Fox accuses Netflix of poaching employees in California suit

Twentieth Century Fox Film sued Netflix, claiming the internet movie and TV service poached its employees.

Netflix, in an e-mailed response, challenged the legality of Fox's employment contracts and said it will defend it actions.

The suit, filed Friday in Los Angeles by two units of 21st Century Fox, alleges the Los Gatos, California-based streaming company illegally induced several executives to breach fixed-term employment contracts. Fox highlighted the departure of two officials in promotions and creative businesses for jobs at Netflix.

"We filed this lawsuit because we believe Netflix is defiantly flouting the law by soliciting and inducing employees to break their contracts," Fox said in a statement. "We intend to seek all available remedies to enforce our rights and hold Netflix accountable for its wrongful behaviour." Netflix said it plans to fight the lawsuit vigorously.

"We do not believe Fox's use of fixed-term employment contracts in this manner is enforceable," the company said. "We believe in employee mobility and will fight for the right to hire great colleagues no matter where they work."

Hollywood has a love-hate relationship with Netflix, owner of the most popular paid online TV network in the world. The company has contributed to the erosion in viewership of live television with its on-demand service. Yet media companies happily sell shows to Netflix, which spends billions of dollars a year licensing programmes and movies from companies like Fox.

In July, Fox sold Netflix exclusive rights to its hit show American Crime Story, a drama about the downfall of O J Simpson, as part of their first global licensing deal. Netflix said at the end of June it will spend more than $5 billion on programming in the coming year and has more than $13 billion in total content obligations.

While California's courts favour letting employees move freely, the right to defect from one company to another depends on specific contractual provisions.

Fixed-term contracts are generally enforceable under California law as opposed to non-compete clauses that take effect after an employee has already left, said Devin McRae, a litigator with Early Sullivan Wright Gizer & McRae in Los Angeles.

Still, McRae pointed to what he called a conspicuous lack of detail in Fox's complaint about how Netflix knew that the two Fox executives had a fixed-term contract or how it might have induced them to break their contracts. "It appears that the plaintiff didn't really know what happened," McRae said in a telephone interview. "Was it really Netflix that caused them to leave or were they going to leave anyway?"

One of the employees cited in Friday's complaint allegedly agreed to serve as Fox's vice-president of promotions for a two-year period starting in January 2015 under a contract that gave the company the right to extend the term another two years. Instead, after Netflix induced him to breach his contract, he told Fox in November 2015 that he was leaving for Netflix. Fox sued him in Los Angeles in February, claiming he broke his contract.