Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 1 of 44 Page ID #:1 1 2 3 4 5 6 7 8 9 10 11 12 13 Jeffrey L. Kessler (pro hac vice forthcoming) jkessler@winston.com David L. Greenspan (pro hac vice forthcoming) dgreenspan@winston.com Isabelle Mercier-Dalphond (pro hac vice forthcoming) imercier@winston.com WINSTON & STRAWN LLP 200 Park Avenue New York, NY 10166-4193 Telephone: 212-294-6700 Facsimile: 212-294-4700 Diana Hughes Leiden (SBN: 267606) dhleiden@winston.com Shawn R. Obi (SBN: 288088) sobi@winston.com WINSTON & STRAWN LLP 333 South Grand Avenue, 38th Floor Los Angeles, CA 90071-1543 Telephone: 213-615-1700 Facsimile: 213-615-1750 Attorneys for Plaintiff WILLIAM MORRIS ENDEAVOR ENTERTAINMENT, LLC 14 15 UNITED STATES DISTRICT COURT 16 CENTRAL DISTRICT OF CALIFORNIA 17 WESTERN DIVISION 18 19 20 21 22 23 24 WILLIAM MORRIS ENDEAVOR ENTERTAINMENT, LLC, Plaintiff, v. Case No. 2:19-cv-05465 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT WRITERS GUILD OF AMERICA, JURY TRIAL DEMANDED WEST, INC. and WRITERS GUILD OF AMERICA, EAST, INC., Defendants. 25 26 27 28 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 2 of 44 Page ID #:2 1 Plaintiff William Morris Endeavor Entertainment, LLC (“WME”), by its 2 undersigned counsel, alleges, upon knowledge as to itself and its own acts and on 3 information and belief as to all other matters, against Defendants Writers Guild of 4 America, West, Inc. (“WGAW”) and Writers Guild of America, East, Inc. (“WGAE”) 5 as follows: 6 7 8 9 I. 1. INTRODUCTION This Complaint concerns defendants WGAW and WGAE’s wanton abuse of union authority in violation of antitrust law. 2. Hollywood talent representation is fiercely competitive. There are 10 hundreds of agencies and thousands of talent agents competing to represent, among 11 others, writers for television and film productions. And the writers, in turn, compete to 12 obtain agents’ representation services. 13 3. Defendants WGAW and WGAE (together, “WGA”) are the two labor 14 unions who represent writers in the entertainment industry. 15 members’ exclusive collective bargaining representatives. Plaintiff WME is a talent 16 agency that—up until April 12, 2019—had been franchised by WGA to represent its 17 writer-members (and showrunner-members) in their individual negotiations for 18 employment with television and film studios. 19 4. They serve as their WGA’s leadership, however, has orchestrated a series of anticompetitive 20 agreements to prevent WME (and other talent agencies) from representing writers if the 21 agencies (i) do not stop their long-accepted, industry-standard practice of “packaging” 22 talent to studios in exchange for packaging fees, and (ii) do not stop affiliating with 23 companies that produce or distribute content. WME has not agreed to these illegal 24 conditions set forth in WGA’s so-called “Code of Conduct” (attached hereto as Exhibit 25 A), and thus WGA has organized an unlawful group boycott to prevent WME from 26 continuing to represent WGA member-writers. To date, approximately 1,300 writers 27 (television and film) and showrunners have fired WME as their talent agency for work 28 as writers because of WGA’s boycott. 1 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 3 of 44 Page ID #:3 1 5. Antitrust law’s protection of market competition can be in conflict with 2 labor law’s protection of collective bargaining. Balancing the two, Congress and the 3 courts have granted certain union activity a limited statutory or non-statutory labor 4 exemption to the antitrust laws. When a union crosses the limits of activity protected 5 by the labor exemptions, its conduct becomes fully subject to antitrust scrutiny just like 6 any other organization. WGA has crossed those limits here by coercing members and 7 non-members alike into a network of anticompetitive agreements that restrain 8 competition in commercial markets over which WGA lacks any legitimate labor law 9 authority or interest. 10 6. Specifically, WGA’s leadership has orchestrated a group boycott of WME 11 and other talent agencies who have refused to agree to WGA’s categorical prohibitions 12 of agency packaging and agency-affiliated content companies. 13 important way that shows and movies get made in the market(s) for TV and film content 14 production, and agency-affiliates who produce shows and movies are important new 15 competitors in these markets. The group boycott, which stifles this competition, as well 16 as competition in the market to represent writers, is a classic, per se violation of the 17 antitrust laws. 18 7. Packaging is an To effectuate its boycott, WGA leaders have coerced their member-writers 19 and showrunners into agreeing to refuse to deal with WME and other talent agencies 20 who will not agree to stop packaging or affiliating with content companies by 21 threatening these individuals with expulsion and other union discipline that would 22 imperil their ability to work, and threatening their healthcare without a legitimate basis 23 to do so. WGA has coerced certain talent agencies to join its illegal boycott under the 24 threat of losing their writer-representation businesses. 25 continues to try, to coerce Hollywood studios to refuse to deal with agents who will not 26 sign the Code of Conduct by, among other things, threatening the studios with 27 objectively bad faith litigation. Finally, WGA is inducing certain unlicensed managers 28 and lawyers into joining the conspiracy by telling them that they should perform the And WGA has tried, and 2 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 4 of 44 Page ID #:4 1 work of boycotted talent agents even though it is illegal for them to do so. In particular, 2 California (and New York) statutory law limits unlicensed managers or lawyers—as 3 opposed to licensed agents—from procuring film and television employment for writers 4 and other talent. But WGA has wrongly told unlicensed managers and lawyers that 5 pursuant to a “limited delegation of [WGA’s] bargaining authority” they can and should 6 procure employment for writers. 7 8. WGA leadership has engaged in an unprecedented abuse of union 8 authority that has pushed their Guilds beyond the protection of the labor exemptions. 9 Their tactics are unlawful, and WGA’s outright bans on agency packaging and content 10 11 affiliates do not serve any legitimate union interest. 9. WGA has a legitimate interest in ensuring that potential conflicts are 12 managed and disclosed, and in protecting its members from the adverse effects of actual 13 conflicts of interest, if and when they arise. But WGA’s boycott to enforce the Code of 14 Conduct is intended to block agents from competing to sell any packages, and to block 15 agency-affiliates from facilitating production or distribution of any content, regardless 16 of whether there is an actual conflict with, or harm to, WGA members. This distinction 17 is critical because, in reality, agency packaging and agency-affiliated content companies 18 generally provide an economic benefit to the writers that the agencies and WGA 19 represent. And the writers who participate in packaging, and seek opportunities from 20 agency-affiliate content companies, do so because of the economic benefits they receive 21 (e.g., obtaining work that might not otherwise be available and saving a 10% 22 commission on packaged programming). 23 10. WGA’s absolute bans on agency packaging and content affiliates are thus 24 grossly over-restrictive, unnecessary to redress any legitimate union concern, and 25 intrude upon commercial activities in markets that WGA has no authority to regulate. 26 Moreover, WGA’s actions will not only harm the economic interests of its own writer- 27 members, including the showrunners who work as producers, but they will also harm 28 3 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 5 of 44 Page ID #:5 1 the economic interests of talent represented by other entertainment guilds (e.g., actors 2 and directors) who want to benefit from packaging and agency content affiliates. 3 11. What WGAW President David Goodman has aptly conceded to be a WGA 4 “power grab” by its leadership in order to “conquer” the most successful talent agencies 5 like WME, is also a whiplash-inducing about-face of seismic proportion. Up until April 6 12, 2019, WGA had expressly permitted packaging for more than forty years. For a 7 generation, WGA utilized narrowly-tailored agent regulations to prevent any harm to 8 union members from actual—not potential—conflicts of interest. 9 12. Whatever WGA’s leadership might argue about agency packaging or 10 agency-affiliate content companies in the abstract, forming a group boycott to wipe it 11 all out and to restrict competition in commercial markets outside of the union’s labor 12 law authority is per se illegal. Any legitimate interest that WGA has in protecting its 13 members from the potential harms of conflicted agents could be accomplished by 14 continuing to implement a rule (like the one that WGA had for more than 40 years) 15 prohibiting agents from acting contrary to the interests of their writer-clients, with a 16 case-by-case determination of any allegation that a writer was in fact harmed by any 17 conflict. 18 13. WGA has never offered a cogent explanation for why the agency 19 regulations permitting packaging and content affiliates that served its members so well 20 for more than 40 years would not continue to do so now. Even so, WME tried—over- 21 and-over in discussions with WGA—to address any arguably bona fide WGA concern 22 about these practices. WGA’s leadership responded—when they responded at all— 23 with dismissiveness and derision and made no bones about their self-proclaimed 24 objective to effectuate a “power grab” and “conquer” the major talent agencies and 25 restrain trade in commercial markets. That is not a legitimate union interest. Indeed, 26 being perceived as “powerful” is not a pejorative status for a talent agency—influence 27 and clout with the studios are features and services that many writers want agents to 28 have. 4 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 6 of 44 Page ID #:6 1 14. The challenged WGA agreements to enforce the Code of Conduct 2 provisions banning agency packaging and agency-affiliate content companies— 3 including the participation of showrunners (producers), unlicensed managers and 4 attorneys, and other non-labor parties—should be enjoined and declared illegal under 5 Section 1 of the Sherman Act; WGA should be found liable for triple the damages to 6 WME’s writer-representation and packaging businesses that WGA has caused, or will 7 cause, by virtue of its antitrust violation; and WGA should be ordered to pay WME’s 8 attorney’s fees and litigation costs. 9 10 II. 15. PARTIES Plaintiff WME is a limited liability company existing under the laws of the 11 State of Delaware, with its principal place of business in Los Angeles, California. 12 WME’s predecessor, the William Morris Agency (“WMA”), was formed in 1898. 13 WMA became WME following its merger with the Endeavor agency in 2009. WME is 14 a talent agency that represents top performing artists, authors and entertainers, including 15 writers for television and film productions and showrunners. 16 16. Defendant WGAW is a California non-profit corporation headquartered in 17 Los Angeles, California. WGAW is a labor union representing thousands of writers in 18 the motion picture, television and new media industries. 19 17. Defendant WGAE is a New York non-profit corporation headquartered in 20 New York City, New York. WGAE is a labor union representing thousands of members 21 who write content for motion pictures, television, news and digital media. Writers who 22 live east of the Mississippi River at the time of their initial membership are enrolled as 23 members of WGAE, whereas those to the west are members of WGAW. 24 18. Although WGAW and WGAE are separate entities, they work in tandem 25 to represent their member-writers. Among other things, WGAW and WGAE negotiated 26 and entered into an industrywide collective bargaining agreement, the “Minimum Basic 27 Agreement” or “MBA” (relevant excerpts are attached hereto as Exhibit B), with the 28 Alliance of Motion Picture and Television Producers, Inc. (“AMPTP”). AMPTP is the 5 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 7 of 44 Page ID #:7 1 multi-employer collective bargaining representative for hundreds of motion picture and 2 television producers who employ writers. 3 19. Together, WGAW and WGAE have orchestrated the conspiracy to enforce 4 the Code of Conduct and implement an unlawful group boycott of WME and other 5 talent agencies who refuse to sign the Code. 6 20. WGA is empowered under federal labor law, as the writers’ exclusive 7 collective bargaining representative, to designate (or “franchise”) licensed agents to 8 represent union members in individual negotiations for employment with the production 9 studios (i.e., AMPTP members).1 But WGA’s authority to designate and regulate 10 agents in their representation of writers is limited to this labor market and by state 11 licensing laws. 12 21. From September 22, 1976 through April 12, 2019, WGA regulated talent 13 agents through the Artists’ Manager Basic Agreement (“AMBA”) between WGA and 14 the Association of Talent Agents (“ATA”), attached hereto as Exhibit C.2 Up until April 15 12th, WGAW and WGAE had designated and authorized WME and numerous other 16 talent agencies under the AMBA to represent their members in individual bargaining 17 with AMPTP members; WME has now lost its designation because of the illegal “power 18 grab” by WGA’s leadership. 19 III. 22. 20 21 JURISDICTION AND VENUE This Court has subject-matter jurisdiction pursuant to 15 U.S.C. §§ 15 and 26, and 28 U.S.C. §§ 1331 and 1337. 23. 22 This Court has personal jurisdiction over WGAW under 15 U.S.C. § 15 23 because it resides in this District. This Court has personal jurisdiction over WGAE 24 because it is a corporation that transacts business in this District under 15 U.S.C. § 22. 25 26 27 28 Such individual negotiations are subject to the limitations of the MBA, e.g., which sets minimum scales for compensation. 2 ATA was previously known, at the time the AMBA was signed, as the Artists Managers Guild. See Ex. C, AMBA, at 1. 1 6 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 8 of 44 Page ID #:8 1 Indeed, WGAE performs services on behalf of its members in this District; in 2 conjunction with WGAW, WGAE entered into the Minimum Basic Agreement with 3 AMPTP, which is located in this District; and, in conjunction with WGAW, WGAE 4 attempted to negotiate a new AMBA with ATA, which is also located in this District. 5 The Court also has personal jurisdiction over both WGAW and WGAE because they 6 are engaged in a conspiracy to adopt and implement a Code of Conduct that was directed 7 at, and has a direct, substantial, reasonably foreseeable and intended effect of causing 8 injury to the business or property of persons and entities located in this District, 9 including Plaintiff WME. As such, WGAE’s activities in this District are continuous 10 and systematic or, at the very least, WGAE purposefully directed its activities toward 11 this District, WME’s claims arise in significant part out of WGAE’s activities in this 12 District, and this Court’s exercise of personal jurisdiction would be reasonable. 13 24. Venue is proper in this District under 15 U.S.C. § 15 and 28 U.S.C. 14 §§ 1391(b), (c) and (d) because WGAW and WGAE are subject to this Court’s personal 15 jurisdiction with respect to this action, and a substantial part of the events giving rise to 16 the claims for relief stated herein occurred in this District. Furthermore, WME has 17 suffered and will continue to suffer harm in this District as a result of the conspiracy 18 entered into by WGAW and WGAE averred herein. 19 20 25. and Defendant WGAW both reside in Los Angeles County. 21 22 This action should be assigned to the Western Division. Plaintiff WME IV. 26. FACTUAL BACKGROUND WME has earned its place at the vanguard of writer talent representation 23 the way that any agency (or individual agent) succeeds in the market for representing 24 writers: by making the clients’ interests paramount. Any agency that put its own 25 interests ahead of a client’s would not represent that client for very long. Accordingly, 26 WME has always committed—and continues to commit—to refrain from any and all 27 behavior that would harm the interests of its clients. 28 commitment to WGA through the AMBA for over 40 years. But WME will not agree Indeed, WME made this 7 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 9 of 44 Page ID #:9 1 to WGA’s total and anticompetitive bans on agency packaging and agency-affiliate 2 content companies because of unsupported and counter-factual allegations of harm to 3 writers from purported conflicts of interest. The reality is that agency packaging and 4 content affiliates provide significant benefits to writers who (used to be able to) exercise 5 their freedom of choice to take advantage of such practices. In the words of WGA’s 6 leadership, the boycott to enforce their unlawful bans is nothing more than a “power 7 grab” masquerading as a legitimate exercise of union authority. 8 A. Packaging Helps Content Get Produced, Saves Writers’ Commissions, and Has Been Expressly Permitted by WGA for More Than 40 Years 27. Packaging refers to a long-standing practice—dating back to at least the 9 10 11 1950s—through which talent agencies provide a “package” of talent (e.g., writers, 12 actors, and directors) to a studio in exchange for “packaging fees.” Writers—and the 13 rest of the packaged talent—do not pay any commission to their agents (customarily, 14 10%) in a packaged deal. 15 28. By putting the creative elements together for the production companies, 16 agency packaging facilitates the development of television and film projects that might 17 otherwise not get produced. Packaging, therefore, is not the means by which talent 18 agents negotiate the terms and conditions of writers’ employment; it is instead a service 19 that talent agencies provide to amass the various elements of new TV shows and films 20 and facilitate their production. Packaging creates more opportunities for writers, 21 directors, and actors. Moreover, talent agencies like WME support and provide talent 22 for packaged programming throughout the life of the project. 23 29. Packaging is an important part of WME’s business because it helps WME 24 get its clients’ shows and films made. When WME pitches a packaged show or film, it 25 provides “packageable element(s)” (e.g., writer(s), actor(s), and director(s)) to a studio 26 in exchange for “packaging fees.” WME’s incentive is to build the best elements into 27 a package to maximize the chances that the project will be sold and that it will last for 28 as long as possible. Packaging—which can be, and often is, conducted by multiple 8 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 10 of 44 Page ID #:10 1 agencies (who then “share” the packaging fee)—thus puts talent agencies in the 2 business of helping to get their clients’ shows and films made, and helping these projects 3 succeed. This of course creates more job opportunities for both WME and non-WME 4 represented writers. Without packaging, some shows and films would never have been 5 produced, and the writing opportunities these productions create would never have 6 existed. 7 30. Unsurprisingly, therefore, many writers have hired WME because of its 8 packaging services. Writers want to benefit from meeting with, and being paired with, 9 in-demand directors and actors. The “package” of talent often enhances demand for the 10 writer’s script and services and leads to the production of TV shows and movies that 11 would not otherwise get made. 12 31. Packaging arrangements are often idiosyncratic and always separately 13 negotiated, but in broad strokes, television packages include an upfront license fee, a 14 deferred (but capped) license fee, and a percentage of the profits of the rare series that 15 is profitable (and the profits percentage, in the case of WME, keys off of revenue 16 definitions that vary from package-to-package, based upon the profit-sharing definition 17 of WME’s top earning client on the show). 18 32. Although WGA regularly refers to packages as a 3% (upfront license 19 fee)—3% (deferred license fee)—10% (backend fee) formula, this is not an accurate 20 description of how packaging works in general, much less in any particular package: 21 a. The upfront license fee, for example, is often times not a percentage 22 at all, but a fixed base number that studios will pay per episode. And 23 when the upfront fee is a percentage, it is capped. The upfront 24 license fee depends on the distribution channels (e.g., basic versus 25 premium cable versus streaming video on demand) and on the 26 content (e.g., drama versus comedy). 27 28 b. The deferred license fee—sometimes referred to as the “middle 3” in a 3%-3%-10% package—is rarely paid anymore. In the past 20 9 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 11 of 44 Page ID #:11 1 years, for example, WME believes it had just a tiny handful of series 2 earn a “middle 3” deferred license fee. And, again, when the 3 deferred fee is on a percentage basis, it is capped. 4 c. The backend fee is also rarely paid for the simple reason that only a 5 small fraction of shows ever achieve profitability (which, again, is 6 defined differently from package-to-package). Upon information 7 and belief, over the past 5 years, roughly (and merely) 5 series on 8 the big four broadcast networks (ABC, CBS, FOX, and NBC) have 9 achieved backend fees.3 Indeed, WGAW President David Goodman 10 recently acknowledged that, more than ever in today’s Hollywood 11 of studio “short orders and streaming vertical integrations,” “[w]e 12 have no idea what profits are going to be on future shows.” 13 33. WGA claims that its about-face in banning talent agency packaging is 14 proper because all packages create a harmful conflict of interest. Specifically, WGA 15 contends that talent agencies like WME will always care more about their package fees 16 (which increase when a show or movie is profitable) than their clients’ compensation, 17 and thus do not work to maximize writers’ or showrunners’ pay in a packaged 18 production. 19 34. This contention of harmful conflicts is not only false, but astounding in its 20 implausibility after WGA expressly endorsed agency packaging for more than 40 years. 21 From September 22, 1976 until April 12, 2019, WGA’s agent regulations were set forth 22 in the AMBA which provided, among other things, that whenever a talent agency took 23 a package fee, it could not additionally commission the writers who were part of the 24 package. See AMBA, § 6(c). In other words, up until April 12, WGA did not merely 25 26 27 28 3 As averred above, talent agency work on a packaged show exists for the life of the series. To give a few examples, WME continues to represent its talent on the show, may need to identify new talent for the show, and may need to find a new network for a cancelled series. 10 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 12 of 44 Page ID #:12 1 fail to ban packaging as a supposedly invariable harmful conflict to writers’ interests, 2 WGA affirmatively endorsed packaging for more than 40 years as a practice that 3 benefitted its members by eliminating the 10% commission they would otherwise have 4 to pay, and by facilitating the production of shows and films that might not otherwise 5 get made. 6 35. The claim by WGA’s current leadership that all packaging is uniformly 7 bad for writers is even more implausible given the significant differences between the 8 terms of different packages negotiated by different agencies with different studios under 9 different circumstances for different programming. 10 36. Furthermore, industry data refutes WGA’s claim that writers are worse-off 11 economically by being included in a package rather than paying commissions to their 12 agents. Indeed, WME’s experience is that its packages have been supported by, and 13 economically benefitted, its writer-clients. 14 37. According to WGA itself, packaging has become the industry norm in 15 scripted television. For example, WGA alleges in a lawsuit it filed against WME and 16 other talent agencies that “[a]pproximately 90% of all television series are now subject 17 to such packaging fee arrangements.” As such, WGA’s prohibition on packaging 18 impacts how the vast majority of series are developed and will lead to a reduction in 19 output of television shows. It will similarly lead to a reduction in the output of feature 20 films. 21 38. Further, WGA freely admits that its agency packaging ban will impact not 22 only the writers that it represents, but actors and directors as well as the production 23 businesses of the studios: “Can’t the agencies just get a package fee with actors and 24 directors? It is possible but very unlikely. . . .” See WGA Agency Campaign FAQ No. 25 19, attached hereto as Exhibit D. And, just as with writers, when WME-represented 26 actors or directors are included in a package, they do not pay any commission to WME. 27 28 39. WGA has also structured its group boycott to enforce its packaging ban in a way that requires WGA members to participate in the boycott even when they work 11 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 13 of 44 Page ID #:13 See Agency Code of Conduct 1 as showrunners or producers rather than writers. 2 Implementation FAQ, attached hereto as Exhibit E, at 1 (“What if I’m a TV 3 writer/producer? Some unsigned agencies have been telling clients they can still 4 represent them as producers. This isn’t true. Because your writer and producer 5 functions are inextricably linked, and are deemed covered writing services under the 6 MBA, you cannot continue to be represented as a producer by an agency not signed to 7 the Code of Conduct.”). But WGA itself recognizes that it does not have the authority 8 to do so. See Ex. D, WGA FAQ No. 48 (“The Guild cannot direct you to leave your 9 agency for non-writing areas of work.”). The anticompetitive impact of WGA’s 10 packaging ban thus is intended to—and does—extend far beyond the labor market for 11 writers that is WGA’s only legitimate union interest. Indeed, one need look no further 12 than WGA’s own membership, which includes showrunners who act as producers and 13 hire and supervise writers, and thus are non-labor parties in this capacity. 14 B. Agency-Affiliated Content Companies Have Created New Jobs and Enhanced Competition Against Traditional Hollywood Studios 40. WME has, for many years, represented films and shows (e.g., helped 15 16 17 promote the sale and distribution of films overseas), and represented clients who are 18 producers and financiers of television and film content without any objection or ban by 19 WGA. 20 41. WME’s parent company, Endeavor, sought to expand its content offerings 21 with the formation, in 2017, of Endeavor Content. Endeavor Content promotes itself 22 as a competitive alternative to existing studios that empowers talent by giving writers 23 and other talent greater creative control and better financial terms than would otherwise 24 be available. As such, Endeavor Content is an alternative to, and competitor of, the 25 traditional Hollywood studios that comprise AMPTP’s membership. The additional 26 competition that Endeavor Content and other agency-affiliates provide directly benefits 27 writers, actors and directors, as well as consumers of television and film content. 28 12 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 14 of 44 Page ID #:14 1 42. Endeavor Content is a separate entity from WME, by corporate structure, 2 and housed in a different building, although the two are affiliated through their common 3 parent company. WME has no ownership interest in Endeavor Content. WME and 4 Endeavor Content have separate day-to-day management. WME agents do not (and 5 may not) work for Endeavor Content. WME agents do not have any creative control 6 over Endeavor Content projects. WME agents do not hire or fire writers (or anyone 7 else) on Endeavor Content projects. And WME does not share any confidential client 8 information with Endeavor Content. 9 43. Endeavor Content often pays more for writers’ intellectual property than 10 other studios and gives writers greater creative control. WGA itself concedes that talent 11 agency-affiliates like Endeavor Content may pay writers more than traditional studios. 12 See Ex. D, WGA FAQ No. 15 (writers “have received beneficial deals with the new 13 producing entities connected to the agencies” because “offering a better deal to some 14 creators is a common approach of new entrants—like Netflix, Amazon, and Apple”). 15 44. In fact, there have been public reports that WGA Negotiating Committee 16 Co-Chair and former WGA West President Chris Keyser is the executive producer and 17 writer on a new project with Endeavor Content. Public reports further indicate that Mr. 18 Keyser agreed to a packaging arrangement on the production. He wrote in response to 19 the public reports that “Every additional studio that provides work for writers is a good 20 thing. That includes Endeavor Content, WiiP and CCM.” Mr. Keyser is hardly alone. 21 Beau Willimon—the President of WGA East—also had a show with Endeavor Content. 22 45. Indeed, Endeavor Content creates more opportunities for writers. Many of 23 these writers are not represented by WME. And WME-represented writers (or, for that 24 matter, any writer) may choose to pursue these opportunities with Endeavor Content or 25 not, just as they may choose whether to retain a talent agent whose agency has an 26 affiliated content company, or not. Writers can and do change agencies with regularity; 27 writers can and do choose the content companies with which they want to work. And 28 if a writer prefers not to pursue opportunities from an agency content affiliate, Endeavor 13 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 15 of 44 Page ID #:15 1 Content’s creation of new writing opportunities frees-up more opportunities for the 2 writers who prefer to look elsewhere. No matter what an individual writer prefers about 3 working with an agency-affiliated content company, the emergence of these companies 4 increases output and the opportunities for writers and other talent and is thus undeniably 5 procompetitive. 6 46. WME’s corporate affiliation with Endeavor Content is known to all of its 7 writer-clients, who often seek opportunities from Endeavor Content specifically 8 because of its affiliation with WME. And WME requires that WME-represented writers 9 who seek writing opportunities from Endeavor Content be represented by independent 10 counsel in their negotiations with Endeavor Content (and, in some circumstances, WME 11 has even reimbursed the legal fees). 12 47. Any potential for a harmful conflict of interest arising out of a WME 13 writer-client who chooses to pursue an opportunity with Endeavor Content is eliminated 14 by the series of prophylactic measures described above that WME has voluntarily put 15 in place to protect against any such potential harm. 16 48. But WGA’s new regulations flatly bar talent agencies from being 17 “affiliated with[] any entity or individual engaged in the production or distribution of 18 motion pictures.”4 19 C. Through the AMBA, WGA Permitted Agency Packaging and Agency-Affiliate Content Companies for More Than 40 Years 49. In 1976, WGA and ATA, of which WME is one of the more than 100 20 21 22 members, entered into an agent-franchise agreement known as the AMBA, i.e., the 23 24 25 26 27 28 4 “Motion pictures” in WGA’s Code of Conduct is defined as works written by writers under the collective bargaining agreement with AMPTP, which refers to motion pictures for exhibition on television and in a theater or similar location in which a fee or admission charge is paid by the viewing audience. See Ex. B, MBA, Art. 1(A)(1)(2). What WGA means by “engaged in” production or distribution is less clear, but in any event, WGA has stated that it intends to ban agency affiliation with entities like Endeavor Content through this language. 14 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 16 of 44 Page ID #:16 1 Artists’ Manager Basic Agreement. Last year, however, WGA decided to exercise its 2 termination right and, as a result, the AMBA expired on April 12, 2019, after it was 3 extended from its earlier April 6 termination date. The AMBA was in place for nearly 4 43 years. 5 50. As averred above, through the AMBA, WGA designated and authorized 6 (or “franchised”) agents to represent WGA members in individual contract negotiations 7 with AMPTP members. The AMBA expressly endorsed packaging for all of this time 8 through narrowly-tailored regulations, such as (i) a regulation preventing agents from 9 taking their 10% commissions from writers on projects for which they are receiving a 10 packaging fee (Ex. C, AMBA, § 6(c)) and (ii) a regulation prohibiting agents from 11 conditioning their representation of writers upon the writers’ agreement to participate 12 in packages (see id., § 6(c) ¶¶ E, G, H). The AMBA further required talent agencies to 13 fund a WGA Negotiator to be available for writers who wanted assistance negotiating 14 package terms. See id., Exhibit N. And the AMBA did not prohibit franchised agencies 15 from having content affiliates. 16 51. To the extent that packaging-specific or other WGA regulations were 17 insufficient to protect WGA members from a potentially harmful conflict of interest, 18 WGA additionally included a requirement in the AMBA that an agent “act with 19 reasonable diligence, care and skill at all times in the interest of his Writer-Client and 20 shall not act against his Writer-Client’s interest.” Id., § 8(e). 21 52. In the event a writer—or, for that matter, WGA itself—believed that any 22 talent agency had breached its obligations under the AMBA to act in the interests of the 23 writers the agent represented, there were mechanisms for arbitration of the dispute set 24 forth in the AMBA. See id., § 3. Upon information and belief, not one writer has ever 25 26 27 28 15 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 17 of 44 Page ID #:17 1 filed a claim under the AMBA against WME based on any claimed failure by WME to 2 act in her/his best interests.5 3 53. Although package terms, packaging fees and the ubiquity of packaging 4 have evolved over time, WGA’s unsupported claims about why all packages 5 supposedly give rise to injurious conflicts of interest would have been as applicable to 6 packaging in 1976 as to packaging in 2019. For example, WGA currently contends that 7 talent agencies: 8 a. 9 always seek to maximize their packaging fee instead of the writer’s compensation; 10 b. 11 always have an incentive to reduce the amount paid to a writer because the packaging fee is tied to a show’s revenues and profits; 12 c. always seek to prevent writers from working on projects with talent 13 represented by a competitor agency to avoid splitting the packaging 14 fee; and 15 d. always pitch their writer clients’ work to production companies that 16 will pay the highest packaging fee, rather than to production 17 companies that will pay the highest compensation to the client. 18 While WME believes that each of these claims is false, nothing about the fundamentals 19 of packaging has changed in the last 43 years such that WGA could not have made these 20 very same assertions in 1976. 21 packaging through the AMBA and never took the position that it should be banned 22 because it was harmful to its members. 23 54. Yet, for 43 years, WGA endorsed talent agency Another fact that has not changed in 43 years is WGA’s labor law duty of 24 fair representation to its members. If banning all packaging by agents were actually 25 required to protect the interests of WGA members, and a lawful exercise of union 26 27 28 5 The AMBA also provided for the appointment of a standing committee to consider and recommend proposed changes to the agreement. Ex. C, AMBA, § 1(d). Such a committee was never appointed. 16 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 18 of 44 Page ID #:18 1 authority, then WGA’s duty of fair representation would have caused it to implement a 2 packaging ban decades ago. 3 benefitted its members, and used tailored regulations in the AMBA (to the extent any 4 protections were needed) to ensure that agents acted in the interests of their writer- 5 clients who were included in a packaged project. And, again, the AMBA was silent on 6 agency content affiliates. 7 55. Instead, however, WGA recognized that packaging The sufficiency of the tailored regulations in the AMBA to prevent any 8 harm to WGA members from potential agent conflicts of interests arising from 9 packaging or content affiliates is confirmed by 43 years of history. 10 56. Not only does WGA’s boycott to enforce its Code of Conduct turn this 11 history on its head, as WGA has admitted, its boycott will effectively prohibit actors 12 and directors—who are not represented by WGA—from continuing to benefit from 13 agency packaging and agency content affiliates. It would also prohibit WGA’s own 14 members who choose to benefit from these commercial activities from continuing to do 15 so when they work as showrunners or producers. 16 D. WME’s Negotiations with WGA Over the Code of Conduct Were an Exercise in Futility—WGA’s Leadership Was Intent on Implementing its Group Boycott to Effectuate its “Power Grab” and to “Divide and Conquer” the Major Agencies 57. WGA provided a termination notice under the AMBA in April 2018. As 17 18 19 20 averred below, terminating the AMBA was the first step in what WGAW President 21 David Goodman called the union’s “power grab.” Specifically, WME and ATA learned 22 that one of the main reasons for this termination was WGA leadership’s decision to try 23 to ban all agency packaging and agency-affiliate content companies in order to “grab 24 power” from the agencies who engaged in such activities to benefit their clients. 25 58. WME—independently and through ATA—attempted to engage WGA in 26 negotiations over a new AMBA. WME offered to provide data on packaging, to answer 27 questions about Endeavor Content, to be transparent, and to engage in a meaningful 28 dialogue about any arguably bona fide WGA concerns and to identify any adjustments 17 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 19 of 44 Page ID #:19 1 to the AMBA—short of outright and anticompetitive prohibitions on packaging and 2 content affiliates—that might assuage any legitimate WGA concerns. 3 59. WGA, however, would not even meet with ATA’s negotiating committee, 4 of which WME is a member, until February 5, 2019. In this meeting, the WGA 5 negotiating committee members who attended simply read out loud their Code of 6 Conduct proposals and responded to a few questions from ATA representatives by 7 providing incomplete and elusive answers. WGA’s representatives also refused to 8 provide any context or explanation for its proposals to ban all agency packaging and 9 affiliation with content companies. 10 60. ATA (and WME) met with WGA leadership again on February 19, 2019. 11 ATA explained packaging and content affiliates in detail, provided an overview of the 12 industry landscape, and answered WGA’s questions. ATA further explained why 13 WGA’s proposals would harm—not help—WGA member-writers and other talent. But 14 it was more of the same from WGA leadership—no meaningful, substantive 15 engagement with the talent agencies who were trying to address WGA’s own ostensible 16 concerns. 17 61. Subsequently, WGA publicly released a February 13 speech by WGAW’s 18 President (Goodman) in which he declared war on WME and the other major talent 19 agencies, admitting that the union was “making a power grab” and intended to “divide 20 and conquer” the agency business. There can be little doubt from statements like this, 21 and WGA’s tactics overall, that WGA’s leadership has decided to misuse WGA’s power 22 as a union to specifically target and cause injury to WME and a handful of the other 23 most prominent talent agencies. Indeed, WGA is seeking to induce, and has induced, a 24 number of smaller agencies to join its illegal boycott by devising the Code of Conduct 25 to force the larger agencies out of the writer-representation market based on their 26 participation in the market for content (whether through packaging or content affiliates 27 or both). 28 18 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 20 of 44 Page ID #:20 1 62. On February 21, 2019, WGA circulated its “new set of agency 2 regulations”—which WGA named the “Code of Conduct”—to the then-franchised 3 agencies. Its key new features were the bans on agency packaging and agency content 4 affiliates. WGA would also require that the agencies turn over to the unions the 5 confidential employment contracts of the agencies’ clients, writers and showrunners 6 alike, without the permission of those clients. 7 63. Less than two weeks later, on March 4, WGA publicly declared that 8 negotiations with ATA had reached an “impasse.” Further efforts by ATA and WME 9 to engage WGA in negotiations about the Code of Conduct led to more meetings, but 10 ultimately proved to be exercises in futility. WGA went so far as to encourage agents 11 at the four largest agencies—including WME—to quit employment with their agencies 12 and form new companies that would sign the Code of Conduct. 13 64. On March 12, 2019, ATA responded to each WGA proposal with a specific 14 counter-proposal. Following meetings with hundreds of writer-clients, ATA drafted 15 and presented to WGA the “Statement of Choice” through which the talent agencies 16 were prepared to commit to a series of tailored agent regulations that would have 17 eliminated any plausibly legitimate WGA concern about packaging. At the same 18 meeting, ATA and WME proposed regulations to provide for protection against any 19 claimed adverse effects on writers from agency-affiliate content companies. ATA’s 20 proposals were rejected out of hand. 21 65. On March 14, 2019, WGA proposed a new “WGA Franchise Agreement,” 22 as the successor to the AMBA. The WGA Franchise Agreement was essentially the 23 Code of Conduct re-purposed as a draft agreement between WGA and talent agencies. 24 It thus included the complete bans on agency packaging and agency-affiliated content 25 companies that WGA’s leadership had been threatening from the outset. 26 leadership further articulated its belief that only the guilds—not talent agents—are 27 capable of advising writers, and that it had decided that all agency packaging and 28 agency-affiliated content companies must be eliminated. ATA once again explained 19 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT WGA Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 21 of 44 Page ID #:21 1 that it could not agree to these absolute bans—which would hurt not only the agencies, 2 but also writers and showrunners, as well as actors, directors, and consumers—and 3 urged continued negotiations. 4 66. On March 21, 2019, ATA submitted a new proposal to WGA, which 5 included comprehensive provisions that would preserve the ability of agents to engage 6 in packaging and have a content affiliate, but with tailored regulations and protections 7 to prevent any purported risk of harm to WGA members. See ATA Comprehensive 8 Proposal to WGA, attached hereto as Exhibit F, at 6-9. 9 67. All of these proposals were again summarily rejected by WGA’s 10 leadership and negotiating committee, which was intent on stopping at nothing short of 11 banning agency packaging and agency-affiliate content companies in order to “grab 12 power” from and “divide and conquer” the largest talent agencies. 13 68. From March 27 through March 31, 2019, WGA called for a vote of its 14 members on the following question: “Do you authorize the Board and Council to 15 implement an Agency Code of Conduct, if and when it becomes advisable to do so, 16 upon expiration of the current Artists’ Managers Basic Agreement on April 6, 2019?” 17 On March 31, 2019, WGA announced that a substantial majority of its members had 18 voted “yes” to this question. 19 69. Despite the limited nature of the question that was put to a vote— 20 authorizing “a” code of conduct “if and when it becomes advisable to do so”—WGA 21 leadership seized-upon the results as a supposed proxy for it to order the membership 22 to fire their agents and to order a collective agreement to boycott WME and any other 23 agents who did not agree to follow whatever Code of Conduct WGA leadership 24 preferred.6 25 26 27 28 6 Upon information and belief, over half of WGA’s members do not even have agents, yet they were permitted to participate in a vote to boycott certain agency practices. 20 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 22 of 44 Page ID #:22 1 70. On April 6, 2019—the day on which the AMBA was then-scheduled to 2 expire—a small group of representatives from ATA initiated a meeting with WGA, 3 during which WGA agreed not to implement its group boycott and Code of Conduct 4 until the end of the day on Friday, April 12, in order to determine if a new AMBA could 5 be negotiated. WGA then informed its members of the brief extension, but further 6 warned that: “Unless we have an agreed-upon deal, the WGAW Board and WGAE 7 Council have voted that the Code of Conduct will go into effect at 12:01 am on 8 Saturday, April 13th.” 9 71. From April 6 to April 12, 2019, ATA representatives met with WGA and 10 presented further proposals in an effort to address WGA’s purported concerns without 11 agreeing to a flat ban on packaging or content affiliates. But WGA was not willing to 12 accept anything short of absolute bans. These negotiations also proved to be futile and 13 the unlawful group boycott directed by WGA’s leadership was implemented on April 14 13. Despite this hostile and unlawful conduct by WGA leadership, WME continued to 15 work towards a negotiated solution with the WGA, to no avail. 16 72. As recently as June 7, in a last-ditch effort to avoid filing this action, 17 WME—through ATA—made yet another proposal to WGA, doing what it would never 18 advise a writer-client to do: negotiate against herself. WME participated in this effort 19 because, above-all-else, WME wants to be able to serve its clients, and remains open to 20 agreeing to additional protections for writers against actual, harmful conflicts of interest 21 without banning the packaging or content affiliates that benefit writers and other talent. 22 For its part, WGA did not even bother to show up to the meeting with its full negotiating 23 committee, declined to engage in any meaningful discussion at the meeting, and then 24 waited nearly two weeks to respond—via a web-posted video directed to its members— 25 that it would not offer any counter-proposal whatsoever to ATA. 26 73. As recounted above, the conduct of the WGA leadership has demonstrated 27 that they never intended to negotiate in good faith with ATA or the talent agencies. 28 WGA’s prohibitions on agency packaging and agency-affiliate content companies— 21 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 23 of 44 Page ID #:23 1 and its group boycott to enforce them—were a fait accompli from the beginning of the 2 negotiations because anything less than these outright bans would not have served 3 WGA leadership’s “power grab” and desire to “divide and conquer” the major agencies. 4 E. WGA Enforces the Code of Conduct Against WME and Other Talent Agencies Through a Conspiracy to Boycott Non-Compliant Agents 74. On April 13, 2019, WGA leadership began to implement its group boycott 5 6 7 and Code of Conduct and instructed its members that they were prohibited from being 8 represented by an agent who does not agree to the Code of Conduct: “No Current WGA 9 member can be represented by an agency that is not franchised by the Guild in 10 accordance with Working Rule 23.” Ex. E, Agency Code of Conduct Implementation 11 FAQ, at 1. Working Rule 23, in turn, provides that: “No writer shall enter into a 12 representation agreement whether oral or written, with any agent who has not entered 13 into an agreement with the Guild covering minimum terms and conditions between 14 agents and their writer clients.” Id. As WGA explained, “[a]s of April 13, 2019 that 15 agreement is the WGA Agency Code of Conduct.” Id. 16 75. The Code of Conduct includes the same provisions banning all agency 17 packaging and content affiliation that WGA had proposed at the outset of its 18 negotiations with ATA. Specifically, the following Code of Conduct provisions are 19 now being implemented by WGA through its unlawful group boycott: 20 a. No Agent shall have an ownership or other financial interest in, or 21 shall be owned by or affiliated with, any entity or individual engaged 22 in the production or distribution of motion pictures.7 b. 23 No Agent shall have an ownership or other financial interest in, or shall be owned by or affiliated with, any business venture that would 24 25 26 27 28 7 The term “motion pictures” refers to work written by writers under the Minimum Basic Agreement. See n.4 supra. 22 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 24 of 44 Page ID #:24 1 create an actual or apparent conflict of interest with Agent’s 2 representation of a Writer. 3 c. No Agent shall derive any revenue or other benefit from a Writer’s 4 involvement in or employment on a motion picture project, other 5 than a percentage commission based on the Writer’s compensation 6 or fee. 7 d. 8 9 10 No Agent shall accept any money or thing of value from the employer of a Writer. Ex. A, Code of Conduct, at 2. 76. WGA has engaged in a conspiracy and group boycott to enforce these 11 prohibitions against WME and other agencies in a variety of ways with both labor and 12 non-labor parties. 13 77. Within less than two weeks of implementing its boycott, WGA publicly 14 declared that over 7,000 of its members had fired their agents. Roughly 1,300 WGA 15 members have fired WME as their agent—including showrunners and television and 16 feature film writers. 17 F. WGA Leadership Coerces Most of its Members into a Horizontal Group Boycott Against WME and Other Non-Compliant Talent Agents 78. WGA Working Rule 23 provides that members can only be represented by 18 19 20 agencies that sign a franchise agreement with WGA. WGA asserts that talent agents 21 who do not sign the Code of Conduct may not represent WGA members with respect 22 to the option and sale of literary material or the rendition of writing services in a field 23 of work covered by the Minimum Basic Agreement (and even for fields of work not 24 covered by the MBA, such as when a writer works as a showrunner or producer). 25 79. WGA’s Executive Director (David Young) and President (David 26 Goodman) have instructed WGA members that they must join the “collective action by 27 WGA members” to refuse to deal with any agents or agencies who refuse to sign the 28 23 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 25 of 44 Page ID #:25 1 Code of Conduct. See Ex. E, Agency Code of Conduct Implementation FAQ, at 1 (“If 2 my agency does not sign the Code of Conduct, do I have to tell them they cannot 3 represent me? Yes, but you will do so as part of a collective action by WGA members.”). 4 80. WGA leadership has also threatened union discipline against any of its 5 members who continue to work with such “non-franchised” agencies and agents. See 6 id., at 3 (“How will Working Rule 23 be enforced? … While individual members have 7 a voice and vote, after the Guild decides on collective action members are obligated to 8 follow Guild rules, which will be enforced. … Article X of the WGAW and WGAE 9 Constitutions guides Guild disciplinary procedures.”); see also Rules for 10 Implementation of the WGA Code of Conduct for Agents, attached hereto as Exhibit 11 G, ¶ 4 (“Members in violation of Working Rule 23 shall be subject to discipline in 12 accordance with Article X of the WGAW Constitution.”). 13 81. Among other things, WGA’s current leadership is attempting to compile a 14 record of which members fire their non-franchised agents, and which members continue 15 to work with their non-franchised agents. The latter group could be subject to discipline 16 by a tribunal of WGA members, and the penalty could be a significant monetary fine or 17 expulsion from WGA. Expulsion from WGA would prohibit AMPTP members (i.e., 18 Hollywood studios) from hiring such writers or showrunners. In other words, WGA 19 members are under threat from WGA leadership that they could become unemployable 20 if they decide against joining WGA’s boycott and choose to work with a non-franchised 21 talent agent. WGA leadership could not have made a more coercive threat to union 22 membership. 23 82. WGA members who want the freedom of working with their preferred 24 talent agent—whether franchised or not—theoretically have the option of turning 25 Financial Core (or “Fi-Core”). This means ceasing to be a WGA member, but paying 26 a fee to WGA to cover the basic costs of representation by the union. Many WGA 27 members understandably feel conflicted about this option because of the potential 28 stigma of not maintaining a WGA membership. Exploiting this, WGA leadership has 24 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 26 of 44 Page ID #:26 1 threatened to publish the names of members who take Fi-Core status and to encourage 2 WGA members not to work with Fi-Core writers. Upon information and belief, no 3 WGA member who has ever taken Fi-Core status has been subsequently accepted back 4 into the union. WGA leadership has thus been able to use coercive threats of public 5 shaming, combined with the pressure to join WGA’s boycott, to prevent most members 6 from using Fi-Core to continue working with WME and other talent agents who have 7 refused to sign the Code of Conduct. 8 83. Significantly, many of the WGA members who have been coerced into 9 participating in the group boycott—in particular, showrunners—primarily work as 10 producers. Among other things, showrunners set budgets for television shows, oversee 11 the production of the shows, and retain the services of WGA writers (i.e., showrunners 12 hire other WGA members). They function as supervisors and are thus non-labor parties. 13 84. In fact, WGA encourages showrunners to hire other WGA members: “To 14 ensure that writers seeking employment have a way to get their samples in front of 15 showrunners with jobs to fill, the Guild has created … the Staffing Submission System,” 16 which “allow[s] writers and showrunners to connect directly.” See Resources for 17 Writers Without Agents, available at: https://www.wgaeast.org/negotiations/amba/ 18 what-happens-after-april-6/ (last visited June 22, 2019); see also C. Lee, VULTURE, 19 How Hollywood Writers Are Finding Jobs After Firing Their Agents, available at: 20 https://www.vulture.com/2019/04/how-wga-writers-are-finding-jobs-after-firing- 21 agents.html 22 Hollywood screenwriters with potential employment opportunities” “within the guild 23 with showrunners”). 24 85. (Apr. 23, 2019) (WGA’s Staffing Submission System “connect[s] Because showrunners are not primarily engaged to perform the functions 25 of writers, they are non-labor parties with respect to WGA and most of its members. 26 Whether voluntarily or by coercion, however, these non-labor party showrunners have 27 been enlisted to participate in the group boycott. 28 25 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 27 of 44 Page ID #:27 1 86. In sum, WGA’s leadership has organized a group boycott in which they 2 have banned all agency packaging and content affiliation, and both willing and coerced 3 writers and showrunners have agreed to boycott WME and other talent agents who will 4 not sign the Code of Conduct. 5 G. WGA’s Leadership Orchestrates and Coerces Various Smaller Talent Agencies into Joining the Group Boycott 87. Because WGA requires talent agencies to sign the Code of Conduct in 6 7 8 order to represent WGA writers, WGA’s Code of Conduct constitutes an agreement 9 among compliant talent agencies to boycott non-signatory talent agencies. WGA claims 10 that, to date, approximately seventy talent agencies have signed the Code of Conduct 11 (including, e.g., Pantheon and other smaller talent agencies). 12 13 14 88. These talent agencies are horizontal competitors who compete with one another, and compete with WME, to sell their representation services to writers. 89. WGA has coerced these and other talent agencies in an attempt to force 15 them to join the group boycott by presenting them with a Hobson’s choice: either agree 16 to the Code of Conduct, or be prohibited from representing any WGA member-writers. 17 90. For many smaller talent agencies that are not involved in packaging, or 18 affiliated with content companies, the group boycott through the WGA Code of Conduct 19 provides them with an anticompetitive advantage over non-complying agencies like 20 WME. Because the packaging and content bans do not practically affect such agencies, 21 they can sign-on to the anticompetitive Code of Conduct without suffering any harm. 22 At the same time, by participating in and facilitating WGA’s group boycott of non- 23 compliant talent agencies, they will inflict anticompetitive injury upon competitors like 24 WME. 25 26 H. WGA Leadership’s Coercion of AMPTP Members—Non-Labor Parties—to Join the Group Boycott 27 28 26 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 28 of 44 Page ID #:28 1 91. WGA’s collective bargaining agreement with AMPTP—the MBA—is 2 effective through May 1, 2020. It does not specifically require AMPTP members to 3 negotiate only with agents that are designated (or “franchised”) by WGA. 4 92. On February 9, 2019, WGA leadership sought to change this by requesting 5 that AMPTP re-open negotiations regarding the MBA in order to add a clause that 6 would prohibit AMPTP members from doing business with any talent agency that fails 7 to agree to WGA’s Code of Conduct. 8 93. Upon information and belief, at the very same meeting, WGA 9 representatives also threatened AMPTP and its members with objectively baseless 10 litigation regarding their participation in packaging deals, unless they agreed to the 11 following amendment (in bold/underscored text) to the MBA: 12 ARTICLE 9 – MINIMUM TERMS (GENERAL) 13 The terms of this Basic Agreement are minimum terms; nothing herein contained shall prevent any writer from negotiating and contracting with any Company for better terms for the benefit of such writer than are here provided, excepting only credits for screen authorship, which may be given only pursuant to the terms and in the manner prescribed in Article 8. Unless conducted by an individual writer without assistance of any other person, such negotiations may be conducted or assisted only by agents who, at the time of such negotiations, are bound to an agreement with the Guild concerning the terms of such representation or are otherwise certified by the Guild to assist with or to conduct such negotiations. The Guild only shall have the right to waive any of the provisions of this Basic Agreement on behalf of or with respect to any individual writer. 14 15 16 17 18 19 20 21 ARTICLE 3 – RECOGNITION 22 … 23 B. RECOGNITION (THEATRICAL) 24 1. The Company hereby recognizes the Guild as the exclusive representative for the purpose of collective bargaining for all writers in the motion picture industry, except that an individual writer may designate an agent to negotiate on his or her behalf, or to assist him or her in the negotiation of better terms than are here provided, provided that such agent is, at the time of such negotiations, bound to an agreement with the Guild concerning the terms of such representation or is otherwise certified by the Guild. 25 26 27 28 WORK LISTS, LOAN-OUTS AND 27 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 29 of 44 Page ID #:29 1 94. Upon information and belief, WGA threatened to sue AMPTP members if 2 they did not agree to the proposed amendments to the MBA, which would prohibit them 3 from continuing to do business with writers’ agents who did not sign the Code of 4 Conduct. 5 95. Upon further information and belief, WGA shared with AMPTP and its 6 members a draft complaint that WGA had prepared against WME and other major talent 7 agencies based on their involvement in the packaging business.8 This complaint alleged 8 that agency packaging violated Section 302 of the Labor Management Relations Act 9 (“LMRA”) because paying packaging fees to talent agencies purportedly constituted 10 criminal kickbacks by the studios in violation of the LMRA. WGA verbally threatened 11 to sue AMPTP and the studios under the same legal theories set forth in the draft 12 complaint—in effect, accusing them of criminal behavior—if they would not acquiesce 13 to the MBA amendment and thus participate in WGA’s group boycott. 14 96. WGA leadership’s threat of filing a civil case alleging that packaging was 15 criminal behavior by the AMPTP members was objectively baseless. Indeed, because 16 WGA itself has endorsed packaging for more than 40 years in the AMBA, it was 17 frivolous for WGA to assert that such behavior was now suddenly criminal. This 18 reality, however, did not stop WGA leaders from attempting to extort AMPTP and its 19 members into joining WGA’s group boycott to enforce the Code of Conduct. 20 97. On March 25, 2019, AMPTP rejected WGA’s invitation to re-open the 21 MBA to include the amendment requiring that AMPTP members refuse to deal with 22 agents who do not sign the Code of Conduct. AMPTP President Carol Lombardini 23 stated in a publicly reported letter to WGAW Executive Director David Young that such 24 25 26 27 28 8 WGA filed such a complaint against WME and other major talent agencies on April 17, 2019 before the California Superior Court for the County of Los Angeles. On May 20, 2019, the day before WME was set to file a demurrer to dismiss the complaint, WGA amended its complaint. The case has been designated a complex case and is temporarily stayed. 28 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 30 of 44 Page ID #:30 1 an amendment “would subject [AMPTP], the WGA and individual writers to a 2 substantial risk of liability for antitrust violations,” and AMPTP members “would also 3 be at risk for violation of federal labor laws as well as state laws.” I. WGA Leadership’s Inducement of Unlicensed Managers and Lawyers—Non-Labor Parties—to Violate State Law and Participate in the Group Boycott 4 5 6 98. The group boycott orchestrated by WGA leadership is harming WGA’s 7 own members by leaving thousands of them without licensed talent agents to represent 8 them in their individual negotiations with AMPTP producer-members. 9 99. WGA leadership has tried to fill this void—which threatens the 10 sustainability of its group boycott—by seeking to induce unlicensed Hollywood 11 managers and lawyers to join the boycott by taking over the representation of WGA 12 writer-members in their negotiations with film and television production companies. 13 Pursuant to California, New York, and certain other state laws, however, unlicensed 14 managers and lawyers are prohibited or limited in their ability to procure employment 15 with the studios. As such, they may not lawfully represent writers in their individual 16 negotiations with the studios absent the involvement of a licensed talent agent. 17 100. Specifically, on March 20, 2019, WGA—upon information at belief, at the 18 direction of WGA leadership—sent a letter to managers and lawyers who represent 19 WGA members titled “Limited Delegation of Authority to Negotiate Overscale Terms 20 with Guild-Signatory Companies.” 21 representative for all writers employed under the MBA, WGA could temporarily 22 authorize unlicensed managers and lawyers “to procure employment and negotiate 23 overscale terms and conditions of employment for individual Writers.”9 WGA’s 24 position is wrong. WGA has no legal authority to override state licensing requirements. The letter asserted that, as the exclusive 25 26 27 28 See also Ex. E, Agency Code of Conduct Implementation FAQ, at 2 (“[Q.] The agencies say it is against state laws for managers and lawyers to help writers find work or negotiate without being connected to an agent. [A.] As a matter of practice, managers and sometimes attorneys already get work for clients. In addition, as the exclusive 9 29 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 31 of 44 Page ID #:31 1 101. WGA falsely told unlicensed managers and lawyers that, if they agree to 2 this limited delegation, WGA will somehow shield them from the consequences of 3 violating California’s Talent Agency Act (“TAA”), which provides that only licensed 4 agents may procure employment for writers with television and film producers. Other 5 states, like New York, impose similar legal restrictions on the ability of managers and 6 lawyers to procure employment for a writer without the involvement of a licensed agent. 7 WGA falsely represented that it can protect unlicensed managers and lawyers from 8 liability under these other state laws as well. 9 102. Continuing to ignore the TAA and other state licensing laws, WGAW 10 Executive Director David Young wrote to members on April 16, 2019 that: “If a talent 11 manager or attorney who provides such procurement services at a writer’s direction and 12 in good faith is not otherwise paid for those services because of an alleged violation of 13 the [TAA], the Guild will reimburse the talent manager or attorney in question for those 14 services.” 15 103. In short, as part of its group boycott and in an effort to achieve its “power 16 grab,” WGA has combined with certain unlicensed managers and lawyers—i.e., non- 17 labor parties—in violation of various state licensing laws. WGA leadership’s actions 18 have the purpose and effect of inducing these non-labor parties to replace WME and 19 other non-franchised talent agents, or to force the non-franchised agents to submit to 20 the Code of Conduct. And the leadership’s actions also lay bare that their crusade 21 against agency packaging and content affiliates is about “conquer[ing]” the agencies 22 rather than about any supposed conflicts of interest. WGA is not requiring lawyers or 23 managers to sign the Code of Conduct in order for WGA members to work with them. 24 25 26 27 28 bargaining representative for writers, the Guild has the right under federal law to delegate authority to other representatives, and on a temporary basis has now delegated that authority to managers and attorneys.”). 30 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 32 of 44 Page ID #:32 1 2 V. COUNT ONE: SECTION 1 OF THE SHERMAN ANTITRUST ACT (15 U.S.C. § 1) 3 104. WME incorporates by reference and re-alleges all previous paragraphs as 4 though fully set forth herein. WGA’s Code of Conduct and group boycott are illegal 5 restraints of trade in violation of Section 1 of the Sherman Act. 6 105. The Sherman Act prohibits agreements that unreasonably restrict 7 competition; some such agreements—including group boycotts and concerted refusals 8 to deal, like the WGA conspiracy challenged here—are condemned as per se illegal. 9 10 A. The Limited Statutory Labor Exemption to the Antitrust Laws Does Not Shield WGA’s Restraint of Trade 11 106. Labor law grants unions the exclusive authority to negotiate with 12 employers over the terms and conditions of the union-members’ employment. This 13 labor law authority thus gives unions absolute control—monopoly power—over the 14 labor markets for their members’ services. There is a tension between labor law and 15 the Sherman Act’s prohibition against unreasonable restraints on competition because 16 virtually all union activity would constitute an unreasonable restraint of trade if there 17 were not a labor exemption to protect it from the antitrust laws. 18 107. Congress, therefore, created the statutory labor exemption to shield from 19 antitrust scrutiny certain union activity that is in pursuit of legitimate labor union goals. 20 Unions, however, do not have carte blanche to restrict competition however they like 21 under the pretext of a labor objective. Courts have instead strictly limited the scope of 22 the statutory labor exemption to union conduct that is both (i) not in conjunction with a 23 non-labor group and (ii) in furtherance of a legitimate union interest. 24 108. Here, WGA may not invoke the protection of the statutory labor exemption 25 for the threshold reason that it has imposed its Code of Conduct in combination with 26 non-labor groups. Showrunners—who primarily operate as producers—are part of the 27 group boycott. And, furthermore, WGA leadership has tried to induce (i) AMPTP and 28 its members, and (ii) various unlicensed managers and lawyers to participate in WGA’s 31 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 33 of 44 Page ID #:33 1 boycott. Each of these parties—the showrunner-producers, AMPTP and its members, 2 and the unlicensed managers and lawyers—are non-labor groups. Therefore, the 3 statutory labor exemption does not apply to WGA’s group boycott on this ground alone 4 because it involves non-labor parties. 5 109. Even if, however, WGA were not acting in combination with a non-labor 6 group, it still would not be entitled to protection under the statutory labor exemption. 7 A group boycott to enforce prohibitions against agency packaging and agency-affiliate 8 content companies goes beyond any lawful union interest. 9 110. WME does not dispute the legitimacy of WGA seeking regulations tailored 10 to prevent franchised talent agents from acting contrary to the interests of WGA 11 members—just as talent agencies and WGA had agreed to through the AMBA for 12 multiple decades. WGA’s boycott, however, oversteps by a country mile any such 13 claimed objective by flatly banning agency packaging and agency-affiliate content 14 companies, without regard to the existence of any actual harm to writers resulting from 15 potential conflicts of interest. Such blanket bans on industrywide commercial practices, 16 which extend far beyond the labor market for writer services, do not fall within WGA’s 17 labor law authority or legitimate union interests. WGA also does not have any 18 legitimate union interest to deny the benefits of agency packaging and content affiliation 19 to actors and directors—who are not represented by WGA—nor to WGA members 20 when they work as showrunners or producers rather than writers. 21 111. In fact, WGA’s packaging and content bans would hurt WGA’s member- 22 writers and other talent while economically shielding AMPTP members—i.e., the non- 23 labor parties that sit across the bargaining table from WGA—from both packaging fees 24 and content competition. This is the antithesis of a legitimate union interest that would 25 support application of the statutory labor exemption. 26 112. Another reason why the boycott orchestrated by WGA leadership to 27 eliminate agency packaging and affiliate content companies does not constitute a 28 legitimate union interest within the meaning of the statutory labor exemption is because 32 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 34 of 44 Page ID #:34 1 the boycott does not concern the terms and conditions of employment for union 2 members. While union regulation of agent commissions indirectly impacts wages, that 3 is not what the challenged provisions of the Code of Conduct do here. On the contrary, 4 the agency packaging ban eliminates packaging fees (not commissions) paid by studios 5 (not by writers) to agents; and the ban on agency content companies has nothing to do 6 with agency fees or the terms and conditions of writer employment. Both provisions 7 stand in stark contrast to the now-expired AMBA, which regulated agent commissions 8 by prohibiting them on projects for which agents were receiving packaging fees. 9 113. Preventing agents from acting against their clients’ interests in procuring 10 employment as writers is a proper WGA concern. But that is neither the motivation nor 11 effect of WGA’s group boycott. The statutory labor exemption may not be invoked 12 merely by parroting a mantra about purported union concerns about potential conflicts 13 of interest. WGA managed packaging and content affiliates for more than 40 years with 14 tailored regulations, including a specific requirement that agents not act against their 15 writer-clients’ interests. WGA leadership’s self-proclaimed political agenda to “grab 16 power” from, and to “divide and conquer,” large talent agencies by prohibiting long- 17 standing commercial behavior does not further any legitimate union interest. 18 114. Another factor courts assess in considering the applicability of the 19 statutory labor exemption is whether the challenged behavior resembles traditional 20 union activity. WGA’s (i) absolute packaging and content affiliate bans in business 21 markets, (ii) “limited delegation of authority” to unlicensed managers and lawyers in 22 violation of California and other state licensing laws, and (iii) threats to bring an 23 objectively frivolous lawsuit asserting criminal conduct by AMPTP members if they do 24 not join the boycott, do not bear any resemblance to traditional union activity like 25 collective bargaining, calling strikes, picketing, or hand-billing. 26 115. Nor is there any legitimate union interest in WGA’s leadership threatening 27 its own members with public shaming, discipline, and a loss of their livelihood if they 28 continue to be represented by their agents. 33 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 35 of 44 Page ID #:35 1 2 116. For all of these reasons, and those averred above, the statutory labor exemption does not apply. 3 B. 4 117. Because courts (not Congress) created the second labor law exemption 5 from the antitrust laws, it is known as the non-statutory exemption. The non-statutory 6 exemption also does not shield the Code of Conduct and WGA’s group boycott to ban 7 agency packaging and content affiliates from the antitrust laws. The Non-Statutory Labor Exemption Also Does Not Apply 8 118. The non-statutory labor exemption exists to provide unions and employers 9 with the ability to bargain over wages, hours, and working conditions (the mandatory 10 subjects of collective bargaining). But, as averred above, the provisions at issue in the 11 Code of Conduct do not concern wages, hours, working conditions, or even agent 12 commissions. 13 119. Additional factors that courts consider in determining whether the non- 14 statutory labor exemption applies include: Do the restraints primarily affect the parties 15 to a collective bargaining agreement and no one else? Do the restraints affect business 16 markets, and if so, directly or indirectly? And could the union’s restraints be achieved 17 through less restrictive means? As averred throughout this Complaint, the answer to all 18 of these questions is a resounding “yes”—thereby establishing that the non-statutory 19 labor exemption does not apply. 20 120. The purpose and effect of the challenged boycott is to directly impact the 21 business market for producing and distributing TV shows and movies. Boycotting 22 talent agencies who will not adhere to the Code of Conduct also adversely impacts the 23 markets for the services of, e.g., directors and actors, who WGA has no authority to 24 represent and who will no longer benefit from agency packaging or the existence of 25 content affiliates. Indeed, WGA has affirmatively stated that its packaging ban will 26 impact actors and directors and the businesses of the studios (see Ex. D, WGA FAQ 27 No. 19), as well as WGA members who work as showrunners or producers (see Ex. E, 28 Agency Code of Conduct Implementation FAQ, at 1). The non-statutory labor 34 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 36 of 44 Page ID #:36 1 exemption does not protect anticompetitive WGA activity that directly impacts either 2 business markets or labor markets for the services of workers that WGA does not 3 represent. 4 121. With respect to the availability of less restrictive alternatives, WGA’s 5 history demonstrates the availability of much less restrictive ways to address any 6 purported union concerns about the possible harmful effects on writers from conflicts 7 of interest. As for packaging, it would be far less restrictive for WGA to rely upon the 8 AMBA rules that sanctioned packaging but also required that agents refrain from acting 9 against the best interests of their clients. WGA could additionally require that agents 10 make disclosures sufficient to provide writers with the information they need to assess 11 whether participating in a particular package is something they want to do. With respect 12 to affiliated content companies, any WGA concern about potential harmful effects on 13 writers from conflicts of interest could be addressed by regulations requiring firewalls 14 and disclosures like those that WME already utilizes vis-à-vis Endeavor Content, rather 15 than an unduly restrictive, outright ban on all such content affiliates. 16 122. The over breadth of WGA’s regulations is readily illustrated. Even WGA 17 has publicly conceded that in many packages, a writer’s net compensation will be higher 18 without paying a 10% commission and being part of a package. Yet, under the Code of 19 Conduct, these writers will always have to pay 10% commissions and be economically 20 worse-off. Furthermore, when purportedly “delegating” its exclusive bargaining power 21 to “authorize” unlicensed managers and writers to negotiate on behalf of individual 22 writers, WGA did not require them to subscribe to the Code of Conduct. This hypocrisy 23 further demonstrates that WGA’s bans on agency packaging and content affiliates are 24 overly restrictive and just a “power grab” by union leadership. 25 123. As another example, many television shows and films would not be 26 produced at all if an agency were not packaging the talent or if there were no agency- 27 affiliate to produce the content. Under the Code of Conduct, however, these jobs for 28 WGA members will not exist. In short, the categorical prohibition of output-enhancing 35 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 37 of 44 Page ID #:37 1 commercial behavior presenting only theoretical conflicts—rather than the prohibition 2 of actual conflicts that harm WGA members—will eradicate agent behavior that 3 benefits writers and thus is far more restrictive than necessary. Indeed, by banning all 4 agency content affiliates, the Code of Conduct would take job opportunities away from 5 writers (and other talent) who are not even represented by the affiliated agency. 6 124. For all of the foregoing reasons, the anticompetitive Code of Conduct and 7 group boycott organized by WGA’s leadership are not entitled to the protection of the 8 non-statutory labor exemption. 9 10 C. The Group Boycott is a Per Se Violation of Section 1 of the Sherman Act 11 125. With WGA unable to invoke the protection of any labor exemption to the 12 antitrust laws, the group boycott and concerted refusal to deal with talent agents who 13 will not sign the Code of Conduct should be condemned as a classic, per se violation of 14 Section 1 of the Sherman Act (15. U.S.C. § 1). 15 126. The first element of a Section 1 claim is the existence of a contract, 16 combination, or conspiracy. Here, WGA has orchestrated a series of such agreements 17 as part of its overall conspiracy. 18 127. At the inducement of the two WGA unions acting in concert, a majority of 19 WGA writer-members and showrunners—who compete with one another to acquire the 20 services of talent agents—have voted for the Code of Conduct and entered into an 21 unlawful horizontal agreement to boycott and refuse to deal with non-complying 22 agencies. WGA leadership, under the auspices of the union’s Working Rules, has 23 threatened members with disciplinary action (including expulsion and an effective 24 blackball from the industry), if they do not agree to boycott non-franchised talent agents. 25 And, as averred above, WGA leadership has also threatened members from taking Fi- 26 Core status and declining to participate in WGA’s group boycott with public shaming 27 and threats to their ability to find opportunities as writers. 28 36 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 38 of 44 Page ID #:38 1 128. Also at WGA leadership’s behest, certain smaller talent agencies—who 2 compete with one another and with WME to sell their representation services to 3 writers—have signed WGA’s Code of Conduct, which operates as a horizontal 4 agreement to boycott non-complying agencies like WME. 5 129. WGA leaders have also tried, and continue to try, to induce AMPTP 6 members—who are horizontal competitors in the market(s) for producing television and 7 film content—to join the group boycott against talent agencies who refuse to subscribe 8 to the Code of Conduct. 9 130. WGA’s leadership has further tried to induce, and continues to induce, 10 unlicensed managers and lawyers into agreeing to participate in the group boycott by, 11 among other things, purporting to provide a “limited delegation” of bargaining authority 12 to procure employment on behalf of individual writers in violation of California and 13 other state licensing laws. 14 131. Such contracts, combinations, or conspiracies among various horizontal 15 competitors to refuse to deal with and boycott talent agencies like WME who will not 16 agree to the Code of Conduct is the type of pernicious, anticompetitive group boycott 17 agreement that is subject to per se condemnation under Section 1 of the Sherman Act. 18 132. WGA itself recognized that such agreements are per se illegal in an April 19 16, 2019 email to all its members: “a combination in restraint of trade in violation of 20 federal antitrust law … would likely constitute a group boycott that is per se unlawful 21 under longstanding Supreme Court precedent.”10 22 D. 23 The Group Boycott Would Also Constitute an Unlawful Restraint of Trade Under a “Quick Look” or Full-Blown Rule of Reason Analysis 24 133. Even if the Court were to decline to apply a per se test, and to instead 25 evaluate the boycott under either the full-blown rule of reason or a “quick look” mode 26 27 28 10 This statement was made in the context of WGA leadership threatening lawyers and managers who might decline to participate in their boycott conspiracy. 37 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 39 of 44 Page ID #:39 1 of analysis, the conduct at issue would still constitute an illegal restraint of trade in 2 violation of Section 1 of the Sherman Act. 3 134. Under a full-blown rule of reason analysis, the Court would weigh the 4 anticompetitive harm caused by WGA’s restrictions (e.g., the elimination of scores of 5 talent agents as competitors to represent writers) against any ostensible procompetitive 6 benefit of those same restrictions. This inquiry would include defining the relevant 7 economic market(s) in which WGA is restraining competition, assessing WGA’s 8 market power in these markets, considering whether WGA could achieve any ostensible 9 procompetitive benefit of its agency packaging and agency-affiliate content bans in a 10 less restrictive manner, and potentially balancing the anti- and procompetitive effects 11 against one another. As an alternative to a full-blown rule of reason analysis, the Court 12 could also conduct a “quick look” rule of reason review of WGA’s conduct to determine 13 whether to summarily condemn it as an unreasonable restraint because of its clear 14 horizontal anticompetitive impact on competition and lack of any plausible justification 15 (e.g., without the need to define the relevant economic markets or assess WGA’s market 16 power). The bottom line, however, is that no matter what antitrust standard is applied, 17 WGA’s anticompetitive agreements cannot withstand scrutiny under Section 1 of the 18 Sherman Act. 19 135. Relevant markets and market power. WME and other talent agencies 20 compete in a relevant market to sell their representation services to writers negotiating 21 with AMPTP producer-members. The flip-side of this market is that the writers 22 compete with each other to acquire the representation services of agents. 23 geographic scope of this relevant market is the United States. See, e.g., Ex. B, MBA, 24 Art. 5 (application of collective bargaining agreement between WGA and AMPTP 25 focuses on whether writer lives or provides services in the U.S.). There are no 26 substitutes for the representation services provided in this market and there is no cross- 27 elasticity of demand with unlicensed managers or lawyers or other potential 28 representatives because, under California and a number of other state laws, only 38 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT The Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 40 of 44 Page ID #:40 1 licensed talent agents may independently procure employment for writers in their 2 negotiations with studios. WGA has stifled competition in this relevant market through 3 its group boycott to enforce the Code of Conduct. 4 136. WGA has market power—indeed, monopoly power—over the relevant 5 market for the representation of writers in the United States. This is because of WGA’s 6 status as the exclusive collective bargaining representative of all writers for unionized 7 television and film productions. Indeed, the very reason for the creation of the statutory 8 and non-statutory labor exemptions to the antitrust laws is because, without them, 9 virtually all union behavior—including agreements with its members—would 10 constitute an unreasonable restraint of trade given unions’ monopoly power over their 11 respective labor markets. This is also the reason why the labor exemptions to the 12 antitrust laws have specific limitations—because, without them, union leaders like the 13 WGAW’s and WGAE’s could abuse their organizations’ monopoly power to impose 14 agreements that either unreasonably restrain competition in commercial markets or 15 extend beyond any legitimate union interest. 16 137. Another relevant market is the market to produce and/or distribute 17 television shows and films.11 There are no close substitutes or cross-elasticity of 18 demand with producers of other forms of entertainment (e.g., sports or theater or opera) 19 because such organizations do not have the unique experience, talent, reputation or 20 motivation to produce television shows and movies. The geographic scope of this 21 market is the United States—the dominant market for television and film production. 22 138. WGA’s ban on agency packaging has unreasonably restrained competition 23 in the market for producing films and television shows by abusing and leveraging its 24 monopoly power in the labor market for writers to eliminate agencies as competitors 25 for packaging in the relevant market for producing films and television shows. As 26 27 28 11 Alternatively, the production and distribution of films, and the production and distribution of television shows may either constitute separate relevant markets or submarkets of the relevant market for film and television production. 39 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 41 of 44 Page ID #:41 1 averred above, writers are essential components of packages, and most television 2 programming is packaged. The anticompetitive effects are thus substantial because 3 many (or all) agents will be driven out of packaging if the conspiracy and group boycott 4 orchestrated by WGA leadership were to succeed. 5 139. With respect to WGA’s agency-affiliate content ban, WGA has 6 unreasonably restrained competition by abusing and leveraging its monopoly power in 7 the labor market for writers to eliminate agency-affiliates as competitors with the 8 established studios in the relevant market for producing and distributing films and 9 television shows. WGA’s group boycott to eliminate important new entrants in a 10 market that has seen substantial consolidation and concentration has significant 11 anticompetitive effects. To the extent that studios are participating in this boycott, they 12 directly benefit from the reduction in competition. 13 140. WGA’s group boycott also further unreasonably restrains competition in 14 the relevant market to represent writers by providing an anticompetitive advantage to 15 unlicensed managers and lawyers who WGA’s leadership has tried to threaten and 16 coerce into replacing the boycotted agents, such as WME, in their representation of 17 writers. 18 packaging and content production without being required to sign the Code of Conduct. 19 141. No procompetitive justifications. There is no plausible pro-competitive 20 justification for completely banning agency packaging and agency-affiliate content 21 companies. Instead, WGA leadership designed these prohibitions to try to drive the top 22 agencies out of the business of representing writers. 23 condemnation under either a quick look or full-blown rule of reason analysis. These unlicensed managers and lawyers are permitted to participate in This fact alone requires 24 142. The main questions for purposes of evaluating any claimed procompetitive 25 justification are whether the challenged bans and group boycott enhance or suppress 26 competition, and if so, whether on balance the challenged restraints are more 27 procompetitive than anticompetitive. Here, however, the only competitive effect of the 28 challenged restraints is to eliminate WME and other agencies who refuse to sign the 40 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 42 of 44 Page ID #:42 1 Code of Conduct as competitors in the relevant markets. These restraints, on their face, 2 thus reduce—not enhance—competition. There is also no plausible procompetitive 3 justification for WGA’s boycott to enforce these anticompetitive rules. And even if 4 there were, WGA could achieve any purported procompetitive objective through far 5 less restrictive alternatives that would be virtually as effective as the absolute packaging 6 and content affiliate bans set forth in the Code of Conduct. 7 143. To the extent the Court were to reach the final step of a full-blown rule of 8 reason inquiry—the balancing step—WGA’s group boycott and anticompetitive Code 9 of Conduct would similarly fail. The absolute bans on agency packaging and affiliate- 10 content companies inflict significant anticompetitive effects in the relevant markets 11 with no offsetting procompetitive benefits. Indeed, the group boycott to enforce these 12 restraints has significant anticompetitive effects with no offsetting competition- 13 enhancing aspects at all. 14 144. Antitrust injury. Finally, WME has suffered and will continue to suffer 15 antitrust injury to its business and property as a direct and proximate result of WGA’s 16 unlawful conspiracy. WME’s refusal to agree to the Code of Conduct has subjected its 17 writer-representation business to a group boycott and refusal to deal. WME has and 18 will continue to lose work, lose clients (1,300 so far), lose packaging fees, and suffer 19 irreparable harm to its business and property as a result of WGA’s unlawful conspiracy. 20 In addition, the ultimate consumers of film and television shows will be injured by the 21 reduction in film and television output caused by WGA’s conspiracy. WME will prove 22 the amount of damages it has suffered as a result of WGA’s antitrust violation at trial 23 and is entitled to both triple damages and attorney’s fees. 24 VI. 25 26 27 28 PRAYER FOR RELIEF WHEREFORE, WME respectfully requests that the Court enter judgment against WGA: 1. Declaring that WGA’s bans on agency packaging and content affiliates, and concerted refusal to deal and group boycott to enforce these 41 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 43 of 44 Page ID #:43 1 prohibitions, is an illegal contract, combination, or conspiracy constituting 2 an unreasonable restraint of trade in violation of Section 1 of the Sherman 3 Act, 15 U.S.C. § 1; 4 2. Permanently enjoining the challenged conduct; 5 3. Awarding WME treble damages, as well as costs and attorney’s fees, in an 6 amount to be proven at trial; 7 4. 8 by the law; and 9 5. Awarding pre- and post-judgment interest at the maximum rate allowable Ordering such other relief as the Court may deem just and equitable. 10 11 12 13 14 15 16 17 18 Dated: June 24, 2019 WINSTON & STRAWN LLP By: /s/ Diana Hughes Leiden Jeffrey L. Kessler David L. Greenspan Diana Hughes Leiden Shawn R. Obi Isabelle Mercier-Dalphond Attorneys for Plaintiff WILLIAM MORRIS ENDEAVOR ENTERTAINMENT, LLC 19 20 21 22 23 24 25 26 27 28 42 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT Case 2:19-cv-05465 Document 1 Filed 06/24/19 Page 44 of 44 Page ID #:44 1 2 3 DEMAND FOR JURY TRIAL Pursuant to Federal Rule of Civil Procedure 38(b), Plaintiff WME demands a trial by jury on all issues so triable. 4 5 6 7 8 9 10 11 Dated: June 24, 2019 WINSTON & STRAWN LLP By: /s/ Diana Hughes Leiden Jeffrey L. Kessler David L. Greenspan Diana Hughes Leiden Shawn R. Obi Isabelle Mercier-Dalphond Attorneys for Plaintiff WILLIAM MORRIS ENDEAVOR ENTERTAINMENT, LLC 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 43 COMPLAINT FOR VIOLATION OF SECTION 1 OF THE SHERMAN ANTITRUST ACT