Big 3 Talent Agencies Say WGA’s Discovery Demands Could Cost Them More Than $10 Million

Hollywood’s Big 3 talent agencies estimate that it will cost them more than $10 million to produce all the documents the WGA is seeking in discovery as their yearlong legal battle over packaging fees winds its way slowly towards trial next March. The WGA, however, says the discovery costs to the agencies will be much lower, even if the guild gets everything it wants. Under the agencies’ proposals to limit discovery, their costs could be cut by two-thirds.

In the latest court filings, WME says the guild’s discovery requests will cost the agency approximately $4,050,970 if it has to produce tens of thousands of documents in the custody of 35 current and former agents and executives – known as “custodians” in court filings. CAA says it will it cost “a minimum of $3.5 million,” and UTA says it will cost more than $3 million – at about $105,637 per custodian.

At issue is a dispute over the scope of discovery: agencies have said they will provide the guild with documents in their centralized files that keep track of packaged deals, plus the files from 15 document custodians. This, they argue, will give the WGA an accurate picture of the issues that remain in the ongoing antitrust suit.

The guild, however, wants a much more extensive discovery, demanding that as many as 50 custodians at each agency produce their files, which may include hundreds of thousands of emails and other documents relating to packaged deals.

The scope of the demands by the WGA East and WGA West, however, could be sharply limited by U.S. Magistrate Judge Alexander MacKinnon, who is handling the discovery portion of the case, in the wake of Monday’s ruling by U.S. District Court Judge Andre Birotte Jr., who threw out the guild’s claims for federal price-fixing, racketeering and group boycott.

Birotte, however, is allowing the guild to proceed to trial on its state claim of price-fixing, and on several other claims by individual plaintiffs for breach of fiduciary duty, unfair competition and breach of contract. The guild told its members yesterday that “We look forward to proceeding with discovery and then to trial.”

Rich Shuter, a partner at UTA, said in a sworn declaration on April 27 that “that the principal issue before the Court concerns the appropriate number of ‘custodians’ that UTA and the other agencies each will be required to search and produce in response to the guilds’ First Set of Document Production Requests. In that regard, I am informed that UTA, CAA and WME have each offered to produce the files of 15 custodians to the Guilds (i.e., the files of 45 different individuals), but that the Guilds have rejected that offer. Instead, the Guilds demand that if UTA is using Technology-Assisted Review (TAR) techniques to identify responsive documents, then UTA must collect and include in its production the files of each person at UTA who has documents ‘likely to possess documents responsive to the Guilds’ requests.’

“Insofar as the Guilds’ document requests seeks documents relating to virtually every aspect of UTA’s packaging practices – and packaging is a core business practice of UTA – then an extraordinarily large number of agents, executives, and other employees of the agency could meet the Guilds’ definition of a ‘custodian who is likely to possess documents responsive to the Guilds’ requests.’ Under this proposal, the number of ‘custodians’ whose files would need to be collected and searched would easily exceed 100 individuals.”

He went on to say that the agencies have already committed to producing documents on some 1,000 packaged deals since 2015. Noting that he is “the primary person at UTA with the responsibility for negotiating Package Deals,” he said that “for each year between 2015 and the present date, UTA received a front-end fee on 30 to 50 (usually closer to 50) discrete active Package Deals per year. Because it is relatively rare that any series generates enough success to meet revenue targets at which ‘back-end’ fees are payable to the agency under the terms of the Package Deals, the number of series for which UTA receives back-end fees in any given year is much smaller. But, significantly, I estimate that the total number of Package Deals for which UTA has received ‘back-end’ fees during the period June 24, 2015, through the present date is between 50 and 100 separate Package Deals.

“Thus, all told, to comply with its commitment to produce the terms of the active Package Deals and the documents in our central files related to these deals, UTA will be producing documents related to between 200 and 350 discrete deals. If CAA and WME have a comparable or greater number of package deals — and my informed belief based on my experience in the agency business is that they do — the Agencies will collectively be producing, just from our respective central packaging files alone, documents relating to at least 500 and perhaps more than 1,000 different package deals.”

“Because UTA has committed to produce not only the terms of the Package Deals,” Suter said in his declaration, “but also the other communications in our files, such as communications with clients or with production entitles concerning those projects, the production of these documents will, in my opinion, provide the Guilds with a large and comprehensive set of documents permitting them to comprehend and scrutinize the deals themselves, and the process through which these deals are negotiated, independent of the production of files or emails of any particular agent or executive at UTA.”

Specifically, he said, the files relating to those packaged deals “contain communications relating to these deals by a large number and a broad cross-section” of senior, junior, literary and talent agents. “Thus, these files will give the Guilds a window into the communications of most of the over 100 UTA agents for UTA’s writer clients, as well as agents at UTA for directors, producers, actors and others. Based on my familiarity with the central files, as a result of UTA’s commitment to produce Package Deals and related documents from UTA’s central files, I believe that the Guilds will have a sufficient and deep source of documents on which to evaluate UTA’s practices and procedures with respect to such deals at the agency even before the production of any individual agent’s or executive’s files.”

CAA attorney Patrick Somers said in his declaration that “During this discovery process, CAA has offered to provide information concerning all ‘active packages,’ which is defined to mean any package transaction for which CAA either received a ‘front-end’ or ‘back-end’ fee during an agreed upon time period. It is my understanding that the documents that will be collected from CAA as part of this offer include, at a minimum, formal documentations of final terms of package deals, and may also include: Agency communications with studios and talent, including writers, regarding negotiations and terms of package projects; the identity of the studios, agency (or agencies) and talent involved in the project; financial arrangements regarding the project, and fees actually received by CAA; financial arrangements and other commitments to talent and fees actually received by artists in accordance with these arrangements; and internal agency communications related to negotiations of package projects.”

The WGA, he noted, “Erroneously assert that the number of additional custodians offered by the Agencies represents a mere ‘small percentage of custodians – less than 7% at WME, less than 8% at CAA, and less than 12% at UTA.’ But the employees the guild calls “custodians,” he said, “are simply employees whom CAA identified in lieu of producing organizational charts that CAA does not maintain in the regular course of business.”

Isabelle Mercier-Dalphond, vice president and counsel of Endeavor, the parent company of WME, said in her declaration that she has supervised and been personally involved in the identification and collection of documents and data regarding WME’s packaging deals that are maintained in central repositories and databases, “from which documents and data will be produced in this matter.”

Those documents, she said, include various package projects in some combination of the following:

• The identity of individual projects/package deals, whether executed or not;
• The studio, agency (or agencies) and talent involved in the project;
• Financial arrangements regarding the project, including but not limited to the network license and back-end fees payable to WME (and revenue considered in the calculation of each) and fees actually received by WME in accordance with these arrangements;
• Financial arrangements and other commitments to talent, including but not limited to fees for writer room services, writing services, series bonuses and royalties, and additional fee contingency arrangements; fees actually received by writers in accordance with these arrangements;
• Internal WME communications related to negotiations of package projects; and
• WME communications with studios and talent, including writers, regarding negotiations and terms of package projects.

The communications contained in WME’s packaging repositories and databases, she said, include those from individuals of various levels of seniority, including senior executives, department heads and agents, and across various departments involved with packaging within WME, including talent agents and business affairs personnel.

Maura R. Grossman, the WGA’s expert on technology-assisted data collection, said “the use of TAR to identify responsive documents would substantially reduce the cost and burden of the search and review process, as compared to a traditional manual review.” The first judicial opinion approving the use of technology-assisted review (TAR) — a term she helped coin — was first issued in 2012, and its use has since become more common in discovery.

WGA attorney Casey Pitts, in an April 20 declaration, laid out the guild’s position, offering a blow-by-blow account of the behind the scenes wrangling between the guild and the agencies, which earlier this month led to an “impasse” in their attempts to reach an agreement on the scope of discovery.

“During a telephone meet and confer on February 19, 2020,” she wrote, “the parties discussed the Agencies’ responses to the Guilds’ requests for production. The Agencies stated that they would be willing to produce information concerning a subset of package deals from their central repositories of data concerning such deals, and to search for other responsive documents from 10 custodians at each Agency. My co-counsel and I explained why the number of custodians they were proposing to search was entirely inadequate in light of the nature of the Agencies’ decentralized business practices and the locations of the relevant evidence we sought. Further, the Agencies had each represented that the set of custodians they had identified to (the guild) did not include former employees, and might possibly exclude some unidentified number of current employees likely to possess responsive information, given that the Agencies had declined to produce complete employee lists, telephone directories, or organizational charts that would allow the Guilds to better understand the universe of relevant custodians at each Agency.

“On February 27, 2020, I wrote to counsel for the Agencies to request that the Agencies put the oral proposals made during our meet-and-confer in writing — as I had previously requested during the February 19 phone call — in order to allow (the guild) to formulate a written counterproposal.”

That same day, UTA attorney Steven Marenberg responded on behalf of all three agencies, she wrote, “and proposed that the Agencies produce terms of contract and certain limited financial data concerning package deals that the Agencies had entered into during the period from June 24, 2015, to the filing of WME’s complaint in this litigation and that had resulted in the Agency’s receipt of a ‘front-end’ fee, and that the Agencies be required to search only 10 custodians each.”

On March 3, she wrote to the agencies lawyers to provide them with the guild’s counterproposals and the two sides subsequently had another telephone conference to attempt to resolve their issues, but were not able to come to an agreement.

On March 16, 2020, Marenberg, writing on behalf of all three agencies, responded to her March 3 email. Marenberg, she said, agreed to certain some of the guild’s proposals concerning the production of information relating to the Agencies’ packaging deals, but rejected others.

Marenberg, she said, “agreed to include information about packages that were entered into before June 24, 2015, for which the Agency had received a ‘back-end’ payment on or after that date,” but “rejected my proposal that the Agencies’ production of information regarding packaging deals include documents relating to those deals that are not located in the central repository, such as communications by the individual agents who represented writers in connection with those deals. Mr. Marenberg also offered a new counterproposal regarding the number of custodians the Agencies would be willing to search, stating that each Agency would be willing to search 15 custodians.”

On March 19, 2020, she wrote to the agencies’ lawyers in response to Marenberg’s counterproposals. “As set forth in my March 19 email,” she wrote, “the Guilds agreed to accept the Agencies’ proposal concerning their production of information regarding a subset of their packaging deals. I explained, however, that the Guilds could not accept the Agencies’ proposal regarding custodians. I noted that the documents produced by the Agencies as part of the parties’ meet-and-confer process identified a substantial number of potential custodians at each Agency – at least 206 at CAA (including at least 75 agents for writers, not including executives), 129 at UTA (including at least 55 agents for writers, not including executives), and 236 at WME (including at least 55 agents for writers, not including executives) – and that simply including the individual (named plaintiffs’) former agents as custodians would take up 11 of the Agencies’ 15 proposed custodians at CAA — again, not including executives. Each Agency has also identified a substantial number of currently-serving executives who possess responsive documents: at least 16 at CAA, at least 9 at UTA, and at least 17 at WME.

“I also noted that the Agencies’ refusal to conduct an independent search beyond the central repository for documents relating to the subset of packaging deals for which they would be producing terms and other financial information would require an even greater number of custodians to be searched, because those custodian searches would be the only way to ensure that many documents and communications relevant to those packaging deals and the representation received by writers from their agents in connection with those deals would be produced.”

By contrast, she wrote, “the Guilds have agreed to produce the most relevant documents responsive to the Agencies’ requests whether or not they are in the possession of any identified custodian. I asked the Agencies to respond to the Guilds’ counterproposal by March 23. Having received no response from the Agencies to my March 19 email, during a telephonic conference of the parties on March 30, 2020, I asked for the Agencies’ current positions. Counsel for UTA agreed that UTA and (the guild) were at impasse with respect to the dispute regarding the number of custodians UTA would include in its search for responsive documents.

“That same day, I wrote to counsel for CAA, UTA, and WME to request that CAA and WME also confirm the parties’ impasse. “On April 4, 2020, having received no response to my email of March 30, I wrote again to counsel for CAA and WME, explaining that the Guilds would presume that their failure to respond meant CAA and WME were taking the same position as UTA.

“On April 6, CAA confirmed that the parties were at impasse. On April 8, WME so confirmed as well. In the same April 8 communication, the Agencies confirmed that they each intended to use predictive coding to search for responsive documents from 15 custodians.”

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