Netflix Aims to Stop Fox From Holding Employees "Hostage"

As the streamer submits its first summary judgment motion, a lawsuit is also drawing in big studios across the industry.
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On Jan. 22, the announcement officially came that Netflix was joining the Motion Picture Association of America. Just a day later, the streaming giant had a bit of a gift for some of its fellow members — subpoenas to Disney, Paramount Pictures, NBCUniversal, Warner Bros plus DreamWorks Animation and Lions Gate Entertainment. Netflix demanded business records in connection with its ongoing fight to free executives from the shackles of fixed-term contracts.

The dispute dates to the defections of Tara Flynn, a former development executive at Fox 21 TV Studios who left for Netflix in September 2016, and Marcos Waltenberg, a former Fox film marketing exec who joined Netflix earlier that year.

Fox sued Netflix, alleging a "brazen campaign to unlawfully target, recruit, and poach valuable Fox executives by illegally inducing them to break their employment contracts with Fox to work at Netflix."  

Netflix responded with a countersuit alleging those deals were unenforceable. According to the streaming giant, Fox was bullying employees into "take-it-or-leave-it" deals that amounted to "involuntary servitude" and was "facilitating and enforcing a system that restrains employee mobility, depresses compensation levels, and creates unlawful barriers to entry for Netflix and others competing in the film and television production."

The case is currently scheduled for trial in May, but in the past week, there's been plenty of action.

Netflix wants to add Fox Networks Group to its cross-complaint. That would be the Rupert Murdoch division that isn't set to be sold to Disney. Netflix asserts that some of the same employee-restrictive contracts can be found throughout the Fox kingdom.

With fighting between the parties over the maneuvering plus word of new discovery demands in the form of subpoenas to other studios in the entertainment industry, Fox on Friday went before the Los Angeles Superior Court judge in an effort to push the trial back to October. At least for now, that application was denied, though the scheduling could adjust depending on whether the judge allows Netflix to add Fox Networks Group and Fox Entertainment Group as part of the case.

Meanwhile, Netflix has just filed its first motion for summary adjudication.

The streamer is targeting 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.

"Fox has taken Hollywood's long history of using contracts to monopolize its on-screen talent and turned it into a tool for restricting the mobility of those Fox calls '[redacted]-employees,' in order to inhibit new competitors like Netflix," states the motion. "No longer content — or able — to lock in the stars, Fox seeks to lock into place for years at a time the innumerable marketing, accounting, production, and other business executives who conduct its daily business, using onerous, one-sided contract terms and baseless threats. But in doing so, Fox has indisputably violated long-standing California public policy that protects employee mobility and prizes free and fair competition, including competition for skilled and talented employees providing business services." 

Netflix characterizes the unfair competition claim as "fundamentally flawed, exposing the unfair, abusive, and anticompetitive conduct Fox uses to hold its employees hostage," and argues that Fox doesn't get a pass simply from boilerplate designating these employees as providing services that are "special, unique, unusual, extraordinary" and of irreplaceable "intellectual character."

The judge is asked to reject as a matter of law Fox's request for an injunction and any relief under its unfair competition claim.

In an email Thursday to opposing counsel, one of Fox's lawyers wrote that the attempt to expand discovery to third parties was "improper" and a "significant change to the status of the case."

Additionally, a Fox spokesperson responds, "Employees at Fox have every right to the security and protections of their employment contracts, and Netflix has no right to interfere with them. Netflix’s claims have no legal basis, and we are confident Netflix will be held accountable in our lawsuit."