Antitrust Law Daily Wrap Up, ANTITRUST—C.D. Cal.: Claim that talent agencies conspired to poach clients insufficiently alleged, (Sep 22, 2015)

By Linda O’Brien, J.D., LL.M.

A small boutique talent agency failed to sufficiently allege a conspiracy to monopolize in its action against two leading talent agencies for engaging in anticompetitive conduct and unfair business practices by soliciting its clients with package deals that are unavailable to the smaller talent agencies. The federal district court in Los Angeles dismissed the antitrust claim without prejudice and found that the agency’s unfair business practices claim could proceed (Lenhoff Enterprises, Inc. v. United Talent Agency, September 18, 2015, O’Connell, B.).

United Talent Agency (UTA) and International Creative Management Partners LLC (ICM) are two of the largest talent and literary agencies in the world. Lenhoff Enterprises is boutique agency, consisting of two agents, that represents its clients—writers, directors, producers, and cinematographers—on an exclusive basis.

After UTA agents solicited several Lenhoff clients and induced them to sever their relationships with Lenhoff and let UTA represent them exclusively, Lenhoff filed suit against UTA and ICM, alleging that the defendants engaged in a conspiracy to monopolize in violation of Section 2 of the Sherman Act and unfair business practices under California’s Unfair Competition Law (UCL). Specifically, Lenhoff asserted that the defendants solicited its clients with package deals that are unavailable to the smaller talent agencies. The package deals allow the largest talent agencies—UTA, ICM, Creative Artists Agency (CAA), and William Morris/Endeavor (WME)—to unfairly compete with smaller agencies for talent by offering to waive the standard ten percent commission. The defendants moved to dismiss the complaint.

Sherman Act claim. The court found that the plaintiff failed to sufficiently state a claim for conspiracy to monopolize. Looking to the Ninth Circuit decision in Rebel Oil Co. v. Atlantic Richfield Co., 51 F3d 1421 (1995), the court held that a plaintiff must allege facts indicating that a conspiracy exists to create a monopoly in a single entity to state a Sherman Act, Section 2 claim. In this case, the plaintiff did not allege that the defendants intended to create a monopoly in a single entity, but instead argued that the leading talent agencies shared market power. Since the Ninth Circuit does not recognize a “shared monopoly” or “joint monopoly” theory, the plaintiff’s conspiracy to monopoly claimed failed, the court concluded. Nevertheless, the motion to dismiss was granted with leave to amend the antitrust claim.

Unfair business practices claim. However, the plaintiff sufficiently stated a claim under the UCL. The plaintiff contended that the defendants conspired to eliminate a Screen Actors Guild regulation that prohibited talent agencies from having any financial interest in a production or distribution company, as such an interest would result in self-dealing. The rule applied to the packaging fee option for their clients, which eliminated the standard 10 percent agency commission and induced clients to join their agencies. The significant increase in business to the four agencies resulted from decreased competition by other agencies. According to the court, the plaintiff’s allegations—that the four leading talent agencies acted in concert to control the vast majority of the scripted series market and statistical information showed that actual harm to competition existed—were sufficient to show that the defendants’ conduct significantly threatened or actually harmed competition.

The case is No. 2:15-cv-01086-BRO-FFM.

Attorneys: Philip J. Kaplan (Law Offices of Philip J. Kaplan) for Lenhoff Enterprises, Inc. Bryan J. Freedman (Freedman and Taitelman LLP) and Steven A. Marenberg (Irell and Manella LLP) for United Talent Agency, Inc. Michael B. Garfinkel (Perkins Coie LLP) for International Creative Management Partners LLC.

Companies: Lenhoff Enterprises, Inc.; United Talent Agency, Inc.; International Creative Management Partners LLC

Cases: Antitrust StateUnfairTradePractices CaliforniaNews