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Netflix Loses Appeal in Lawsuit Over Poaching of Fox Executives

Dec. 3, 2021, 2:21 AM

Netflix Inc. lost its challenge to an order that the streaming giant stop poaching fixed-term employees from Twentieth Century Fox, after a California appellate court upheld the injunction on Thursday.

Fox sued the streaming service in 2016, alleging Netflix enticed certain Fox executives to leave the company, breaking fixed-term contracts.

A state trial court in Los Angeles granted an injunction blocking Netflix from soliciting Fox employees on fixed-term employment agreements or inducing them to breach their agreements.

The California Court of Appeal, Second District, upheld the injunction, rejecting Netflix’s argument that Fox’s fixed-term contracts were unconscionable and against public policy.

The California Supreme Court has observed that there are public policy benefits to fixed-term contracts, Justice Dorothy C. Kim wrote in the unpublished opinion. And other provisions, including a confidentiality provision and a nonsolicitation provision, do not violate public policy, Kim said.

Fox’s agreements provided “stability and predictability” for employees, Kim said. She also rejected Netflix’s argument that Fox pressured employees into extending their contracts, thereby holding them under contract longer than the legally allowed limit under California law.

The poached employees in question were “sophisticated business executives who negotiated their fixed-term employment agreements with Fox at arm’s length,” Kim wrote. Nothing in the record indicated a restraint on mobility or any other public policy violation, she said.

Justices Carl H. Moor and Brian M. Hoffstadt joined the opinion.

Orrick, Herrington & Sutcliffe represents Netflix. O’Melveny & Myers represents Fox.

The case is Twentieth Century Fox Film Corp. v. Netflix, Cal. Ct. App., 2d Dist., No. B304022, unpublished 12/2/21.

To contact the reporter on this story: Maeve Allsup in San Francisco at mallsup@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Meghashyam Mali at mmali@bloombergindustry.com