CAA, UTA Headed to Second Arbitration Over "Lawless Midnight Raid"

The dispute over poached agents is very much active — with a recent court decision, a big hearing this month and the introduction of a second arbitrator.
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CAA

It's now been more than three years since nearly a dozen talent agents left Creative Artists Agency for United Talent Agency. The lawsuit over the alleged "lawless midnight raid" has gone very quiet after an arbitration proceeding began over the defections of Martin Lesak, Jason Heyman and Nick Nuciforo. But the war is very much an active one, and The Hollywood Reporter has learned of a new development fostering a second arbitration.

To rewind for a moment, CAA is claiming contract breaches and interference. The UTA side is arguing that agreements binding agents to CAA for periods longer than seven consecutive years are unenforceable under California law. (Some detailed analysis here.)

Way back in 2015, JAMS Arbitrator Richard Chernick issued a tentative ruling that rejected UTA's big contention. It was never adopted as final. The final few days of testimony and arguments will take place before Chernick this month — and his decision could come by the end of the year.

But now, there's some complication.

Lesak, Heyman and Nuciforo have been arbitrating over their old employment contracts. Two other agents, Gregory Cavic and Gregory McKnight, were not under contract with CAA and have been in open court defending CAA's tortious interference claim. In 2016, both filed a petition to compel arbitration. They nodded to an operating agreement when TPG bought its majority stake in CAA. That agreement had an arbitration provision, too, but with an important wrinkle: a requirement that the arbitration be handled by a retired judge. Chernick was not a retired judge. CAA saw it as a UTA gambit to dispense with the arbitrator who in its eyes was about to rule in its favor.

But at the time, Los Angeles Superior Court Judge Nancy Newman denied the Cavic/McKnight petition to compel arbitration and paused the litigation to wait on Chernick's decision regarding Heyman/Lesak/Nuciforo.

Everything then went dark, and observers are forgiven for thinking this dispute had gone away. It didn't.

Late last year, Heyman, Lesak and Nuciforo quietly filed their own petition to compel arbitration — even though they were already in the midst of arbitration. They pointed to operating and profit-sharing agreements — again, separate from the employment contracts with different arbitration provisions. The three wanted to test their right to terminate their services for any reason under these particular agreements. They also wanted to arbitrate their harm from an allegedly illegal restraint on competition.

CAA again opposed, although it was willing to arbitrate the narrow issue of whether these agents forfeited certain entitlement to income by leaving the agency.

A hearing was held last month. A final order followed a few weeks later. The outcome? Los Angeles Superior Court Judge Nancy Newman has granted the petition for arbitration.

The development seemingly opens the door to lots of confusion given the possibility of two arbitrations happening at the same time exploring similar ground. It probably won't be surprising if the dispute resurfaces in open court after findings and determinations are issued.

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