Wednesday, September 21, 2011
Court Upholds Arbitrator’s Ruling for Law Firm in Dispute With Talent Agency
By SHERRI M. OKAMOTO, Staff Writer
The Court of Appeal for this district yesterday upheld an arbitrator’s decision rejecting malpractice claims against Fox & Spillane LLP arising from the firm’s representation of a talent agency in a dispute against three actors.
Div. Seven, in an unpublished decision, explained the arbitration agreement between the firm and Marathon Entertainment Inc. did not permit judicial review of any factual or legal errors that may have occurred in the course of the arbitration.
Marathon and its president, Rick Siegel, had retained Fox & Spillane in 2002 to pursue breach of contract claims against Reggie Hayes, Rosa Blasi and Nia Vardoles, who were all former Marathon clients.
The parties’ retainer agreement contained a dispute resolution provision in which they consented to “binding arbitration” governed by “the California rules of evidence, pleading and procedure.” The agreement further provided that the arbitrator “shall determine the dispute based solely on the law governing the claims at issue, and not on any other basis such as “Just Cause.”
In the three underlying breach of contract actions, Marathon asserted that its former clients failed to pay commissions that were required under their respective management agreements.
Specifically, Marathon asserted that Blasi “fired Marathon… and stopped paying commissions two years into the series’ six-year run starring in the Lifetime Network series, ‘Strong Medicine’ ”; Hayes fired Marathon and stopped paying commissions 22 episodes “into the 140-episode run of the UPN series ‘Girlfriends’ ”; and Vardoles, “the writer and star of the film ‘My Big Fat Greek Wedding’…fired Marathon” after it had “produced the play, developed the screenplay and succeeded in obtaining a production entity and funding for the film.”
Marathon anticipated that each defendant would argue that their management agreement was unenforceable under the Talent Agencies Act—which requires “anyone who solicits or procures artistic employment or engagements for artists to obtain a talent agency license”—and requested that Fox & Spillane “focus on challenging the validity and application of various provisions” of the act, and especially the act’s “constitutionality as applied to personal managers.”
Fox & Spillane continued to represent Marathon until June 2005. During that period, the firm successfully negotiated a settlement of the Vardalos matter entitling Marathon to approximately $750,000. The other two matters were heard by the Labor Commission, and eventually proceeded to trial.
In the Hayes matter, the Labor Commission ruled that Marathon had not violated the act and, as a result, its management agreement was enforceable. Hayes sought a de novo trial in superior court, where the jury found that he had fully complied with the terms of the agreement. The jury’s findings were affirmed on appeal.
The Labor Commission found Marathon had violated the act in the Blasi matter, an a superior court affirmed. Marathon appealed the judgment, arguing that severability applied to manager-talent contracts applied, and the appellate court agreed. The California Supreme Court has granted review of this ruling.
In August 2006, Marathon submitted an arbitration demand to JAMS alleging that Fox & Spillane had committed malpractice, breach of fiduciary duty and fraud during its representation in the Hayes, Blasi and Vardalos matters. The firm filed a counterclaim alleging that Marathon owed $200,208.86 for unpaid legal fees
JAMS neutral Barbara Reeves Neal later issued a final award, ruling that Marathon “shall take nothing by their complaint,” and that Fox “shall recover $200,208.86 on its Counterclaim, payable by Marathon Entertainment.”
Marathon elected to appeal to a second arbitrator, and retired Santa Clara Superior Court Judge Read Ambler was assigned to hear the appeal. Ambler upheld Neal’s award in most respects, but reduced Fox’s recovery to approximately $85,000.
Last January, Marathon filed a petition to vacate the arbitration award. Marathon contended that although a court ordinarily has no authority to review errors of law and fact, the parties’ arbitration agreement contained language that expanded the scope of review ordinarily applicable to arbitration awards.
Los Angeles Superior Court Judge Yvette M. Palazuelos was not persuaded by Marathon’s argument that the language in the arbitration agreement did not permit her to review the merits of the arbitrators’ decisions, and the appellate court, in a decision by Justice Laurie D. Zelon, agreed.
Zelon explained that the parties to an arbitration agreement are permitted to expand the scope of judicial review to include errors of law and fact, if the agreement explicitly and unambiguously provides for review on the merits, but that the agreement in this case did not do so.
She noted that “the agreement states only that ‘the California rules of evidence, pleading and procedure shall govern the arbitration’” and that “[t]he arbitrator shall determine the dispute based solely on the law governing the claims at issue, and not on any other basis such as ‘just cause.’ ”
This first clause, Zelon reasoned, “is merely a choice of law provision, while the second clause prohibits the arbitrators from deciding disputed issues under principles of equity or justice.”
Zelon also rejected Marathon’s argument that the arbitration award was procured through fraud, since these allegations were “in effect, request[s] that we re-weigh the evidence and revisit various legal rulings the arbitrators made,” as “all of the ‘misrepresentations’ were disputed matters decided at the arbitration.”
Justices Fred Woods and Frank Y. Jackson joined Zelon in her opinion.
The case is Marathon Entertainment, Inc. v. Fox & Spillane, LLP, B224686.
Copyright 2011, Metropolitan News Company