Judge Dismisses Most of WGA Packaging Fee Lawsuit Against WME, CAA and UTA

by Gene Maddaus
Variety
April 27, 2020

A federal judge on Monday dismissed most of the Writers Guild of America’s lawsuit against the major talent agencies, including claims that packaging fees amount to illegal kickbacks and were a form of racketeering.

U.S. District Judge Andre Birotte dismissed eight of the 14 claims brought by the WGA in its countersuit. The countersuit, filed last fall, is part of a broader battle between the guild and the major agencies over the practice of packaging. The judge threw out eight of the nine claims brought against WME, CAA and UTA by the guild but allowed the individual claims of eight showrunners who joined the litigation as individuals, although one of those plaintiffs, David Simon, was already forced to drop out because of a previous legal settlement.

The judge’s ruling was seen as a setback for the WGA’s cause in the legal arena. The WGA and agencies have not had meaningful discussions in months about resolving their differences on packaging fee and affiliated production entities, which spurred the guild’s antitrust lawsuit against Hollywood’s Big Three agencies.

The battle ignited a year ago when the WGA imposed new rules for talent agents that represent guild members. The agencies balked at the guild’s effort to ban packaging and agencies having ties to production entities, which led to the mass firing of thousands of agents by WGA members in April 2019 and sparked the current litigation in Los Angeles federal court. WME, CAA and UTA are also suing the WGA in federal court, claiming that the WGA’s new franchise rules for talent agencies amounts to an illegal boycott and an overreach of the guild’s authority.

The union argues that packaging fees — standard practice in the industry for decades — pose a conflict of interest, as agents are incentivized to suppress their clients’ wages. The guild has been defending the agencies’ antitrust suit, and filed its own countersuit in October. In the countersuit, the guild leveled its own antitrust allegations, accusing the agencies of refusing to bargain individually, and instead working only through their trade group. The countersuit also alleged that agencies had set an industry standard packaging fee schedule, which amounted to illegal price-fixing. Further, the guild contended that the agencies’ acceptance of packaging fees from producers amounted to an illegal kickback under racketeering law. 

Birotte dismissed the racketeering allegations, finding that the law was aimed at corrupt union officials and was not meant to apply to talent agents. He also dismissed federal price-fixing claims, finding that the WGA did not have standing to bring the claim because, as a union, it does not buy talent representation services, and therefore cannot claim to have been injured by a price-fixing conspiracy. The judge also held that the agencies had not violated antitrust law by working through their trade group. 

The judge did allow the WGA to pursue its price-fixing allegations under the Cartwright Act, the California antitrust law. The guild claims that Lee Gabler of CAA and Ari Emanuel conspired in the 1990s to set the “3-3-10” TV packaging fee structure, and that the agencies have since exchanged sensitive information to maintain this cartel. Birotte held that the guild pleaded sufficiently specific allegations to nudge the claim “across the line from conceivable to plausible.” Birotte also let stand the guild’s breach of fiduciary duty and unfair competition allegations on behalf of several individual members.

The two sides are still in for a protracted court battle, assuming they do not reach a settlement. In January, Birotte denied the WGA’s motion to dismiss the agencies’ antitrust suit, finding a plausible claim that the union’s hardball tactics had violated the law. A trial date has been set for March 2021, and a trial is expected to take 20-30 days.

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