Electronically FILED by Superior Court of California, County of Los Angeles on 04/17/2019 11:17 AM Sherri R. Carter, Executive Officer/Clerk of Court, by M. Mariscal,Deputy Clerk 19SMCV00725 Assigned for all purposes to: Santa Monica Courthouse, Judicial Officer: Gerald Rosenberg 1 2 3 4 5 6 7 Stephen P. Berzon (SBN 46540) Stacey Leyton (SBN 203827) P. Casey Pitts (SBN 262463) Rebecca Lee (SBN 305119) ALTSHULER BERZON LLP 177 Post Street, Suite 300 San Francisco, California 94108 Telephone: (415) 421-7151 Facsimile: (415) 362-8064 Email: sberzon@altber.com sleyton@altber.com cpitts@altber.com rlee@altber.com 12 Anthony R. Segall (SBN 101340) Juhyung Harold Lee (SBN 315738) ROTHNER, SEGALL & GREENSTONE 510 South Marengo Avenue Pasadena, California 91101 Telephone: (626) 796-7555 Facsimile: (626) 577-0124 Email: asegall@rsglabor.com hlee@rsglabor.com 13 Attorneys for Plaintiffs 8 9 10 11 14 15 SUPERIOR COURT OF THE STATE OF CALIFORNIA 16 FOR THE COUNTY OF LOS ANGELES 17 18 19 20 21 WRITERS GUILD OF AMERICA, WEST, INC.; WRITERS GUILD OF AMERICA, EAST, INC.; PATRICIA CARR; ASHLEY GABLE; BARBARA HALL; DERIC A. HUGHES; GEORGE JOHANNESSEN; DEIRDRE MANGAN; DAVID SIMON; and MEREDITH STIEHM, Plaintiffs, 22 23 24 25 Case No.: COMPLAINT FOR: 1. BREACH OF FIDUCIARY DUTY 2. UNFAIR COMPETITION (CAL. BUS. & PROF. CODE, § 17200 ET SEQ.) v. WME ENTERTAINMENT; CREATIVE ARTISTS AGENCY; UNITED TALENT AGENTS; INTERNATIONAL CREATIVE MANAGEMENT PARTNERS; and DOES 1-10, 26 Defendants. 27 28 1 COMPLAINT 1 Plaintiffs Writers Guild of America, West, Inc. and Writers Guild of America, East, Inc. 2 (collectively “Guilds” or “WGA”), and plaintiffs Patricia (“Patti”) Carr, Ashley Gable, Barbara 3 Hall, Deric A. Hughes, George (“Chip”) Johannessen, Deirdre Mangan, David Simon, and 4 Meredith Stiehm (collectively “Individual Plaintiffs”), allege as follows: 5 6 INTRODUCTION 1. Writers are the creative heart of the television and film businesses. They are 7 responsible for providing the stories, plots, dialogue, and other content of television shows and 8 movies that are enjoyed by audiences around the world and that generate billions of dollars in 9 revenue every year. Without the work and creative content provided by these writers, the 10 11 television and film industries could not operate. 2. The compensation and benefits paid to writers for their work are determined by a 12 collectively-bargained contract between the Guilds and hundreds of studios and production 13 companies. Because the entertainment industry is a freelance industry, and because writers may 14 negotiate compensation above the minimum levels established by the WGA contract, the vast 15 majority of working writers procure employment through talent agents they have retained to help 16 them find work and negotiate for the best possible compensation. These agents owe a fiduciary 17 duty to their clients, and must provide their clients with conflict-free representation. 18 3. Historically, the agents whom writers retained were compensated by receiving a 19 portion of any payments made to the writers by production companies for work that the agents 20 helped them procure. By tying the agents’ compensation to the writers’ compensation, this 21 arrangement aligned the interests of the agents with the interests of their writer clients. 22 4. Unfortunately, over the last few decades, the four largest talent agencies— 23 defendants WME Entertainment, Creative Artists Agency, United Talent Agents, and 24 International Creative Management Partners (collectively, “Agencies”)—largely abandoned this 25 compensation model in favor of “packaging fees.” 26 5. Agency compensation via packaging fees is possible because, after substantial 27 consolidation within the industry, the Agencies now control access to all of the key talent 28 necessary to create a new television show or feature film, including not only writers but also 2 COMPLAINT 1 actors and directors. The Agencies leverage this control to enter into agreements with television 2 and film production companies wherein they negotiate “packaging fees” that are paid directly by 3 the production companies from a program’s budget or revenues to the Agencies simply because 4 the Agencies represented the writers, directors, and actors who will be employed by the 5 production companies in producing the show. The packaging fees paid by production companies 6 to the Agencies are unrelated to their own clients’ compensation and generate hundreds of 7 millions of dollars in revenue for the Agencies each year. 8 6. Packaging fees create numerous conflicts of interest between writers and the 9 Agencies serving as their agents. Unlike in a commission-based system, the economic interests 10 of the agents at the Agencies that represent writers and other creative talent are no longer aligned 11 with those of their writer clients. Rather than seeking to maximize how much writers are paid 12 for their work, the Agencies seek to maximize the packaging fee they will be paid for a particular 13 project or program. Because the Agencies’ packaging fee is generally tied to a show’s revenues 14 and profits, the Agencies have an incentive to reduce the amount paid to writers and other talent 15 for their work on a show. Further, the Agencies seek to prevent the writers they represent from 16 working with talent represented by other Agencies in order to avoid having to split the packaging 17 fee with other Agencies—even where the project would benefit by drawing from a larger talent 18 pool. The Agencies also pitch writers’ work to the production companies they believe will pay 19 the most lucrative packaging fee, rather than to the companies that will pay the most to their 20 writer clients. 21 7. Packaging fees have caused tremendous financial harm to the Guilds and their 22 members, including the Individual Plaintiffs. The fees have depressed the compensation paid to 23 writers, as money that would otherwise be paid to the writers is instead paid to the Agencies as 24 part of the packaging fee or left on the table. Because of the conflicts of interest created by 25 packaging, writers have also been required to retain other professionals (such as lawyers and 26 personal managers) to monitor the Agencies, protect the writers’ interests, and provide conflict- 27 free services that agents would otherwise provide. Packaging fees have harmed the Guilds by 28 requiring them to devote substantial resources to monitoring the Agencies’ packaging fee 3 COMPLAINT 1 practices, attempting to help writers protect their interests, and developing a comprehensive 2 campaign to eliminate the harms and abuses associated with packaging fees. 3 8. Plaintiffs bring this lawsuit to end the Agencies’ harmful and unlawful practice of 4 packaging fees. The Agencies’ packaging fees violate the fiduciary duty that agents owe to their 5 writer clients and deprive them of the conflict-free representation to which they are entitled. For 6 these reasons, and because the payments made from production companies to Agencies as part of 7 any package constitute unlawful kickbacks from an employer to a “representative of any of his 8 employees” prohibited by Section 302 of the federal Labor-Management Relations Act, 29 9 U.S.C. §186(a)(1), packaging is an unlawful or unfair business practice for the purposes of the 10 California Unfair Competition Law, Cal. Bus. & Prof. Code §17200 et seq. Packaging fees 11 should therefore be declared unlawful and enjoined, Plaintiffs should be awarded disgorgement 12 of unlawful profits, and the Individual Plaintiffs should be awarded restitution and damages. 13 14 PARTIES 9. Plaintiff Writers Guild of America, West, Inc. is, and at all material times was, a 15 labor union representing approximately 10,000 professional writers who write content for 16 television shows, movies, news programs, documentaries, animation, and new media. Writers 17 Guild of America, West serves as the exclusive collective bargaining representative for writers 18 employed by the more than 2000 production companies that are signatory to an industrywide 19 collective bargaining agreement negotiated by the Guilds and the Alliance of Motion Picture and 20 Television Producers, Inc. (“AMPTP”). 21 nonprofit corporation headquartered in Los Angeles, California. Writers Guild of America, West 22 brings this action for injunctive and declaratory relief under California’s law of fiduciary duty in 23 its representative capacity on behalf of all writers it represents, and brings this action under 24 California’s Unfair Competition Law on its own behalf. 25 10. Writers Guild of America, West is a California Plaintiff Writers Guild of America, East, Inc. is, and at all material times was, a 26 labor union representing over 4,700 professional writers who write content for television shows, 27 movies, news programs, documentaries, animation, and new media. Writers Guild of America, 28 East serves as the exclusive collective bargaining representative for writers employed by the 4 COMPLAINT 1 more than 2000 production companies that are signatory to an industrywide collective bargaining 2 agreement negotiated by the Guilds and the AMPTP. Writers Guild of America, East is an 3 unincorporated association headquartered in New York, New York. Writers Guild of America, 4 East brings this action for injunctive and declaratory relief under California’s law of fiduciary 5 duty in its representative capacity on behalf of all writers it represents, and brings this action 6 under California’s Unfair Competition Law on its own behalf. 7 8 11. The Individual Plaintiffs in this action are as follows: (a) Patti Carr is a television writer who resides in Studio City, California and 9 works in Los Angeles County. She has written for television shows including Life Unexpected, 10 Mixology, Private Practice, Reba, and ‘Til Death, and served as showrunner for 90210. She is a 11 member of Writers Guild of America, West. From January 2018 until April 2019, defendant 12 International Creative Management Partners, LLC served as her talent agency. 13 approximately 2001 to January 2018, defendant Creative Artists Agency, LLC served as her 14 talent agency. Carr has written or served as showrunner for packaged shows, including 90210, 15 Mixology, Private Practice, Reba, and ‘Til Death, and was injured by the payment of packaging 16 fees to Agencies on those packaged shows. 17 (b) From Ashley Gable is a television writer who resides in Los Angeles, California 18 and works in Los Angeles County. She has written for television shows including Buffy the 19 Vampire Slayer, Bull, Designated Survivor, Magnum PI, and The Mentalist. She is a member of 20 Writers Guild of America, West. From approximately 2006 until April 2019, defendant Creative 21 Artists Agency, LLC served as her talent agency. Prior to 2000, defendant International Creative 22 Management Partners, LLC served as her talent agency. Gable has written for packaged shows, 23 including Magnum PI and Designated Survivor, and was injured by the payment of packaging 24 fees to Agencies on those packaged shows. 25 (c) Barbara Hall is a television writer who resides in Santa Monica, California 26 and works in Los Angeles County. Her work as a television writer includes serving as the 27 showrunner for Madam Secretary for each of its five seasons and creating the television shows 28 Judging Amy and Joan of Arcadia. She is a member of Writers Guild of America, West. From 5 COMPLAINT 1 approximately 2012 until April 2019, and before 2000, defendant United Talent Agency, LLC 2 served as her talent agency. From approximately 2000 until approximately 2012, defendant 3 Creative Artists Agency, LLC served as her talent agency. Hall has written, created, or served as 4 showrunner for packaged shows, including Madam Secretary and Judging Amy, and was injured 5 by the payment of packaging fees to Agencies on those packaged shows. 6 (d) Deric A. Hughes is a television writer who resides in Sherman Oaks, 7 California and works in Sherman Oaks. He has written for television shows including Arrow, 8 The Flash, Beauty and the Beast, and Warehouse 13. He is a member of Writers Guild of 9 America, West. From approximately 2009 until April 2019, defendant Creative Artists Agency, 10 LLC served as his talent agency. Hughes has written for packaged shows, including Arrow, 11 Black Samurai, The Flash, and Beauty and the Beast, and was injured by the payment of 12 packaging fees to Agencies on those packaged shows. 13 (e) Chip Johannessen is a television writer who resides in Pacific Palisades, 14 California, and works in Century City. He has written for television shows including Homeland, 15 24, Moonlight, and Beverly Hills 90210, was the showrunner for season five of Dexter, and also 16 created the miniseries Saints and Strangers. He is a member of Writers Guild of America, West. 17 From approximately June 2006 until April 2019, defendant International Creative Management 18 Partners, LLC served as his talent agency. Johannessen has written for or created packaged 19 shows, including Homeland and Saints and Strangers, and was injured by the payment of 20 packaging fees to Agencies on those packaged shows. 21 (f) Deirdre Mangan is a television writer who lives in Los Angeles, California 22 and works in Los Angeles County. She has written for television shows including Midnight 23 Texas, The Crossing, iZombie, and Do No Harm. She is a member of Writers Guild of America, 24 West. From approximately 2013 until March 2019, defendant United Talent Agency, LLC 25 served as her talent agency. Mangan has written for packaged shows, including iZombie and Do 26 No Harm, and was injured by the payment of packaging fees to Agencies on those packaged 27 shows. 28 /// 6 COMPLAINT 1 (g) David Simon is a television writer who works and resides in Baltimore, 2 Maryland. His work as a writer includes creating and running the shows The Wire and The 3 Deuce, as well as writing Homicide: Life on the Street (which was based on an earlier book 4 published by Simon), and writing and producing The Corner, Treme, Generation Kill, and Show 5 Me A Hero. He is a member of Writers Guild of America, East. From approximately 1992 until 6 April 2019, defendant Creative Artists Agency, LLC served as his talent agency. Simon has 7 written for a packaged show, Homicide: Life on the Street, and was injured by the payment of 8 packaging fees to Agencies on that packaged show. 9 (h) Meredith Stiehm is a television writer who resides in Santa Monica, 10 California and works in Los Angeles County. Her work as a writer includes writing for NYPD 11 Blue and ER, creating Cold Case and The Bridge, and serving as executive producer and writer 12 on Homeland. She is a member of Writers Guild of America, West. From approximately 2011 13 until April 2019, defendant William Morris Endeavor Entertainment, LLC served as her talent 14 agency. Prior to then, defendant Creative Artists Agency, LLC served as her talent agency. 15 Stiehm has written, created, or served as showrunner for packaged shows, including Homeland, 16 Cold Case, and The Bridge, and was injured by the payment of packaging fees to Agencies on 17 those packaged shows. 18 12. Defendant William Morris Endeavor Entertainment, LLC (“WME”) is, and at all 19 material times was, a limited liability company existing under the laws of the State of Delaware, 20 with its principal place of business in Los Angeles County, California. 21 13. Defendant Creative Artists Agency, LLC (“CAA”) is, and at all material times 22 was, a limited liability company existing under the laws of the State of California, with its 23 principal place of business in Los Angeles County, California. 24 14. Defendant United Talent Agency, LLC (“UTA”) is, and at all material times was, 25 a limited liability company existing under the laws of the State of Delaware, with its principal 26 place of business in Los Angeles County, California. 27 /// 28 /// 7 COMPLAINT 1 15. Defendant International Creative Management Partners, LLC (“ICM”) is, and at 2 all material times was, a limited liability company existing under the laws of the State of 3 Delaware with its principal place of business in Los Angeles County, California. 4 16. Each of the defendant Agencies is a talent agency comprised of numerous 5 individual talent agents, who as partners, principals, or employees of the Agency, render services 6 on behalf of the defendant talent agency. In rendering such services, each individual agent acted 7 on behalf of his or her respective Agency, which at all times remained liable for the acts or 8 omissions of the individual agent. 9 17. The true names and capacities of defendants sued herein as Does 1 through 10 are 10 unknown to plaintiffs, who therefore sue these defendants by fictitious names. Plaintiffs will 11 amend the complaint to allege these Doe defendants’ true names and capacities when they are 12 ascertained. 13 14 JURISDICTION AND VENUE 18. The Superior Court of the State of California has jurisdiction in this matter 15 because the Agencies regularly conduct business in California. Venue is proper in in the Superior 16 Court for Los Angeles County because each of the defendant Agencies has its principal place of 17 business in Los Angeles County, California. Venue is proper in the West Division of the 18 Superior Court for Los Angeles County because one or more of the defendants and one or more 19 of the plaintiffs resides in the West Division and the causes of action set forth herein arose in the 20 West Division. 21 FACTUAL ALLEGATIONS 22 The WGA and the Role of Talent Agents 23 19. Writers are responsible for producing the literary material that forms the basis for 24 thousands of television episodes and films produced every year (many in California) which 25 generate billions of dollars in annual revenue. The literary material provided by writers includes, 26 among other things, stories, outlines, treatments, screenplays, teleplays, dialogue, scripts, plots, 27 and narrations. This literary material forms the heart of every television show and film; without 28 it, the shows and films could not be made. 8 COMPLAINT 1 20. The Individual Plaintiffs’ work as writers is exemplary of the work performed by 2 all writers in the television and film industry. They have written for hit shows including 24, 3 Beverly Hills 90210, Buffy the Vampire Slayer, Designated Survivor, Dexter, Homeland, 4 Homicide: Life on the Street, Moonlight, The Mentalist, Reba, Private Practice, iZombie, and 5 NYPD Blue. They also ran and/or created shows including 90210, Cold Case, Hit and Run, Joan 6 of Arcadia, Madam Secretary, Saints and Strangers, and The Wire. 7 21. The Guilds and their predecessor organizations have represented writers in the 8 American film and television industries since the 1930s. The Guilds serve as the exclusive 9 collective bargaining representative for writers in negotiations with film and television producers 10 to protect and promote the rights of screen, television, and new media writers. The Guilds’ long- 11 term efforts on writers’ behalf have resulted in a wide range of benefits and protection for 12 writers, including minimum compensation, residuals for reuse of a credited writer’s work, 13 pension and health benefits, and protection of writers’ creative rights. 14 15 16 22. The Guilds also administer the process for determining writing credits for feature films, television, and new media programs. 23. The Guilds sponsor seminars, panel discussions, and special events in order to 17 educate its members about their rights and the steps they can take to protect their own interests. 18 The Guilds also conduct legislative lobbying and public relations campaigns to promote their 19 members’ interests. 20 24. Approximately 2000 television and film production companies are parties to the 21 industrywide agreement knows as the Writers Guild Theatrical and Television Basic Agreement 22 (“MBA”), negotiated between the Guilds and the AMPTP. The AMPTP serves as the collective 23 bargaining representative of the major studios and production companies, while the Guilds 24 jointly serve as the exclusive representative for all of the writers employed under the MBA. The 25 MBA establishes minimum terms for the work performed by writers for the MBA-signatory 26 employers, including the minimum compensation that writers must be paid for such work. 27 28 25. The MBA expressly permits writers to negotiate “overscale” employment terms— that is, compensation and other employment terms that exceed the minimums set forth in the 9 COMPLAINT 1 MBA. Although the Guilds are the exclusive collective bargaining representatives for writers 2 employed by MBA-signatory companies, the Guilds have chosen to allow writers to negotiate 3 directly with the companies regarding overscale compensation and other terms of employment. 4 At all times relevant to this action, Article 9 of the MBA has provided: 5 The terms of this Basic Agreement are minimum terms; nothing herein contained 6 shall prevent any writer from negotiating and contracting with any Company for 7 better terms for the benefit of such writer than are here provided, excepting only 8 credits for screen authorship, which may be given only pursuant to the terms and 9 in the manner prescribed in Article 8. The Guild only shall have the right to waive 10 any of the provisions of this Basic Agreement on behalf of or with respect to any 11 individual writer. 12 26. The film and television production industry now operates almost entirely on a 13 freelance basis. Writers are generally hired by production companies to work on individual 14 projects for the duration of those projects, rather than working for the company on a long-term 15 basis across multiple different projects. In order to find employment, negotiate for overscale 16 employment terms, obtain career guidance, and protect their professional interests, writers 17 traditionally retained agents (and the agencies with which those agents were associated) to 18 represent them in their dealings with the production companies. The Agencies (through the 19 individual agents associated with each of them) agree to provide such representation to their 20 clients. In doing so, the Agencies exercise authority delegated to them by the WGA, the writers’ 21 exclusive collective bargaining representative. 22 The Mechanics of Packaging 23 27. Historically, the agents retained by writers (and other creative professionals) were 24 compensated for representing their clients by being paid a percentage (generally ten percent) of 25 the amount paid to clients for work procured while the agent serves as their representative. This 26 traditional arrangement aligned the economic interests of the writers and their agents, because 27 any increase in the compensation received by the writers resulted in a corresponding increase in 28 /// 10 COMPLAINT 1 the agents’ compensation. The same arrangement persists in film and television industries in 2 other countries, such as Canada, where the system of packaging fees does not exist. 3 28. Over time, conditions in the television and film industry changed dramatically in 4 a manner that has had significant negative consequences for writers, while drastically increasing 5 the profits of the Agencies and their agents. 6 29. First, there has been overwhelming consolidation within the market for talent 7 agents. 8 overwhelming majority of writers, actors, directors, and other creative workers involved in the 9 American television and film industries. By virtue of this consolidation, the Agencies exert 10 Because of this consolidation, the four defendant Agencies now represent the oligopoly control over access to almost all key talent in the television and film industries. 11 30. Second, the Agencies have moved away from the commission-based model of 12 compensation described above. Instead, the Agencies have shifted to a “packaging fee” model 13 whereby the Agencies negotiate and collect payments directly from the production companies 14 that employ their writer-clients and that are tied to the revenues and profits of the “packaged” 15 program, rather than receiving a percentage of their clients’ compensation. Approximately 90% 16 of all television series are now subject to such packaging fee arrangements. 17 31. In television, the packaging fee for a particular project normally consists of three 18 components: an upfront fee of $30,000 to $75,000 per TV episode, an additional $30,000 to 19 $75,000 per episode that is deferred until the show achieves net profits, and a defined percent of 20 the TV series’ modified adjusted gross profits for the life of the show. 21 32. Packaging fees are generally based on a “3-3-10” formula, with the upfront fee 22 defined as 3% of the “license fee” paid by the studio for the program, the deferred fee also 23 defined as 3% of the “license fee” paid by the studio for the program, and the profit participation 24 defined as 10% of the program’s modified adjusted gross profits. The “license fee” used to 25 determine that portion of the packaging fee is an amount set by the production company or 26 negotiated between the Agency and the production company as part of the packaging fee 27 agreement. 28 /// 11 COMPLAINT 1 33. Each of the Agencies uses this formula for packages including writers and other 2 talent it represents. Packaged programs on which the Individual Plaintiffs worked include, but 3 are not limited to, 90210 (CAA); Beauty and the Beast (CAA); The Bridge (WME); Cold Case 4 (CAA); Designated Survivor (CAA); Do No Harm (UTA); Homeland (WME); Homicide: Life 5 on the Street (CAA); iZombie (UTA); Judging Amy (CAA); Madam Secretary (UTA and CAA); 6 Magnum PI (CAA and ICM); Private Practice (CAA); Reba (CAA); and ‘Til Death (CAA and 7 ICM). 8 34. Packaging fees generate hundreds of millions of dollars per year in revenue for 9 the Agencies—far more than they would earn from a traditional 10% commission from their 10 clients. The Agencies have used the income generated through packaging to raise private capital, 11 and their business has become so lucrative that some Agencies are now planning to become 12 publicly held corporations. 13 35. The packaging fees paid to the Agencies often exceed the amount their clients are 14 paid for work on a particular program. On Cold Case, for example, CAA was entitled to a 15 packaging fee of $75,000 per episode, an amount that exceeded Meredith Stiehm’s per episode 16 pay for at least the first two years of the series. 17 36. With almost all television series being packaged, the Agencies now earn much of 18 their revenue from representing their own economic interests, rather than from maximizing the 19 earnings of their clients. 20 21 22 23 Harm Caused by Packaging 37. The packaging fee model of Agency compensation harms writers in multiple respects. 38. Because the first component of any packaging fee is part of a TV episode’s 24 budget, payment of that amount diverts financial resources away from the Agencies’ clients and 25 the projects on which they are working and to the Agencies themselves. Even where the 26 Agencies are paid a lower end upfront packaging fee of, for example, $25,000 per episode, that 27 represents the cost of hiring approximately one additional high-level writer or two additional 28 lower-level writers for the program. Where a studio or network insists that the budget for a 12 COMPLAINT 1 program be limited or reduced, showrunners cannot reduce the amount paid to the Agencies as a 2 packaging fee, and must instead cut resources from other portions of the program’s budget. 3 39. Likewise, because the third component of the packaging fee is based on defined 4 gross profits, the payment of the packaging fee to an Agency has the effect of reducing the profit 5 participation of the Agency’s own clients, including writers, as the writers’ share of the profit 6 points is correspondingly reduced. Worse, the Agencies in many instances negotiate more 7 favorable profit definitions for themselves than for their own writer clients. 8 Individual Plaintiffs are entitled or would have been entitled but for the Agencies’ malfeasance 9 to profit participation for their prior work on packaged shows including, but not limited to, 10 90210; Cold Case; Homicide: Life on the Street; Saints and Strangers; and Judging Amy. As a 11 result of the fact that packaging fees are frequently paid to the Agencies before the profits that 12 determine writer’s profit are calculated, because of the Agencies’ higher priority profit 13 definitions, the ongoing amount paid to those Individual Plaintiffs is substantially reduced. 14 Indeed, even though CAA has not performed any work in connection with Cold Case since the 15 show was originally purchased by CBS approximately two decades ago, CAA is presently being 16 paid almost exactly the same amount for that successful show that Meredith Stiehm is paid in in 17 profit participation for having created the show and served as showrunner for seven years. 18 Likewise, although David Simon has never received any profit distributions for Homicide: Life 19 on the Street because his agency, CAA, negotiated a profit definition for Simon that was based 20 on net rather than gross profits, on information and belief, CAA to this day continues to receive 21 profit from that show because it secretly negotiated a far more favorable profit definition for 22 itself, without Simon’s knowledge or consent. 23 CAA’s negotiation of an unfavorable net profit definition for Simon, and had sought to improve 24 his profit definition in further negotiations; however, when Simon’s attorney sought to amend his 25 original net profit definition, Simon learned that CAA had represented to the production 26 company that Simon had already agreed to that profit definition and that the production company 27 and NBC had already invested substantial sums in preproduction. CAA further represented to 28 Simon that if he did not agree to the original, unfavorable net profit definition, he would not only 13 Many of the Indeed, Simon had strenuously objected to COMPLAINT 1 lose the option payments and other monies that were due him under the contract, but would also 2 be liable to the production company and NBC for the preproduction costs. It was not until many 3 years later that Simon learned not only that CAA had simultaneously represented the director and 4 the head of the production company in the negotiations, but also that all other profit participants 5 in Homicide, including CAA and the director, had profit definitions based on gross rather than 6 net profits. 7 40. Because the Agencies’ compensation in a packaging arrangement is tied to the 8 budget for and profits generated by a particular program, rather than to the amount paid to their 9 clients working on that program, the Agencies’ financial incentive to protect and increase their 10 clients’ pay is eliminated. Agencies receive packaging fees whether their client’s pay increases 11 or decreases, and even if their client no longer works on a particular program. Indeed, Agencies 12 actually have a disincentive to advocate for greater pay for their clients, because the Agencies’ 13 share of profits would be at risk of being reduced. 14 41. For Deirdre Mangan’s work on iZombie, The Crossing, and Midnight Texas, for 15 example, UTA refused to negotiate a title and compensation commensurate with Mangan’s 16 experience, insisting that “studio policy” precluded her from receiving a better title or salary. 17 She subsequently learned that was not true, and her lawyer was sometimes able to negotiate 18 better terms even after UTA refused to do so. On information and belief, UTA refused to 19 negotiate a title and compensation commensurate with Mangan’s experience in order to protect 20 its own profit participation. Mangan’s experience with packaging is typical of writers in the 21 early and mid-stages of their careers. Indeed, Agencies routinely refuse to negotiate greater 22 salaries for staff writers, instead taking the first offer made by the studio in order to protect the 23 Agencies’ packaging fee. 24 42. The Agencies also have little incentive to protect the pay their clients have 25 already earned. For example, when Chip Johannessen’s script for Saints and Strangers was 26 produced by National Geographic, his Agency ICM pressured him to accept a reduced profit 27 participation and to forgo a series sales bonus that he had been entitled to under his original 28 contract, informing Johannessen that there was not sufficient money in the budget for the show 14 COMPLAINT 1 to be made unless Johannessen agreed, which he reluctantly did. After legal fees, Johannessen’s 2 expenses on the show nearly equaled his compensation, such that Johannessen’s net earnings 3 were close to zero on that project. Johannessen only learned several months later that ICM had 4 extracted a substantial packaging fee with a more favorable profit definition for itself from Saints 5 and Strangers, thus deliberately enriching itself at Johannessen’s expense. 6 43. The Agencies themselves recognize that their interests are no longer aligned with 7 those of the writers they represent, but are instead aligned with the production companies that 8 employ their clients. The head of WME has stated publicly, for example, that his most important 9 client is now a head executive at Warner Brothers. 10 11 12 44. Packaging fees also distort agents’ incentives when seeking employment opportunities for their clients. 45. In order to avoid splitting a packaging fee with other agencies, the Agencies 13 pressure their clients to work exclusively on projects where the other key talent is also 14 represented by the client’s Agency. The Agencies exert this pressure even where the client and 15 the agent know that the project will be best served by involving someone from another Agency. 16 Many of the Individual Plaintiffs have found that their Agency presents them with opportunities 17 to work only on projects involving other talent from the same Agency. Their ability to obtain 18 work and compensation commensurate with their experience has been severely hampered by the 19 Agencies’ failure to present them with other work opportunities. 20 46. The Agencies also choose not to sell packaged programs to the production 21 companies willing to pay the most for the programs, or that will be the best creative partner for 22 the programs. Instead, the Agencies choose to sell packaged programs to the companies willing 23 to pay the largest packaging fee. 24 47. Agencies use popular writers as leverage to secure packaging fees, even where 25 doing so does not serve the economic or creative interests of those writers. Indeed, Agencies 26 have at times actively suppressed the wages of their own clients to secure packaging fees, in one 27 case offering to secure a writer’s work for a studio for $14,000 an episode, instead of the $20,000 28 he had previously earned. 15 COMPLAINT 1 48. The consequences of packaging for television writers have been profound. 2 Despite growing demand for television series, driven in part by the entry of companies like 3 Netflix, Amazon, Apple, and Facebook into the production and distribution business, and despite 4 the unprecedented profitability of the entertainment industry as a whole, overscale compensation 5 for writers has been stagnant over the last 15 years. When inflation is accounted for, writers are 6 now being paid less than they were more than a decade ago. This is true even for top-level 7 writers, show creators, and showrunners. 8 49. While the practice of packaging has its historical roots in television, the Agencies 9 now also extract packaging fees on feature film projects, particularly on independent productions 10 not financed or produced by a major studio. On packaged feature projects, the Agencies are paid 11 a fee from a film’s budget or financing, in addition to taking a 10% commission from their 12 clients. Agencies also use their leverage to steer film projects to their own clients or affiliated 13 companies to function as financiers or distributors of the finished film. 14 50. While the economics of film packaging differs in some respects from packaging 15 agreements in television, the conflict of interest is the same. The Agencies leverage their access 16 to high profile clients for their own benefit, and negotiate compensation for themselves, 17 undisclosed to their clients and unrelated to what their clients earn. 18 51. Feature film packaging has a direct detrimental effect on writers. As the feature 19 film business has contracted, increasing pressure on screenwriters, the Agencies have not 20 advocated against declining screenwriter pay or unpaid work because the Agencies make most of 21 their money on packaging fees paid by production companies for television and film projects, 22 and have little incentive to fight for clients from whom they are simply paid a commission. As 23 in television, the effect of these conflicts has been to exert downward pressure on writer 24 compensation. 25 52. In addition, because packaging fees are based in part on gross profit, the payment 26 of the film’s packaging fee may, depending on the profit definition, have the effect of reducing 27 the profit participation of the Agency’s own clients, including writers. And because a portion of 28 the packaging fee comes out of a film’s budget, payment of the fee diverts financial resources 16 COMPLAINT 1 away from the Agencies’ clients and the projects on which they are working and to the Agencies 2 themselves. 3 53. Film packaging fees also distort agents’ incentives when seeking employment 4 opportunities for their clients. In order to avoid splitting a packaging fee with other agencies, the 5 Agencies pressure their clients to work exclusively on projects where the other key talent is also 6 represented by the client’s Agency. The Agencies exert this pressure even where the client and 7 the agent know that the project will be best served by involving someone from another Agency. 8 54. The Agencies also choose not to sell packaged programs to the production 9 companies willing to pay the most for the film, or that will be the best creative partner for the 10 film. Instead, the Agencies choose to sell packaged films to the companies willing to pay the 11 largest packaging fee. 12 13 14 55. Agencies use popular writers as leverage to secure film packaging fees, even where doing so does not serve the economic or creative interests of those writers. 56. Packaging fees have deprived writers of conflict-free and loyal representation in 15 their negotiations with production companies. By depriving writers of conflict-free and loyal 16 representation, packaging reduces the compensation paid to writers for their work on particular 17 programs. Agencies receiving a packaging fee do not negotiate on their clients’ behalf with the 18 same vigor they would if they were being paid a portion of their clients’ compensation, and their 19 financial interest in the program creates an incentive for them to hold down or reduce the amount 20 paid to their clients. The Guilds’ members, including the Individual Plaintiffs, have seen their 21 writing wages stagnate or decrease over the last decade, particularly on shows packaged by their 22 Agencies, despite the substantial expansion of the television market in recent years. 23 57. Because of the Agencies’ breaches of their fiduciary duties, writers—including 24 each of the Individual Plaintiffs—have been forced to retain and pay other professionals, 25 including lawyers and talent managers, to protect their interests, frequently paying as much as 26 15% or 20% in additional commissions to these other professionals to secure the services that 27 talent agencies alone once provided. Because writers’ agents no longer represent their clients 28 vigorously and without conflicts, writers, including the Individual Plaintiffs, rely upon their 17 COMPLAINT 1 talent managers to identify employment opportunities and upon their lawyers to negotiate the 2 terms of their contracts with production companies. 3 themselves should be providing to the writers they represent. That writers must pay others for 4 these services further reduces their take-home pay. 5 58. These are services that the agents Barbara Hall’s situation is typical in this respect. Although she was represented 6 by UTA until April 2019, to protect her interests, she also had to retain a business manager, 7 talent manager, and lawyer, who collectively receive a total of 20% of her income. The end 8 result of these additional payments Hall must make is that the per episode payment to UTA for 9 Madam Secretary is approximately equal to Hall’s post-commission payment per episode for her 10 work as showrunner on that program. A second agency, CAA, also receives a separate per 11 episode packaging fee for Madam Secretary. 12 59. Packaging also denies writers employment opportunities. The Agencies are 13 resistant to placing their clients with programs or films that are already connected to talent from 14 other Agencies, because doing so will reduce or eliminate any packaging fee they might be paid 15 for the clients’ work. Many potential projects have been delayed or killed solely because of a 16 dispute between an Agency and a production company over the packaging fee. Programs are 17 sold to the production companies willing to pay the largest packaging fee, rather than those 18 willing to provide the Agencies’ writer clients with the greatest compensation or those that will 19 serve as the best creative partners for the programs. 20 60. The Agencies routinely fail to disclose the conflicts of interest inherent in 21 packaging. The packaging agreement, including the profit definition, is negotiated directly 22 between the Agency and production company, with no notice or disclosure to the writer-clients. 23 Indeed, virtually no writer has ever seen a packaging agreement. The Individual Plaintiffs were 24 never provided with the specific details of the packaging agreements applicable to the packaged 25 programs on which they worked. 26 61. Agencies have never obtained their writer-clients’ valid, informed consent to the 27 Agencies’ flagrant conflicts of interest. Such a valid, informed consent would require the 28 disclosure not just of the existence of the conflict but also of all of the specific details of any 18 COMPLAINT 1 packaging agreement between the Agency and the production company. 2 however, not only fail to disclose the material terms of the packaging agreements to their writer- 3 clients, but in many instances deliberately conceal the existence of the conflict of interest by 4 informing their writer-clients that packaging benefits the client because they will not pay 5 commission, when in fact the Agencies’ packaging fees exceed the 10% commission the 6 Agencies are forgoing. 7 62. The Agencies, In fact, the Agencies sometimes do not even disclose the fact that packaging has 8 occurred. For example, David Simon was not informed that the show Homicide: Life on the 9 Street, which was based on a book Simon had previously published, had been packaged by his 10 Agency, CAA. Indeed, CAA purported to represent Simon both as the seller of his intellectual 11 property and as a writer on the show, while simultaneously representing the purchaser of 12 Simon’s IP, thus deliberately suppressing Simon’s compensation and profit participation. 13 63. Packaging also causes substantial harm to the Guilds. In order to protect their 14 members’ interests, the Guilds have devoted substantial resources to monitoring packaging (to 15 the extent possible given the Agencies’ failure to provide the Guilds or their writer-clients with 16 clear information about the terms of their packaging arrangements); to educating members about 17 packaging, the risks and harms created by agents’ conflicted representation, and the steps they 18 can take to protect themselves; to engaging in political advocacy and public outreach to increase 19 awareness of the harms resulting from packaging; and to preparing a comprehensive campaign to 20 end packaging’s harms and abuses. 21 enforcing writers’ contractual rights because the Agencies, conflicted by their packaging 22 practices, are reluctant or unwilling to defend writers’ interests in the face of contract violations. 23 Finally, packaging has reduced the Guilds’ revenue from member dues, because dues are 24 dependent in part upon writers’ compensation. 25 64. The Guilds have also incurred additional expenses in Packaging fees have harmed the market for writers’ work by draining money from 26 television and film production budgets, and by diverting to the Agencies funds that could 27 otherwise be used to finance production and the employment of writers. 28 /// 19 COMPLAINT 1 65. Because of packaging, writers face a less competitive market for their services, 2 with the Agencies generally attempting to place writers only with projects tied to other clients of 3 the Agency, rather than with all available projects, and failing to negotiate the best possible 4 compensation for their clients. 5 66. Likewise, the Agencies use their oligopoly control over key talent to pressure 6 writers whose agents are not affiliated with the Agencies to fire those agents and retain a 7 defendant Agency in order to have access to employment on the Agency’s packages. 8 67. Finally, packaging fees have harmed the overall market for television and film 9 production by establishing a fixed set of financial terms production companies must pay for each 10 “package” an Agency provides, and by preventing production companies from retaining the best 11 writers and other talent for each project, regardless of agency affiliation. 12 FIRST CAUSE OF ACTION 13 Breach of Fiduciary Duty 14 (brought by the Individual Plaintiffs on their own behalf, and by the Guilds on behalf of 15 their members, against all Defendants) 16 17 18 19 20 68. Plaintiffs re-allege and incorporate by reference the allegations set forth in the foregoing paragraphs. 69. Under California law, an agent owes a fiduciary duty to his or her principal, which includes the duty of loyalty and the duty to avoid conflicts of interest. 70. At all times relevant to the Complaint, the Agencies owed fiduciary duties to the 21 Individual Plaintiffs, and each of them, and to all members of the Guilds represented by the 22 Agencies. 23 71. ICM willfully breached its fiduciary duty to Patti Carr, Chip Johannessen, and 24 other members of the Guilds represented by ICM by placing its own interests above that of its 25 clients Carr, Johannessen, and other members of the Guilds, and by increasing its own profits at 26 the expense of Carr, Johannessen, and other members of the Guilds, which constituted a breach 27 of the duty of loyalty. ICM further willfully breached its fiduciary duty to Carr, Johannessen, 28 and other members of the Guilds by proceeding with the representation under numerous conflicts 20 COMPLAINT 1 of interest without obtaining valid, informed consent to those conflicts of interest from Carr, 2 Johannessen, or other members of the Guilds. 3 72. CAA willfully breached its fiduciary duty to Patti Carr, Ashley Gable, Barbara 4 Hall, Deric A. Hughes, David Simon, Meredith Stiehm, and other members of the Guilds 5 represented by CAA by placing its own interests above that of its clients Carr, Gable, Hall, 6 Hughes, Simon, Stiehm, and other members of the Guilds, and by increasing its own profits at 7 the expense of Carr, Gable, Hall, Hughes, Simon, Stiehm, and other members of the Guilds, 8 which constituted a breach of the duty of loyalty. CAA further willfully breached its fiduciary 9 duty to Carr, Gable, Hall, Hughes, Simon, Stiehm, and other members of the Guilds by 10 proceeding with the representation under numerous conflicts of interest without obtaining valid, 11 informed consent to those conflicts of interest from Carr, Gable, Hall, Hughes, Simon, Stiehm, or 12 other members of the Guilds. 13 73. UTA willfully breached its fiduciary duty to Barbara Hall, Deirdre Mangan, and 14 other members of the Guilds represented by UTA by placing its own interests above that of its 15 clients Hall, Mangan, and other members of the Guilds, and by increasing its own profits at the 16 expense of Hall, Mangan, and other members of the Guilds, which constituted a breach of the 17 duty of loyalty. UTA further willfully breached its fiduciary duty to Hall, Mangan, and other 18 members of the Guilds by proceeding with the representation under numerous conflicts of 19 interest without obtaining valid, informed consent to those conflicts of interest from Hall, 20 Mangan, or other members of the Guilds. 21 74. WME willfully breached its fiduciary duty to Meredith Stiehm and other 22 members of the Guilds represented by WME by placing its own interests above that of its clients 23 Stiehm and other members of the Guilds, and by increasing its own profits at the expense of 24 Stiehm and other members of the Guilds, which constituted a breach of the duty of loyalty. 25 WME further willfully breached its fiduciary duty to Stiehm and other members of the Guilds by 26 proceeding with the representation under numerous conflicts of interest without obtaining valid, 27 informed consent to those conflicts of interest from Stiehm, or other members of the Guilds. 28 /// 21 COMPLAINT 1 75. As a result of ICM’s willful breaches of its fiduciary duty to Carr and 2 Johannessen, they suffered significant damages, including but not limited to lost wages, lost 3 employment opportunities, and other economic losses. 4 76. As a result of CAA’s willful breaches of its fiduciary duty to Carr, Gable, Hall, 5 Hughes, Simon, and Stiehm, they suffered significant damages, including but not limited to lost 6 wages, lost employment opportunities, and other economic losses. 7 77. As a result of UTA’s willful breaches of its fiduciary duty to Hall and Mangan, 8 they suffered significant damages, including but not limited to lost wages, lost employment 9 opportunities, and other economic losses. 10 78. As a result of WME’s willful breaches of its fiduciary duty to Stiehm, she 11 suffered significant damages, including but not limited to lost wages, lost employment 12 opportunities, and other economic losses. 13 79. As a result of the Agencies’ willful breaches of their fiduciary duties to the 14 Guilds’ members, the Guilds’ members suffered significant harm, including but not limited to 15 lost wages, lost employment opportunities, and other economic losses. 16 80. Plaintiffs are informed and believe that Defendant Agencies, and each of them, 17 committed the aforementioned acts maliciously, fraudulently, and oppressively, with the 18 wrongful intention of injuring Plaintiffs, from an improper and evil motive amounting to malice, 19 and in conscious disregard of Plaintiffs’ rights. The Individual Plaintiffs are therefore entitled to 20 recover punitive damages from Defendants in an amount according to proof. 21 SECOND CAUSE OF ACTION 22 Unfair Competition, Cal. Bus. & Prof. Code §17200 et seq. 23 (brought by the Individual Plaintiffs on their own behalf, and by the Guilds on their own 24 behalf, against all Defendants) 25 26 27 28 81. Plaintiffs re-allege and incorporate by reference the allegations set forth in the foregoing paragraphs. 82. California’s Unfair Competition Law, Cal. Bus. & Prof. Code §17200 et seq. (“UCL”), prohibits “unlawful, unfair or fraudulent business act[s].” 22 COMPLAINT 1 83. The Agencies’ packaging practice violates the UCL in three respects. 2 84. First, packaging fees are an “unlawful” or “unfair” practice because they 3 constitute a breach of the Agencies’ fiduciary duty to their clients. 4 85. Second, packaging fees are an “unfair” practice because they deprive writers of 5 loyal, conflict-free representation; divert compensation away from the writers and other creative 6 talent that are responsible for creating valuable television and film properties; and undermine the 7 market for writers’ creative endeavors. 8 9 10 86. Third, packaging fees are an “unlawful” or “unfair” practice because they violate Section 302 of the federal Labor-Management Relations Act (“LMRA”), 29 U.S.C. §186, the socalled “anti-kickback” provision of the Taft-Hartley Act. 11 87. Subsection (a) of LMRA Section 302 makes it unlawful for “any employer or 12 association of employers … or who acts in the interest of an employer to pay, lend, or deliver, or 13 agree to pay, lend, or deliver, any money or other thing of value … to any representative of any 14 of his employees who are employed in an industry affecting commerce.” 29 U.S.C. §186(a) 15 (emphasis added). The same section makes it unlawful for “any person to request, demand, 16 receive, or accept, or agree to receive or accept, any payment, loan, or delivery of any money or 17 other things of value prohibited by subsection (a).” Id. §186(b). 18 88. The television and film industries are industries that affect commerce. Indeed, 19 those industries generate hundreds of millions of dollars of national and international revenue 20 each year. 21 89. The production companies that produce the television shows and films on which 22 the Individual Plaintiffs and other WGA-member writers work are employers for the purposes of 23 LMRA Section 302. 24 90. The Agencies are representatives of the production companies’ employees for the 25 purposes of LMRA Section 302. Indeed, the very reason Agencies are retained by writers is to 26 represent those writers in procuring employment opportunities and negotiating wages in excess 27 of the minimums established by the MBA. The Agencies exercise authority delegated to them 28 /// 23 COMPLAINT 1 by the WGA (which otherwise has the exclusive right to negotiate on behalf of the represented 2 employees) when representing their writer clients in negotiations with the production companies. 3 91. The key feature of any packaging fee agreement is the payment of a negotiated 4 fee by the employer production company to the employee representative Agency. 5 payments are expressly prohibited by and unlawful under LMRA Section 302, and therefore 6 constitute an unlawful business practice for the purposes of California’s UCL. 7 92. Such The Individual Plaintiffs and the Guilds have lost money or property as a result of 8 the Agencies’ packaging fee practices. As noted above, the Individual Plaintiffs have been 9 required to spend money to retain other professionals to provides services their agents should 10 have been providing; have seen their compensation reduced by virtue of packaging fees; and 11 have been denied employment opportunities because of the misalignment of incentives that 12 results from the Agencies’ packaging fee practices, as alleged in more detail above. The Guilds 13 have been required to expend their own resources monitoring the Agencies’ packaging fees, 14 educating members about the Agencies’ packaging fee abuses, preparing a comprehensive 15 campaign to address those abuses and end packaging fees, and enforcing their members’ 16 contractual rights after the Agencies failed to do so. The Guilds have also lost dues revenue due 17 to packaging fees. 18 93. As a result of the Agencies’ unlawful and unfair business practices, Plaintiffs are 19 entitled to injunctive relief, and disgorgement of agency profits, and the Individual Plaintiffs are 20 entitled to restitution. Cal. Bus. & Prof. Code §17203. 21 PRAYER FOR RELIEF 22 WHEREFORE, Plaintiffs respectfully request that the Court: 23 24 25 1. Declare that packaging fees constitute a breach of the Agencies’ fiduciary duty to their writer clients; 2. Declare that packaging fees constitute an unfair and/or unlawful practice under 26 California’s UCL because they either breach the Agencies’ fiduciary duty to their writer clients; 27 violate LMRA Section 302; deprive writers of loyal, conflict-free representation, divert 28 compensation away from the writers and other creative talent that are responsible for creating 24 COMPLAINT 1 valuable television and film properties, or undermine the market for writers’ creative endeavors; 2 or all of the above; 3 3. Enjoin each defendant Agency from entering into new packaging fee agreements 4 in which one or more writer clients of the Agency works as a writer, or from receiving any 5 monetary payments or other things of value from any production company that employs any 6 writer client of the Agency; 7 4. Order the Agencies, and each of them, to provide an accounting of all moneys 8 received by the Agencies in connection with projects or programs for which Individual Plaintiffs 9 or other WGA members were employed as writers; 10 5. Require the Agencies to pay restitution to Individual Plaintiffs in an amount equal 11 to the funds that would have been paid to Individual Plaintiffs in the absence of the Agencies’ 12 unlawful and unfair packaging fees; 13 6. 14 packaging fees; 15 7. 16 Require the Agencies to disgorge all profits generated from unlawful and unfair Award Individual Plaintiffs compensatory and punitive damages based on Defendants’ breach of fiduciary duty; 17 8. Award Plaintiffs their costs and attorneys’ fees; and 18 9. Award such further and additional relief as is just and proper. 19 20 21 22 23 24 DATED: April 17, 2019 Stephen P. Berzon Stacey Leyton P. Casey Pitts Rebecca Lee ALTSHULER BERZON LLP Anthony R. Segall Juhyung Harold Lee ROTHNER, SEGALL & GREENSTONE 25 /s/ P. Casey Pitts P. Casey Pitts 26 Attorneys for Plaintiffs 27 28 25 COMPLAINT