CAA’s Move To Place wiip In Blind Trust Revealed As Agency Seeks Court Order To End WGA Standoff – Update

CAA; WGA

UPDATED with WGA response, Bryan Lourd declaration details: CAA asked a federal judge Tuesday to issue a preliminary injunction that would force the WGA East and WGA West to drop their group boycott against the agency. The move comes just two months after CAA said that it thought it had a deal with the guilds to end their long-running legal battle over packaging fees and its affiliation with wipp, its corporately related production entity. The WGA guilds, however, said no such deal had been reached, citing outstanding issues over the agency’s reduction of its ownership of wiip.

Now CAA wants U.S. District Court Judge André Birotte Jr. to end the standoff by ordering the guild to allow CAA’s writer clients to return to the agency, and to order the WGA to refrain “from utilizing or threatening any form of union sanctions or discipline against any Guild member for engaging CAA as a talent agent.”

In an effort to become re-franchised by the guild, CAA managing partner Bryan Lourd revealed in a declaration filed with the court today that the agency has put wiip into a blind trust, saying that the trustees of the trust have been given the “clear direction to sell-down CAA’s present interest in wiip such that the combined holdings of CAA will not exceed the 20% ceiling established by the WGA’s operative franchise agreement for all talent agencies.”

That was reiterated by James Burtson, CAA’s chief financial officer, who said in a declaration filed with the court that “once wiip is sold, the Trustee will transfer back to CAA a minority ownership interest that does not exceed 20 percent.”

The WGA’s agency negotiating committee, however, said that such a unilateral move – and an alleged threat by CAA to sue the guild – was not good enough to seal the deal.

“On Wednesday, November 11th, three weeks after our last proposal to them, CAA informed the WGA that they have placed their production entity (wiip) into a blind trust for an eventual sale. They determined, unilaterally, that this action discharged the remainder of CAA’s obligations under the UTA/ICM franchise agreement and that the Guild was, therefore, obligated to sign CAA to that agreement. They concluded by threatening to sue the Guild if we didn’t accede to their position by the end of the day yesterday, Monday, November 16th.

“For the second time in the past few months, CAA has chosen to negotiate this deal from both sides of the table, as if it were possible to reach a settlement with the WGA without ever consulting us on the terms. That is not how negotiations work. Nor will the Guild be held to arbitrary deadlines. Nor is it helpful to take additional legal action—such as the request for an injunction CAA filed this afternoon—in the middle of a complex conversation about untangling CAA’s conflicted corporate structure.”

In his declaration, Lourd provides a detailed chronology of the agency’s communication with WGA and claims that the guild’s refusal to franchise the agency is harmful because former clients are being poached by management companies, citing the news about Range Media Partners’ signing ex-CAA client Damon Lindelof. You can read his declaration and WGA’s statement in full below.

The dispute arose in April 2019 when the guilds ordered all of their members to fire their agents who refused to sign the WGA’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%.

CAA said in its motion filed Tuesday that it “has established that entry of a preliminary injunction is appropriate because (1) CAA is likely to succeed on the merits; (2) CAA is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in CAA’s favor; and (4) an injunction is in the public interest.”

“CAA has established that it is likely to succeed on the merits that the Guilds’ refusal to franchise CAA violates Section 1 of the Sherman Act,” the agency’s motion says (read it here). “First, CAA has shown that the so-called ‘statutory labor exemption’ is unlikely to apply, because CAA has established that there is a ‘serious question’ as to whether the Guilds’ refusal to accept CAA’s acquiescence to the Guilds’ own conflict-of-interest terms is a legitimate union action such that the statutory labor exemption does not apply to the Guilds’ conduct.”

The agency also said that it has established “that the statutory labor exemption likely does not apply because the Guilds combined with (1) non-licensed managers and (2) producer ‘showrunners’ to effectuate their group boycott, in violation of Section 1 of the Sherman Act. CAA, at the very least, raises ‘serious questions’ that the Guilds have combined with non-labor parties in furtherance of their boycott—that is, (i) the Guilds have forced showrunners who function as management to join the group boycott; and (ii) the Guilds have entered into agreements with non-labor party talent managers.”

The motion goes on to argue that CAA “has raised substantial questions as to whether the Guilds’ conduct likely demonstrates an illegitimate union objective (inflicting commercial harm on CAA) using non-traditional union tactics by inducing talent managers to violate California law in furtherance of their boycott. CAA has also demonstrated that the non-statutory labor exemption likely does not apply, or at least that there are serious questions going to the issue. The non-statutory exemption protects the Guilds from antitrust liability only if (1) the restraint primarily affects the parties to the agreement and no one else, [and] (2) the agreement concerns wages, hours, or conditions of employment that are mandatory subjects of collective bargaining ….”

CAA also claims that it “has established sufficient evidence to raise ‘serious questions’ that the Guilds’ boycott does not primarily affect the parties to the Code of Conduct ‘and no one else.’ CAA has also presented evidence suggesting that the Guilds’ agreement does not primarily concern wages, hours, or conditions of employment, since the Guilds’ group boycott continues despite CAA’s agreement to the Guilds’ conflict-of-interest requirements applicable to other agencies.

“With no ‘labor exemption’ applicable, CAA has demonstrated the existence of serious questions as to whether the Guilds have violated each element of Section 1 of the Sherman Act. A violation of Section 1 of the Sherman Act requires proof of (1) a contract, combination or conspiracy among two or more persons or distinct business entities; (2) by which the persons or entities intended to harm or restrain trade or commerce; (3) which actually injures competition.”

The agency added that it has “further demonstrated that it is likely to suffer irreparable harm in the absence of preliminary injunctive relief. CAA has shown that it has already lost over a thousand showrunners and writers who have terminated the agency at the instruction of the Guilds, and that these relationships are personal and non-fungible. CAA has also shown that the Guilds’ boycott has caused CAA to lose agents to others. Evidence of threatened loss of prospective customers or goodwill certainly supports a finding of the possibility of irreparable harm.”

In a declaration filed with the court today, Lourd said:

Since the inception of the concerns expressed by the WGA about talent agencies’ receipt of packaging fees and ownership interest in affiliated production companies, CAA has continuously worked to resolve these concerns. For over 45 years, CAA and the WGA worked side-by-side in an effort to look after the best interest of WGA members. Unfortunately, over the last 20 months, all of CAA’s efforts to resolve these issues have been rebuffed by the WGA as part of the WGA’s publicly declared strategy to make a ‘power grab’ and punish and ‘conquer’ the largest talent agencies-CAA and William Morris Endeavor. Instead of permitting CAA to do what it does best-to create opportunities for WGA members in Hollywood – the WGA ordered writers and showrunners to terminate their relationships with CAA. As a result, countless opportunities have been lost, and the WGA has caused personal and professional damage to many relationships, the damage of which may never be undone.

Although CAA was reluctant to bring any lawsuit against the WGA, CAA had no choice when the WGA enlisted showrunners and others to engage in a boycott of CAA. And, even then, in bringing a lawsuit against the WGA, CAA had hoped that the lawsuit could be resolved promptly either through settlement or a trial. Unfortunately, the realities of the global COVID-19 pandemic eliminated the possibility of a prompt trial.

On February 21, 2020, this Court appointed Gail Title as a mediator in this action. She promptly reached out to the parties to commence the mediation, but while CAA immediately agreed to participate, the WGA did not. Despite CAA’s willingness and invitation to do so, the WGA has declined to meet with a neutral party to help resolve the differences between the parties so that CAA may be franchised and WGA members may have the opportunity to choose their representation. On June 16, 2020, I had a Zoom call with David Young, the Executive Director of the WGA West, in an effort to resolve the dispute. During that call, Mr. Young informed me that he was working on a potential deal with another agency and would not work on any potential deal with CAA at that time. During that call, I made clear to Mr. Young that CAA was prepared to work out an amicable resolution with the WGA.

On July 17, 2020, following the WGA’s announcement to its members that it had signed an agreement with United Talent Agency, permitting UTA to again represent WGA members for covered writing services, I realized that this deal must have been the deal that Mr. Young alluded to during our June 16th conversation. I immediately sent a message to Mr. Young, congratulating him on getting another deal done, and reiterated CAA’s willingness to work with him to resolve our differences. Despite my effort to use the UTA deal as a framework to reach agreement with the WGA, the WGA refused to engage in any further discussions with me. On August 4, 2020, the WGA announced that it had reached an agreement with ICM Partners on a new franchise agreement. I again reached out to Mr. Young in an effort to engage in meaningful dialogue, and once more Mr. Young ignored my outreach. On September 1, 2020, I learned of a communication from the WGA Negotiation Committee to its members about the agreements the WGA had reached with UTA and ICM. In that letter, the WGA informed its members that the WGA has ‘now gone about as far as we can go’ in making compromises with talent agencies, and that the WGA is ‘not going to give [CAA or WME] a different and better deal because they waited.’ Instead, the WGA publicly declared that ‘WME and CAA are of course welcome to sign the current agreement, which has evolved as a result of meaningful talks with individual agencies….We know that the franchise agreement we now have offers a viable business model for the agencies.’

On September 14, 2020, CAA accepted the WGA’s public offer to sign the ‘current agreement,’ and CAA delivered to the WGA’ s counsel a signed agreement on the same terms that ICM agreed upon when it had signed a deal with the WGA in August 2020. The only difference between the agreement CAA signed and that signed by ICM was that CAA inserted a clause permitting a standard ‘commercially practicable’ time to come into compliance with a 20% ownership limitation concerning affiliated production companies. At that time, CAA had an interest in wiip-a small, independent production company-which exceeded the 20% threshold established by the ICM franchise agreement. On September 30, 2020, the WGA rejected the agreement CAA had signed, and instead made a litany of demands for information about CAA’s interest in wiip.

CAA diligently worked to provide the WGA with the information it requested and promptly did so. However, that still was insufficient for the WGA. On October 16, 2020, the WGA issued a letter to its members, stating that it would not come to an agreement with CAA unless and until CAA divested all but 20% ownership interest in wiip. Further, the WGA added a new demand that any restructuring and compliance would have to be subject to third-party monitoring, oversight and verification, even though no other franchised talent agency is subject to such requirements, including UTA, which has a 19.9% interest in a production company.

On November 11, 2020, CAA delivered an unexecuted copy of the operative franchise agreement to the WGA, and a copy of an irrevocable blind trust agreement to the WGA, which was subsequently executed and provided to the WGA on November 12, 2020. CAA placed its entire interest in wiip into the Blind Trust, and the Trustee of the Blind Trust was given clear direction to sell-down CAA’s present interest in wiip such that the combined holdings of CAA will not exceed the 20% ceiling established by the WGA’s operative franchise agreement for all talent agencies. By executing the Blind Trust, CAA was-and is-in full compliance with the WGA’s requirements to be a franchised talent agency, because CAA has reduced its interest in wiip below the 20% threshold. In that November 11, 2020 letter, CAA requested that the WGA respond by close of business on November 16, 2020.

The WGA has not responded. Thus, although CAA is in full compliance with the WGA’s stated requirements to be a franchised talent agency and has agreed to sign the WGA’s franchise agreement identical to ICM’s, the WGA continues to refuse to franchise CAA.

Earlier today, Peter Micelli of Range Media, a management company, admitted to CAA that Damon Lindelof, a well-known showrunner who was forced to terminate CAA as a result of the WGA boycott, has signed with Range Media instead of waiting any longer to rejoin CAA. Micelli asserts, despite the prohibitions set forth in the Talent Agencies Act, that he is free to ‘make deals’ for Mr. Lindelofs employment. This is another example of the harms that are presently occurring as a result of the Guilds’ boycott of CAA and their encouragement of managers to poach CAA clients while the Guilds refuse to franchise CAA.

The WGA’s agency negotiating committee issued the following statement today:

On Wednesday, November 11th, three weeks after our last proposal to them, CAA informed the WGA that they have placed their production entity (wiip) into a blind trust for an eventual sale. They determined, unilaterally, that this action discharged the remainder of CAA’s obligations under the UTA/ICM franchise agreement and that the Guild was, therefore, obligated to sign CAA to that agreement. They concluded by threatening to sue the Guild if we didn’t accede to their position by the end of the day yesterday, Monday, November 16th.

For the second time in the past few months, CAA has chosen to negotiate this deal from both sides of the table, as if it were possible to reach a settlement with the WGA without ever consulting us on the terms. That is not how negotiations work. Nor will the Guild be held to arbitrary deadlines. Nor is it helpful to take additional legal action—such as the request for an injunction CAA filed this afternoon—in the middle of a complex conversation about untangling CAA’s conflicted corporate structure.

It is unfortunate that CAA – professional negotiators that they are – has found it impossible over the last few months to engage in the quite ordinary process of exchanging proposals back and forth. But that is how this negotiation will be conducted, if it is to be successful.

CAA’s latest proposal is a step forward. But it does not, in and of itself, fully protect writers’ interests. In some ways, it may even complicate the path forward to a deal. CAA has signed itself to an irrevocable trust without any input from the Guild. That is an act of substantial hubris. In return, we intend to act responsibly and to analyze their proposal in consultation with our lawyers. Until then, we will not share the full list of our concerns. But, even now, certain issues rise to the fore:

    • The trust, as drafted, provides no timeline to complete the sale of wiip. But even with wiip in a blind trust, CAA remains conflicted until the asset is sold.
    • CAA still fails to address our request for a system to verify long term compliance with the 20% cap.
    • The trust does not provide adequate protection against TPG, which has a majority ownership stake in CAA, from also having a greater than 20% interest in an affiliated production entity. That is a conflict of interest pure and simple. It is clearly prohibited by the franchise agreement, and we will not permit CAA to exercise an end-run around the protections of that agreement by exempting their equity owners.

Together, the Guild and its members have spent the last 19 months in an ongoing struggle to end the conflicts of interest that have become embedded in the agency system. For much of that time, and even as we made steady progress toward our goal, CAA was the one agency that refused to speak to us and would not negotiate. As we have made clear from the moment they finally returned to the table, we will not now make a deal with them that undermines what we have already achieved. That is not changed by the fact that CAA is more conflicted than other agencies, nor by threats of specious lawsuits and arbitrary deadlines. To the contrary, that CAA’s business structure creates deep and fundamental conflicts of interest that do not exist at any talent agency we have already franchised makes it all the more important that we exercise due diligence, take seriously our fiduciary obligations to our members, and respond in proper time to this latest offer.

As an additional update, the WGA sent a proposal to WME on October 16th, but we have not as yet received a counter from them. To reiterate, until further notice, Working Rule 23 remains in effect with regard to both CAA and WME.

We will let you know when there are significant developments. In the meantime, please stay safe.

Working Rule 23 prohibits members from being represented by non-franchised agents.

A CAA spokesperson said: “Rather than respond to the negotiating committee’s unsworn public statement today, we choose to stand on the sworn testimony we submitted to the court this afternoon. We remain ready to meet the Guild at the negotiating table to finalize a deal. If they remain unwilling, we will see them in court.”

This article was printed from https://deadline.com/2020/11/caa-injunction-filing-writers-guild-boycott-1234617437/