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Artist RightsDisneyLawPixar

Judge Rules Disney, Pixar, DreamWorks, Sony, and Other Studios Can’t Evade Wage-Fixing Lawsuit

Score one for the artists.

In the ongoing legal battle being waged by animation artists Robert A. Knitsch, Jr. Georgia Cano, and David Wentworth against the major animation studios — Disney Animation, Pixar, Blue Sky Studios, DreamWorks, Sony Pictures Animation, Sony Pictures Imageworks Inc., and Lucasfilm Ltd., among others — the federal judge in the case has rejected the studios’ latest attempt to dismiss the case. The case will now advance, potentially to trial.

The plaintiff animation artists, who seek to represent everyone who worked at the defendants’ studios from 2004 to the present in a class-action suit (excluding officers, directors, and executives, including human resources and recruiting personnel), allege the studios conspired to suppress artist wages and then fraudulently concealed the conspiracy.

Specifically, the artists claim that, when Lucasfilm sold its computer animation division, soon to be renamed Pixar, to Steve Jobs in the mid-1980s, Jobs, Pixar president Ed Catmull, and Lucasfilm founder George Lucas agreed not to pursue each others’ artists.

edcatmull-noapologiesSEE ALSO: Ed Catmull on Wage-Fixing: “I Don’t Apologize for This”

As the animation industry exploded with the rise of computer animation, and as an industry that had once been dominated by Disney saw the rapid sprouting of animation studios such as DreamWorks, Blue Sky Studios, and Sony Animation, more and more studios were brought into the conspiracy. A 2005 email from Pixar’s vice president of human resources, Lori McAdams, for example, actually refers to a “gentleman’s agreement” among “ILM, Sony, Blue Sky, etc….not to directly solicit/poach from their employee pool.”

Lori McAdams, Pixar's human resources vice president, revealed a wage-fixing conspiracy in emails she sent.
Lori McAdams, Pixar’s human resources vice president, revealed a wage-fixing conspiracy in emails she sent.

Soon, Jeffrey Katzenberg’s DreamWorks Animation was also brought into the fold. According to the artists, a 2007 email from Catmull to then-Disney chairman Dick Cook, stated, “we have an agreement with Dreamworks not to actively pursue each other’s employees.” Perhaps the studio executives remembered all too well the bidding wars for top artists that broke out in the mid-1990s when Katzenberg founded DreamWorks Animation. The competition for talent led to higher and higher wages for the artists. The studios, ever focused on maximizing corporate profits, likely did not want that to happen again.

Even so, on April 3, 2015, Judge Lucy H. Koh ruled against the artists, stating that their lawsuit, filed in September of 2014, came too late. Because federal antitrust law requires most claims to be filed within four years, and because the studios’ allegedly conspiratorial actions occurred prior to 2010, the judge ruled that the law still required that she dismiss the case.

However, there remained one hope: the claim of fraudulent concealment of the conspiracy. Because fraud is especially reprehensible, federal law allows a claim of fraud to be filed not four years after the fraudulent act, but four years after the victim discovered the fraudulent act. (The conspiracy was only discovered last year through Ed Catmull’s deposition testimony from an earlier case.)

To allow the case to move forward, Judge Koh needed evidence of “affirmative acts to mislead” beyond “mere passive concealment.” The artists accordingly revised their complaint and now allege that the defendant studios fraudulently concealed the conspiracy by actively avoiding the creation of a paper trail and by giving employees dishonest pretextual or even outright false explanations for compensation decisions.

Among the evidence they cite is a 2009 email from Catmull to Pixar employees explaining that wages would only be raised by 3.5% because the studio needed money to fund additional benefits; the artists allege the true reason for the low pay raise — this, in the wake of the success of 2008’s WALL-E and 2009’s Up — was the conspiracy to avoid soliciting and poaching artists among the various animation and visual effects studios.

The artists also allege that the studios carefully ensured that all discussions involving the wage fixing took place in person or over the phone — and if an email was necessary, then only personal email accounts were used, avoiding the internal corporate email accounts that might prove discoverable in a lawsuit. The artists cite deposition testimony from Sharon Coker, one-time Industrial Light & Magic, Disney, and ImageMovers human resources honcho, that the gentleman’s agreement among the studios was never written down, that Pixar’s Lori McAdams chose in-person meetings to discuss salary matters, and that Lucasfilm allegedly required its lawyers be notified should an email be discovered that discussed the anti-solicitation agreements, which the studio code-named “DNR” agreements.

If these allegations prove true, then the studios likely illegally suppressed the wages of thousands of industry artists by preventing them from earning the wage the free market might otherwise have offered them. The studios could be liable for the lost wages their conspiracy caused. A related case involving a Justice Department investigation of Pixar, Lucasfilm, and several Silicon Valley tech companies, including Apple, Google, Intel, and Adobe Systems, resulted in a settlement worth over $415 million (although Pixar and Lucasfilm agreed to a settlement of only $9 million).

  • I sure hope this gets resolved in the artists’ favor. I also hope this pushes for artists to have better earnings for the work they do. Godspeed.

    • Chinoiserie

      I so too. But then I wonder what this could mean to the budget’s of future films and if the studios will seek to employ more foreign cheaper animators in the future or maybe just hire less people so the quality of the films suffer. Pixar films for example have already so high budgets that they can not go much higher even if their films are successful. And Dreamworks is struggling so they have been trying to lower their budgets.

      • AmidAmidi

        If a major studio like Disney choose to move production overseas, it would be for the same reason that they’ve been suppressing artist’s wages: to boost shareholder profits. Disney generates billions of dollars in annual profit for its shareholders, and the studio (and its subsidiaries like Pixar) are flush with cash. Oftentimes, the only people who don’t see the money are the people who make their films.

        Further, studios move work to other countries for any number of reasons, including the artificial manipulation of salaries. The UK government, just to offer one example, has granted Disney $272 million in production incentives. In other words, production in the UK is cheaper because British taxpayers fund the salaries of employees who work on Disney’s films, not because the film crews are genuinely cheaper.

        And yes, DreamWorks is struggling but it has nothing to do with the wages of its employees and everything to do with years of mismanagement and poor decision-making at the executive level.

        • William Bradford

          Amid’s right on that part at least: if it was just a case of not wanting to risk asking for more because it would encourage cheaper outsourcing: it would a happened already. But this issue is just a symptom of a bigger issue: there needs to be safe guards in all industries of first world countries that subsidize affordable wages, OR to subsidize the cost of living. While we should hold the heads of these animation studios accountable; it won’t help much if similar things aren’t being done in industries statewise.

    • Mightyflog

      At the end alot of these decisions help the artist but Hollywood execs will still line their pockets with more and more money. Wages go up 10-20% and they just go to the next developing country. You don’t really think it takes 150 Million to make a movie do you, when Japan is doing it for 30, Spain and South Africa for 20. Despicable me cost 60 Million. South America and France at 20 Million for a full CGI film. Someone is lining their pockets and it ain’t going to the animators. It never will.

  • ibawl

    This is great news. I have been trying to keep this story alive by posting your original article on forums and social media whenever there seems to be PR pieces praising Catmull, Lasseter, et al. I personally think they are scum bags and their actions are indicative of how most American executives think nowadays. Our culture needs to move past praising these executives who, I would argue, do nothing compared to the very talented artists who slave night and day to create these motion pictures. Hopefully this is the beginning of great change, at least for the animation scene.

    • RichyRichhatesyou

      “Most American executives think nowadays” based on what exactly? Show your stats and sources maybe?

      • ibawl

        Notice how you left out the part where I said, “…I would argue…” because that was an opinionated statement based on my own life and anecdotal evidence. Take it as you will, I do not care, but we are increasingly seeing, under the guise of globalization, stagnant American wages and more offshoring of decent paying “Middle-Class” jobs all for the bottom-line.

      • Martin Cohen

        See the movie “Corporation” at https://en.wikipedia.org/wiki/The_Corporation_(film)

        Corporations, by definition, are created to enhance their own value. Criminality is just a cost of doing business.

  • Adam_Smith

    So if animators decide to form a cartel (aka Union) to fix a minimum salary is all very noble, but if studio owners decide to get together and fix maximum salaries, they are evil capitalist.

    • Brian Gabriel

      Adam, a couple things to consider: (1) the animators’ union does not “fix a minimum salary” but instead negotiates with the studios for agreeable salaries, and that agreement is, to my understanding (not being a member of any union), then voted on by the members of the union; (2) the alleged conspiracy here is against the law, and indeed does involve a handful of powerful people “fixing” salaries. Whatever one might think of such actions, they are against the law. As for “evil capitalis[m],” I’d argue that the actions by the studios, if true, are antithetical to capitalism; they actually prevent artists and engineers from negotiating their true market value with other employers.

    • The issue is that it was secret. Unions don’t really make the fact that they want a minimum salary secret; the entire point is for it to be public. This, on the other hand, was kept secret from the people who needed to know about it.

      • William Bradford

        That is true: I think if it had been openly known they’d all said “look, lets not blatantly try stealing each others talent, so we can fix the wage”, and if they’d said to the studios “I know that’s a liiittle sneaky, but we’re not stopping anyone from moving ot other studios if they want to. Our budgets are going nuts as it is…” NOW if this was coupled with the top guys will to make slightly less during low box office times, that’d make it easier to swallow

    • Maharg

      You clearly know little of economics. Price fixing an industry is in blatant disregard of the free market. The same free market corporate capitalist love to trot out like the prized pig when it suits them. Unions are not setting fixed minimums, they fight for “livable” wages based off of economic inflation and demand. Think about what it is you are saying, then take the ignorant sidelining statements somewhere else, they add nothing to this conversation.

      • Adam_Smith

        Price fixing has everything to do with the free market, another thing is how long it will last. If you suppress wages that means that companies outside the cartel have an incentive to hire those employees for a cheaper price, until, eventually wages rise again. Imageworks and R&H were able to attract talent and pay way over what ILM, or pixar was paying. Eventually cartels break up. If some artist productivity is really worth 3000 a week, and he is getting paid 2200. I can hire him for 2800 and save 200$. Unions have never done anything to rise employees salaries, the only thing that increases their salaries is the productivity of those employees thanks to capital investment. Inflation is a consequence of money printing by a central bank , a semi government institution nothing to do with free market.

        • Eric

          After reading a comment like that, I can’t be sure you even read the article before making your initial reply.

          The issue at hand is that NOT ONLY are major studios alleged to be in a SECRET, ILLEGAL agreement to fix wages, they are ALSO alleged to be in a secret, illegal agreement to NOT HIRE artists at higher salaries. Your comment here is a moot point, because the scenario you suggest is not happening.

        • guest

          I don’t think I have read anything as ridiculous as this in quite some time. Price fixing is antithetical to the “free market” which is why it is illegal. Your statement that unions have never helped to increase employee’s wages shows a profound lack of knowledge of labour history. Then you go completely off topic about inflation being solely due to money printing by central banks that are integral, for better or worse, to the operation of “free markets” and the economies of nations.

        • Maharg

          “If you suppress wages that means that companies outside the cartel have an incentive to hire those employees for a cheaper price, until, eventually wages rise again.”
          You just explained why this is a huge problem. It’s artificially driving the wages down even more, and out of a livable scope for most! Why not just let the “free market” set the wages naturally? Why should we even tolerate these cartels, and the damage they have done? I don’t know how you expect wages to magically come back up again? They haven’t risen to match inflation in 20 years. Thats some real 1950’s capitalist mentality you have right there. If the major studios are colluding to paying less money it sets a standard through out the industry, and it’s very unlikely you would pay $2800 when they are setting the rate of worth at $2200. The true hypothetical number of $3000 doesn’t even come into the picture.

    • Taco

      Dear Adam *fallback for every Republican argument* Smith. Unions are not overt entities… But these A’holes & their anti poaching club are: http://animationguildblog.blogspot.mx/2014/12/suppression-and-freedom.html
      May the illustrious reputation of Edwin Catmull be forever tarnished by this. We all expected better from a man who was so monumental to the Computer Animation Industry. The crux of the matter is with this Industry Wage Collusion beggars can’t be choosers. And by that I mean the workers.

    • Francis_Hutcheson

      Animation reps meet and negotiate with each Union studio on behalf of the artists and AGREE on wage minimums. The minimums are only “fixed” when both sides of the table are happy. They sign a binding, legal contract and everyone is satisfied until the next negotiation roles around at the end of the term.

      Artists retain the freedom to negotiate a higher rate, based on skill level and demand. Studios retain the freedom to agree to the higher rate, or not. They also have the power to lock artist into exclusive contracts so that they will stay at that particular studio.

      In this case, studio execs appear to have met behind closed doors, without the artists or animation reps present and colluded to fix wages, functionally eliminating competition for talent and the freedom of the artist to truly negotiate a higher rate or even seek employment at a competing studio. Studios agreed not to compete for talent, thereby “fixing” a maximum wage. No competition. They win. We lose because they didn’t follow the rules, you know, little things called laws that ensure a competitive market economy can actually function and a commodity (talented artists) realize their fair market value..

      Before making ignorant remarks about a situation you clearly don’t understand, you should probably study your own economic theories again, Adam Smith.

    • LouieD

      You neglect to mention several mitigating factors, such as, oh… which side wields the financial power to suppress the other, weather a labor dispute, and still continue to satiate their greed. In short, your statement is correct in this particular case.

    • anim8r123

      [Comment removed by editors. Per our commenting guidelines, “It is OK to post with a nickname or alias, but your email address (which we will NEVER share publicly), must be a real, permanent email address. Comments with fake or non-permanent emails will be deleted.”]

    • Not even close

      LoL… “Cartel”… You’ve obviously never seen the Animation Guild in action. They have little to no power at all. They have a no-strike-clause agreement with the studios, and therefore no bargaining power. They can go to the major studios and make demands of ‘Better Wages’, ‘Better Hours’ etc….
      And all the Studios have to do is say…..”No.”
      Pretty far from being a ‘Cartel’.

    • Karl Hungus

      Well then, lets just get rid of all of those anti-trust laws that we have on the books too. Your blind adherence to a completely free market is great material to build the shackles of servitude for yourself and the rest of the country. Maybe you haven’t been “kept in your place” by people richer than you before. You know this nation learned valuable lessons about corporate hegemony and passed laws to prevent it and we get an Einstein like you in here asking that we should all learn those hard lessons all over again. No thanks.

  • cw

    There’s lots of money to go around, and certainly the artists of these films deserve a better cut of the box office. Case in point – Sandra Bullock for Gravity. $70 million once the dust settled in bonuses and the lionshare of the film was VFX crew work…not her. UK animation studios aren’t known for high wages, nor OT. The studios choose to cut the artists out of the equation over and over again.

    • Ross

      Do you give the carpenter, a cut of the profits when you sell your house? o.O NO! >:I When you choose to be a PRODUCTION ARTIST this is the role you take! A role similar to a carpenter. There’s only ONE Sandra Bullock, there’s HUNDREDS if not THOUSANDS of VFX artists. Sandra Bullock can do a monologue on stage and people will come to see HER! That’s why she commands the fee she commands!

      • Karl Hungus

        …and yet individual members of an orchestra who score a film also fit the parameters you are painting for us. And those musical artists receive a ROYALTY of the profits of the film they worked on. In perpetuity. So the precedent is established. You want to ignore it for some unstated reason. Maybe you work in carpentry or real estate which is a different kind of business and your comparison between industries is hardly apt.

        • Ross

          Do the BACKGROUND ACTORS on movie sets get a cut of the profits? They are acting too, you know. But do they get a cut of the profits? NO! Hans Zimmer is in a better position to get a cut of profits from sale of soundtracks, ’cause there aren’t THOUSANDS of ZIMMERS contributing to the musical score of one movie! >:I As a financier of a movie, I’m not gonna give a cut of the profits to the ROTO-PAINT artists! I’m not gonna give a cut of profits to the ROTOSCOPE ARTISTS! I’m not gonna give a cut of profits to the WELDER on set, the SET DRESSER! But I’m gonna give a cut to the person who SCORES my WHOLE MOVIE from start to finish! If you want to have a cut of the profits, then you need to position yourself to get that CUT! If you see a certain position that makes more money than you, then you learn the skills to get to that position! You think the steel workers are getting a cut of Trump Towers profits! NO! You think they’re complaining? NO! Why? ‘Cause they understand, they are not positioned to get a cut of profits!

          • Eric

            You could change the background actors with literally anyone and your movie would hardly change. The same does not stand true of your major animators, who are far more akin to the lead actors than background.

            At the level you’re talking about here, it would be like the software developers of the applications used by the animators would be asking for more money. That’s not what’s going on at all.This is the major cast of the production working toward fair compensation, not just bit players.

      • cw

        Well, if the house you helped build sold for 800 million dollars, and you noticed that the electrician, architect, designer and plumber all got a cut, then I bet you would want a piece as well.

        I understand that the talent deserves a high level of compensation, but think about this. Did you go see Gravity because you are a big Sandra Bullock fan? (unless maybe you are Sandra bullock which could explain the enthusiasm of your post) Or did you go see Spider-Man for Toby? Probably not. If you are like most people, you went for the action and the effects. In some cases, its NOT the talent driving the gate receipts. It’s the VFX artists. When a property makes billions, the artists that worked on those films should be taken care of a little better in my opinion. And I definitely think the most egregious example of this was Rhythm and Hues going bankrupt the week they got the Oscar for their $600 million Life of Pi.

        In short, the system is broken and needs a reset.

      • Brandon Bailie

        If you have a company that’s full of bad carpenters, would you not go to that contracting agency again? If all you hired were mediocre skilled animators, wouldn’t the film suffer as a whole?
        You can have big brand named voice actors, and still have the movie flop; Ex. “Food Fight” http://www.imdb.com/title/tt0249516/
        You can also be a great actor, and realize the necessity of the other production artists like Keanu Reeves
        http://us.hellomagazine.com/celebrities/200305283652/keanu/reeves/matrix/

  • JohnG.

    No doubt the studios will have to settle this one – no way they want this getting to trial. The PR and media storm alone would damage their brands.

    As for wages, they were completely in the wrong for having this “gentleman’s agreement.” Such a horrible practice that likely isn’t just isolated.

    After they settle, sadly, I’m betting even more animation will be done overseas with just development work done stateside. Shops in India/Asia have gotten pretty good over the last decade.
    As for the argument of these studios making “billions.” Animated films are not all a sure thing, they still need too many elements to be successful and you can’t look at a few successful ones as the normal examples. And even though some films garner billions in merchandise over years and otherwise, these large companies are set up as separate business units with their own AOP/P&L.
    The masses of production line filmmakers don’t get a cut of the other proceeds, only the separate BU’s do. Yes, there is a small instance of directors, producers, and VO actor’s, but those are isolated.

    The reality is animation will continue to get outsourced on the production end with only critical creative (direction, vis dev, art directing, storyboarding, etc.) being done here.

  • Toby

    If the artists win this case it would be nice if current employees of these companies have their wages lifted to what they would have been without the wage fixing.

  • Guest

    I’m sorry if this is a stupid question, but if all the employees in the animation industry are having their wages fixed then why don’t they just go on strike.

    • CTM

      Because everyone is expendable. For every artist who goes on strike, there’s another fifty who would take the job for peanuts or less just for the tantalizing prospect of being part of animated feature.

    • not even close

      And because at the LA studios, there is a “no strike clause” written into the Animation Guild contract. So… nope.

  • Barrett

    It’s a shame that the prior judge ruled that the artists lacked standing to bring their case against the *actual* wage suppression scheme, and that the only shot now is proving that the studios conspired to hide their initial conspiracy! They really should pay for their actual crime, but then, as we saw with Nixon and many others since, it’s often not the crime, but the cover-up that gets ya!

  • guest

    How do you actually prove that any of what is alleged took place? The only way is if a high-ranking member of the conspiracy suddenly decided to be a whistleblower. And I don’t think that is likely to happen in this case.

  • Ross

    “resulted in a settlement worth over $415 million (although Pixar and Lucasfilm agreed to a settlement of only $9 million).” – – – and strategies to not deal with American workers anymore! Outsourcing! Dumb sh*t like this just encourages outsourcing. People act as if they lost out on MILLIONS by having wages set the same at ALL studios! They didn’t lose anything! You can’t lose what you didn’t earn! They were paid enough to live in the locations, every private business should be able to do the same with each other!

  • Leonardi

    And this is why 2d/3d artist pay is so low. No Job security……………..and is sooo hard/investing a lot of time to get the skills/education for a low pay salary…………….sad sad…………..is time to move on to a new career…………….and do 3d as a hobby…………thanks pixar, dreamworks and the rest ;) before the pay was good, (I read online) I cannot believe that Ed Catmull, one of my heroes, did this to all of us…………..I can expect this from Jeffrey Katzenberg ;) but not from Ed and pixar guys ;( can I get my money back from Creativity Inc. ??

  • Charles Norwood

    I doubt this will make any difference to the enthusiasm of eager students and new recruits who imagine life at these studios. But for a lot of talented and experienced professionals who have considered taking the leap to apply or work at these places, these revelations definitely tarnish the studio brands, and suck an awful lot of the ‘magic’ out of the idea of ‘working for Disney’, ‘working for Pixar’, etc. All the hawaiian shirts, segways, and monkeys in the world won’t change that.