Viacom likely to get permanent halt to Netflix poaching

LOS ANGELES -- A judge said he will rule in favor of Viacom International in its unfair competition suit seeking to enjoin Netflix from poaching its executives, during a summary judgment hearing Thursday.

With all parties except Los Angeles County Superior Court Judge Jon R. Takasugi appearing remotely, the jurist said he was unlikely to alter his tentative ruling filed Tuesday in which he found Viacom is entitled to a permanent injunction.

"I want to let you know folks, the court will be adjusting the court's tentative. But to be perfectly frank, it's going to be along the same lines," Takasugi said.

As the number of companies launching streaming services continues to rise, so has the demand for executives to run the operations. Viacom claims Netflix poached former Viacom Executive Vice President Momita Sengupta -- a Viacom employee since 1995 -- well before the April 2020 expiration of her fixed-term employment deal.

Viacom's attorney, Anthony J. Oncidi of Proskauer Rose LLP, said Aaron Mitchell, director of talent acquisition at Netflix, testified that despite Netflix being well aware of Sengupta's agreement, the streaming giant pursued her nevertheless.

"Netflix interfered intentionally and deliberately with the contract between Viacom and Ms. Sengupta. They do not deny that," Oncidi said. "They offered her indemnity and defense, saying, 'You might get sued by Viacom, your former employer if you come to Netflix, so we are arming you with an indemnity in the event that occurs."

Shortly after Sengupta's departure, Viacom sued Netflix under the Business and Professional Code Section 16600 provision of the Unfair Competition Law in October 2018. Viacom said it would suffer "irreparable harm" if Netflix was allowed to continue to pilfer its workforce. Viacom International Inc. v. Netix Inc., 18STCV00496 (L.A. Super. Ct., filed Oct. 5, 2018).

Before Takasugi expressed his intention to rule for Viacom, Netflix's attorney, Karen G. Johnson-McKewan of Orrick Herrington & Sutcliffe LLP, raised additional case law purportedly supporting her argument that Viacom's fix-term employment agreements are illegal and unenforceable under 16600. She said a provision in Viacom's employment agreement with Sengupta unlawfully prohibited her from taking a job with a competitor for up to two years after she quit.

"This provision is a classic post-employment restriction on an employee's mobility and a classic 'no compete' in violation of Section 16600," McKewen said.

However Oncidi called McKewen's argument a "straw man" designed to shift focus away from Netflix's poaching habits to potential employment contract flaws. "Viacom is not suing Sengupta over a contract violation," he said.

This is not the first time Netflix has been accused of poaching executives. 20th Century Fox leveled similar charges against the streaming giant over two executives in September 2016 and won on summary judgment last year. Netflix is appealing the judgment.

In that suit, Netflix filed a cross-complaint similarly claiming Fox stifled competition with the fixed-term deals, arguing they are typically limited to "recording artists, athletes, and movie stars," not "business employees."

While a jury trial in the Viacom suit is set for February 2021, the attorneys said they would speak to their clients about possibly asking for continuances in light of Takasugi's comments and potential court restrictions on jury trials due to COVID.