By Wendy Biddle, J.D.
A small boutique talent agency failed to sufficiently plead the existence of an antitrust conspiracy among Hollywood’s largest talent agencies, the U.S. Court of Appeals in San Francisco ruled, affirming a decision by the federal district court in Los Angeles to dismiss the case with prejudice. Because the complaining agency pleaded only parallel conduct without "something more" as required by the Sherman Act in each of its three previous pleadings, the agency failed to plead a claim and additionally, the district court did not abuse its discretion in denying additional amendments (Lenhoff Enterprises, Inc. v. United Talent Agency, March 30, 2018).
Plaintiff Lenhoff Enterprises, Inc. contended that Hollywood's "Big 4 Agencies"—United Talent Agency, Inc. (UTA), International Creative Management Partners, LLC (ICM), William Morris Endeavor Entertainment (WME), and Creative Artists Agency (CAA)—have been able to capture 94 percent of the scripted series packaging market through a series of anticompetitive agreements. The large agencies were supposedly able to gain dominance as a result of an agreement among them to allow Association of Talent Agents (ATA) restrictions on third-party investments in talent agencies to expire. Lenhoff also alleged that these "Uber Agencies" conspired to exclusively co-package with each other. The defendants allegedly lured talent away from smaller firms by eliminating the standard 10 percent commission and offering to package the individual in future deals with studios, networks, and producers. The Big 4 agencies purportedly split packaging fees with each other, but they did not split with any other firms. In addition, the defendants allegedly conspired to coerce studios, networks, and producers to refuse deals with small agencies. The large agencies allegedly threatened to withhold talent as a consequence of noncompliance.
The Ninth Circuit concluded that the facts presented amounted to nothing more than an allegation that the defendants participated in a lawful trade organization, which does not suggest an illegal agreement. Lenhoff alleged the Uber Agencies acted through representatives at the ATA to allow Rule 16(g) to expire so as to gain access to outside funding and thereby increase their market dominance. Participation in trade-organization meetings did not suggest an illegal agreement, as Lenhoff argued.
The appellate court found that the evidence submitted show that the "Uber Agencies" co-packaged with smaller agencies on several occasions and nowhere in the complaint are there are facts that would support a plausible conspiracy again failing to sufficiently plead a conspiracy. The complaint alleged that the Uber Agencies co-packaged scripted television series "almost exclusively" with each other and "coerced" television networks and studios to deal only with them. However, the complaint also acknowledges a market-based reason for why larger agencies might co-package predominantly amongst themselves: larger agencies "are uniquely and advantageously situated to participate in packaging [scripted television series] because of their large, exclusive, and in-demand talent rosters." The complaint exhibits purported to show the number of times the Uber Agencies co-packaged with each other as opposed to with smaller agencies, but actually showed that the Uber Agencies co-packaged with smaller agencies on several occasions in the relevant timeframe. Moreover, Lenhoff failed to plead the evidentiary facts that would nudge its claim across the line from conceivable to plausible.
Lenhoff’s claims under the "unfair" prong of the California Unfair Competition Law failed because it did not adequately allege that the conduct of the "Uber Agencies" threatened an incipient violation of an antitrust law, or violated the policy or spirit of one of those laws because its effects are comparable to or the same as a violation of the law, or otherwise significantly threatens or harms competition.
The district court had permitted the plaintiffs to file three amended complaints and with each amendment, the plaintiffs failed to plead its claims with particularity. On appeal, the court found that the plaintiff did not provide a reason to suppose that a fourth amendment would be anything but futile and the appeals court found that the district court did not abuse its discretion in denying leave to amend a fourth time.
The case is No. 16-55739.
Attorneys: Gabriel Shanti Barenfeld (Nelson & Fraenkel LLP) for Lenhoff Enterprises, Inc. Bryan Joel Freedman (Freedman and Taitelman, LLP) and Steven Marenberg (Irell & Manella LLP) for United Talent Agency, Inc. Michael B. Garfinkel (DLA Piper LLP) and Kathleen M. O'Sullivan (Perkins Coie LLP) for International Creative Management Partners, LLC.
Companies: Lenhoff Enterprises, Inc.; United Talent Agency, Inc.; International Creative Management Partners, LLC
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