Fox v. Netflix: Giants Clash Over Employee Poaching

by: The Knowledge Group

April 17, 2018


Twentieth Century Fox has challenged Netflix in court over the poaching of two Fox employees. The facing-off of these two big firms could affect employment contracts across a wide range of businesses.

The issue: can a studio (here, Fox) hold employees to fixed-term contracts?

Such agreements are typical for TV producers. Whether they are enforceable is another matter. Employees sometimes leave before completing their contractual terms. So it is not unusual that a programming executive, Tara Flynn, and a marketing manager, Marcos Waltenberg, would walk away from their posts to join Netflix. But Fox in 2016 sued Netflix over its “brazen campaign” to draw these executives away.

Netflix countersued, arguing that Fox bullies employees into contracts that are tantamount to involuntary servitude.  Netflix wants the court to enjoin Fox from imposing the contracts on their personnel.

Fox moved to end Netflix’s countersuit under California’s anti-SLAPP statute, which bars frivolous litigation over protected activity — here, Fox’s rights to enforce contracts. But the trial court allowed both suits to proceed.

Fox Appeals, While Netflix Keeps Poaching

Next, Fox went to California’s Second District appellate court. There, Fox attorney Jonathan Hacker argued that the company simply has no recourse but litigation when an employee decides to breach the contract.

Eric Shumsky of OrrickHerrington & Sutcliffe acknowledged on behalf of Netflix that California law compels specific performance by people of extraordinary talent. But to enforce Fox’s contracts, Netflix argues, would stretch specific performance too far. Moreover, Netflix asserts, Fox selectively holds people to these contracts, letting some executives off the hook if they aren’t attempting to accept a competitor’s offer.

Fox lawyer Jonathan Hacker of O’Melveny & Myers blasted Netflix’s “faux populism” as it persists in extracting Fox employees from their fixed-term agreements.

Within the coming three months, the appellate panel will decide the case. It could affirm the trial court, leaving the anti-poaching case and Netflix’s countersuit in place. Alternatively, it could let Fox’s anti-poaching challenge continue alone.

Meanwhile, Netflix has paid $300 million to poach top TV producer Ryan Murphy from Fox.

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