On February 22, 2019, Los Angeles Superior Court Judge Richard E. Rico refused to toss Viacom Inc.’s case against Netflix based upon allegations that Netflix illegally recruits employees from Netflix’s competitors (including Viacom).

Judge Rico shot down Netflix’s arguments- which Netflix raised in a motion asserting that Viacom’s fixed-term employment contract violates California labor law with an illegal non-compete agreement- against Viacom’s claims for unfair competition and intentional interference with contractual relations: “The argument is not appropriate at the demurrer stage,” the Judge said, “because it addressed the factual substance of the allegations and not the legal basis for them.”

In its brief filed in early February, 2019, Viacom argued that the purported noncompete provision in its employee contracts is a non-issue and has no relation to Viacom’s allegations of wrongdoing by Netflix. Viacom’s complaint alleges that Momita Sengupta- an executive vice president of production management and operations at Viacom before she left for a job with Netflix- was employed by Viacom with an enforceable three-year term employment contract, and that Netflix interfered with that agreement by encouraging Sengupta to breach her contract — which was set to expire in April 2020 — and hired her knowing she was bound by the agreement.

Viacom’s complaint states, “Viacom, like other California employers, uses fixed-term contracts with certain executives to secure their commitment to stay with the company for a specified number of years,” and that “the noncompete provision is related to the protection of confidential information that Viacom is not seeking to enforce in the lawsuit.”

When Viacom initially discovered that Netflix asked Sengupta to jump ship, it demanded that Netflix take back its job offer but Netlfix refused. Instead, Netflix provided Sengupta with a lawyer to directly respond to Viacom and assured the executive that it would defend and indemnify her and pay for her legal representation should Viacom pursue legal action.

This is the second suit alleging that Netflix scooped employees with fixed-term contracts from other industry employers. In 2017, Twentieth Century Fox Film Corpsued Netflix, also in Los Angeles County Superior Court, claiming it encouraged two of its top executives to break their contracts. In response, Netflix filed counterclaims, accusing Fox of using illegal fixed-term employment agreements that bar Netflix and others from competing in the film and television production industry. In June of 2018, a California appeals court sided with Netflix, keeping the counterclaim in play in that case.

Viacom is represented by Anthony J. Oncidi and Pietro A. Deserio of Proskauer Rose LLP.

Netflix is represented by Lynne C. Hermle, Karen G. Johnson-McKewan and Michael D. Weil of Orrick Herrington & Sutcliffe LLP.

The case is Viacom International Inc. v. Netflix Inc., case number 18STCV00496, in the Superior Court of the State of California for the County of Los Angeles, Central District.

* Lowe & Associates (“The Firm”) is a boutique entertainment and business litigation firm located in Beverly Hills, California. The Firm has extensive experience handling cases involving business, entertainment law and intellectual property, having provided top quality legal services to its clients since 1991. The Firm is recognized in multiple publications for its many achievements and high ethical standards, including Martindale-Hubbell and Super Lawyers.

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