12:18pm PT by Eriq Gardner
Talent Agencies Beat Lawsuit Claiming Conspiracy in Scripted Television Market
In this century, the four biggest Hollywood talent agencies have undoubtedly grown bigger and more powerful, but a boutique firm that aimed to make a federal antitrust issue of the way that scripted television is allegedly ruled by a cartel has earned a firm rejection from a judge.
The lawsuit came in February 2015 by Lenhoff & Lenhoff, fresh off of having a couple of its prized clients poached. The complaint alleged tortious interference against United Talent Agency and International Creative Management Partners, but what made the dispute worth watching were the added injury-to-competition claims discussing how both defendants, along with WME and CAA, caused the demise of Rule 16(g) of the franchise agreement between the Screen Actors Guild and the Association of Talent Agents. That rule required agents "to be independent" and not "possess any financial interest in a production or distribution company or vice versa," and once it was gone, private equity money flowed into the growing agencies, which moved away from a flat commission model to one favoring packaging fees. Doing the latter, the agencies lined up talent for TV projects and participated in the lucrative revenue generated by TV shows throughout their runs.
Lenhoff claimed that the four "Uber Agencies" now control 94 percent of the scripted television market and have excluded other agencies from participating in the packaging agreements, even by coercing studios, networks and producers from doing deals with the boutiques. As for harm, the lack of diversity on television was one thing that Lenhoff was blaming on the alleged restraint of trade.
Throughout the case, U.S. District Judge Beverly Reid O'Connell was skeptical, but she also was lenient enough to allow three amended complaints. As such, the lawsuit kept getting bulkier, with everything from a statistical analysis added to new allegations like one that proposed that UTA had coerced AMC to renew Halt and Catch Fire in order to get Better Call Saul.
The problem for Lenhoff was the predicate.
Judge O'Connell isn't convinced that there were enough factual details to support conclusions of conspiracy and price-fixing.
In her rule of reason analysis, for example, she addresses the plaintiff's allegation that the ATA’s Strategic Planning Committee was formed by the heads of UTA, ICM, WME and CAA with the specific goal of eliminating Rule 16(g).
But merely participating in trade-organization meetings doesn't add up to an illegal agreement and Lenhoff's lawsuit fails to do enough to show conspiracy. "Adding dates of committee meetings and communications likewise does not cure this defect," she adds. "Further ... the decision to permit Rule 16(g) to expire is as much evidence of a conspiracy as it is evidence that each individual agency acted for its own independent benefit. In sum, that the expiration of Rule 16(g) would ultimately benefit Big 4 Agencies does not demonstrate that Defendants conspired to bring about its demise, especially in light of the fact that SAG, not the ATA, rejected a new version of Rule 16(g)."
The judge also is not impressed with inconsistent data — some of which showed that smaller agencies participated in co-packaging arrangements on 12 occasions — nor with a lack of detail (names, dates, etc.) on how buyers were supposedly coerced. What's more, O'Connell notes that the biggest agencies represent the biggest talent in the industry. The judge writes, "It is reasonable to infer that studios, networks, and producers would be drawn to work with Big 4 Agencies; no threats would be necessary."
These deficiencies killed the restraint of trade claims, while a lack of pled harm dooms ones focused on tying arrangements (the Halt and Catch Fire example above, as well as ICM supposedly cajoling ABC to renew Private Practice in order to keep Grey’s Anatomy). And this time, the claims are dismissed with prejudice, meaning it can't be amended.
Lenhoff can now either appeal the result or focus on the poaching. The judge rejects the tortious interference claim, too, but without prejudice. But that's a claim under state law, so if Lenhoff wants to go down that route by bringing the case back to its origins, it won't be before Judge O'Connell, who says she will decline jurisdiction over it. Here's the full opinion.
The defendants were represented by Steven Marenberg at Irell & Manella, Bryan Freedman at Freedman + Taitelman, and Michael Garfinkel and Chuck Samel of Perkins Coie.