By Helen Coster and Jill Serjeant
NEW YORK/LOS ANGELES (Reuters) - "The Wire" creator David Simon and seven other writers, along with the Writers Guild of America, sued the four major Hollywood talent agencies on Wednesday for getting paid in such a way that the agencies' financial interests prevail over those of their clients.
The plaintiffs are trying to establish that talent agency "packaging fees," in which an agent is paid directly by the writer's employer instead of getting paid a 10 percent commission fee from the writer, are illegal under both California and federal law.
In recent decades, packaging fees have become the standard form of compensation for the four largest talent agencies, which have grown in power and reach amid a wave of consolidation.
The lawsuit, filed in Los Angeles Superior Court, alleges that because packaging fees are generally tied to a show's revenue and profits, the agencies are incentivized to reduce the amount production companies pay writers and other talent on a show.
As such, packaging fees violate California fiduciary law, the suit claims, because they pit the interests of the agency against those of its writer client. The fees also violate the state's Unfair Competition Law, the suit maintains, because they amount to an illegal "kickback" from production companies to agencies.
The four agencies named in the complaint - William Morris Endeavor, Creative Artists Agency, United Talent Agency and ICM Partners - receive over 80 percent of the packaging fees paid by Hollywood studios and networks, according to the WGA.
The agencies could not immediately be reached for comment.
The relationship between the WGA and the Association of Talent Agencies, whose members include the four defendants in Wednesday's lawsuit, has been governed by a 43-year-old agreement that regulates how agents represent writers. After negotiations over a new, updated agreement fell apart, the WGA asked agents to sign a new code of contact that would eliminate packaging fees.
The majority of agents refused, and on Friday the WGA told its members to fire agents that had not signed the new code.
That directive has led to some chaos in the industry, with high-profile writers such as Patton Oswalt and Andy Richter tweeting images of letters to their agents that terminate representation.
The timing of the lawsuit and broader uncertainty is significant, as production companies approach staffing season and seek to hire writers for recently acquired TV shows.
(Reporting by Helen Coster and Jill Serjeant; Additional reporting by Lisa Richwine; Editing by Tom Brown)