Netflix accused by Fox of `audacious’ poaching as trial looms

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Published: June 6, 2019 7:43:57 AM

The Fox studios alleged in the 2016 complaint that Netflix illegally induced the two executives -- a vice president of promotions at the movie studio and a vice president of creative at the TV studio -- to break their contracts.

Netflix argues it can’t be barred from recruiting and hiring Fox’s fixed-term employees (File photo)Netflix argues it can’t be barred from recruiting and hiring Fox’s fixed-term employees (File photo)

A lawyer for a pair of Fox studios described Netflix Inc.’s hiring of 17 Fox executives as “very audacious” as the companies head toward a trial in a high-profile fight over talent poaching.

The dispute has intensified after the defection of two Fox executives was followed by another 15, the attorney said at a hearing Wednesday. A California state judge issued a tentative ruling that the suit brought in 2016 by the Fox studios, now owned by Walt Disney Co., must go to a jury trial.

“This is a very serious issue,” lawyer Daniel Petrocelli told the judge. “They are very audacious about it.”

Karen Johnson-McKewan, a lawyer for Netflix, responded that Fox’s reaction feels “a little like crocodile tears.”

“To suggest that there’s some pillaging going on here is a bit overwrought,” she said.

The Fox studios alleged in the 2016 complaint that Netflix illegally induced the two executives — a vice president of promotions at the movie studio and a vice president of creative at the TV studio — to break their contracts. Netflix countersued, accusing Fox of using unlawfully restrictive employment agreements.

Barring a settlement, the case is scheduled to go before a jury in Santa Monica, California, in late January.

Netflix argues it can’t be barred from recruiting and hiring Fox’s fixed-term employees, because that would be tantamount to forcing them to remain at Fox even if they wanted to leave. Such contractual restrictions can be enforced only against certain artists and entertainers, not ordinary business employees, according to Netflix.

Challenging Hollywood
Hiring flexibility is central to Netflix’s challenge to the traditional Hollywood studios’ dominance in movie and TV production. As the Los Gatos, California, company has branched out into producing original content for its streaming service, it has been building its ranks of Hollywood executives with the expertise to oversee creative projects.

In his tentative ruling, issued ahead of the hearing, Gross said there were factual disputes in the case that needed to be decided by a jury. Among those issues is whether the Fox studios were harmed by the departure of the two executives.

According to Netflix, Fox replaced one of them with an executive who was paid significantly less and didn’t replace the other one at all. Netflix doubled or more than doubled the salaries the two executives were earning while at Fox, according to the ruling.

The judge took issue with Netflix’s argument that Fox isn’t entitled to a court order that would prevent the streamer from interfering with any of its fixed-term employment agreements.

“Netflix’s position ignores the benefits to the employee of having continuous employment if the employee so chooses,” the judge wrote. “This may provide financial security and provide an employee assurance that he or she will be able to continue to meet their obligations, mortgage, car payment, school tuition, etc.”

The hearing ended without the judge finalizing his tentative decision. He allowed Fox to provide more information about any economic harm it may have sustained, in support of its allegation that Netflix induced the executives to break their contracts.

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