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When two entertainment executives defected from Fox to Netflix two years ago, setting off a consequential legal battle about the enforceability of fixed-term contracts in the industry, one of the questions was whether Netflix knew these executives were contractually locked up. After all, knowledge is a necessary component of interference. Fox could always point to the cease and desist letters sent to Netflix, but was there any more? According to a summary judgment motion filed on Friday, there was.
“Netflix has systematically executed a blueprint for poaching,” states Fox’s motion in Los Angeles Superior Court.
Daniel Petrocelli, attorney for Fox, writes that Netflix keeps an Excel spreadsheet updated over time that identifies key executives at other companies and the duration of their unexpired contracts. The alleged blueprint for poaching also includes secret communications through personal email accounts, the provision of free legal counsel for executives thinking of leaving a rival studio and indemnification in the event of litigation.
In its own summary judgment motion, Netflix targets Fox’s claim of unfair competition in an effort to preclude any injunction that would prevent Netflix from soliciting, recruiting and inducing Fox employees to leave. Netflix alleges that Fox is using contracts to keep employees “hostage” and is looking to get a judge to declare this system to be void under California law.
Fox, of course, has some thoughts about Netflix’s campaign.
“Having no real defense, Netflix seeks to avoid liability by boldly asserting that Fox’s employment contracts — all of them — are unconscionable and against public policy, thereby permitting Netflix to freely disrupt them — all of them,” continues Fox’s brief. “In other words, Netflix, a rival competitor, wants the Court to exercise its equitable powers to invalidate hundreds of contracts to which Netflix is not a party and where the contracting parties themselves — Fox and its employees — have no interest in seeing their contracts declared invalid. This proposition is all the more perverse when considering Netflix seeks to break contracts of employees who are not before the Court and have no opportunity to be heard.”
Fox says Netflix must lobby the California legislature to achieve this employment change. It argues there are no grounds under the current law for breaking Fox’s employment contracts.
A trial is currently set for May, but the schedule could be adjusted depending on forthcoming decisions. Perhaps the biggest will be how Judge Lawrence Cho rules on summary judgment. What aspects of this dispute will be a matter of law versus a matter of triable fact? The answer to this isn’t particularly clear at the moment.
If, however, Fox is granted summary judgment on claims that Netflix induced the contract breaches for production exec Tara Flynn and marketing exec Marco Waltenberg, Fox tells the judge it is only seeking $1.
That’s right, just a buck. Fox’s big goal now is to win the point in the face of an attack on all of its employment agreements.
Then again, Fox says it is reserving the right to seek more should this case get to trial. For Flynn, Fox says it has evidence that her departure led Fox to restructure the department where she worked and had to hire a more senior executive who commanded a higher salary. For Waltenberg, Fox footnotes the out-of-pocket costs to hire a consultant to assume Waltenberg’s duties and how there was a significant decrease in advertising support from Fox’s promotional partners allegedly attributable to Netflix’s interference.
For now, Fox aims for a win on the interference claims as well as on Netflix’s cross-claims covering the legality and conscionability of its employment pacts.
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