UPDATE, 6:55 PM: Netflix got swiped in court today for swiping one of Viacom’s executives back in 2018, but not as much as expected.
Just like in his tentative of last week, though Judge Jon R. Takasugi gutted the streamer’s argument that the Shari Redstone ruled company broke the famed seven-year rule with its ongoing contracts with then EVP Production Management Momita Sengupta. However, while also granting Viacom’s unfair competition notion, unlike his tentative order of December 8, the LA Superior Court judge did not grant Viacom the injunction it desired to ban Netflix from poaching more of its employees in the future.
Netflix ignored the latter near miss, but took the Judge to task over the former in a statement provided to Deadline after Monday’s DTLA hearing.
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“Employee mobility and open, fair competition are at the heart of California’s innovation and economic prosperity,” a spokesperson for the streamer said. “We strongly disagree with the judge’s ruling which we believe wrongly allows Viacom to use unfair and unlawful contract terms to prevent its employees from taking a job of their choosing,” they added.
No official word if Netflix will be appealing this decision as they did their loss last year in the Fox’s lawsuit over the home of Queen’s Gambit poaching two of its execs in 2016. Yet, I would say, if you were to be planning your next chess move, you can be pretty sure an amazing bishop endgame is being strongly considered.
PREVIOUSLY, DEC 8 PM: (Updated with Netflix reaction) Sure it has the launch of The Surgeon’s Cut tomorrow, but some weeks it kind of bites to be Netflix.
Already fighting an uphill appeal battle against Fox (aka Disney ) for poaching two executives a few years back, the Reed Hastings– and Ted Sarandos-led streamer were sued December 4 by Activision Blizzard for allegedly seducing the latter’s CFO back in late 2018. In a repeat of sorts of the skirmish with Fox, Netflix looks almost certain to lose its legal dust-up with Viacom (now ViacomCBS) for snagging Momita Sengupta from the Shari Redstone-controlled company two years ago.
“The Court finds that Viacom’s employment agreements do not contain unlawful non-compete covenants for the simple reason that Netflix has failed to support its argument with on-point statutory support,” declared a tentative ruling Tuesday from Los Angeles Superior Court Judge Jon R. Takasugi. “The cases relied on by Netflix concern at-will employment contracts,” continues the ruling (read it here).
“This is fatal to Netflix’s case because there is no dispute that Viacom employment contracts do not enforce the non-compete covenant beyond the contract period,” Takasugi added in pretty stark terms.
Or, to make a long-ish tentative short: “Netflix’s motion for summary judgment is denied. Netflix’s motion for summary adjudication is denied. Viacom’s motion for summary adjunction is granted.”
The streamer wasn’t silent about the tentative, either.
“We strongly disagree with the judge’s tentative ruling, which, if adopted, would confirm Viacom’s right to bind employees to contract terms that are unfair and, we believe, unlawful,” said a spokesperson for Netflix in a statement to Deadline. “We’ll share the legal and factual bases of our position at Thursday’s hearing, and will continue to fight for the basic right of employees to choose to leave their job to take another.”
If Netflix comes up a cropper, it’s almost certain it will appeal, like it did in September after losing the long-running Fox case in December 2019.
The then-Viacom went after Netflix in October 2018 after the streamer signed up EVP Production Management Sengupta to become Netflix’s VP Physical Production for original series — a gig she still holds today.
“Netflix was aware that Sengupta was under a term Employment Agreement with Viacom,” the home of Comedy Central said in its October 5, 2018 filing in LASC. “Despite that fact, and flouting well-settled law that applies to all who do business in California, Netflix engaged in an illegal course of dealing designed to tortiously induce Sengupta to breach her Employment Agreement with Viacom so that she could commence employment with Netflix immediately,” it stated.
In December 2018, Netflix made its own filing in the case, essentially recycling its Fox arguments to paint Viacom as attempting to “stymie employee mobility.” As it did in the unsuccessful Fox matter, the freewheeling streamer pulled out claims that Sengupta’s deals with Viacom over 16 years violated the famed “seven-year rule.”
Not content to try to offer a new POV on California labor law, as they did in the Fox case, Netflix and their Orrick, Herrington & Sutcliffe lawyers also tossed in that the non-compete clause in Sengupta’s contract was unlawful. Takasugi wasn’t having any of that today, however.
“If Netflix wishes to argue that non-compete covenants are illegal in fixed-term contracts where they restrain employees even after they have left the company due to termination or resignation (i.e., when they are no longer actually employed by the company), it must provide support for that contention,” he wrote in the tentative. “Netflix has failed to do so.”
Now, there is always a possibility the judge will change his mind and issue a different final order following the summary judgment hearing set for Thursday. There’s always a chance someone with come up with a successful theory for cold fusion too, but that doesn’t seem to happening anytime soon either.
In the meantime, pathological science references aside, Netflix really does look to be getting legally chomped up this week for not keeping its hiring hands to themselves – and lawyers love to binge on that.
