NEW YORK/LOS ANGELES (Reuters) - “The Wire” creator David Simon, seven other writers, and the Writers Guild of America sued the four major Hollywood talent agencies on Wednesday for getting paid in such a way that the agencies’ financial interests prevail over those of their clients.
The plaintiffs are trying to establish that talent agency “packaging fees,” in which an agent is paid directly by the writer’s employer instead of getting paid a 10 percent commission fee from the writer, are illegal under both California and federal law.
In recent decades, packaging fees have become the standard form of compensation for the four largest talent agencies, which have grown in power and reach amid a wave of consolidation.
The lawsuit, filed in Los Angeles Superior Court, alleges that because packaging fees are generally tied to a show’s revenue and profits, the agencies are incentivized to reduce the amount production companies pay writers and other talent on a show.
As such, packaging fees violate California fiduciary law, the suit claims, because they pit the interests of the agency against those of its writer client. The fees also violate the state’s Unfair Competition Law, the suit maintains, because they amount to an illegal “kickback” from production companies to agencies.
The four agencies named in the complaint - William Morris Endeavor, Creative Artists Agency, United Talent Agency and ICM Partners - receive over 80 percent of the packaging fees paid by Hollywood studios and networks, according to the WGA.
The Association of Talent Agencies (ATA), whose members include the four defendants in Wednesday’s lawsuit, said the filing was a sign that the WGA “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,” ATA executive director Karen Stuart said in a statement.
The relationship between the WGA and the Association of Talent Agencies, has been governed by a 43-year-old agreement that regulates how agents represent writers. After negotiations over a new, updated agreement fell apart, the WGA asked agents to sign a new code of contact that would eliminate packaging fees.
The majority of agents refused, and on Friday the WGA told its members to fire agents that had not signed the new code.
Reporting by Helen Coster and Jill Serjeant; Additional reporting by Lisa Richwine; Editing by Tom Brown and Michael Perry