Following a decade of success, Netflix might be facing a big sign of trouble. What started as a DVD-mailer service metamorphosed into a corporate powerhouse worth an astonishing $156 billion. This is thanks to a seemingly unending list of critically acclaimed hits such as Stranger Things, Unbreakable Kimmy Schmidt, Orange is the New Black, and Marvel’s Daredevil. But now, as lawsuit from 20th Century Fox agains Netflix nears a resolution, Netflix has reason to worry.
20th Century Fox first filed the suit back in 2016, accusing Netflix of allegedly persuading former Fox executives of breaching their contracts in order to sign onto the streaming service’s team. Production executive Tara Flynn, known for her work on Showtime’s Homeland and FX’s The Americans, and marketing executive Marcos Waltenberg are allegedly the ones who jumped ship from 20th Century Fox in favor of Netflix.
In response to the 2016 suit, Netflix presented claims that Waltenberg and Flynn’s contracts with 20th Century Fox were allegedly strewn with illegal clauses. Not only were they allegedly camouflaged as non-competes, violating Californian Law, but the contracts also allegedly contained verboten injunction relief provisions to the hindrance of Fox’s competition. In addition, Netflix also accused Fox of allegedly permitting illegal “take-it-or-leave-it” contracting, arguing that when said contracts were compiled with succeeding agreements, they were in violation of California’s limitation on personal service contracts, which cannot exceed seven years.
These accusations threatened future employment of not only the entertainment industry, but also Californian employment at large.
According to the Hollywood Reporter, however, Fox might be approaching a major victory, much to the misfortune of Netflix. In their report, LA Superior Court Judge Marc Gross presented a tentative decision that sides with the plaintiff, proving that Netflix allegedly induced both Flynn and Waltenberg to break their contracts with Fox. Gross cited evidence that indicates Netflix’s self-awareness in intentionally acting to upset relationships between Flynn, Waltenberg, and other Fox employees.
Despite this tentative decision, victory is not a guarantee for the film company. In order to secure their gain, Fox must provide evidence that they suffered damages as a result of Netflix’s alleged interference. Not only this, but Gross has also indicated that he appreciated evidence presented by Netflix, showing that Fox may have actually saved money due to the departure of their executives.
Ultimately though, victory in the original 2016 suit would not mean monetary triumph on Fox’s part, as the company is only seeking $1 in damages. The point of the lawsuit was not to make money. Instead, Fox wanted to make a point.
As for Netflix’s counterclaim, Fox eyes success there too. In this counterclaim, Netflix caught a judicial declaration that Fox’s use of fixed-term employment contracts for all of its employees was unlawful. According to the judge however, these agreements were not in violation of legal code. “The provisions appear to apply while the employees are still employed and do not, in fact restrain anyone, and, even assuming, arguendo, the injunctive relief provisions in the Fixed-Term Employment Agreements violate Business & Professions Code §16600 and/or are void for any other reasons, the Fixed-Term Employment Agreements are still valid as to the remaining lawful terms,” the judge explained.
The judge also sided with Fox in regards to Netflix accusing the network of breaking the seven-year rule, which originally amassed attention in the 1940s when Olivia de Havilland broke her contract with Warner Bros.
The tentative order was as follows: “This court does not believe the overall legislative intent behind Labor Code §2855(a) would be served by the blanket ruling Netflix seeks, one that would prohibit all employees under contract in any business or context from engaging in continuous employment with the same employer for more than seven years. Netflix is, in effect, asking this court to look solely to the length of each employee’s tenure with Fox as determinative. However, Netflix, in making this argument, does not address the difference between the length of time someone has worked for a company and the term of any specific employment contract.”
The judge continued, further criticizing Netflix’s attack on Fox’s contracting system.
“Netflix’s position ignores the benefits to the employee of having continuous employment if the employee so chooses,” explained the judge. “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.)….) Labor Code §2855 merely ensures a choice must be available to employees at least every seven years to ensure they have the freedom and opportunity to choose to enter into employment agreements.”
At a hearing today, the judge appeared to stand by his tentative decision in favor of Fox. An official ruling will likely come soon.