Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Appeal from an order of the Superior Court of Orange County Super. Ct. No. 06CC07695, James P. Gray, Judge. Affirmed.
Hampton Holley, George L. Hampton IV and Colin C. Holley for Defendant and Appellant.
LaFlam Law and Laura M. Sullivan for Plaintiff and Respondent.
OPINION
FYBEL, J.
INTRODUCTION
Chad Morton, a professional football player in the National Football League (NFL), sued Leigh Steinberg, the athlete agent who represented him, and six other individual and entity defendants for many causes of action, including but not limited to breach of contract, fraud, breach of fiduciary duty, unfair competition, and violation of the Miller-Ayala Athlete Agents Act. Steinberg filed a petition to compel arbitration, based on an arbitration provision in the representation agreement between Morton and Steinberg which required arbitration of disputes based on that agreement. However, the representation agreement was not the contract Steinberg was alleged to have breached. The trial court denied the petition to compel arbitration, and Steinberg appealed. We affirm the trial court’s order for two reasons.
First, the trial court correctly determined the causes of action in Morton’s complaint were not subject to arbitration because they were not within the scope of the representation agreement containing the arbitration provision.
Second, the trial court did not abuse its discretion in denying the petition under Code of Civil Procedure section 1281.2, subdivision (c). (All further statutory references are to the Code of Civil Procedure unless otherwise noted.) Other defendants were not subject to arbitration, and compelling Morton to arbitrate his claims against Steinberg would have led to the possibility of inconsistent results. Morton’s allegations that some of the defendants were alter egos of the others does not alter our decision, because the nonsignatory defendants (1) have not sought the benefits of the representation agreement and its arbitration provision, and (2) are not third party beneficiaries of the representation agreement and the claims against them do not arise under that agreement.
STATEMENT OF FACTS
As required by the National Football League Players Association (NFLPA), Morton and Steinberg executed a standard representation agreement on December 10, 1999. The representation agreement includes the following arbitration clause: “Any and all disputes between Player and Contract Advisor involving the meaning, interpretation, application, or enforcement of this Agreement or the obligations of the parties under this Agreement shall be resolved exclusively through the arbitration procedures set forth in Section 5 of the NFLPA Regulations Governing Contract Advisors.”
The Complaint
In June 2006, Morton sued Steinberg, David Kim, SLL Enterprises, LLC, Steinberg & Associates, LLC (doing business as Steinberg Tollner & Moon Sports Management, also known as Tollner Moon & Steinberg Sports Management, and as Leigh Steinberg Enterprises), and Leigh Steinberg, LLC. A first amended complaint was filed in September 2006, adding Richard Lee and Eugene Lou as defendants. (We refer collectively to all defendants named in the first amended complaint as defendants.) Morton alleged Kim was Steinberg’s employee and representative, and Lou and Lee were the co-owners of SLL Enterprises and the co-venturers of Steinberg and Kim. Morton also alleged Steinberg, Kim, and the three entity defendants were alter egos of one another.
The first amended complaint asserted three causes of action for breach of contract (none involving the representation agreement), as well as claims for negligence, concealment and misrepresentation, fraud, breach of fiduciary duty, unfair competition/constructive trust, unjust enrichment, violation of the Miller-Ayala Athlete Agents Act, money had and received, and breach of the covenant of good faith and fair dealing.
The following allegations are drawn from the first amended complaint. Steinberg, Kim, and SLL Enterprises borrowed $300,000 from Morton in June 2003. When they defaulted on the loan, they offered Morton a five percent interest in a restaurant venture in China in exchange for repayment of the loan. Based on representations made by Kim on behalf of defendants, Morton agreed to the proposal. Kim and Steinberg made misrepresentations to Morton regarding the progress of the restaurant venture, and refused to return the $300,000 investment.
In June 2004, Morton loaned defendants an additional $200,000 to finance a music concert series in China. Defendants also defaulted on this loan, and made misrepresentations to Morton regarding when it would be repaid. Defendants made promises to repay the loan and a subsequent guarantee, without any actual intent to do so. Two checks written to pay off defendants’ debts were returned for insufficient funds, and a promised wire transfer was never completed.
Steinberg, Kim, and Steinberg & Associates acted negligently in failing to use due care in handling Morton’s business affairs, thereby breaching a duty they owed Morton as his athlete agents and financial advisors. Defendants misrepresented the risk of Morton’s investment in the restaurant venture in China, obtained a loan from Morton while intentionally concealing the fact they lacked funds to repay the loan pursuant to its terms, and provided false assurances to Morton regarding their ability to repay the loan and honor the guarantee.
In the cause of action for breach of fiduciary duty/constructive fraud, Morton alleged “Steinberg and the other Defendants,” specifically in their role as “Morton’s athlete agents and financial advisors,” and “SLL Enterprises, and each of its members including Defendants Steinberg, Lee, Lou, and Kim,” owed Morton fiduciary duties, which Morton described as follows: “(i) a duty of loyalty; (ii) a duty to act in Morton’s best interests; (iii) a duty to disclose material facts regarding Morton’s business or personal affairs; (iv) a duty to disclose any potential or actual conflicts of interests that might affect Steinberg or Defendants’ representation of Morton and to otherwise avoid any such conflicts of interest; and, (v) a duty to act with heightened care in the handling of Morton’s business and personal affairs.” Additionally, Morton alleged all of the foregoing acts by defendants constituted unfair competition under Business and Professions Code section 17200, resulted in unjust enrichment to defendants, violated the Miller-Ayala Athlete Agents Act (Bus. & Prof. Code, § 18895 et seq.), resulted in money had and received, and breached the covenants of good faith and fair dealing implied in the loan agreements and the guarantee. The damages Morton sought were the money due under the terms of the loans and the guarantee, as well as profits defendants obtained from the funds Morton invested, plus punitive and statutory damages.
THE PETITION TO COMPEL ARBITRATION
Steinberg filed a petition to compel arbitration, arguing Morton’s claims against him were within the scope of the arbitration provision in the representation agreement. Morton opposed the petition, arguing (1) Steinberg had failed to produce a valid agreement to arbitrate, (2) the disputes raised in Morton’s complaint were not within the scope of the arbitration provision in the representation agreement, (3) defendants had already actively litigated the case, and (4) certain defendants were not subject to any arbitration agreement, leading to the possibility of inconsistent judgments if the claims against Steinberg were ordered to arbitration.
The trial court denied the petition for arbitration. The court’s minute order does not explain the basis for its decision, but at the hearing on the petition, the trial court stated it was denying the petition because (1) Morton’s claims were not within the scope of the agreement containing the arbitration provision, and (2) under section 1281.2, subdivision (c), there were other parties to the proceeding who were not subject to mandatory arbitration. Steinberg timely appealed.
DISCUSSION
I.
MORTON’S CLAIMS ARE NOT WITHIN THE SCOPE OF THE AGREEMENT TO ARBITRATE.
A.
Standard of Review
Where there is no conflicting evidence, we review the record de novo to determine whether the arbitration provision applies to a particular controversy. (In re Tobacco Cases I (2004) 124 Cal.App.4th 1095, 1105.) However, when the trial court’s ruling on arbitrability is based on resolution of disputed facts, we review to determine whether the court’s decision is supported by substantial evidence. (American Federation of State, County & Municipal Employees v. Metropolitan Water Dist. (2005) 126 Cal.App.4th 247, 257.)
B.
Analysis
As noted above, the arbitration provision in the representation agreement applies to “all disputes . . . involving the meaning, interpretation, application, or enforcement of this Agreement or the obligations of the parties under this Agreement.” In determining whether Morton’s claims are within the arbitration provision and therefore arbitrable, we must read the contract as a whole: “However broad the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract.” (Civ. Code, § 1648; see Mayhew v. Benninghoff (1997) 53 Cal.App.4th 1365, 1368, 1370 [provision in an attorney-client fee agreement requiring arbitration of “‘any controversy arising out of or related to the [attorney]’s engagement for legal matters’” did not compel arbitration of the client’s claims against the attorney arising out of unrelated business dealings].)
In Bono v. David (2007) 147 Cal.App.4th 1055, 1057, the plaintiff and the defendant were both parties to a real property agreement containing a provision requiring arbitration of “‘[a]ny controversy among the parties involving the construction or application of any provision of this Agreement.’” Disagreements arose between the plaintiff and the defendant regarding the property, and in the course of attempts to resolve those disputes, the defendant sent an e-mail to a third party challenging the plaintiff’s emotional stability, honesty, and trustworthiness. (Id. at pp. 1059-1060.) The plaintiff sued for defamation, and the trial court denied the defendant’s motion to compel arbitration. (Id. at pp. 1060-1061.) The appellate court affirmed the trial court’s order, concluding the arbitration provision was narrow, and would apply only to actions involving “the construction or application of any provision of the real property agreement.” (Id. at p. 1067.)
In Marsch v. Williams (1994) 23 Cal.App.4th 250, 252, the plaintiff and the defendant had two separate contractual partnerships; the first partnership agreement involving certain real property contained an arbitration provision, while the second agreement involving a separate commercial venture did not. The plaintiff sued the defendant in connection with the commercial venture, and the trial court denied the defendant’s petition to compel arbitration. (Id. at pp. 253-254.) The appellate court affirmed, stating, “[t]he agreement to arbitrate need not be contained in the contract at issue, but may be contained in a collateral document which is incorporated by reference. [Citations.]” (Id. at p. 255.) “Where, as here, the parties have separate contractual relationships, which involve separate enterprises and most importantly separate commercial risks, an arbitration clause which governs one contractual relationship cannot be imposed in the other relationship without undermining the parties’ reasonable expectations.” (Id. at p. 256.)
Here, the purpose of the representation agreement is set forth as follows: “Player hereby retains Contract Advisor to represent, advise, counsel, and assist Player in the negotiation, execution, and enforcement of his playing contract(s) in the National Football League.” Morton does not assert a claim for breach of the representation agreement, or ask the court to interpret, apply, or enforce the representation agreement. Morton alleges Steinberg breached other contracts which do not contain arbitration provisions. Steinberg does not argue the contracts under which Morton sued incorporate the representation agreement or the NFLPA regulations. Indeed, these contracts do not appear to be included in the record on appeal.
Steinberg nevertheless argues the petition to compel arbitration should have been granted because the NFLPA regulations are incorporated into the representation agreement and Morton’s claims are directly related to conduct prohibited by or otherwise related to the NFLPA regulations. Under the heading “Scope of Regulations,” the NFLPA regulations state: “The activities of Contract Advisors which are governed by these Regulations include: the providing of advice, counsel, information or assistance to players with respect to negotiating their individual contracts with Clubs and/or thereafter in enforcing those contracts; the conduct of individual compensation negotiations with the Clubs on behalf of players; and any other activity or conduct which directly bears upon the Contract Advisor’s integrity, competence or ability to properly represent individual NFL players and the NFLPA in individual contract negotiations, including the handling of player funds, providing tax counseling and preparation services, and providing financial advice and investment services to individual players.”
Both the representation agreement and the NFLPA regulations address the provision of services by an athlete agent to an athlete within the limited context of negotiating and enforcing the player’s employment agreement with a professional football team, namely “individual contract negotiations,” in the words of the regulations. Steinberg attempts to broaden the scope of these documents by arguing his alleged breaches of contract and allegedly fraudulent conduct are within the scope of the NFLPA regulations and therefore the arbitration provision in the representation agreement, because the regulations require the contract advisor to “[a]ct at all times in a fiduciary capacity on behalf of players,” and prohibit certain conduct on the part of the contract advisor, including but not limited to the following:
“Providing materially false or misleading information to any player or prospective player in the context of recruiting the player as a client or in the course of representing that player as his Contract Advisor; [¶] . . . [¶]
“ . . . Directly or indirectly borrowing money from any player (whether or not the player is a client), either by receiving the funds directly from the player or by the player providing collateral for or agreeing to guarantee a loan to the Contract Advisor by another party; [¶] . . . [¶]
“ . . . Engaging in any other activity which creates an actual or potential conflict of interest with the effective representation of NFL players; [¶] . . . [¶]
“ . . . Engaging in unlawful conduct and/or conduct involving dishonesty, fraud, deceit, misrepresentation, or other activity which reflects adversely on his/her fitness as a Contract Advisor or jeopardizes his/her effective representation of NFL players; [¶] . . . [¶]
“ . . . Affiliating with or advising players to use the services of a person who is not an NFLPA Registered Player Financial Advisor for purposes of providing financial advice to the player, or acting as a ‘Financial Advisor’ and/or providing ‘Financial Advice’ to an NFL player as those terms are defined in the NFLPA Regulations and Code of Conduct Governing Registered Player Financial Advisors, without first becoming a Registered Player Financial Advisor . . .; [and] [¶] . . . [¶]
“ . . . Violating any other provision of these Regulations.”
When we consider the full text of the regulations, we conclude they address the conduct of agents in the context of their actions or omissions as agents under the representation agreement. The acts and omissions placed at issue by Morton’s complaint are outside the scope of the representation agreement. Steinberg argues Morton cannot sue him for breach of fiduciary duty without making their agency relationship an issue in the case. Once the agency relationship is an issue in the case, the argument continues, the list of the conduct from which Steinberg is prohibited as Morton’s agent (included in the NFLPA Regulations) becomes relevant, thus bringing into play the representation agreement and its arbitration provision. But in this case, Morton’s complaint does not contain an allegation that Steinberg violated the representation agreement, or the NFLPA regulations, or the list of prohibited conduct in the regulations.
We wish to make clear that we are not deciding here whether Morton can establish the existence of a fiduciary duty owed by Steinberg to him in the context of international loans or investments, or the breach of any such fiduciary duty. These decisions will be made at other stages of these proceedings. All we hold here is that by alleging Steinberg violated a fiduciary duty owed to him, Morton did not make the arbitration provision in the representation agreement applicable to claims not arising out of that agreement.
Under Steinberg’s theory, virtually any conduct of any type occurring between Steinberg and Morton would be within the NFLPA Regulations and thus within the arbitration provision. If Steinberg punched Morton, would a claim for personal injuries be subject to mandatory arbitration? Such an action would presumably create a conflict of interest with Morton, is unlawful, would reflect adversely on Steinberg’s fitness as an advisor to Morton, and would jeopardize his ability to represent Morton. We believe it is clear, however, that such an action is not intended to be encompassed by the arbitration provision in the representation agreement.
Steinberg cites Rosenhaus v. Star Sports, Inc. (Fla.Dist.Ct.App. 2006) 929 So.2d 40, 41, in which one NFL agent sued another for stealing away an athlete client. The court ordered a dispute between the two agents to be arbitrated, because section 5 of the NFLPA regulations provides that arbitration is the “exclusive method for resolving” any “dispute between two or more Contract Advisors with respect to whether or not a Contract Advisor interfered with the contractual relationship of a Contract Advisor and player in violation” of the regulations. (Id. at p. 42.) The agents in that case were bound by contract to arbitrate claims arising out of alleged interference with the agency contracts of their respective clients. In contrast, Morton’s claims for breach of contract and fraud as alleged, among others, are not required by the NFLPA regulations to be arbitrated.
The NFLPA regulations also provide that arbitration is the exclusive method for resolving disputes arising from: “1. Denial by the NFLPA of an Applicant’s Application for Certification; [¶] 2. Any dispute between an NFL player and a Contract Advisor with respect to the conduct of individual negotiations by a Contract Advisor; [¶] 3. The meaning, interpretation or enforcement of a fee agreement; [¶] 4. Any other activities of a Contract Advisor within the scope of these Regulations; and/or [¶] 5. A dispute between two or more Contract Advisors with respect to whether or not a Contract Advisor interfered with the contractual relationship of a Contract Advisor and player . . . .” Steinberg would argue the broad language of “[a]ny other activities . . . within the scope of these Regulations” covers the dispute between him and Morton. As explained ante, Morton’s claims are not within the scope of the NFLPA regulations. Further, regulations stating that arbitration is required for one specific type of dispute between a player and contract advisor (“[a]ny dispute . . . with respect to the conduct of individual negotiations”) tend to show other disputes between a player and agent are not.
Morton argues the representation agreement containing the arbitration provision expired before the events giving rise to the present lawsuit arose. The representation agreement provides: “The term of this Agreement shall begin on the date hereof and shall continue for the term of any player contract executed pursuant to this Agreement.” Morton therefore argues the representation agreement terminated when his football contract expired on February 28, 2003. Steinberg, for his part, argues the representation agreement remains in effect through the term of any later negotiated contracts. We need not consider whether a new agreement was necessary after Morton’s initial football contract expired, in light of our holding ante.
II.
THE TRIAL COURT DID NOT ERR BY DENYING THE PETITION BASED ON SECTION 1281.2, SUBDIVISION (C).
A.
Standard of Review
The order denying the petition to compel arbitration under section 1281.2, subdivision (c) is reviewed for abuse of discretion. (Whaley v. Sony Computer Entertainment America, Inc. (2004) 121 Cal.App.4th 479, 484.)
B.
Section 1281.2, subdivision (c) is not preempted by the FAA.
Steinberg argues the trial court erred by applying section 1281.2, subdivision (c) because the Federal Arbitration Act (FAA) preempts the California Arbitration Act (CAA) (§ 1280 et seq.). The choice of law provision in the representation agreement was left blank. Steinberg therefore argues the FAA preempts section 1281.2, subdivision (c), because there is no California choice of law provision in the agreement. In determining whether the FAA preempts state arbitration procedures, “we examine the language of the contract to determine whether the parties intended to apply the FAA to the exclusion of California procedural law and, if any ambiguity exists, to determine whether section 1281.2[, subdivision] (c) conflicts with or frustrates the objectives of the FAA.” (Cronus Investments, Inc. v. Concierge Services (2005) 35 Cal.4th 376, 383.) We cannot conclude the parties intended to apply the FAA to the exclusion of the CAA by leaving the governing law provision blank. Rather, we conclude an ambiguity exists as to the applicability of the FAA under these circumstances.
The California Supreme Court has held section 1281.2, subdivision (c) neither conflicts with the FAA’s provisions nor undermines or frustrates its policies. (Cronus Investments, Inc. v. Concierge Services, supra, 35 Cal.4th at p. 394.) Therefore, we conclude section 1281.2, subdivision (c) was not preempted by the FAA in this case.
C.
The trial court did not abuse its discretion in denying the petition for arbitration.
“On petition of a party to an arbitration agreement alleging the existence of a written agreement to arbitrate a controversy and that a party thereto refuses to arbitrate such 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, unless it determines that: [¶] . . . [¶] . . . A party to the arbitration agreement is also a party to a pending court action or special proceeding with a third party, arising out of the same transaction or series of related transactions and there is a possibility of conflicting rulings on a common issue of law or fact.” (§ 1281.2, subd. (c).)
Steinberg argues the trial court abused its discretion in denying the petition to compel arbitration because Morton alleged in his first amended complaint that the nonsignatories to the representation agreement are Steinberg’s agents, alter egos, or under his control. Steinberg cites Dryer v. Los Angeles Rams (1985) 40 Cal.3d 406, 409, 418, in which a professional football player sued his team and four individuals alleged to be the owners, operators, and managing agents of the team, for breach of the player’s employment contract after he was removed from the active player roster. The Supreme Court directed the trial court to grant the petition to compel arbitration filed by the team and the individual defendants. (Ibid.)
There are two reasons why Dryer v. Los Angeles Rams is inapplicable here. First, in that case, the nonsignatory defendants moved to compel arbitration, and were seeking the benefit of the arbitration clause to which their principal had agreed to be bound. Here, the nonsignatory defendants did not join Steinberg’s petition to compel arbitration, and have not agreed to be bound by the arbitration provision in the representation agreement. (See Bensara v. Marciano (2001) 92 Cal.App.4th 987, 990-992 [discussing difference between nonsignatory’s voluntary agreement to arbitrate and forcing nonsignatory to arbitrate].)
Second, and more importantly, here the nonsignatory defendants were not third party beneficiaries of the representation agreement (see Macauley v. Norlander (1992) 12 Cal.App.4th 1, 8), and there is no argument that the claims against them arise under the representation agreement (see Britton v. Co-op Banking Group (9th Cir. 1993) 4 F.3d 742, 748 [signatory company’s agent/officer/employee could not enforce arbitration provision for claims involving acts of fraud unrelated to contract]).
A recent decision from California Court of Appeal, First Appellate District, Division Five, is instructive, but distinguishable. In Rowe v. Exline (2007) 153 Cal.App.4th 1276, 1280 (Rowe), the plaintiff and the corporate defendant entered a settlement agreement containing an arbitration clause. After the corporate defendant failed to make a payment under the settlement agreement, the plaintiff sued it and two of its officers for breach of contract, and three counts of violation of the Corporations Code. (Rowe, supra, 153 Cal.App.4th at pp. 1280-1281.) Each of the causes of action was based on the corporate defendant’s failure to make the scheduled settlement payment. (Ibid.) In the first cause of action, for breach of contract, the individual defendants were sued based on an alter ego theory; the plaintiff alleged that as of the time the corporate defendant signed the settlement agreement, it had no separate corporate existence, and was intended solely to assist the individual defendants in avoiding their own obligations to the plaintiff. (Ibid.) The trial court denied a motion to compel arbitration filed by all three defendants. (Id. at pp. 1281-1282.) The trial court determined the plaintiff could not be forced to arbitrate his claims against the individual defendants, who were not parties to the agreement containing the arbitration provision, and enforcing the arbitration provision against the claims asserted against the corporate defendant could lead to “conflicting rulings on common issues of law and fact.” (Id. at p. 1282.)
The appellate court reversed the order denying arbitration and held the arbitration provision was enforceable (Rowe, supra, 153 Cal.App.4th at p. 1283), and applied to all claims to recover the money due under the settlement agreement, “whether the legal theory is breach of contract, tort, or violation of a statute” (id. at p. 1286, fn. 4). The appellate court also held the plaintiff was compelled to arbitrate the cause of action for breach of contract against the individual defendants because he sued them as the corporate defendant’s alter egos. “[The plaintiff] does not refute the law permitting a nonsignatory to compel arbitration if sued as a signatory’s agent. Nor does he provide any persuasive reason why a nonsignatory should be precluded from compelling arbitration if sued as a signatory’s alter ego. Indeed, while an agent is one who acts on behalf of a corporation, an alter ego is one who, effectively, is the corporation. By suing [the individual defendants] for breach of the Agreement on the ground that they are [the corporate defendant]’s alter egos, and even alleging in the complaint that [the individual defendants] entered into the Agreement, [the individual defendants] are ‘entitled to the benefit of the arbitration provisions.’ [Citation.]” (Id. at p. 1285.)
Finally, the appellate court held, “a signatory to an arbitration clause may be compelled to arbitrate against a nonsignatory when the relevant causes of action rely on and presume the existence of the contract containing the arbitration provision. [Citation.] In other words, a plaintiff who relies on the contractual terms in a claim against a nonsignatory may be precluded from repudiating the arbitration clause in the contract. [Citation.]” (Rowe, supra, 153 Cal.App.4th at pp. 1286-1287.) Because the plaintiff’s statutory claims against the individual defendants “rel[ied] upon, ma[d]e reference to, presume[d] the existence of, and [were] intertwined with the Agreement,” the plaintiff was equitably estopped from refusing to arbitrate those claims under the agreement’s arbitration provision. (Id. at p. 1287.)
This case differs from Rowe in that Morton’s claims do not rely on or presume the existence of the representation agreement containing the arbitration provision, and are not intertwined with it. As explained above, Morton’s claims against Steinberg are not within the scope of the representation agreement’s arbitration provision. The nonsignatory defendants who were sued as Steinberg’s alter egos or agents have no more right to demand arbitration than would Steinberg himself. Although Steinberg argues that the nonsignatory defendants are entitled to arbitration because they were sued as his agents and alter egos, the nonsignatory defendants have not requested arbitration; to the contrary, several of them litigated their case in court by propounding written discovery, serving a notice of deposition on Morton, and demurring to Morton’s complaint.
Morton also argues the case should not be sent to arbitration because his claims against some nonsignatory defendants could not be resolved in that forum. Morton cites In re Arbitration of Bienstock Sports and Faulk, an NFLPA arbitration decision, in support of this argument. That case, however, only addresses a corporation’s right to make a claim against a player before the NFLPA. We need not reach this issue, in light of our holdings.
DISPOSITION
The order is affirmed. Respondent to recover costs on appeal.
WE CONCUR: RYLAARSDAM, ACTING P. J., BEDSWORTH, J.