In a pending lawsuit in California, 20th Century Fox sued Netflix for hiring away two executives who were under contract with Fox. Hiring away competitor’s employees, or poaching employees, has been part of Hollywood business for years. California law prohibits noncompete agreements, so California businesses have to be a bit more creative when suing competitors for poaching employees.
Fox Argues that Netflix Tortiously Interfered With Its Contract
In this case, the employees entered into a written agreement with Fox, so the company was able to sue for tortious interference with contract and unfair competition. Fox filed a motion for summary judgment, arguing that there were no disputed issues of fact and that it was entitled to judgment as a matter of law. Netflix’s argument in opposition centered on allegations that Fox’s contracts amounted to involuntary servitude that conflicted with California law and public policy. Netflix also tried to argue that the Fox contracts were simply “disguised” noncompete agreements, and that they were unconscionable contracts, because Fox allegedly “bullied” the executives into signing the contracts and committing to Fox. Superior Court judge Marc Gross heard the parties’ arguments and indicated that he would likely grant Fox’s request to prohibit Netflix from interfering with the contracts of current Fox employees.
Court Rules for Fox and Issues Injunction Against Netflix
Judge Gross rejected the majority of Netflix’s arguments, and indicated that Fox was entitled to an injunction on the unfair competition claim. The court noted that it was undisputed that Netflix would likely interfere with Fox’s contracts in the future if not enjoined from pursuing that behavior. As to the tortious interference claim, the court denied the motion for summary judgment because Fox failed to produce evidence of its damages, which can be tricky to prove. Netflix maintained that Fox did not suffer any damages as they did not really care that the two executives left the company, and that Fox actually saved money by replacing the two executives. Fox tried to argue that it incurred nominal damages of at least $1, in hopes of prevailing on the motion, but the court held that there were triable issues of fact whether or not Fox incurred any damages.
It seems likely the case will settle at this point. Fox has won the injunction, which is the big prize in this type of litigation: enjoing the bad guy from doing bad things. But the claim for tortious interference with contract seems like a loser if Fox cannot prove it incurred $1 in damages.