Judge Dismisses Several Key Claims in WGA Lawsuit Against Talent Agencies

Eight of 14 claims in anti-packaging fee lawsuit have been dismissed

Last Updated: April 27, 2020 @ 11:23 PM

A federal district judge has dismissed eight of the 14 claims filed by the Writers Guild of America against three of Hollywood’s top talent agencies in an effort to force them to eliminate packaging fees, including key claims that such fees serve as illegal kickback payments from a studio to an agency.

The ruling, filed by Judge Andre Birotte and obtained by TheWrap, found that the WGA had no standing to make racketeering claims as anti-racketeering laws were not found to apply to talent agencies. The guild had accused the three agencies — WGA, CAA and UTA — of racketeering by refusing to negotiate on terms to phase out packaging fees individually, instead negotiating through the Association of Talent Agencies, which has refused to give up any fees.

Judge Birotte also partially dismissed the guild’s price-fixing claims, saying claims that the agencies violated the federal Sherman Act could not be made because the guild itself does not buy talent representation services. However, the judge did not dismiss WGA’s claims of price-fixing in violation of California’s Cartwright Act, citing that contrary to the agencies’ claim, the guild had sufficient evidence to proceed with their claim.

The WGA’s claim that packaging fees are a violation of agents’ fiduciary duty to their clients was also dismissed, with Birotte ruling that the guild does not have the organizational standing to bring such claims on behalf of all its members. However, he did not dismiss the individual claims of fiduciary duty breach filed by specific writers alongside the guild, including “Cold Case” creator Meredith Stiehm.

Packaging fees are payments sent from a studio to an agency in exchange for packaging talent — like writers, actors and directors for a project — and they have been the center of a year-long struggle between agencies and the WGA. In April 2019, WGA members gave leadership approval to enforce a new Code of Conduct requiring agencies to give up packaging fees in order to represent members. Thousands of WGA members then terminated their representation with agents, leading WME, CAA and UTA to file a lawsuit claiming that the WGA was participating in an illegal boycott.

The WGA responded with a countersuit that attempted to get a federal judge to declare that packaging fees are illegal. Such a ruling would have been a major blow to the industry practice as the three agencies in the lawsuit, along with ICM Partners, combine to make over 90% of deals involving packaging fees in Hollywood.

But Monday’s ruling is a severe setback to the guild’s plans. While the WGA has two weeks to restore some of their dismissed claims by amending their complaints, the federal racketeering and price-fixing claims have been dismissed with prejudice, meaning that they cannot be refiled. With only some individual claims and a state antitrust claim remaining, the chance of getting a ruling that would force agencies to shut down packaging fees is greatly diminished.

While the WGA has made deals with smaller agencies like Paradigm and APA to phase out packaging fees by the end of 2021, legal sources have told TheWrap that such deals were likely made on the assumption that the top agencies would have to do the same, and it is unlikely that they would continue with such phase out plans if it put them at a disadvantage to competing agencies. The WGA’s remaining claims, along with the agencies’ “illegal boycott” claim, are still scheduled to go to trial in March 2021.

In a joint statement, the three agencies called the judge’s ruling a “resounding victory.”

“The WGA’s claims against the major talent agencies were gutted today by the federal court,” they said. “What has become crystal clear is that David Young, David Goodman and this WGA leadership have led thousands of writers over a cliff, wasted their member dues on failed lawsuits, and left them without agents to represent and advocate for them for more than a year. While the agencies value the WGA’s role, the Guild’s current leadership has overstepped, recklessly damaging personal and professional relationships and forcing agents to defend their integrity and their livelihoods against the Guild’s false claims and inflammatory rhetoric.  Meanwhile, the agencies’ claims against the WGA move full steam ahead.”

This defeat comes after a heated exchange between the WGA and the Alliance of Motion Picture and Television Producers (AMPTP) resulted in potential contract negotiation talks being called off. After the AMPTP agreed to the guild’s proposed negotiation start date of May 11, the WGA rejected the date after AMPTP President Carol Lombardini wrote that the WGA’s additional request to extend the guild’s health plan eligibility through the end of the year would have to be discussed further with the Alliance’s member studios.

In a terse reply to this decision on the health plan, WGA Executive Director David Young wrote: “There will be an agreement when both sides agree there’s one. You people are despicable.” In response, the AMPTP chose to once again postpone negotiations with the WGA and instead begin talks with SAG-AFTRA on Monday.

“We obviously would have preferred a complete victory.  But the court’s decision assures that the Guild’s core claims, namely that packaging is a breach of fiduciary duty and that agencies have committed antitrust violations by fixing the price of those packages, will be explored through discovery, and ultimately in court.  That’s what we wanted,” read a statement from WGA President David A. Goodman.

“There remain six powerful claims in our lawsuit that we will pursue, and discovery is underway. We are confident that the evidence uncovered in this process will support the claims detailed in our lawsuit.”

Pamela Chelin contributed to this report.