Judge: Alison Mackenzie, Case: 24STCV20161, Date: 2024-12-09 Tentative Ruling

Case Number: 24STCV20161    Hearing Date: December 9, 2024    Dept: 55

NATURE OF PROCEEDINGS: Hearing on Defendants’ Motion to Compel Arbitration

Defendants’ Motion to Compel Arbitration is granted.

BACKGROUND

Plaintiff, The Windigo Film LLC, filed this action against 2K4, Inc., and Shaun Hill (“Defendants”), alleging that Defendants failed to pay a minimum guaranteed payment of $200,000.00 for the distribution rights to the film The Windigo. The causes of action are: (1) Breach of Contract; (2) Unfair and Fraudulent Business Practices; (3) Fraud – Intentional Misrepresentation; and (4) Promissory Estoppel.

Defendants filed a Motion to Compel Arbitration. Plaintiff filed an opposition.

LEGAL STANDARD

“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party to the agreement refuses to arbitrate that controversy, the court shall order the petitioner and the respondent to arbitrate the controversy if it determines that an agreement to arbitrate the controversy exists….” Code Civ. Proc. § 1281.2. “The party seeking arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing arbitration bears the burden of proving any defense, such as unconscionability.” Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55 Cal.4th 223, 236 (Pinnacle)

ANALYSIS

It is undisputed that the parties signed a Distribution Agreement, which includes an arbitration provision. Declaration of Shaun Hill (Hill Decl.) at ¶ 3, Ex. A ¶ 16; Opp. at p. 4. The agreement also contains a forum selection clause that permits legal action relating to the agreement to be brought in the courts of the State of California in Los Angeles County, California. Hill Decl., Ex. A ¶ 14. Plaintiff requests that this Court interpret the agreement to determine if arbitration is mandatory, or if the forum selection clause authorizes it to proceed with its suit in court. Opp. at p. 2:10.

Before the Court reaches that issue, it must decide whether the agreement places jurisdiction of this threshold question in the arbitrator. “Under both federal and state law, courts presume that the parties intend courts, not arbitrators, to decide … disputes about arbitrability, including whether an arbitration clause in a concededly binding contract applies to a particular type of controversy. The parties may agree to delegate authority to the arbitrator to decide arbitrability, but given the contrary presumption, evidence that the parties intended such a delegation must be ‘clear and unmistakable’ before a court will enforce a delegation provision.” Mondragon v. Sunrun Inc. (2024) 101 Cal.App.5th 592, 603 (Mondragon) (citations omitted) (internal quotation marks omitted).

In Dream Theater, Inc. v. Dream Theater (2004) 124 Cal.App.4th 547, 557, the court held, “where the Contract provides for arbitration in conformance with rules that specify the arbitrator will decide the scope of his or her own jurisdiction, the parties’ intent is clear and unmistakable, even without a recital in the contract that the arbitrator will decide any dispute over arbitrability.” However, subsequent cases have clarified that for unsophisticated parties like hourly employees and consumers, merely incorporating the arbitration rules by reference is not a clear and unmistakable agreement to delegate arbitrability decisions to the arbitrator. See Mondragon, supra, 101 Cal.App.5^th at p. 605; Gostev v. Skillz Platform, Inc. (2023) 88 Cal.App.5th 1035, 1053.

Here, the agreement is between a film production company and its distributor and concerns a $200,000 distribution deal. See Compl. at ¶ 1. Therefore, the Court finds that the agreement is between sophisticated parties, and issues of arbitrability may be delegated by incorporating the arbitration rules through reference.

The agreement provides that arbitration will be governed “under the Independent Film & Television Alliance Rules for International Arbitration in effect as of the date of this Agreement (‘IFTA Rules’).”  Hill Decl., Ex. A ¶ 16. Rule 21 of the IFTA rules, then in effect, provides in relevant part, “The arbitrator shall have the power to rule on their own jurisdiction, including any objections with respect to arbitrability, to the existence, scope, or validity of the arbitration agreement(s), or with respect to whether all of the claims, counterclaims,  and setoffs made in the arbitration may be determined in a single arbitration, without any need to refer such matters first to a court.” Declaration of Michael A. Trauben, Ex. D.

In light of this provision, the Court finds that the parties clearly and unmistakably delegated the threshold issue of enforceability to the arbitrator. Therefore, the Court need not address the parties’ arguments concerning the effect of the forum selection provision.

CONCLUSION

Defendants’ Motion to Compel Arbitration is granted. The case is ordered stayed pending resolution of the arbitration.