IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA SECOND APPELLATE DISTRICT, DIVISION 5 TWENTIETH CENTURY FOX Court of Appeal No. FILM CORPORATION, FOX 21, B304022 INC., Plaintiffs-Respondents, (Super. Ct. No. SC126423) v. Service on Attorney NETFLIX, INC., General and L.A.D.A. Required by Cal. Bus. & Defendant-Appellant. Prof. Code § 17209 Appeal from a Judgment and Order of the Superior Court, CountyDeadline of Los Angeles, Hon. Marc D. Gross APPELLANT NETFLIX, INC.’S OPENING BRIEF (REDACTED) FOR PUBLIC VIEWING INCLUDES REDACTED MATERIAL SEALED BY COURT ORDER Karen G. Johnson-McKewan *Eric A. Shumsky (SBN 206164) (SBN 121570) Jeremy Peterman (pro hac vice) Russell P. Cohen (SBN 213105) Anne Savin (SBN 215800) Catherine Y. Lui (SBN 239648) Orrick, Herrington & Daniel Justice (SBN 291907) Sutcliffe LLP Alexander Fields (SBN 311984) 1152 15th Street, N.W. Sachi Schuricht (SBN 317845) Washington, D.C. 20005-1706 ORRICK, HERRINGTON & Telephone: (202) 339-8464 SUTCLIFFE LLP [email protected] 405 Howard Street San Francisco, CA 94105-2669 Lynne C. Hermle (SBN 99779) Jason K. Yu (SBN 274215) Jennifer Keighley (pro hac vice) Orrick, Herrington & ORRICK, HERRINGTON & Sutcliffe LLP SUTCLIFFE LLP 1000 Marsh Road 51 West 52nd Street Menlo Park, CA 94025-1015 New York, NY 10019-6142 Attorneys for Appellant Document received by the CA 2nd District Court of Appeal. jyyv HQqHBDTT|D}D|~Q|y ®Ã¥½¶ · ´³µ²µ°° DqqH~|HTDqzqHQqDqqH~|y qDq|D~Q|y °µ±¯±² QT|zHHQqD|~Q|y ~D|yÃ§Ä ®¤¦«»¾¨ ®¥¯°±²°³ Bz~D|y½§§¾¿§§¼ªÀ®¦ÁÁ q||qD|y¯¯·°¯·¤®§ º zqyº­»¤¼ª qDq|y¶¥ zTH|y°µµµ·¸¯¹µ± q|}|TH~|~HyBÅ°µ°Æ³³Ç¸È²µµ D~HyÅ°µ°Æ³³Ç¸È·µµ |UDz}D|y»¤¦«»¾¨Éª§§¾ ª« DqqH~|BHv9wxy DTT|}}D~q T|qzqzH~|y |TH~|~q ¢£¤¥¦§¨©ª©«¥ª§¬ª§­ª­ |D}TDqz~z~q||qy u x34vx ¡ z~zqzD}|qzBzDq| QTT}||~qD}|qzBzDq| eghicpqcarcscatsuqcrvwxyvatvwvvcfescieqcghbg hrfesweuaurcg hrfesfesg chhghaq icsghfhiagchaacaq ceufhqceusshcfesascshcfhbegheaqhiagheeseerhghegerui a egheesaqhiaghehg ceusgefcaqat ceufhqcacghghefesacgsaesthasshgweua aqreurcg hrfesararuqccgaqicsghfhiagc ceuqcasefi abctesatthgheaqhfesagheg agurg cthriqerctw Deadline X qrI!#"$CI!p IPs!pCI%% G"Pp r#"#%r #""tIPsE$%Wuv9wxy ( ¡ qr $ $ P"IP% $ !% G P%I%I !"$E $!"P!%r%C!%p I!% GIP%rI!S $%I#IS% PG $$ '()' p zP% $ !% G P%I%I !"$E $!"P!$ {I$ G%"p I!% GPG $$ '()'$ !#""t!y uqqacefhgcscrgct aguscefhgcscrg cghgescsre defgh X ( 0 "P%IP G"P%%SrC P%( cutcsrhbcticsghfhcrg agg caeicjqhrgctcsrerescghghcrkiesesagherasgcsr hrfhsresaeg cs arreihagheugeghiquthbbeicscgcghghcresg chsabcihcrl aicchg cskdlaecsr hhgcscrgefdycsicges eschg casghfhghracghgmeskxlafhaihaqeseg cshgcscrghg ceugiecefg cseiccthbg agg cnurghicr r euqtierhtcshtcgcshhb cg csgethrouaqhfg crcqicrartcfhcthsuqcvwxyvkclkxlw % y®¬«Ê§°°µ°µ Ã§Ä ®¤¦«»¾¨ qT|HTz~q~D| z~DqQ|HBDTT|}}D~qHDqqH~| abcdefd B"$CDEE$"F G#"$HE%I"PQ! !"#"$%&$ !'()'&'0''Document received by the CA 2nd District Court of Appeal. RGISI"PSI"#I#"$PI 11123456782392@4A DTTU))'V FRP$WX&()XY` TABLE OF CONTENTS Page CERTIFICATE OF INTERESTED PERSONS OR ENTITIES .....2 TABLE OF CONTENTS ...................................................................3 TABLE OF AUTHORITIES .............................................................6 INTRODUCTION .......................................................................... 15 STATEMENT OF FACTS ............................................................. 18 California has long prioritized employee mobility and a competitive labor market; Hollywood has not ....... 18 Netflix disruptsDeadline the studio system ...................................... 20 Fox limits employee mobility with fixed-term agreements that it renews when employees have minimal bargaining power ..................................................... 21 Fox’s employment agreements diminish employee mobility in other ways ........................................................... 27 Fox threatens to enforce its contracts when employees attempt to leave for competitors ............................. 29 Flynn and Waltenberg leave despite Fox’s threats ............ 31 Fox sues Netflix for interference with the Flynn and Waltenberg Agreements; Netflix seeks a declaration that Fox’s contracting practices are unlawful ....... 33 STATEMENT OF APPEALABILITY ........................................... 35 SUMMARY OF ARGUMENT ....................................................... 35 STANDARD OF REVIEW ............................................................. 37 ARGUMENT .................................................................................. 38 I. Fox’s Failure To Prove The Damages Element Of Its Tort Claims Precludes Judgment On Its Derivative UCL Claim. .............................................................. 38 3 Document received by the CA 2nd District Court of Appeal. II. Fox Did Not Establish A Breach Of Contract (And Therefore Did Not Establish A UCL Violation) Because Fox’s Campaign To Restrain Employee Mobility Violates Public Policy. .............................. 42 A. California public policy protects employee mobility and open competition. ....................... 44 B. The Flynn and Waltenberg contracts, and associated practices, violate these fundamental public policies. .................................................. 47 C. The superior court made a series of fundamental legal errors in summarily adjudicating Netflix’s public policy defense. .. 52 Deadline1. The superior court ignored the collective impact of the contractual provisions and Fox’s contracting practices. ................. 52 2. The superior court erroneously required Netflix to establish a statutory violation. .............................................. 55 3. Even if a statutory violation were required, there are triable issues regarding such violations. ................... 55 D. Severability cannot save Fox’s contracts. ....... 61 E. The court refused to consider highly relevant evidence. ........................................................... 64 III. A Factfinder Could Find Any Interference With Fox’s Contracts Justified. ....................................... 65 IV. The Superior Court’s Injunction Is Contrary To Law. .......................................................................... 69 V. The Court Erred In Dismissing Netflix’s Cross- Claims. ..................................................................... 75 A. There is no indispensable party problem. ...... 75 4 Document received by the CA 2nd District Court of Appeal. B. Netflix has standing to seek a declaration of its rights under section 1060. ............................... 78 C. Netflix has standing under the UCL to stop Fox’s anticompetitive employment practices. 80 D. Netflix’s cross-claims do not rise and fall with its public-policy defense. .................................. 80 CONCLUSION ............................................................................... 81 CERTIFICATE OF COMPLIANCE PROOF OF SERVICE Deadline 5 Document received by the CA 2nd District Court of Appeal. TABLE OF AUTHORITIES Page(s) Cases Abramson v. Juniper Networks (2004) 115 Cal.App.4th 638 ................................................ 62, 63 Aguilar v. Atlantic Richfield (2011) 25 Cal.4th 826 ................................................................ 54 AMN HealthcareDeadline v. Aya Healthcare Services (2018) 28 Cal.App.5th 923 ................................ 38, 41, 51, 60, 67 Anderson v. Neal Institutes (1918) 37 Cal.App. 174 ............................................................. 74 Angelica Textile Services v. Park (2013) 220 Cal.App.4th 495 .......................................... 56, 57, 58 Application Group v. Hunter Group (1998) 61 Cal.App.4th 881 ...................................... 45, 49, 78, 79 Applied Equipment v. Litton Saudi Arabia (1994) 7 Cal.4th 503 .................................................................. 72 Applied Materials v. Advanced Micro-Fabrication Equip. (Shanghai) (N.D.Cal. 2009) 630 F.Supp.2d 1084 .................................................................. 56 Armendariz v. Foundation Health Psychcare Services (2000) 24 Cal.4th 83 ............................................................ 62, 63 Beaver v. Tarsadia Hotels (9th Cir. 2016) 816 F.3d 1170 ................................................... 39 Document received by the CA 2nd District Court of Appeal. 6 Beverly Glen Music v. Warner Communications (1986) 178 Cal.App.3d 1142 ...................... 20, 70, 71, 73, 74, 75 Bovard v. Am. Horse Enterprises (1988) 201 Cal.App.3d 832 ................................................. 43, 52 Cel-Tech Communications v. Los Angeles Cellular Telephone (1999) 20 Cal.4th 163 .......................................................... 39, 74 Cerberonics v. Unemployment Ins. Appeals Bd. (1984) 152 Cal.App.3d 172 ....................................................... 45 Chamberlain v. Augustine (1916) 172 Cal.Deadline 285 ....................................................... 19, 50, 53 Comedy Club v. Improv West Associates (9th Cir. 2009) 553 F.3d 1277 ................................................... 57 Continental Car-Na-Var v. Moseley (1944) 24 Cal.2d 104 ........................................................... 19, 45 Cooper v. Takeda Pharmaceuticals Am. (2015) 239 Cal.App.4th 555 ...................................................... 65 Countrywide Home Loans v. Super. Ct. (1999) 69 Cal.App.4th 785 ........................................................ 77 County of Marin v. Assessment Appeals Board (1976) 64 Cal.App.3d 319 ......................................................... 53