Daniels et al v. Painter et al

RESPONSE IN SUPPORT of NOTICE OF MOTION AND MOTION to Vacate or Correct Arbitration Award 76

C.D. Cal.June 5, 2018

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -1- REPLY OF MAGICSPACE IN SUPPORT OF MOTION TO VACATE AWARD HARDER LLP CHARLES J. HARDER (State Bar No. 184593) DILAN A. ESPER (State Bar No. 178293) JORDAN SUSMAN (State Bar No. 246116) 132 S. Rodeo Drive, Fourth Floor Beverly Hills, California 90212 Telephone: (424) 203-1600 Facsimile: (424) 203-1601 Email: CHarder@HarderLLP.com DEsper@HarderLLP.com JSusman@HarderLLP.com Attorneys for Specially Appearing Respondent MAGICSPACE ENTERTAINMENT, INC. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA BRETT DANIELS, an individual; and BRETT DANIELS PRODUCTIONS, INC., a Wisconsin corporation, Plaintiffs, v. SIMON PAINTER, an individual; TIMOTHY LAWSON, an individual; INTERNATIONAL SPECIAL ATTRACTIONS, LTD., a Colorado corporation; TML ENTERPRISES, PTY, LTD., a foreign corporation; ASIA LIVE NETWORK, PTE, LTD., a foreign corporation; and THE WORKS ENTERTAINMENT INC., a Nevada corporation, Defendants. CASE NO. 2:16-CV-3782 RSWL-Ex [Assigned to Hon. Ronald S.W. Lew, Courtroom 21] REPLY OF MAGICSPACE ENTERTAINMENT, INC. IN SUPPORT OF MOTION TO VACATE OR CORRECT ARBITRATION AWARD Date: June 19, 2018 Time: 10:00 a.m. Courtroom: 21 Case 2:16-cv-03782-RSWL-E Document 83 Filed 06/05/18 Page 1 of 8 Page ID #:2085 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -2- REPLY OF MAGICSPACE IN SUPPORT OF MOTION TO VACATE AWARD I. INTRODUCTION Magicspace was not a party to the Creator Agreement. No matter how Daniels attempts to obscure this, it remains a basic fact that is undisputed. The issue is whether language in the Creator Agreement that purported to bind any company in the future that did nothing more than come to the production of The Illusionists, automatically bound Magicspace to the terms, even if Magicspace did not know about agreement, or consent to it. Under applicable law, Arbitrators do not have the power to bind nonparties to the contract except where an extraordinary relationship is shown such as agency, assignee, or intended third party beneficiary. Daniels has not established that there was any evidence in the record of any such relationships, or that the Award made any such finding. Daniels’ attorney’s fees argument is an outrageous overreach. Daniels’ contention is that merely by exercising its legal right to due process by seeking review in this Court (a right guaranteed under the United States Code), Magicspace is “refusing to abide” by the arbitration clause. This argument is completely meritless and, if accepted, would serve deprive parties to arbitration agreements of their legal right to seek judicial review of awards. For the reasons discussed herein, and in the moving papers, the Award should be vacated against Magicspace. II. ARGUMENT A. The Arbitrator’s Determination To Treat Magicspace As Jointly And Severally Liable Should Be Vacated. While Arbitrators have broad powers under California and federal law, their powers derive from the agreement to arbitrate and the District Court clearly has the power to review and vacate an arbitration award that purports to binds non-parties. Thus, in Comedy Club, Inc. v. Improv West Associates, 553 F.3d 1277, 1287 (9th Cir. Case 2:16-cv-03782-RSWL-E Document 83 Filed 06/05/18 Page 2 of 8 Page ID #:2086 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -3- REPLY OF MAGICSPACE IN SUPPORT OF MOTION TO VACATE AWARD 2007), the Ninth Circuit held that where an Arbitrator purported to issue an injunction that extended to non-parties to the arbitration agreement, that portion of the Award was subject to review in the federal courts and would be vacated. “But generally arbitration clauses and contracts do not bind non-parties in the absence of such extraordinary relationships.” Id. The examples the Court gave of extraordinary relationships that would bind a non-party to an arbitration award are intended third party beneficiaries, agents, and assignees. The basis for this established legal rule is that “[t]he strong public policy in favor of arbitration does not extend to those who are not parties to an arbitration agreement”. Id. Thus, this issue is not subject to a deferential standard of review (let alone the standard of no review of arbitration awards at all, and an award of attorney’s fees against anyone who dares to move to vacate, urged by Daniels). There was simply no evidence presented in the record establishing that Magicspace was either a party to any agreement with Daniels, or that Magicspace’s non-existent relationship with Daniels constitutes one of the enumerated “extraordinary relationships” recognized by the Ninth Circuit to permit a non-party to be bound to an agreement. Daniels’ response is to say that the “Creator Agreement’s” language purported to bind any non-party who, in the future, was brought into or worked with the production. However, contracting parties have no power to do this-Daniels does not cite to any case that holds that open-ended language that purports to bind unidentified third parties who were not intended third party beneficiaries or legal successors or assignees is legally effective to bind all such unidentified non-parties. See Crowley Maritime Corp. v. Boston Old Colony Insurance Co., 158 Cal. App. 4th 1061, 1069-70, 70 Cal. Rptr. 3d 605, 611 (2008) (arbitrator’s power to bind non- parties to contract limited to “(1) where the nonsignatory is a third party beneficiary of the contract containing the arbitration agreement; and (2) where ‘a preexisting relationship existed between the nonsignatory and one of the parties to the arbitration Case 2:16-cv-03782-RSWL-E Document 83 Filed 06/05/18 Page 3 of 8 Page ID #:2087 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -4- REPLY OF MAGICSPACE IN SUPPORT OF MOTION TO VACATE AWARD agreement, making it equitable to compel the nonsignatory to also be bound to arbitrate his or her claim’”). This principle of law was applied specifically to agreements to procure talent in Matthau v. Superior Court, 151 Cal. App. 4th 593, 602-03, 60 Cal. Rptr. 3d 93, 100 (2007), The Matthau court held that legally, there could be no successor in interest to an agreement between an actor and a talent agent, and thus non-party successors in interest could not be bound to an arbitration clause contained in such an agreement. Id. at 603, 60 Cal. Rptr. 3d at 100. The court further noted that there were no cases holding that merely being a successor in interest to a party to an arbitration clause was sufficient to bring a non-party into an arbitration. Id. Daniels, in addition to arguing this issue is unreviewable (which is inconsistent with the case law), argues that Magicspace this failed to produce any evidence showing that it was not liable, and thus an adverse inference could be drawn against Magiscpace. This argument is telling. Pressed in the moving papers for any evidence in the record that actually supports a finding that Magicspace could be bound to the contract as agents or assignees, Daniels instead attempts to shift the burden of proof on the issue. However, Daniels offers no argument as to why Magicspace, a nonparty to the contract, was required to produce the evidence or witnesses that the Arbitrator said were not produced. Daniels argues that Magicspace waived its right to assert that it was not a party to or bound by the Creator Agreement, citing case law that holds that parties must raise contract defenses in breach of contract actions. However, this ignores the fact that Magicspace was not, in fact, a party to either the Creator Agreement or any arbitration agreement. Magicspace was not required to present any evidence, particularly when Daniels failed to present any evidence at the arbitration trial that Magicspace had agreed to the terms of the “Creator Agreement” or otherwise was liable to Daniels. Case 2:16-cv-03782-RSWL-E Document 83 Filed 06/05/18 Page 4 of 8 Page ID #:2088 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -5- REPLY OF MAGICSPACE IN SUPPORT OF MOTION TO VACATE AWARD No such evidence was presented, and therefore, Magicspace was not required to present evidence to rebut the nonexistent evidence presented by Daniels. Magicspace was not required to do anything, as a non-party to the contract, until it was added as an additional judgment debtor by the Arbitrator (at which point in time Magicspace did send a letter brief to the arbitrator detailing its defenses). See Motores de Mexicali, S.A. v. Superior Court, 51 Cal. 2d 172, 176, 331 P.2d 1, 3 (1958) (party added as additional judgment debtor has no obligation to intervene in underlying proceedings). Because the Award purports to bind Magicspace to the Creator Agreement without any factual or legal basis to attach the obligations to it as an assignee, intended third party beneficiary, or agent, the Award must be vacated as to Magicspace. B. Daniels’ Attorneys Fees Argument Is an Outrageous Overreach. Finally, Daniels seeks attorney’s fees in this proceeding. Daniels does not point to any contractual provision in the Creator Agreement in which Magicspace agreed to pay Daniels’ attorney’s fees in a proceeding seeking to vacate an arbitration award. Cal. Code Civ. Proc. § 1021. This should resolve the matter. California follows the “American rule” that parties bear their own fees in actions to enforce contracts unless the agreement provides otherwise. To escape this bedrock principle of contract law, Daniels constructs an argument whereby exercising its due process right to move to vacate an arbitration award, Magicspace is “refusing to abide” by the Award. This argument is both frivolous and dangerous. It is frivolous because the Award has not yet been confirmed by the Court and there is not a shred of evidence that Magicspace has ever indicated a refusal to comply with the terms of the Award if this Court confirms it. It is dangerous because however limited review of arbitration awards is, the United States Congress has provided for a procedure whereby a party may move to Case 2:16-cv-03782-RSWL-E Document 83 Filed 06/05/18 Page 5 of 8 Page ID #:2089 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -6- REPLY OF MAGICSPACE IN SUPPORT OF MOTION TO VACATE AWARD vacate an arbitration award. 9 U.S.C. § 12. Congress could have provided for fee shifting in such proceedings, as it has done in other types of federal court actions, e.g., 42 U.S.C. § 1988, but it did not do so. Were Daniels’ argument accepted, parties who exercised their due process right to limited federal court review of an arbitration award would be labeled as “disobeying” it and would be punished for seeking a court review. This is no more “disobedience” of an arbitration award than appealing any judgment is “disobeying” the judgment. The cases, not surprisingly, offer no support to Daniels. International Union of Petroleum & Industrial Workers v. Western Industrial Maintenance, Inc., 707 F.2d 425, 427 (9th Cir. 1983), a shop disobeyed a labor arbitrator’s determination that a layoff was improper. The Court noted that it was especially important that labor arbitrators’ awards be obeyed because of the policies behind the Labor-Management Relations Act. Id. at 428. Thus, the Court upheld an award of attorney’s fees in the District Court under a standard of “bad faith, vexatious[], wanton[], or for oppressive reasons”. Id. at 428. The Court denied attorney’s fees on appeal. Id. at 430. International Union of Petroleum & Industrial Workers is both distinguishable and inapplicable. The special context of labor arbitrations distinguishes it, and the fact that there is no evidence here that Painter Parties acted in bad faith, vexatiously, wantonly, or for oppressive reasons makes the case inapplicable. Nor is there any evidence that Painter Parties have disobeyed or intend to disobey the Award. Writers Guild of America, West, Inc. v. Capitol Films Development, LLC, 2009 WL 10702738 at *1 (C.D. Cal. Jul. 16, 2009), involved a party which neither paid the Award nor moved to vacate it, but simply failed to appear, thereby forcing the claimant to needlessly expend attorney’s fees obtaining an order confirming the award. In that circumstance, this Court awarded attorney’s fees. That is obviously completely different than where parties assert legal grounds and seek to vacate the award. Writers Guild of America, West, Inc. v. Ion Closers, 2008 WL 11417837 at Case 2:16-cv-03782-RSWL-E Document 83 Filed 06/05/18 Page 6 of 8 Page ID #:2090 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -7- REPLY OF MAGICSPACE IN SUPPORT OF MOTION TO VACATE AWARD *1 (C.D. Cal. Dec. 8, 2018) is distinguishable on the same grounds. Indeed Screen Actors Guild, Inc. v. Farm Fed Productions, LLC, 2009 WL 10674391 (C.D. Cal. Nov. 5, 2009), a case cited by Daniels, makes very clear that the act of “disobeying” an arbitration award does not occur when a party seeks to vacate the award in court, but rather when a party simply ignores the award and forces the prevailing party to needlessly expend fees on a confirmation proceeding: Cases that have distinguished Int'l Union usually involve employers that have participated in the litigation at the district court level. See, e.g., Shank/Balfour Beatty v. Int'l Union of Operating Engineers, No. EDCV-03-00086-VAP (SGLx), 2003 U.S. Dist. LEXIS 16355, at *13-14 (C.D. Cal. June 5, 2003) (recognizing that employer stipulated to the record and filed the Complaint in district court to vacate the arbitration award); Gulfport Convalescent Ctr. v. United Food & Commercial Workers Union, No. 93-1404-CIV-T-24-C, 1994 U.S. Dist LEXIS 20663, at *11 (M.D. Fla. July 22, 1994) (distinguishing employer's conduct from Int'l Union because it “utilized legitimate avenues of recourse available to it” rather than failing to act at all). Here, the Arbitrator issued her Award on August 22, 2005. SAG claims that Farm Fed has failed to set forth any legal arguments for failing to comply with the Awards. Moreover, SAG conferred with Farm Fed on July 29, 2009 about this motion and Farm Fed has still failed to submit any papers in opposition. Screen Actors Guild, Inc. v. Farm Fed Productions, LLC, 2009 WL 10674391 at *3. Daniels’ argument as to the conduct that constitutes alleged “noncompliance” with the Award is without substance. First, obviously, Magicspace has participated in this proceeding and has made a substantive request to vacate the award. Second, Daniels argues that Magicspace made false “ad hominem” attacks on Daniels’ character and professionalism. What Daniels is actually referring to is truthful, Case 2:16-cv-03782-RSWL-E Document 83 Filed 06/05/18 Page 7 of 8 Page ID #:2091 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -8- REPLY OF MAGICSPACE IN SUPPORT OF MOTION TO VACATE AWARD unrebutted evidence in the record of the arbitration that explains the nature of this dispute and why certain of the Painter Parties sought to sever their relationship with Daniels. (Notably, Magicspace did not become involved in the production until months after Daniels had left and never returned.) This evidence included recordings of Daniels engaging in outrageous conduct, and police records of complaints against and arrests of Daniels. Moreover, of course, none of the cases cited by Daniels holds that placing the arbitral record before the Court on a motion to vacate constitutes a refusal to comply with the award or sanctionable conduct. III. CONCLUSION For the foregoing reasons and those stated in the moving papers, the Award should be vacated or corrected. Dated: June 5, 2018 HARDER LLP By: /s/ Charles J. Harder CHARLES J. HARDER Attorneys for Specially Appearing Respondent MAGICSPACE ENTERTAINMENT, INC. Case 2:16-cv-03782-RSWL-E Document 83 Filed 06/05/18 Page 8 of 8 Page ID #:2092