Judge: Monica Bachner, Case: 22STCV23489, Date: 2022-12-15 Tentative Ruling

Department 71: Attorneys who elect to submit on these published tentative rulings, without making an appearance at the hearing, may so notify the Court by communicating this to the Department's staff at (213) 830-0771 before the set hearing time.  See, e.g., CRC Rule 324(b).   All parties are otherwise encouraged to appear by Court Call for all matters.

Case Number: 22STCV23489    Hearing Date: December 15, 2022    Dept: 71

Superior Court of California

County of Los Angeles

 

DEPARTMENT 71

 

TENTATIVE RULING

 

WHISTLE SPORTS, INC.,

 

         vs.

 

MJ PICTURES, LLC, et al.

 Case No.:  22STCV23489

 

 

 

Hearing Date:  December 15, 2022

 

Defendants MJ Pictures, LLC’s, Jean Elie’s, and Mike Gayo’s motion to compel arbitration of Plaintiff Whistle Sports, Inc.’s, claims in this action is granted. The case is stayed pending arbitration. 

 

The Court sets a non-appearance case review June 12, 2023, at 8:30 a.m.  The parties are directed to submit a joint statement five court days in advance, apprising the Court of the status of the arbitration.

 

Defendants MJ Pictures, LLCs (“MJ Pictures”), Jean Elie (“Elie”), and Mike Gayo (“Gayo”) (collectively, “Defendants”) move for an order compelling arbitration of all claims asserted by Plaintiff Whistle Sports, Inc. (“Whistle Sports”) (“Plaintiff”) and dismissing Plaintiff’s claims or alternatively staying the action pending completion of arbitration.  (Notice of Motion, pgs. 1-2; 9 U.S.C. §1 et seq.; C.C.P. §1281 et seq.; CRC Rule 3.1330.) 

 

Background

 

On July 20, 2022, Plaintiff filed the instant action against Defendants. On August 26, 2022, Plaintiff filed its first amended complaint (“FAC”) against Defendants in connection with a production services agreement Plaintiff made with MJ Pictures, which stated Plaintiff would produce seven episodes of a scripted television series called “SEND HELP” (“Project”) on behalf of MJ Pictures.  (FAC ¶1.)  In exchange, MJ Pictures agreed to pay Plaintiff a guaranteed production services fee in the amount of $161,000, and reimbursement of all production costs incurred by Plaintiff in connection with the Project within seven days of MJ Pictures securing funds from AMC Networks, Inc.  (FAC ¶1.)  Plaintiff alleges it incurred $538,616.26 in fees that MJ Pictures refuses to reimburse to Plaintiff in addition to MJ Pictures’ refusal to pay Plaintiff the guaranteed production services fee.  (FAC ¶3.)  Defendants filed the instant motion on September 29, 2022.  Plaintiff filed its opposition on November 17, 2022.  Plaintiff submitted a supplemental brief in opposition on November 30, 2022.  Defendants submitted their reply on December 1, 2022.

 

Motion to Compel Arbitration

 

A.  Arbitration Agreement

 

  1. The Arbitration Agreement is enforceable

     

    Federal law provides for enforcement of this Arbitration Agreement. The Federal Arbitration Act, 9 U.S.C. §1, et seq. (“FAA”), establishes a strong federal policy in favor of arbitration of disputes where a written arbitration agreement exists. Section 2 of the FAA provides, in pertinent part that “[a] written provision . . . to settle by arbitration a controversy thereafter arising out of such contract . . .  shall be valid, irrevocable, and enforceable.” (9 U.S.C. §2.)  The purpose of the FAA is to “reverse the longstanding judicial hostility to arbitration agreements.” (Gilmer v. Interstate/Johnson Lane Corp. (1991) 500 U.S. 20, 24.)  The FAA places arbitration agreements “on an equal footing with other contracts and [requires courts] to enforce them according to their terms.”  (AT&T Mobility, LLC v. Concepcion (2011) 563 U.S. 333, 339; see also Rent-A-Center West, Inc. v. Jackson (2010) 561 U.S. 63, 67 [“The FAA reflects the fundamental principle that arbitration is a matter of contract.”].)  The FAA will preempt not only a state law that “discriminat[es] on its face against arbitration,” but also a state law that “covertly accomplishes the same objective by disfavoring contracts that (oh so coincidentally) have the defining features of arbitration agreements.”  (Kindred Nursing Centers Limited Partnership v. Clark (2017) 137 S.Ct. 1421, 1426.)

     

    The FAA restricts a court’s inquiry related to compelling arbitration to two threshold questions: (1) whether there was an agreement to arbitrate between the parties; and (2) whether the agreement covers the dispute.  (Howsam v. Dean Witter Reynolds, Inc. (2002) 537 U.S. 79, 84.)  Here, both criteria are satisfied. First, Plaintiff agreed to arbitration when parties entered into the Production Services Agreement that contained the relevant arbitration clause.  (Decl. of Elie ¶2; Exh. A; FAC ¶¶1, 15.) 

     

    Second, the Arbitration Agreement expressly covers contract claims between Plaintiff and Defendant MJ Pictures.  (Decl. of Elie, Exh. A ¶15.)  Defendants argue all of Plaintiff’s claims fall within the scope of the agreement: breach of contract (1st cause of action); breach of implied covenant of good faith and fair dealing (2nd cause of action); fraud in the inducement (3rd cause of action); violation of unfair competition law (4th cause of action); and quantum meruit (5th cause of action).  (Motion, pgs. 11-12.)  Defendants argue the 2nd cause of action must be arbitrated because the covenant of good faith and fair dealing “does not exist independently of the underlying contract.”  (Molecular Analytical Systems v. Ciphergen Biosystems, Inc. (2010) 186 Cal.App.4th 696, 711-712.)  Defendants argue the 3rd cause of action must be arbitrated because the claim of fraud in the inducement relates to the negotiation and performance of the contract between parties.  (See Ericksen, Arbuthnot, McCarthy, Kearney & Walsh, Inc. v. 100 Oak St. (1983) 35 Ca1.3d 312, 315.)  Defendants argue the 4th cause of action must be arbitrated because the claim for violation of unfair competition law relates directly to the negotiation and performance of the contract between parties, and because the claim seeks private relief, which is arbitrable, while a claim for public relief is not.  (Clifford v. Quest Software, Inc. (2019) 38 Cal.App.5th 745, 750.)  Defendants argue the 5th cause of action for quantum meruit claim is predicated on Defendant MJ Pictures’ alleged failure to compensate Plaintiff for its work performed under the contract and is intrinsically intertwined with the performance of the contract.  (Turtle Ridge Media Group, Inc. v. Pacific Bell Directory (2006) 140 Cal.App.4th 828, 835.)

     

    Defendants further argue non-signatories to an agreement containing an arbitration clause can be compelled to arbitrate, and here, non-signatory individual defendants must be compelled to arbitrate the fraud in the inducement claim under the theories of agency, alter ego, and estoppel.  (Motion, pg. 13; Dryer v. Los Angeles Rams (1985) 40 Ca1.3d 406, 418; Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1284-1286; Metalclad Corp. v. Ventana Environmental Organizational Partnership (2003) 109 Cal.App.4th 1705, 1713.)  Defendants argue Plaintiff alleges that “each of the Defendants was acting as an agent . . . of every other of the Defendants in doing all of the acts described in this complaint and at all times, was acting within the course and scope of such agency . . . in doing the acts described herein.”  (FAC ¶¶9, 11.)  Defendants argue Plaintiff alleges the Individual Defendants are the alter egos of Defendant MJ Pictures: “each of the Defendants was acting as an . . . alter ego . . . of every other of the Defendants in doing all of the acts described in this complaint.”  (FAC ¶¶9, 11.)  Defendants argue Plaintiff’s claim for fraud in the inducement of the contract and is inherently inseparable from the arbitrable claims against Defendant MJ Pictures, and therefore, Plaintiff is estopped from avoiding arbitration of its fraud in the inducement claim against Individual Defendants.  Accordingly, Plaintiff’s claims are subject to arbitration under the FAA.

     

    California law also favors arbitration for dispute resolution. The California Arbitration Act (“CAA”), codified at C.C.P. §1281 et seq., provides, “A written agreement to submit to arbitration an existing controversy or a controversy thereafter arising is valid, enforceable and irrevocable, save upon such grounds as exist for the revocation of any contract.” (C.C.P. §1281; see also Grafton Partners L.P. v. Superior Court (2005) 36 Cal.4th 944, 955 [“[U]nlike predispute jury waivers, predispute arbitration agreements are specifically authorized by statute.”].) 

     

    “California law, like federal law, favors enforcement of valid arbitration agreements.” (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97, 99 [“Armendariz”].) The public policy in favor of arbitration is so strong that California courts have held that an employee is “bound by the provisions of the [arbitration] agreement regardless of whether [he] read it or [was] aware of the arbitration clause when [he] signed the document.”  (Brookwood v. Bank of America (1996) 45 Cal.App.4th 1667, citing Macaulay v. Norlander (1992) 12 Cal.App.4th 1.)  The only prerequisite for a court to order arbitration is a determination that the parties have entered into an agreement to arbitrate the dispute.  (United Transportation Union v. Southern California Rapid Transit District (1992) 7 Cal.App.4th 804, 808.)  Thus, arbitration must be ordered “unless the agreement clearly does not apply to the dispute in question.” (Vianna v. Doctors’ Management Co. (1994) 27 Cal.App.4th 1186, 1189.)

     

    Defendants proved the existence of an arbitration agreement with Plaintiff.  Defendant submitted evidence that on July 13, 2021, Plaintiff entered into a production services agreement with Defendant MJ Pictures that contained the relevant arbitration clause.  (Decl. of Elie, Exh. A; FAC ¶¶1, 15.) 

     

    Plaintiff does not contest the arbitrability of its causes of action against Defendants.  (Opposition, pg. 2.)  Plaintiff stipulated to arbitrate its claims against Defendant MJ Pictures subject to the provisions of the production services agreement.  (Decl. of Said ¶2.)  Plaintiff argues this Court should deny this motion to compel as there is no need to compel arbitration.  However, Plaintiff’s stipulation to arbitrate claims does not include Individual Defendants; therefore, the motion to compel remains necessary.

     

    B. Unconscionability

     

    “[P]rocedural and substantive unconscionability must both be present in order for a court to exercise its discretion to refuse to enforce a contract or clause under the doctrine of unconscionability.”  (Armendariz, supra, 24 Cal.4th at pg. 102.)  Courts invoke a sliding scale which disregards the regularity of the procedural process of the contract formation, that creates the terms, in proportion to the greater harshness or unreasonableness of the substantive terms themselves, i.e., the more substantively oppressive the contract term, the less evidence of procedural unconscionability is required to conclude that the term is unenforceable, and vice versa.  (Id., at pg. 114.)  Plaintiff bears the burden of proving that the provision at issue is both procedurally and substantively unconscionable. 

     

  1. Procedural Unconscionability

     

    “Procedural unconscionability focuses on the elements of oppression and surprise. [Citations] ‘Oppression arises from an inequality of bargaining power which results in no real negotiation and an absence of meaningful choice . . . Surprise involves the extent to which the terms of the bargain are hidden in a ‘prolix printed form’ drafted by a party in a superior bargaining position.’ [Citations.]”  (Roman v. Superior Court (2009) 172 Cal.App.4th 1462, 1469.)

     

    Procedural unconscionability “focuses on the unequal bargaining positions and hidden terms common in the context of adhesion contracts.”  (24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1212-1213.)  Adhesion contracts are “fully enforceable . . . unless certain other factors are present which under established legal rules—legislative or judicial—operate to render it otherwise.” (Id. at 819-820; Harper v. Ultimo (2003) 113 Cal.App.4th 1402, 1409 [adhesion alone does not render arbitration agreements unconscionable]; see also Armendariz, supra, 24 Cal.4th at 114; Lagatree v. Luce, Forward, Hamilton & Scripps, LLP (1999) 74 Cal.App.4th 1105 [discussing many authorities upholding arbitration agreements contained in adhesion contracts].)

     

    The terms of the Arbitration Agreement do not appear hidden or obscure, and the Arbitration Agreement was presented as a separate section in the production services agreement and is typed in all caps. (Decl. of Elie, Exh. A.)  Accordingly, the Arbitration Agreement’s duty to arbitrate was not hidden from Plaintiff in a manner as to make it unaware of the agreement to arbitrate.

     

    Based on the foregoing, the Court finds the Arbitration Agreement is minimally procedurally unconscionable.  However, as discussed below, the Court finds the arbitration agreement is not substantively unconscionable. 

     

  2. Substantive Unconscionability

     

    “Substantive unconscionability focuses on the actual terms of the agreement and evaluates whether they create ‘overly harsh’ or ‘‘one-sided’ results’ [Citations] that is, whether contractual provisions reallocate risks in an objectively unreasonable or unexpected manner.  [Citation] Substantive unconscionability ‘may take various forms,’ but typically is found in the employment context when the arbitration agreement is ‘one-sided’ in favor of the employer without sufficient justification, for example, when ‘the employee’s claims against the employer, but not the employer’s claims against the employee, are subject to arbitration.’ [Citations].”  (Roman, supra, 172 Cal.App.4th at pgs. 1469-1470.) In determining whether an arbitration agreement is unconscionable, the Court considers whether the agreement: (1) provides for a neutral arbitrator; (2) provides for reasonable discovery; (3) requires a written award; (4) provides for the same remedies that otherwise would be available in court; and (5) does not require employees to bear costs unique to arbitration.  (See Armendariz, supra, 24 Cal.4th at pgs. 102-103.)

     

    The Arbitration Agreement satisfies the requisite elements set forth in Armendariz to determine the Agreement is not substantively unconscionable.  First, as stated above, the Arbitration Agreement provides for a neutral arbitrator; the Agreement states, “ANY AND ALL DISPUTES ARISING UNDER THIS AGREEMENT OR WITH RESPECT TO THE NEGOTIATION, DOCUMENTATION, INTERPRETATION OR PERFORMANCE OF THIS AGREEMENT, SHALL BE SUBMITTED TO BINDING ARBITRATION, BEFORE A SINGLE NEUTRAL ARBITRATOR WITH ENTERTAINMENT INDUSTRY EXPERIENCE, WHO SHALL BE A RETIRED JUDGE OF A STATE OR FEDERAL COURT.”  (Decl. of Elie, Exh. A ¶15.)  Second, the court in Armendariz explicitly acknowledged an arbitrator’s authority to determine what constitutes sufficient discovery adequate to arbitrate an employee’s claims. (Armendariz, supra, 24 Cal.4th at pg. 106 [employees are “entitled to discovery sufficient to adequately arbitrate their statutory claim, including access to essential documents and witnesses, as determined by the arbitrator.”)  Here, the Arbitration Agreement states the arbitrator will determine adequate discovery “IN ACCORDANCE WITH THE PROVISIONS OF SECTIONS 1280 ET SEQ. OF THE CALIFORNIA CODE OF CIVIL PROCEDURE, WITH DISCOVERY AS PROVIDED UNDER SECTION 1283.05.”  (Decl. of Elie, Exh. A ¶15.)  Therefore, the parties remain entitled to conduct all relevant discovery.  Third, Under Armendariz, an employee cannot be required to pay any type of expense that the employee would not be required to bear if he or she were free to bring the action in court. (Armendariz, supra, 24 Cal.4th at pgs. 110-111.)  Here, the Arbitration Agreement provides that “THE ARBITRATOR SHALL BE BOUND BY THE SUBSTANTIVE RULES OF LAW IMPOSED BY THE STATUTORY AND CASE LAW OF THE STATE OF CALIFORNIA. ALL ARBITRATION PROCEEDINGS SHALL BE CONDUCTED UNDER THE AUSPICES OF JAMS THROUGH ITS LOS ANGELES, CALIFORNIA OFFICE.”  (Decl. of Elie, Exh. A ¶15.)  Accordingly, Plaintiff would not be required to bear expenses it would not be required to bear if it were to bring the action in court.

     

    Based on the evidence before the Court, the terms of the Arbitration Agreement do not create overly harsh or one-sided results, satisfying the requirements for a substantively conscionable agreement.

     

    Based on the foregoing, the Court finds the Arbitration Agreement is not substantively unconscionable. Defendants motion to compel arbitration is granted and the case is stayed pending arbitration.

     

  1. Writ of Attachment

     

    Defendants argue that the entire action, including any application for writ of attachment must be ordered to arbitration.  (Defendants’ Supp. Br., pgs. 2-3.)

     

    C.C.P §1281.8 provides:

     

  1. As used in this section, ‘provisional remedy’ includes . . .

 

  1. Attachments and temporary protective orders. . . .

 

. . .

 

  1. A party to an arbitration agreement may file in the court in the county in which an arbitration proceeding is pending, or if an arbitration proceeding has not commenced, in any proper court, an application for a provisional remedy in connection with an arbitrable controversy . . .

 

(C.C.P. §1281.8.)

 

The hearing on the application for writ of attachment is scheduled in a different department.  The question of what provisional relief, if any, is determined by that Court.  Accordingly, the question of whether a writ of attachment should issue is not properly before this Court, and the Court denies the request that the Court order that any applications for provisional relief be determined by the arbitrator.

 

  1. Conclusion

     

    Defendants’ motion to compel arbitration is granted.  The case is stayed pending arbitration. The Court sets a non-appearance case review June 12, 2023, at 8:30 a.m.  The parties are directed to submit a joint statement five court days in advance, apprising the Court of the status of the arbitration.

     

    Dated:  December _____, 2022

                                                                                                                           

    Hon. Monica Bachner

    Judge of the Superior Court