With no end in sight to the impasse between Hollywood's writers and talent agencies over the practice of taking packaging fees from studios, William Morris Endeavor on Monday filed an antitrust lawsuit in California federal court alleging that the Writers Guild of America has organized an unlawful group boycott.
For months, the WGA has been negotiating a "code of conduct" with the Association of Talent Agents. The writers demand that agents no longer collect packaging fees, an activity that has been around for decades whereby in return for lining much of the talent (writers, actors, directors, etc) in a television show or movie, agencies collect compensation from the production studio in lieu of taking a commission on earnings from their clients. The writers also object to how talent agencies often receive profit participation from studios or affiliate with companies producing or distributing content. Such practices, they argue, represent a conflict of interest and a breach of fiduciary duties.
The inability to come to resolution on these issues first caused the WGA to direct their members to fire their agents en masse and then sue WME and other big talent agencies. In April, writers filed a lawsuit in California state court alleging that these packaging fees from studios amounted to an illegal kickback under federal and state statutes including California's Unfair Competition Law.
Now, WME is returning legal fire as the parties struggle to find common ground amid meetings and rejected offers. (Earlier this month, for example, the ATA extended a proposal to let writers share a small portion of packaging fee revenue. It wasn't enough.)
Leading the latest escalation of the fight is Jeffrey Kessler and David Greenspan, attorneys at Winston & Strawn who have long represented unions, especially in the sports arena. Both have participated in groundbreaking legal cases against all of the professional sports leagues and the NCAA over impasses in collective bargaining as well as the rights of athletes.
Now, however, they are taking on a union over an alleged concerted refusal to deal.
"Antitrust law’s protection of market competition can be in conflict with labor law’s protection of collective bargaining," states the complaint. "Balancing the two, Congress and the courts have granted certain union activity a limited statutory or non-statutory labor exemption to the antitrust laws. When a union crosses the limits of activity protected by the labor exemptions, its conduct becomes fully subject to antitrust scrutiny just like any other organization. WGA has crossed those limits here by coercing members and non-members alike into a network of anticompetitive agreements that restrain competition in commercial markets over which WGA lacks any legitimate labor law authority or interest."
WME, whose parent company just filed paperwork to go public, presents the practice of packaging as an important way that shows and movies get made in the market. The agency asserts that the boycott is stifling competition and is a per se violation of Section 1 of the Sherman Antitrust Act.
The complaint continues, "To effectuate its boycott, WGA leaders have coerced their member-writers and showrunners into agreeing to refuse to deal with WME and other talent agencies who will not agree to stop packaging or affiliating with content companies by threatening these individuals with expulsion and other union discipline that would imperil their ability to work, and threatening their healthcare without a legitimate basis to do so. WGA has coerced certain talent agencies to join its illegal boycott under the threat of losing their writer-representation businesses. And WGA has tried, and continues to try, to coerce Hollywood studios to refuse to deal with agents who will not sign the Code of Conduct by, among other things, threatening the studios with objectively bad faith litigation. Finally, WGA is inducing certain unlicensed managers and lawyers into joining the conspiracy by telling them that they should perform the work of boycotted talent agents even though it is illegal for them to do so."
That latter sentence is a reference to how California law only permits licensed agents to procure employment for individuals.
The lawsuit further asserts that absolute bans on agency packaging and content affiliation are "grossly over-restrictive, unnecessary to redress any legitimate union concern, and intrude upon commercial activities in markets that WGA has no authority to regulate."
Should the case not settle, the litigation is likely to focus on the extent to which unions can regulate agents as well as antitrust exemptions for union activity. In its action Monday, WME isn't suing any individual writers, merely going after the unit that collectively bargains on behalf of its members. That figures to gather courtroom attention as well. The case may also explore the last 40 years in the relationship between the two sides because, as noted above, some of the objectionable practices have been around for quite some time. On the other hand, those rules of the road were part of franchise agreements. In fact, in some degree of irony, talent agencies were themselves once sued for (and successfully beat back) antitrust allegations over the practice of packaging.
In a statement in conjunction with the filing, a WME spokesperson said, "We took today’s step with careful consideration. The WGA negotiating committee has made it clear both through its legal action and unwillingness to negotiate that it was never interested in making a reasonable deal. We are now left to seek a legal remedy for this dispute. While we wish we were not in this position, we will not capitulate to a leadership group that limits the choices and opportunities available to our clients, and has made repeated attempts to undermine our business.”
The WGA replied to WME's antitrust suit, noting, “History repeats itself. In 1975, the William Morris Agency sued the Guild for antitrust violations in response to the WGA’s campaign to prohibit packaging fees. A federal judge made an initial ruling in the WGA’s favor. There is no merit to WME’s lawsuit, and the Guild will not be bullied into a bad deal.”