A Santa Monica Superior Court judge ordered Netflix last December to stop poaching Fox employees, finding that the streaming service had flagrantly induced employees to break their fixed-term contracts.
In an appeal to the 2nd District Court of Appeal, Netflix argues that it is taking on the “Hollywood establishment” by challenging the “unwritten rules” against competing for talent.
“The Hollywood establishment… takes a dim view of employee mobility,” the filing states, invoking battles over personal services contracts under the old studio system. “The studios have long done their best to maintain their hold on talent, as reflected by decades of litigation over these restraints.”
Fox sued Netflix in 2016, after the streaming service hired Marcos Waltenberg, 20th Century Fox’s vice president of promotions, and Tara Flynn, an executive at Fox 21. Both executives were on two-year contracts with Fox, which Fox had the right to renew for an additional two years. Netflix lured both executives away by doubling their salaries.
At the trial court, Netflix argued that Fox’s contracts were unenforceable because they gave Fox a unilateral right to extend the term and allowed Fox to seek a court injunction to prevent employees from leaving.
Judge Marc Gross disagreed, holding that the contracts were valid and that Netflix was not allowed to induce employees to breach them.
In the appeal, Netflix argues that Fox’s conduct runs counter to California’s public policy in favor of employee mobility.
“Fox locks in its employees by conditioning modest pay raises and continued employment on the employee agreeing to a multi-year, fixed-term contract, typically with additional, multi-year options that Fox alone can exercise,” the appeal states.
The appeal also contends that Fox’s conduct includes “browbeating employees into accepting these terms, and threatening them if they don’t.” The effect, Netflix argues, is that Fox employees can only leave if a new job comes along at the moment their contract expires.
“That result is intolerable to innovation, employee mobility and competition,” Netflix argues.
If Netflix were to prevail on appeal, it would dramatically upend the way Hollywood does business.
Fox was acquired by Disney over the course of the litigation.
Viacom also sued Netflix for poaching an employee in October 2018.