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Writers Guild Expands Suit Against Agencies With New Fraud Allegations

The Writers Guild of America has bulked up its lawsuit with additional fraud allegations against Hollywood’s four biggest talent agencies.

The WGA amended its suit Monday in Los Angeles Superior Court with the claim that CAA, WME, UTA and ICM partners have engaged “constructive fraud” by allegedly placing their own interests ahead of their clients and by concealing facts about how packaging works.

The amended complaint alleges “failure of a fiduciary to disclose a material fact to his principal that might affect the fiduciary’s motives or the principal’s decision constitutes constructive fraud, regardless of whether the fiduciary acted with fraudulent intent.”

The amended complaint also alleged that agencies are operating in a conflicted position because their interests in negotiating packaging fees for themselves are at odds with the interests of writer clients.

The Association of Talent Agents, which serves as the negotiating arm for the agencies, brushed off the amended complaint. The ATA failed to negotiate a deal with the WGA after more than two months of formal talks over efforts to revamp the 43-year-old rules governing how agents represent WGA members.

The WGA’s campaign to ban packaging fees and affiliate ownership led to a April 12 directive from the guild to its nearly 15,000 members to terminate relations with agents that refused to sign the guild’s new Code of Conduct. In response, the ATA alleged that the WGA never had any intention of making a deal and predicted that the suit will be tossed out.

“This is a desperate attempt by the WGA to keep their utterly meritless legal battle alive,” the ATA said in its statement. “Today’s action by the WGA is further evidence that Guild leadership had no intent to pursue a negotiated solution with the ATA, instead opting for a long and costly legal process that was completely avoidable.”

“It is ironic that the Guild is accusing these agencies of fraud when in reality, it is Guild leadership who have misled their members into believing they are trying to make a deal,” the ATA also said. “Unfortunately, it’s those members who will be footing this bill with their own membership dues, and who will have to continue without agent representation.”

The original suit, filed April 17, alleged that the practice of agencies collecting packaging fees violates state and federal law. Those fees are typically calculated as 3% of the program’s budget and another 10% of backend profits. 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 benefit seen as the trade-off for allowing the agency to take the upfront and backend fees.

The plaintiffs are the guild’s West and East branches and eight individual writers — Patti Carr, Ashley Gable, Barbara Hall, Deric Hughes, Chip Johannessen, Deirdre Mangan, David Simon and Meredith Stiehm.

The allegations added in the amended complaint include concealment packaging fees are paid directly by production companies from a program’s budget or revenues to the agency; that agencies allegedly sought to prevent their clients from working with talent represented by other agencies in order to avoid having to split packaging fees with other agencies; and that agencies allegedly intentionally failed to maximize their clients’ compensation in order to maximize their own packaging fees.

The amended complaint also alleges that agencies intentionally failed to pitch clients’ to production companies that would pay the most and instead pitched to companies that the agencies believed would pay the largest packaging fee.

Nearly 70 agencies have signed the WGA’s new Code of Conduct, which was overwhelming approved by a member vote in March and went into effect on April 13. The most prominent is Verve, which signed on May 16. No new negotiations are scheduled.

The WGA has been providing its members with extensive guidance as to making deals during the TV staffing season. It’s also told members that labor law permits the WGA to assign the power to perform the agenting task of procuring employment to managers and lawyers.

The ATA said in its statement Monday that attorneys for the agencies met with the last week to inform them they would file motions to dismiss the lawsuit — alleging that doing so prompted the WGA to go back to the drawing board and amend their original complaint.

“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 added, “While the legal process runs its course, ATA strongly believes that in the interim it remains in the best interests of writers to be represented by licensed talent agencies.”

 

 

 

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