallel conduct—even consciously parallel conduct—are insufficient to state a claim under § 1 of the Sherman Act.”

Accordingly, because the guilds “have not plausibly alleged a horizontal agreement among the Agencies, the Court GRANTS the Agencies’ motion to dismiss” the guild’s second and fourth causes of action.

The judge also dismissed the guild’s racketeering allegations, which claimed that packaging fees they received were “illegal kickbacks” from the studios. The core purpose of anti-kickback provisions of the Labor Management Relations Act, the judge found, “is to prevent corruption of employee representatives who are chosen by, and have a statutory duty to represent the interests of, other employees.” As the Agencies correctly argue, although the LMRA has been on the books for over seventy years, Section 302 has been applied only to kickbacks made to union leaders or union-managed retirement funds. Further, (the guilds) have made no showing that prohibiting studios from paying packaging fees to the Agencies furthers the LMRA’s core purpose of ‘preventing corruption of employees representatives who are chosen by . . . other employees.”

Pointing to the WGA’s Working Rule 23, which provides that members may only be represented by agencies that sign an appropriate franchise agreement with the Guilds, the judge also said that “it is the Guilds—not the employee-writers—who choose which talent agencies may represent writers in their negotiations.”

Accordingly, because the WGA’s allegations “do not demonstrate that the Agencies are representatives within the meaning of Section 302, the Court GRANTS without leave to amend the Agencies’ motion to dismiss Counterclaimants’ eighth through eleventh causes of action.”

In ruling that the guilds lack organizational standing to bring claims for breach of fiduciary duty and constructive fraud on behalf of their members, the judge found that “An organization has standing to bring suit on behalf of its members where “([1] its members would otherwise have standing to sue in their own right; [2] the interests the organization seeks to protect are germane to the organization’s purpose; and [3] neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.”

“Here, the Guilds’ allegations demonstrate that a litany of individualized assessments would be necessary to determine whether the Agencies breached their fiduciary duties to individual writer-members. As the Agencies show, resolving the Guilds’ breach of fiduciary duty and constructive fraud claims would require determining: (1) which writers were represented by the Agencies, (2) what the details of each writer’s packaging arrangement were, (3) what information each individual writer received with respect to the details of each packaging arrangement, (4) whether any member(s) assented to those packaging terms after receiving such information, and (5) what damages each individual members suffered as a proximate cause of the Agencies’ breach of fiduciary duties.”

The WGA’s allegation that the Agencies have never obtained their writer-clients’ valid, informed consent to receive packaging fees, he wrote, “does not negate the need for these individualized determinations. Accordingly, because the Guilds’ breach of fiduciary duty and constructive fraud claims cannot be resolved without participation of the Guilds’ individual members, the Court GRANTS the Agencies’ motion to dismiss the Guilds’ fifth and sixth causes of action.”

The judge, however, is allowing the individual plaintiffs – Patricia Carr, Ashley Gable, Barbara Hall, Deric A. Hughes, Deirdre Mangan, and Meredith Stiehm – to proceed with their own claims of breach of fiduciary duty.

“The Guilds’ lack of organizational standing does not affect the standing of these individual Counterclaimants to bring suit,” the judge ruled. “The allegations of the individual Counterclaimants show that the Agencies acted as the agents for individual Counterclaimants in their negotiations with production studios,” he wrote. “Further, individual Counterclaimants allege that they were never given the details of packaging arrangements while they were represented by the Agencies. Individual Counterclaimants allege that, as a result of the Agencies’ failure to disclose material terms of packaging arrangements, they suffered damages including ‘lost wages and lost employment opportunities.’ Accordingly, because individual Counterclaimants have stated a claim for breach of fiduciary duty, the Court DENIES the Agencies’ motion to dismiss individual Counterclaimants’ fifth cause of action.”

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