9:24am PT by Ashley Cullins
Judge Reconsidering Pause of CAA-UTA Open Court Battle
More than a year ago, in what has become known as the "Lawless Midnight Raid," a handful of CAA agents left to work for UTA, spurring a heated legal battle that has partially been fought in open court.
Judge Nancy Newman has not yet decided if she'll pause CAA's open court dispute with UTA, Gregory Cavic and Gregory McKnight pending a separate arbitration involving their colleagues Martin Lesak, Jason Heyman and Nick Nuciforo.
In a tentative ruling issued last month, Newman indicated she would issue a stay and opened a Friday hearing by saying supplemental briefings submitted by both parties have not changed her mind. However, the judge ended the hearing without adopting her tentative ruling and said she expects to issue a decision next week.
Newman wrote in the tentative opinion that "the arbitrable issues raised in the currently pending arbitration proceeding are 'inextricably intertwined' with the issues recently raised in the present case" and therefore a stay is necessary to preserve the status quo.
Arguments during the hearing from UTA attorney Bryan Freedman and CAA attorney Anthony Oncidi were essentially a subdued restatement of their filings — in which neither side pulled any punches.
A thread of drama has weaved through the documents, with each side arguing that the other is employing legal trick plays to guarantee its desired outcome. UTA argues CAA's motion for a stay — in its own proceeding — is a "transparent attempt" to obtain a favorable ruling in arbitration on the so-called seven-year rule and apply that to a separate trial proceeding in which CAA is the only common party. Meanwhile, CAA argues that UTA is trying to "dodge an adverse ruling" and including information about confidential LLC agreements in filings to "garner a ‘win’ in the press."
CAA took it a step further by asking the court to consider sanctions against UTA's legal team, arguing that their latest filing was a "Trojan horse" and addressed irrelevant issues for which the court did not request a brief. Newman declined, finding "there was a legitimate basis to request further briefing."
The judge also indicated that she will punt the issue of whether there is a need to launch a separate arbitration to determine whether the LLC agreement signed by all five agents (when TPG bought its majority stake) trumps the employment contract signed by three of them.
CAA argues that Cavic and McKnight's LLC agreements are irrelevant, as the agency acknowledges they were at-will employees at the time they resigned and it has never and will never sue either of them for breach of contract. (They're being sued for allegedly helping the other three agents break their contracts.)
“CAA has always contended that Heyman, Lesak and Nuciforo ... are entitled to arbitrate their affirmative defenses under the Membership Agreements as those defenses at least arguably relate to whether they breached their Employment Agreements.” In a footnote, CAA states that “a termination provision of the Membership Agreements ... expressly contains carve-out language ... limiting those termination rights in the event the Participant entered into a term employment agreement with CAA.”
UTA argues that CAA is purposely dodging the issue and argues that the LLC agreements are “nothing more than a sham intended to lawfully restrain CAA talent agents … from competing with CAA after they left the company.” In addition to finding an answer to whether the LLC agreement allows any employee to leave with 30 days' notice, UTA also argues it entitles the agents to equity, cash compensation and transaction proceeds.
Further complicating matters is a provision in the LLC agreement that requires disputes be arbitrated by a retired judge, which JAMS vp Richard Chernick, who is overseeing the arbitration, isn't.
In another not-yet-adopted tentative ruling, Newman was hesitant to allow an arbitrator switch-up at this point in the proceedings. "The court notes that Petitioners Heyman, Lesak, and Nuciforo did have employment agreements with CAA and have apparently argued as a defense in the underlying arbitration that the LLC Member Agreements novated the terms of the parties' employment agreements. The court suspects that this contractual defense would certainly be within the scope of arbitral claims before the current arbitrator on CAA's breach of employment contract and would not require a separate arbitration."
Newman is expected to issue rulings next week on both the stay of Cavic and McKnight's court proceedings and the petition to compel arbitration in their case. Unless she deviates dramatically from her tentative rulings and in-hearing comments, it seems a stay is likely and if UTA, or the individual agents, wants the court to answer questions related to the LLC agreement, it'll need to file another petition at a later date.
Also appearing for CAA were Proskauer's Tracey Silver and Pietro Deserio; Miles Feldman of Raines Feldman and Colin Vandell of Venable also are representing UTA.