Judge: Daniel S. Murphy, Case: 24STCV17056, Date: 2024-10-23 Tentative Ruling

Case Number: 24STCV17056    Hearing Date: October 23, 2024    Dept: 32

BACKGROUND

            On July 10, 2024, Plaintiff Jonathan T. Jackson filed this action against Defendants Kevin Hart (Hart) and Hartbeat, LLC (Hartbeat). Plaintiff filed the operative First Amended Complaint on August 6, 2024, asserting causes of action for (1) breach of contract, (2) fraudulent inducement, (3) intentional infliction of emotional distress, (4) malicious prosecution, and (5) defamation.

            The dispute between the parties stems from a highly publicized sex tape scandal involving Hart back in 2017. Plaintiff alleges that he was falsely accused of extortion in connection with the scandal. Hart and his company, Hartbeat, allegedly released a docuseries in 2019, accusing Plaintiff of extortion and involvement in the dissemination of the sex tape.

Plaintiff and Hart settled their dispute in July 2021 through a written settlement agreement (the Agreement), wherein Hart agreed to issue a public statement exonerating Plaintiff of involvement in the extortion scandal. Hart allegedly breached the Agreement by failing to issue the statement, causing harm to Plaintiff’s reputation. Hart also allegedly submitted fabricated evidence to prosecutors, resulting in false charges against Plaintiff.

On September 19 and 30, 2024, Hartbeat and Hart, respectively, filed the instant motions to compel arbitration based on an arbitration clause in the Agreement. Plaintiff filed his opposition on October 10, 2024. Defendants filed their replies on October 16, 2024.

LEGAL STANDARD

The Federal Arbitration Act (FAA) states that “[a] written provision in any . . . contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” (9 U.S.C. § 2.) The term “involving commerce” is interpreted to mean simply “affecting commerce” to give the FAA the broadest reach possible, and does not require a transaction that is actually “within the flow of interstate commerce.” (See Allied-Bruce Terminix Co. v. Dobson (1995) 513 U.S. 265, 273-74; Citizens Bank v. Alafabco, Inc. (2003) 539 U.S. 52, 56.) Moreover, parties may agree to apply the FAA notwithstanding any effect on interstate commerce. (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 355.)

“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.)

EVIDENTIARY OBJECTIONS

Plaintiff’s Objections

• Plaintiff’s objections are overruled.

DISCUSSION

I. Prima Facie Proof of Agreement

            “The moving party ‘can meet its initial burden by attaching to the motion or petition a copy of the arbitration agreement purporting to bear the opposing party's signature.’” (Gamboa v. Northeast Community Clinic (2021) 72 Cal.App.5th 158, 165.)

            The Agreement contains a provision stating: “Any controversy, claim, or dispute arising out of or relating to this Agreement or this agreement to arbitrate . . . shall be fully and finally adjudicated by binding arbitration to the fullest extent allowed by law.” (Hart Decl., Ex. A, § 7(a).) The Agreement is signed by Hart (on behalf of himself and Hartbeat) and Plaintiff. (Id. at p. 14.) Therefore, Defendants have met their prima facie burden.

II. Validity of the Arbitration Clause

An arbitration agreement need not be enforced if “[g]rounds exist for rescission of the agreement.” (Code Civ. Proc., § 1281.2(b).) “The agreement” refers to the arbitration agreement only, not the larger contract containing the arbitration clause. (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 29.) Disputes over illegality, enforceability, or interpretation of the larger contract are themselves subject to arbitration. (Ibid.) “[A]n arbitration clause may be enforceable regardless of the enforceability of the contract of which it is a part.” (Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 785.) Thus, the issue on a motion to compel arbitration is simply whether the arbitration clause is enforceable.        

Here, Plaintiff “seeks to invalidate the delegation and arbitration clauses based on fraudulent inducement, material breach, and the triggering of the ‘Hammer clause.’” (Opp. 2:19-20.) However, these are disputes over “the interpretation, performance, formation, validity, breach, or enforcement of this Agreement,” which the Agreement expressly states “shall be fully and finally adjudicated by binding arbitration.” (See Hart Decl., Ex. A, § 7(a).)   

As discussed further below, none of Plaintiff’s arguments invalidate the arbitration clause itself.

a. Fraudulent Inducement

“[T]he court decides claims of fraud in the inducement of the arbitration clause, but the arbitrator decides claims of fraud in the inducement of the contract generally.” (Ajamian, supra, 203 Cal.App.4th at p. 785.) “[M]ere allegations that the contract as a whole was induced by fraud will not avoid the effect of an arbitration clause.” (Hayes Children Leasing Co. v. NCR Corp. (1995) 37 Cal.App.4th 775, 781.)

Plaintiff presents no evidence that he was fraudulently induced into the arbitration clause specifically. Plaintiff argues that “HART fraudulently induced him to enter the Agreement by fabricating the April 27 email.” (Opp. 16-17.) This refers to an email sent to Hart in April 2018 which Plaintiff contends was fabricated and provided to law enforcement to falsely implicate him in the extortion scheme.

Plaintiff’s argument fails because he claims that the email fraudulently induced him into “the Agreement,” as in the overall Settlement Agreement. According to Plaintiff’s own cited case, this is a matter for the arbitrator. (See Ajamian, supra, 203 Cal.App.4th at p. 785 [“the arbitrator decides claims of fraud in the inducement of the contract generally”].) In any event, Plaintiff fails to show how an email sent to Hart in April 2018 and then provided to prosecutors, induced Plaintiff into the Settlement Agreement three years later in August 2021. Even if Plaintiff could prove that the email was fabricated, he fails to prove how it induced him into the Agreement, much less the arbitration clause specifically. The email relates to the underlying sex tape/extortion dispute; it has no bearing on the arbitration issue.    

As Plaintiff acknowledges, “[f]raud in the inducement or execution of a contract, including an arbitration clause . . . must be proven by a preponderance of the evidence.” (Opp. 8:24-28, citing Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 415.) Plaintiff’s theory regarding the April 2018 email does not come close to meeting this standard.  

b. Hart’s Alleged Breach and the Hammer Clause

The Settlement Agreement contains the following provision:

“Contingency of this Agreement: This Agreement and all of the below terms, including but not limited to all representations, warranties, promises, releases. etc. made by Jackson, shall be rendered null, void and ineffective for any purpose at all if either (1) all criminal charges against Jackson are not dismissed within sixty (60) days of the date of this Agreement. or (2) KH fails to post the above-referenced video on his Instagram account with the above verbiage and specifications within thirty (30) days following dismissal of the criminal charges against Jackson (collectively the ‘Two Preconditions’).”

(Hart Decl., Ex. A., p. 2.)

            Plaintiff argues that under this “Hammer Clause,” he has no obligations under the Settlement Agreement, including the obligation to arbitrate, because Hart failed to fulfill his obligation to post a public statement matching the specifications outlined in the Agreement. However, as established above, issues of “the interpretation, performance, formation, validity, breach, or enforcement of this Agreement” are themselves subject to arbitration. (See Hart Decl., Ex. A, § 7(a).) The operation of the Hammer Clause, and Hart’s purported breach of the Agreement, are matters of contract interpretation expressly delegated to the arbitrator. These are not arguments that invalidate the arbitration provision.

            Plaintiff cannot unilaterally decide that Hart’s performance was inadequate and then use that as an excuse to avoid the arbitration provision. The adequacy of Hart’s performance is itself a matter for the arbitrator, falling under “the interpretation, performance, formation, validity, breach, or enforcement of this Agreement.” (See Hart Decl., Ex. A, § 7(a).)   

III. Public Policy

            Citing Sonic-Calabasas A, Inc. v. Moreno (2013) 57 Cal.4th 1109, Plaintiff argues that “arbitration cannot shield parties from liability for wrongful acts.” (Opp. 14:9-10.) Plaintiff contends that “the arbitration clause would allow HART to avoid accountability for his defamation and fabrication of evidence.” (Opp. 14:10-11.)

            The Court in Sonic-Calabasas held that “the FAA preempts a state law rule that categorically prohibits an adhesive arbitration agreement from requiring an employee to waive access to a Berman hearing.” (Sonic-Calabasas, supra, 57 Cal.4th at p. 1171.) The matter was remanded to the trial court for a determination of unconscionability. (Id. at pp. 1171-72.) Plaintiff does not quote or cite any portion of Sonic-Calabasas suggesting that the court believed arbitration should have been denied because it would have shielded the defendant from liability. An arbitration agreement merely governs the forum in which a dispute is resolved; it does not allow a defendant to escape liability. Plaintiff provides no explanation for how arbitration in this case would allow Hart to “avoid accountability for his defamation and fabrication of evidence.”

            To the extent Plaintiff is referring to public accountability, Plaintiff’s personal desire to have the case be publicized is not a reason to avoid a binding arbitration agreement. Plaintiff cites no authority suggesting that a dispute cannot be arbitrated just because “it is a matter of public concern.” (See Opp. 14:12-13.) Plaintiff claims that McGill v. Citibank, N.A. (2017) 2 Cal.5th 945 supports his position. The court in McGill held that “a provision in a predispute arbitration agreement that waives the right to seek [injunctive relief under the CLRA and UCL] in any forum . . . is contrary to California public policy and is thus unenforceable under California law.” (Id. at pp. 951-52.) McGill has no bearing on this case, which does not involve injunctive relief under the CLRA or UCL. McGill does not support skirting a binding arbitration agreement just because the public exposure from a court action may “deter future misconduct by public figures.” (See Opp. 14:18-21.)

IV. Waiver

            Plaintiff argues that Hart has waived his right to compel arbitration by litigating other cases related to the sex tape/extortion scandal. Plaintiff cites no authority for the proposition that a party’s litigation conduct in one case can lead to waiver of the right to compel arbitration in another case. Hart’s conduct in other cases not involving Plaintiff does not affect his ability to compel arbitration in this case. Plaintiff has filed his own lawsuit based on his own settlement agreement with Hart. Arbitration provisions in other contracts not involving Plaintiff, and Hart’s conduct in those other cases, are not relevant to this motion. Plaintiff does not point to any conduct by Hart in this case that would constitute a waiver of the right to compel arbitration.

V. Additional Testimony

            “Evidence received at a law and motion hearing must be by declaration or request for judicial notice without testimony or cross-examination, unless the court orders otherwise for good cause shown.” (Cal. Rules of Ct., Rule 3.1306(a).) Facts pertaining to a motion to compel arbitration ordinarily “are to be proven by affidavit or declaration and documentary evidence, with oral testimony taken only in the court's discretion.” (Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413-14.) A trial court has discretion to “resolv[e] evidentiary conflicts without hearing live testimony.” (Id. at p. 414.) However, where “the enforceability of an arbitration clause may depend upon which of two sharply conflicting factual accounts is to be believed, the better course would normally be for the trial court to hear oral testimony and allow the parties the opportunity for cross-examination.” (Ibid.) 

            Plaintiff argues that he should be permitted to cross-examine Hart regarding certain contentions that Hart made in his declaration in support of this motion. Specifically, Plaintiff contends that there is no foundation for Hart’s claims that he was extorted, that Plaintiff was involved in the extortion, or that the charges against Plaintiff were dismissed because Hart chose not to pursue charges. (See Hart Decl. ¶¶ 2-6.) However, these factual disputes have no bearing on the arbitration issue. Plaintiff identifies no disputed facts pertaining to the arbitration clause that need to be resolved by live testimony.

CONCLUSION

            Defendants’ motions to compel arbitration are GRANTED. The case is stayed in its entirety pending the outcome of arbitration.