21st Century Fox Sues Netflix Over Executive Poaching (latimes.com)

An anonymous reader quotes a report from Los Angeles Times: 21st Century Fox on Friday filed a lawsuit against Netflix, accusing the streaming video giant of illegally recruiting two of its executives who were under contract. The suit, which was filed Friday in California Superior Court in Los Angeles, says Netflix engaged in a "brazen campaign to unlawfully target, recruit, and poach valuable Fox executives by illegally inducing them to break their employment contracts with Fox to work at Netflix." The lawsuit was sparked following the exits of two Fox executives: Marcos Waltenberg, who made the jump to Netflix earlier this year, previously worked as a marketing executive at Twentieth Century Fox Film; Tara Flynn, who made the move to Netflix just last week, had been the vice president of creative affairs at Fox 21 TV Studios. Fox alleges that Netflix pursued and hired the executives even though it knew they each had employment contracts that were still in effect, according to the complaint. The Century City-based studio is seeking an injunction to prevent Netflix from interfering with its employment contracts, as well as compensatory and punitive damages. A Netflix spokesperson said in a statement: "We intend to defend this lawsuit vigorously. We do not believe Fox's use of fixed term employment contracts in this manner are enforceable. We believe in employee mobility and will fight for the right to hire great colleagues no matter where they work."

Comments

SInking SHip

[ISoldat53]

The rats are leaving the sinking ship.

Re:SInking SHip

[Opportunist]

No, but fortunately the requirements for opening a service like Netflix are WAY lower than for opening a cable TV service.

Re:SInking SHip

[Megol]

Many times, may I suggest that you do some studying? Because the monopoly controls existing today weren't created because some dude named Marx speculated about it, they were created to avoid problems that actually existed at the time.

Monopolies still exist today but mostly in a different form - a few companies that willingly divide a market between them making it near impossible for new actors to enter. For consumers and corporations alike that is the same problem as a real monopoly but technically a market with two-three strong companies isn't one.

This is in California.

[brunes69]

This suit will be thrown out before the ink dries. Employee mobility is very strongly enforced in California.

Let me see if I understand

[Anonymous Coward]

Two people have contracts with Fox that, presumably, say they can't work for someone else. Neflix, who has no contract with Fox, hires those people. Fox sues Netfix and not their former employees.

How the fuck is this not a SLAPP-like bullshit case that gets thrown out teh second a judge sees it? How can you sue someone for breaking a contract they aren't party too?

Re:Let me see if I understand

[Tesen]

If I offered you a bribe in exchange for providing me with info that your NDA says you can't share, I may not be a party to your NDA, but I can still be sued for inciting you to breach it. The same applies here...sort of. The interesting wrinkle in this case is that the contract itself was likely illegal from the beginning due to the terms in contained, meaning that it was never enforceable to begin with.

There is no similar application here; employment contracts are between employee and employer and unless Netflix had a non-compete with Fox, this lawsuit is moot against Netflix

That being said, action against the former employees is probably likely and I doubt the term contract will be upheld in its entirety; in my field (IT) I usually have a standard non-compete clause in the employment contracts for the employers current industry, I would be shocked if a similar did not exist in these employees contracts.

Also, if the employees have violated the non-compete this does not compel Netflix to fire them either, in fact all Netflix needs to do is provide their corporate lawyers as apart of their employees benefits, so they can fight Fox in court. Also a NDA agreement that they likely signed does not allow them to divulge Fox corporate secrets, but it does not prevent them from practicing their skillset elsewhere (that would be the non-compete).

Re:Let me see if I understand

[Richard_at_work]

There is a concept that is alive and well in contract law called "Torturous Interference" - if Netflix did indeed incite these execs to breach their contracts, they have a case to answer.

Re:Let me see if I understand

[whoever57]

if Netflix did indeed incite these execs to breach their contracts, they have a case to answer.

You can't breach a clause in a contract if state law says that clause is null and void. Non-compete clauses are not valid in California.

Re: Let me see if I understand

[Tesen]

Employment contracts are between employer and employee but have you heard of tortious interference?

The real problem is the non compete is not enforceable in California. Hopefully it is dispensed with by the judge quickly.

FOX will need to actually prove they suffered harm and loss; maybe I misunderstand tortious interference, but it was my impression that as long as Netflix was not aware of the provisions of the former executives contracts (which they can claim and FOX will need to prove otherwise) they acted in good faith to extend a job offer to two executives in a state where non-compete's are invalid (i.e. tough to prove they suffered harm and loss).

My opinion is this will come down to an employment dispute between FOX and its former employees, most likely over stock options, bonuses etc and whatever other incentives they had in their contracts and that Netflix may pay a penalty during their next streaming rights negotiations with FOX :)

Re: Did the contracts have a "Key person" clause

[HornWumpus]

INAS (I am not a shyster), but working in CA for decades.

Non competes are only binding in California when the people involved are 'business principles' and the non compete is narrowly structured.

A CEO's non compete is binding (if narrow) a regular employees is not.

These are 'executives' so maybe, but odds are low.

Long term employment contracts in the USA cannot be held for 'specific performance' as that gets close to slavery (history: Indentured servants), but damages can be assessed.

What's the travesty here is

[future assassin]

the new guard is bringing in the old guard into the new system.

Re: Did the contracts have a "Key person" clause

[whoever57]

INAS (I am not a shyster), but working in CA for decades.

Yes, it's just as well that you are not providing legal services:

In California it is a bright-line rule: Employee noncompete agreements are void. It does not matter how reasonable or well-intended they are.

That page lists the only exception:

Are Any Non Compete Agreements Legal in California?

Only for owners of a business, corporation, LLC, or partnership.

These people may own some shares, but that doesn't make them an "owner" for this purpose.

Re: Did the contracts have a "Key person" clause

[DRJlaw]

Your source is wrong.

As to the rest:
1. A business principal is an owner, partner, or other person with a material fractional interest in the business and an ability to control. I don't know where you're getting your definition of business principal from, but they mean the same thing. BPC 16601 specifically states:

"For the purposes of this section, "owner of a business entity" means any partner, in the case of a business entity that is a partnership... or any member, in the case of a business entity that is
a limited liability company... or any owner of capital stock in the case of a business entity that is a corporation."

2. California does have a trade secrets exception; you need to read Muggill v. Reuben H. Donnelley Corp -- Edwards v. Arthur Andersen expressly refused to eliminate that exception.

3. CEOs and other executive level staff are far more likely to have knowledge of trade secrets, and to be expected to use that knowledge in new positions. It is not a slam dunk that you can exclude an executive level employee from employment in another business (and you can't in businesses in different fields or positions with different responsibilities within the same field), but if the responsibilities of the new position require exploiting the old trade secret knowledge, you can effectively enjoin that use and, as a result, exlcude that person from that job.

I understand "bright line rule" just fine. I also understand that there is no bright line rule like the one that you suggest, that the BPA exceptions are broader than you believe, and that the trade secret exception to your so-called "bright line rule" still exists and is enforced in California.

I merely allow for the possibility that he could be excluded from the job (technically, performing certain job responsibilities) under California law, you're the one arguing that there's no possible way for that to happen. You're wrong. You can't point to one California court decision that states otherwise, and, no, court decisions which don't even discuss trade secrets issues do not suffice to show that Muggill does not apply.

you can't stop someone from working for a competitor just because you fear that they may reveal trade secrets

It all depends upon how objectively reasonable that fear is. I suggest that you begin by reading the cases that actually cite Muggill, rather than implicitly trusting a spamvertisement page that completely misrepresents the Dowell decision. That court said:

"Although we doubt the continued viability of the common law trade secret exception to covenants not to compete, we need not
resolve the issue here. Even assuming the exception exists, we agree with the trial court that it has no application here. This is
so because the noncompete and nonsolicitation clauses in the agreements are not narrowly tailored or carefully limited to the
protection of trade secrets, but are so broadly worded as to restrain competition"

The California Court of Appeal can doubt all it wants, but it can't overrule the California Supreme Court. Until the latter overrules Muggill, it remains the law.