Will Netflix's Appeal in Poaching Case Impact Actors?

George Clooney
Photo by Anette Nantell/Dagens Nyheter/TT/Sipa USA

George Clooney

Netflix can no longer recruit executives under fixed-term contracts at Disney's 20th Century Studios (formerly 21st Century Fox Film) nor from Viacom either. That's thanks to a pair of injunctions that were entered by judges in big poaching battles. The Fox case is now on appeal wherein Netflix is reprising its argument that many of the entertainment industry's traditional executive contracts are illegal under California statute. But will this dispute also become a vehicle for an appeals court to basically sanction how television producers sometimes hold actors off the market?

That's SAG-AFTRA's concern. In January, the actors' guild filed an amicus brief. On Monday, Disney's Fox unit responded.

"George Clooney. Tom Hanks. Michelle Williams. Melissa McCarthy. Even the late Robin Williams. Why are some of Hollywood’s biggest stars relevant to a fight between two entertainment megaliths relating to the hiring of two corporate vice presidents?" asked SAG-AFTRA in its brief.

Answering, SAG-AFTRA continued, "Because the lower court’s decision in this case has potential significance far beyond the executive suite. Long before these critically and internationally acclaimed actors became film stars, they got their start on television. And long before these actors found fame, the California Legislature recognized that all workers, including actors, should be free to seek and obtain new employment."

SAG-AFTRA drew specific attention to a Los Angeles Superior Court judge's interpretation of California's Business and Professions Code Section 16600, which is the state's prohibition on non-competes. The guild's main concern is that if Section 16600 merely applies to non-competes past a contract's expiration, there will be nothing from stopping a studio from preventing television series' regulars from taking other work (like movie roles) during a show's hiatus.

"As written, the Superior Court’s opinion threatens to embolden a restrictive entertainment industry practice—the inclusion of restrictive covenants of indefinite and uncertain duration in television actors’ contracts—that, with industry changes, has steadily moved into unlawful territory," argued SAG-AFTRA, soon adding, "Had the cast of E.R. or The Gilmore Girls been working in today’s entertainment industry, with these O&E Restrictive Covenants, the careers of George Clooney and Melissa McCarthy may have started and ended with those shows, with no opportunity to expand and extend those careers, much less become the film stars they are today."

SAG-AFTRA added that most Section 16600 cases "focus on highly compensated full time executives with fiduciary duties to their employers," but expressed concern that an overly broad holding might restrict the mobility of working actors. "The Lower Court Decision, if the rationale is left unaltered, harms SAG-AFTRA’s members, particularly women and performers of color, by indirectly endorsing a growing practice that restricts their career opportunities for long periods without work or any wages,"  continued the guild.

Fox has now responded.

"SAG-AFTRA’s central thesis is that certain restrictive covenants commonly (it says) included in actors’ contracts are unlawful," write attorneys led by Daniel Petrocelli. "Whatever the merits of that position, it has nothing to do with the dispute at hand."

Fox stresses that this case involves executives — and is not about "prohibiting actors from acting."

Even more specifically, Fox says this case is about executives practicing their trade at Fox before being recruited to work elsewhere.

"Fox has never sought injunctive relief to prevent any Fox employee from practicing her profession, even at Fox’s competitors," the reply brief continues. "The only issue in this case is whether Netflix can tortiously interfere with Fox’s contracts. In other words, this dispute concerns—as SAG-AFTRA says―an 'entertainment megalith[]' poaching 'two corporate vice presidents' from the 'executive suite.'”

That noted, Fox hardly does much to tamp down on the notion of a developing legal concern for exploration elsewhere in perhaps some future case. It again endorses the conclusion that Section 16600 applies only to post- employment restraints and “does not affect limitations on an employee’s conduct or duties while employed.”

Perhaps most worrisome for SAG-AFTRA, Fox tells the appeals court, "If non-competes are not barred by Section 16600 during the term of employment, then less-restrictive contractual provisions like the options, confidentiality provisions, and no-shop clauses at issue here are plainly not prohibited."

Read the entire brief here: