Netflix Tells Court It Shouldn't Have to Disclose Which Actors Have Long-Term Deals

Stranger Things 3 - David Harbour - Netflix Publicity-H 2019
Courtesy of Netflix

The ongoing legal dispute between Netflix and 20th Century Fox (now owned by Disney) has mostly been about the recruitment of business executives under fixed-term contracts, but the two sides have also been warring behind the scenes over contracts for "above-the-line" talent including actors and directors.

Fox is suing Netflix for poaching two executives and is hunting for an injunction that would prevent the streaming giant from further interfering with Fox's agreements with employees. Netflix contends that such deals are unconscionable, void out of public policy interests, and furthermore, constitute unfair business practices. In June, Fox got a leg up in the summary judgment round, but the dispute is hardly over and has the possibility of going to trial early next year.

Meanwhile, for the past two years, the two sides have been engaging in a side fight, this one in arbitration over discovery issues arising from the main battle. Pretty much everything in terms of running a modern-day entertainment company has come up, including Netflix's deals with its top executives to its strategy in getting into content production. Some of those documents were teased in summary judgment motions, though most of what's been uncovered is under seal and may or may not see the light of day should the case proceed to trial.

One batch of documents now under controversy pertains to long-term deals for talent.

Fox would love to show that Netflix professes a distaste for locking up employees into supposedly illegal contracts but does so anyway.

Previously, an arbitrator denied Fox's demands for some of Netflix's headline-making deals with producers like Shonda Rhimes and Ryan Murphy. The arbitrator reasoned that the deals were with independent contractors rather than employees and didn't really lock those producers into true "exclusivity." Rhimes, for example, is not prohibited from producing content with other entities such as ABC.

Nevertheless, Fox has modified its demands, reframed its theories and continued to be aggressive in the hunt.

For example, Fox began targeting agreements made by Netflix or any of its subsidiaries for contracts with talent lasting more than seven years (even via options), confronting Netflix's allegation that Fox's own deals violate California's rule against personal service contracts beyond seven years. (The seven-year rule was made famous when Olivia de Havilland was allowed to break her contract with Warner Bros in the 1940s.) Fox's lawyer also made the point that California laws could pertain to independent contractors, too.

Netflix, in response, pointed out that it has only been producing its own content since 2016, so there could be no deal with any actor that was mathematically out-of-bounds.

In May, an arbitrator accepted Fox's look to the future.

"Netflix's contention that for a contract at issue to be relevant, an individual must have been already subject to a term greater than seven years, improperly values form over substance," wrote the arbitrator in an order requiring Netflix to hand over this information. "The anticipation, or even the contractual possibility, of an extension is sufficient to create relevance."

Netflix is now objecting to the order and requesting an oral hearing in open court to address its contentions, including that the streamer's above-the-line talent agreements are not remotely similar to Fox’s agreements.

"They are not employment agreements, they do not require the individuals to work exclusively for Netflix, they involve 'above-the-line' talent (actors) (who are treated differently than standard employees under the law), and they involve entities that are not parties to this case," states a Netflix brief filed July 18 (and made public Monday).

In his summary judgment ruling, Los Angeles Superior Court Judge Marc Gross wasn't particularly impressed with Netflix's arguments how the seven-year rule applied to situations where contracts are re-upped. The judge wrote, "Labor Code §2855 merely ensures a choice must be available to employees at least every seven years to ensure they have the freedom and opportunity to choose to enter into employment agreements."

This time, he will be addressing the relevance of actor deals to the dispute at hand, which could mean a different sort of seven-year-rule analysis.

Nevertheless, and with no guarantees that the deals would ever become public given a protective order in the litigation as well as a potential challenge to the admissibility of such evidence for trial, there exists a remote possibility of seeing which shows streamed on Netflix are envisioned by the company as potentially lasting for a few years hence and which characters may be along for the ride.