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Appeals Court Rules Against Fox in Netflix Poaching Dispute

A three-judge panel on Friday rejected an appeal from 20th Century Fox, allowing rival Netflix to proceed with a lawsuit that seeks to invalidate Fox’s fixed-term employment agreements.

The high-stakes case could establish whether studios can prevent their employees from leaving before their contracts expire. Fox accuses Netflix of poaching two employees, Marcos Waltenberg and Tara Flynn, in 2016. Netflix countersued, arguing that Fox should not be able to keep the employees against their will.

Attorneys for Fox asked a Los Angeles Superior Court judge to throw out the Netflix countersuit, arguing that it concerned protected speech under the California anti-SLAPP statute. The judge rejected the motion, causing Fox to appeal.

On Friday, a three-judge panel of the 2nd District Court of Appeal upheld the lower court’s ruling, deciding that the Netflix countersuit is not barred by the anti-SLAPP statute.

“In our independent judgment, Netflix’s cross-claims do not arise from Fox’s prelitigation communications or litigation activity,” Justice Lamar W. Baker wrote on behalf of a unanimous panel. “Rather, Netflix’s claims are predicated on Fox’s business practices related to the fixed-term agreements… Because we conclude Netflix’s claims do not arise from protected activity, we affirm the denial of the anti-SLAPP motion.”

Both the initial suit and the cross-complaint will now proceed at the trial court level.

Netflix alleges that Fox selectively enforces the fixed-term agreements, allowing some employees to go but barring others from leaving to work for a competitor. Fox’s attorneys have accused Netflix of meddling in private agreements to which it is not a party.

Update: Fox has issued a statement on the ruling.

“As the Court of Appeal’s opinion expressly acknowledges, today’s ruling has no bearing on the merits of Fox’s claim that Netflix has illegally solicited and induced employees to break their fixed-term employment contracts. As Netflix has reluctantly admitted during this litigation, fixed-term employment contracts are enshrined in the California Labor Code, and Fox looks forward to vindicating its position in Court.”

Netflix, meanwhile, has a different take:

“We appreciate the court’s careful consideration of the arguments and are pleased to see that the decision fully supports Netflix. Fox has prevented Netflix from litigating its challenge to Fox’s illegal employment practices, and this decision puts an end to that delay. This is an important case and we are encouraged that it now can move forward.”

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