WGA Sues Talent Agencies in Battle Against Packaging Fees

WGA Agents Contract Tug of War
Gary Musgrave for Variety

The Writers Guild of America has filed a lawsuit against WME, CAA, UTA and ICM Partners as the guild steps up its fight against Hollywood’s largest talent agencies over conflict of interest concerns.

“We are here today to announce the filing of a lawsuit to establish that packaging fees are illegal under the law of California,” WGA general counsel Tony Segall said on Wednesday during a news conference at the WGA West headquarters in Los Angeles.

The suit has been filed in Los Angeles Superior Court on behalf of the WGA West and East. Packaging fees are at the center of the suit, in the form of two claims that say the agency practice violates state and federal law.

Karen Stuart, the executive director of the ATA, released a statement Wednesday that continued to accuse the WGA of bad faith negotiating tactics.

“This development is ironic given that the Guild itself has agreed to the legitimacy of packaging for more than 43 years,” the statement reads. “Even more ironic is the fact that the statute the WGA is suing under prevents abuses of power and authority by labor union leaders, even as the Guild has intimidated its own members and repeatedly misled them about their lack of good faith in the negotiating room.

“Today’s move confirms that the WGA’s leadership is on a predetermined path to chaos that never included any intention to negotiate. Knowing that it could take months or even years for this litigation to be resolved, WGA leaders are unnecessarily forcing their members and our industry into long-term uncertainty,” the statement continues. “While the legal process runs its course, we strongly believe that in the interim it remains in the best interests of writers to be represented by licensed talent agencies. We empathize with our writer clients and the untenable position they have been put in by WGA leadership. We stand ready and willing to represent writers with the added protections outlined in the Agency Standards for Client Representation that further ensures choice and greater transparency for writers.”

Two writers — Meredith Stiehm and Barbara Hall — spoke at the WGA’s news conference about what they said were harmful experiences with packaging fees. Stiehm was the creator on the CBS series “Cold Case.” In the show’s seventh season, Stiehm was asked to gut her budget, leave location shooting in Philadelphia, forgo music licensing and make other concessions she said “adversely affected the quality of the show.”

Meanwhile, she noted, CAA made $75,000 per episode as a part of their packaging fee on the series. The production studio, Warner Bros., refused to reduce the fee. Stiehm estimated CAA made 94 cents on every dollar she earned on the show.

Stiehm and Hall are plaintiffs in the suit along with the WGA and six other writers: Patti Carr, Ashley Gable, Deric Hughes, Chip Johannessen, Deirdre Mangan and David Simon.

The WGA’s 25-page complaint lists a host of what the guild asserts are harms caused to writers and to the guild by the fact that agencies receive packaging fees. The complaint details the guild’s view that packaging fees give agents a disincentive to fight for higher salaries for writers because the agency ultimate gets a cut of a backend profits. It also discusses the competitive nature of packaging and asserts that agencies sometimes thwart the hiring of top writers from rival agencies in order to avoid having to split a package with another agency.

In the WGA’s view, the crux of the conflict is rooted in the fact that packaging fees are paid to agencies by the production entity behind a TV show or film. The fees are typically calculated as 3% of the program’s budget and another 10% of backend profits, based on a specific profit definition. In TV, writers and other agency clients who work on a packaged show do not have to pay the standard 10% commission on their salaries, a significant benefit that has long been seen as the trade-off for allowing the agency to take the upfront and backend fees.

“Because the Agencies’ compensation in a packaging arrangement is tied to the budget for and profits generated by a particular program, rather than to the amount paid to their clients working on that program, the Agencies’ financial incentive to protect and increase their clients’ pay is eliminated,” the complaint states. “Agencies receive packaging fees whether their client’s pay increases or decreases, and even if their client no longer works on a particular program. Indeed, Agencies actually have a disincentive to advocate for greater pay for their clients, because the Agencies’ share of profits would be at risk of being reduced.”

The complaint also details what the WGA sees as abuses and conflicts of interest in the agency packaging process for independent feature films.

“As the feature film business has contracted, increasing pressure on screenwriters, the Agencies have not
advocated against declining screenwriter pay or unpaid work because the Agencies make most of their money on packaging fees paid by production companies for television and film projects, and have little incentive to fight for clients from whom they are simply paid a commission. As in television, the effect of these conflicts has been to exert downward pressure on writer compensation,” the complaint states.

The complaint further asserts that WGA members have been forced to hire lawyers and business managers at great cost to police the work of their agents. And it faults the agencies for forcing the WGA to mount its anti-packaging campaign.

The complaint also incorporates the experiences of the writer plaintiffs.

“For Deirdre Mangan’s work on ‘iZombie,’ ‘The Crossing,’ and ‘Midnight Texas,’ for example, UTA refused to negotiate a title and compensation commensurate with Mangan’s experience, insisting that “studio policy” precluded her from receiving a better title or salary,” the complaint states. “She subsequently learned that was not true, and her lawyer was sometimes able to negotiate better terms even after UTA refused to do so. On information and belief, UTA refused to negotiate a title and compensation commensurate with Mangan’s experience in order to protect its own profit participation. Mangan’s experience with packaging is typical of writers in the early and mid-stages of their careers. Indeed, Agencies routinely refuse to negotiate greater salaries for staff writers, instead taking the first offer made by the studio in order to protect the Agencies’ packaging fee.”

At the news conference, Segall encouraged members of the WGA who have yet to disclose the firing of their agents — or openly decry the Code of Conduct at the heart of the war — to “think about the well-being of their guild and their members.”

The WGA’s lawsuit had been expected amid the mushrooming battle between the guild and ATA. The sides had been trying to negotiate a new agency franchise agreement during the past two months, but talks broke down last week as tensions flared and the WGA and ATA were far apart on key issues.

On April 12, the WGA issued a directive to members to terminate their business relationships with any agents that have not signed on to the WGA’s new Agency Code of Conduct. It’s believed that more than 1,000 such termination letters have been sent in the past few days, a development that has left the industry in a state of uncertainty about how to move forward with dealmaking that involves WGA members.