The Writers Guild of America sued the entertainment industry's four biggest talent agencies Wednesday in the latest and boldest move in an increasingly bitter and protracted fight between the two sides over the way Hollywood does business.
The lawsuit filed in Los Angeles County Superior Court claims agents' use of so-called packaging fees is illegal under California law because they pose "numerous conflicts of interest between writers and the agencies serving as their agents."
Packaging fees mean agents combine elements of a television series, including writers, scripts or actors, and sell them directly to studios as a unit rather than taking commissions from each. It can mean massive payouts for agents from successful shows, sometimes more than those who directly work on them receive.
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The practice, common for decades in Hollywood, has brought negotiations to a halt between agents and writers, who say they can no longer tolerate it.
"The packaging fees paid by production companies to the agencies are unrelated to their own clients' compensation and generate hundreds of millions of dollars in revenue for the agencies each year," the lawsuit states. "Rather than seeking to maximize how much writers are paid for their work, the agencies seek to maximize the packaging fee they will be paid for a particular project."
"Indeed," it later adds, "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 lawsuit alleges that the practice violates California's fiduciary and unfair competition laws and an anti-kickback provision of the federal Taft-Hartley Act. It asks that a judge declare packaging fees unlawful and prohibit the agencies from entering into new agreements based on them.
Named as defendants are the agencies that dominate Hollywood, often called the "Big Four": William Morris Endeavor Entertainment, Creative Artists Agency, United Talent Agents and ICM Partners. None of the agencies had immediate comment on the lawsuit.
The Association of Talent Agents, which represents the agencies, has previously called the guild's moves a power grab full of misinformation that seeks to remake the entire industry and restrain the ability of its members to do business.
The ATA said in public documents on its negotiating position that packaging keeps more money in writers' pockets, that agents' interests remain aligned with clients under the system, and that writers would lose considerable money if the practice were eliminated.
In a statement issued Wednesday evening, the ATA said the lawsuit "confirms that the WGA's leadership is on a predetermined path to chaos that never included any intention to negotiate." It cited the lengthy legal process that will ensue, saying it will force WGA members and the overall industry "into long-term uncertainty."
The lawsuit also lists eight individual writers it says have suffered from the packaging-fee system as plaintiffs, including "Cold Case" creator Meredith Stiehm and "The Wire" creator David Simon.
At a news conference Wednesday, Stiehm said she pitched and sold "Cold Case" to the Warner Bros. studio and CBS.
She didn't learn until six years and more than 130 episodes into the run of the 2003-10 crime drama that her agency, CAA, had negotiated a packaging fee for itself "without my knowledge," Stiehm said.
She later discovered that CAA also had a piece of the show's profits, Stiehm said, with the agency getting 94 cents for every dollar she earned.
"This is indefensible," said Stiehm, who won an Emmy as an executive producer for "Homeland." Agents traditionally get 10 percent of what their clients earn, which she said is fair and aligns the agency's financial incentives with that of their clients, "who they're supposed to represent."
The lawsuit also asks that agencies be compelled to provide an accounting of what they earned on the packaged projects for the eight individual plaintiffs, and to pay them damages accordingly.
The fight puts Hollywood in uncharted territory, and the industry's trade publications have said it's unclear what its practical impact would be. While it's unlikely to have the visible and dramatic effect that writers strikes have had, it's also certain to slow production if it continues.
Writers' objections to packaging fees have fueled heated negotiations in recent months between agencies and the guild. The talks broke off Friday, and on Saturday the 1976 agreement between the two sides ended.
The guild then called for its approximately 8,500 writers who are represented by agents to fire them, and said Wednesday that the vast majority either already have or will.
Some prominent writers, including Stephen King and Patton Oswalt, posted photos of the termination letters they sent on social media. Both said they were happy with their representation but not with the system, and they owed their allegiance to their union.
"I have an amazing agency that represents me," Oswalt tweeted. "But I have an even better guild which stands for me."