10:07am PT by Jonathan Handel
Writers Guild Sues Talent Agencies as Dispute Goes Nuclear
The Writers Guild of America on Wednesday filed suit against the major talent agencies, turning a roiling conflict into an outright war in which neither side is likely to compromise.
The lawsuit alleges that television packaging fees — one of the two key business models undergirding the upper ranks of the agency business — are a breach of fiduciary duty and an illegal kickback under federal and state statutes, including California’s Unfair Competition Law. Asked at a press conference whether the WGA has the resources to fight four well-funded talent firms, WGA West general counsel Tony Segall responded, "We will see it through to the end."
The suit seeks an end to packaging fees on new and existing series, and also disgorgement and restitution of packaging fees previously received by the agencies. The named defendants in the case are the major agencies, WME, CAA, UTA and ICM. The plaintiffs are the guild's West and East branches and eight individual writers.
The disputed practice, in which agencies are compensated by studios (their clients’ employers) rather than by commissioning the clients themselves, has been commonplace for roughly five decades and was permitted under a 1976 agreement between the WGA and the Association of Talent Agents that the guild terminated last Friday at midnight. Segall called that attempt to regulate packaging fees “unsuccessful,” and said of the practice, “It’s time to ban it altogether.”
The ATA issued a statement Wednesday evening in response to the lawsuit. (The four agencies did not have any comment.)
“This development is ironic given that the Guild itself has agreed to the legitimacy of packaging for more than 43 years,” said ATA executive director Karen Stuart. “Even more ironic is the fact that the statute the WGA is suing under prevents abuses of power and authority by labor union leaders, even as the Guild has intimidated its own members and repeatedly misled them about their lack of good faith in the negotiating room.”
The statement continued, “Today’s move confirms that the WGA’s leadership is on a predetermined path to chaos that never included any intention to negotiate. Knowing that it could take months or even years for this litigation to be resolved, WGA leaders are unnecessarily forcing their members and our industry into long-term uncertainty. While the legal process runs its course, we strongly believe that in the interim it remains in the best interests of writers to be represented by licensed talent agencies. We empathize with our writer clients and the untenable position they have been put in by WGA leadership. We stand ready and willing to represent writers with the added protections outlined in the Agency Standards for Client Representation that further ensures choice and greater transparency for writers.”
In response, the WGA said, “This matter is very simple. If the major agencies would abide by existing law — antitrust and racketeering law — this deal would have been done 11 months ago. The ATA’s repeated use of anti-union rhetoric illustrates how much in denial the big agencies are.”
At stake in the suit are massive sums, although packaging of new shows has become somewhat less lucrative in the Netflix era. That’s because digital streamers tend to do long-term, often worldwide deals, meaning that there is less afterlife for streaming shows than there was for network series even 10 years ago, when syndication and foreign sales were common for hit series. Gone with those aftermarkets is the potential for outsize profits.
The talent agencies' last offer to the WGA was to share one percent of backend packaging fees with television series writers — an offer too meager to interest the guild, which in any case has consistently said that it wants to ban the fees altogether, not participate in what it contends is an unlawful practice. A UTA study of over 33,000 scripted episodes found that writers made 16 percent more on packaged series (10 percent of which is attributable to the fact that the writers don’t have to pay commission on a packaged series), but that study did not encompass the backend portion of packaging fees.
Other than that one percent offer, neither side has been willing to budge on the issue, and it now seems likely that fundamental questions about the entertainment business will be decided in a courtroom. The suit does not address affiliate production, another controversial issue at the core of the dispute between writers and agencies, and Segall declined to address what the guild has planned on that front.
The eight individual writer plaintiffs in the lawsuit are Patti Carr, Ashley Gable, Barbara Hall, Deric Hughes, Chip Johannessen, Deirdre Mangan, David Simon and Meredith Stiehm. Hall and Stiehm, along with guild lawyers, spoke at the press conference. Others in attendance included WGA West executive director David Young and president David Goodman, neither of whom spoke.
"When the show was sold, CAA negotiated a packaging fee for itself, without my knowledge. It wasn’t until six years and 134 episodes later that I learned about it," stated plaintiff Stiehm, the creator of CBS' Cold Case. Another plaintiff, The Wire creator Simon, wrote an essay on his own website on March 18 titled "But I’m not a lawyer. I’m an agent," in which he described packaging fees as "corrupt."
"The plaintiffs will seek a judicial declaration that packaging fees are unlawful and an injunction prohibiting talent agencies from entering into future packaging deals. The suit will also seek damages and repayment of illegal profits on behalf of writers who have been harmed by these unlawful practices in the past," Segall stated.
Segall also noted at the press conference that 8,500 WGA writers (out of 15,000 total active members) have — or until recently had — agents and the "vast majority" have already parted ways with representation. Guild rules require members to discharge their agents unless the agency has signed on to the guild’s “Code of Conduct,” which bans packaging fees and affiliate production. None of the large or mid-size agencies have done so.
Meanwhile, the mobilization of the WGA membership inevitably increases the likelihood that next year’s triennial negotiations with the studios and producers could lead to a writers strike. And, recent statements from the Directors Guild of America and SAG-AFTRA suggest that the war against agents could widen to those unions as well.
April 17, 6:35 p.m. Updated with ATA response.
April 17, 9:45 p.m. Updated with WGA response to ATA response.