9:41am PT by Eriq Gardner
Talent Agencies: Because Everyone Can Sue Us, Nobody Can Sue Us
It's been a month since a federal judge "gutted" claims brought by the Writers Guild of America against the three largest talent agencies. Perhaps because the COVID-19 pandemic has halted entertainment production, neither side in an ongoing high-stakes lawsuit in California federal court seems to feel pressing pressure to figure out a way to resolve writers' demands that agents no longer collect a producer-like compensation package called "packaging fees." And so, the case plays on, with the WGA recently amending its cross-complaint while CAA, UTA and WME now take aim at the few WGA claims surviving Judge André Birotte's order.
In his April 27 decision, Birotte ruled that the WGA didn't have standing to pursue antitrust claims under federal law including price-fixing and group boycott. The judge also threw out fiduciary duty claims asserted by the guild for lack of standing plus knocked down racketeering claims that framed packaging fees as illegal kickbacks and bribes. But the judge did permit WGA to pursue a claim under California's Cartwright Act, the state's own attempt to stamp out anti-competitive activity.
Time will tell if the agencies' immediate success is a long-lasting one. The judge concluded that the Guild and its writer-members don't buy packages of talent (like TV studios do) nor sell them in the market (as agents do), so they're not in position to directly claim competitive injury. The judge also concluded that when it came to whether agents are breaching their fiduciary duties, a "litany of individualized assessments" prohibited associational standing. On the other hand, several writers on an individual basis were allowed to proceed with fiduciary claims. No reason why other writers — or others in the talent community — couldn't attempt the same. (Indeed, in the legal community, there presently is some shopping for clients for new suits, according to sources.)
On Wednesday, the agencies filed a new motion to dismiss. This one targets remaining claims. The agencies basically want the judge to take another gander at the standing issue. Among other arguments, they say the Cartwright Act imposes its own heightened standing requirements, so the state claim should be dismissed for similar reasons as the federal ones.
Of potential note is contention about who can actually sue. The motion states that standing requires consideration of who has been victimized by alleged wrongful conduct — with the law aiming to avoid duplicative recovery while taking stock of the complexity of apportioning damages when there are multiple parties harmed.
The writers "allege that for every dollar a studio overpays for an allegedly price-fixed package, that dollar comes 'off the top' of a show's or film's production budget, in turn reducing writer pay and/or writing jobs," states the motion. "But, if that is so, then this theory of secondary harm to writers necessarily raises an insurmountable problem of duplicative recovery and injury. Not only could the studios — the direct victims of the supposed conspiracy — sue, so could all other talent participating in the allegedly price-fixed package, 'includ[ing] writers, actors, and directors.'"
"And, that is not all," the agencies continue. "Under the theory that a packaging fee overcharge causes indirect harm to any person or business paid from a production budget, there could also be claims from cinematographers, make-up artists, costume designers, special effects providers, musical composers and arrangers, sound engineers, concessionaires, hospitality companies, and countless others."
After CAA, UTA and WME give their list of potential plaintiffs, they add, "The risk of exponential and duplicative claims, and injury that is impossible to prove — potentially existent for some, non-existent for others, depending on whether, how or to whom the studio passed-on any alleged overcharge — is precisely why the Cartwright Act does not permit standing in this case."