A Case To Read On The Limits Of The Delegation Doctrine.
Neal Moritz, the film producer and industry executive associated with the Fast and Furious (FF) franchise, sued Universal City Studios LLC and others for breach of an oral contract and promissory estoppel after the distributor allegedly removed him as lead producer of the FF spinoff, Hobbs & Shaw. Defendants moved unsuccessfully to compel arbitration, and appealed the order denying the motion to arbitrate. Neal Moritz v Universal City Studios LLC, et al. B299083 (2/1 9/2/20) (Chaney, Rothschild, Bendix).
Moritz had entered into several FF film contracts with arbitration clauses. Appellants argued first, that the court compel arbitration of the threshold question of arbitrability, based on delegation provisions in any arbitration clauses in the FF contracts. Alternatively, if the Court of Appeal decided it had jurisdiction to decide arbitrability, then it should compel arbitration, because the dispute "related to" one or more of the FF contracts.
The interesting part of the case, which perhaps explains why it is published, is the discussion in footnote 2, and in the body of the opinion, about the so-called "wholly groundless" doctrine. If there is a valid delegation clause, i.e., clear and convincing evidence establishes that the parties intended to delegate a decision about arbitrability to the arbitrator, then the fact that the arbitrability argument itself is "wholly groundless" does not mean that the decision can't be delegated to the arbitrator. Henry Schein, Inc. v. Archer & White Sales, Inc., 139 S.Ct. 524 (2019). This, at least, is the rule under the Federal Arbitration Act, and it was undisputed that the FAA governed the case. Avoiding whether the "wholly groundless" rule might still be good California law, the Court of Appeal explains that "Schein presupposes a dispute arising out of the contract or transaction, i.e. some minimal connection between the contract and the dispute. That is so because under the FAA, contractual arbitration clauses are 'valid, irrevocable, and enforceable' if they purport to require arbitration of any 'controversy thereafter arising out of such contract.'" Such was not the case here, because Hobbs & Shaw was not the subject of the earlier FF contracts. The FF contract relied upon by appellants applied to "remakes" or "sequels", and the court states that Hobbes & Shaw was neither.
Does this mean that the Court of Appeal has smuggled the "wholly groundless" exception in through the back door by using different words to say that appellant's arbitrability argument was "wholly groundless"? We don't think so. There still needs to be "some minimal connection between the contract and the dispute." Just because the parties entered into a contract providing for the delegation of arbitrability issues and covering prequels and sequels doesn't mean the delegation of arbitrability issues applies to a film, if it is undisputed that the film is neither a prequel nor a sequel.
Affirmed.
COMMENT: Unless the matter now settles, the parties will get to litigate whether an oral contract isn't worth the paper it's written on.
COMMENT ON COMMENT: Did Samuel Goldwyn really say that an oral contract isn't worth the paper it's written on? Quote Investigator tells us that he disavowed this, and many other malapropisms attributed to him. In fact, this witticism has been floating around since the 19th century.
Samuel Goldwyn by photographer Arnold Genthe. 1919 or 1920. Library of Congress.
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