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May 11th, 2020
“Packaging Fees” Dispute: Court Permits Certain Writer Claims to Proceed
Film and television creatives and executives have been closely watching William Morris Endeavor Entertainment, LLC vs. Writers Guild of America, West, Inc., a battle between talent agencies and writers over agency “packaging fees.” Resolution of the dispute will have a large impact on how writers, creators, and agents get paid. Recently, a federal judge issued an important ruling on the WGA and individual writers’ claims -- allowing certain claims to proceed. Here’s a summary of what you need to know.
Background and claims. The case began when the agencies sued the WGA, asserting antitrust claims. The dispute focuses on “packaging fees” – the fees studios pay agencies for bringing talent together for a proposed project. (Before packaging fees, agencies were customarily paid by commission.) The packaging fee has always been the same: an initial 3% license fee, a deferred 3% license fee and a 10% back-end fee, also known as a 3-3-10 structure. Believing that packaging fees create conflicts of interest that reduce writer compensation and opportunities, and in response to the agencies’ lawsuit, the guild and individual writers asserted a number of claims under federal and California state law. Their claims included price fixing, boycotting, racketeering, breach of fiduciary duty, fraud, unfair competition, breach of contract, and “promissory estoppel.”
The decision. The agencies asked the court to dismiss all of the WGA and individual writer claims. While the court dismissed several claims, it also permitted certain claims to proceed. Here are the WGA and writer claims that remain in the case.
- Price fixing. The WGA argued that packaging fees at fixed amounts were evidence of a price-fixing conspiracy that reduces their members’ pay and opportunities, and forces the guild to expend resources educating writers on the practice – in violation of both state and federal law. The agencies moved to dismiss these claims, but the court ruled that the price-fixing allegation was specific enough to proceed under California’s Cartwright Act. The court dismissed the federal price-fixing claim.
- Individual writer claims. Individual writers also filed claims against the agencies. Their filing included actions for breach of fiduciary duty, unfair competition, breach of contract, and promissory estoppel. The agencies asked the court to dismiss these claims.
The court allowed the breach of fiduciary duty and unfair competition claims to proceed, since writers said their agencies never informed them of the studio package fees.
One writer also filed claims for breach of contract and promissory estoppel. These were also allowed to move forward. The writer alleged that she continued to use the agency as a representative because, in exchange, they promised to return certain commissions. Although the arrangement was not recorded in a signed contract, the court held that the matter would proceed because the writer’s continued use of the agency could prove the agreement existed.
The court dismissed all of the other WGA and individual writer claims.
What’s next? If the parties do not settle, the case will now proceed to the discovery phase and trial. Last week, the agencies requested that the scope of discovery be narrowed. If granted, this will limit which documents that agencies would need to turn over to the WGA. We will continue to monitor the case and report important developments.
If you have a question about William Morris Endeavor Entertainment, LLC vs. Writers Guild of America, West, Inc., or about any other entertainment law matters, please contact Lisa E. Davis, Dionne Gordon or any other member of the Frankfurt Kurnit Entertainment Group.
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