Ferrer v. Preston

51 Cal. Rptr. 3d 628, 145 Cal. App. 4th 440, 2006 Daily Journal DAR 15664, 2006 Cal. Daily Op. Serv. 10990, 2006 Cal. App. LEXIS 1897

Opinions

Opinion

JACKSON, J.

Footnotes

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INTRODUCTION

Defendant, Arnold M. Preston, appeals from an order denying his motion to compel arbitration and granting a motion by plaintiff, Alex E. Ferrer, for a preliminary injunction and a stay of the action. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Defendant is an attorney who renders services for personnel in the motion picture-television industry. Plaintiff is a former Florida superior court judge, who now works arbitrating legal disputes on the television program, Judge Alex, on the Fox television network. Defendant contends that plaintiff breached a written agreement by failing to pay defendant certain fees based on plaintiff’s earnings from his performance in Judge Alex.

On March 7, 2002, plaintiff signed a management contract with defendant, and the contract contained a standard American Arbitration Association (AAA) arbitration clause. On June 10, 2005, defendant initiated an arbitration proceeding against plaintiff, seeking to recover the fees to which he claimed he was entitled. On July 1, 2005, plaintiff filed a motion to stay the arbitration with the arbitrator. Plaintiff also filed a petition to determine controversy (Petition) with the Labor Commissioner (Commissioner) and a motion asking the Commissioner to stay the arbitration. Defendant thereafter filed a motion to dismiss the Petition with the Commissioner. On October 12, 2005, the arbitrator issued an order denying plaintiff’s motion to stay the arbitration.

On November 2, 2005, plaintiff filed the instant complaint containing two causes of action, one for a declaration that the dispute involving the validity of the contract is not subject to arbitration, and the second for injunctive relief, seeking to restrain defendant from proceeding with the arbitration. On November 8, 2005, defendant filed a motion with the trial court to compel arbitration. On the same day, the Commissioner denied defendant’s motion to dismiss plaintiff’s petition. The Commissioner also denied plaintiff’s motion to stay the arbitration, “on the grounds that the Labor Commissioner does not have the authority to stay arbitration proceedings.” On November 10, 2005, plaintiff filed with the trial court a motion for preliminary injunction, attempting to restrain the defendant from proceeding with the arbitration unless and until the Commissioner determined that he had no further jurisdiction over the parties’ dispute.

Plaintiff also filed a motion for reconsideration with the arbitrator. On December 6, 2005, the arbitrator granted the motion for reconsideration and stayed the arbitration pending disposition of the matter before the Commissioner.

On December 7, 2005, the trial court issued its order, denying defendant’s motion to compel arbitration and granting plaintiff’s motion for a preliminary injunction and staying the action pending final resolution by the Commissioner of the Petition. Defendant has appealed from this order.

DISCUSSION

1. The Talent Agencies Act

The Talent Agencies Act (Act) (Lab. Code, § 1700 et seq.)¹ regulates the activities of a “talent agency,” i.e., “a person or corporation who engages in the occupation of procuring, offering, promising, or attempting to procure employment or engagements for an artist or artists . . . .” (§ 1700.4, subd. (a).) Artists include persons rendering professional services in television enterprises. (Id., subd. (b).)

Section 1700.44, subdivision (a), of the Act states that “[i]n cases of controversy arising under this chapter, the parties involved shall refer the matters in dispute to the Labor Commissioner, who shall hear and determine the same, subject to an appeal within 10 days after determination, to the superior court where the same shall be heard de novo.”

Section 1700.5 of the Act states that “[n]o person shall engage in or carry on the occupation of a talent agency without first procuring a license therefor from the Labor Commissioner.” Plaintiff contends that defendant was an unlicensed talent agent, and therefore their agreement is void and defendant is barred from recovering the compensation he is seeking under the contract. Defendant asserts that he was acting as a personal manager, not as a talent agent, and he is not barred from recovering compensation for his services.

The question before us is who has original jurisdiction to make the determination as to the validity of the parties’ contract. Defendant contends that the question of the contract’s validity should be determined by the arbitrator, and the trial court therefore erred in refusing to compel arbitration. We disagree.

The parties’ contract included a standard AAA arbitration clause, including a stipulation that the parties are to arbitrate any attack on the “validity or legality” of the contract. However, as interpreted by the courts, section 1700.44, subdivision (a), vests exclusive original jurisdiction in the Commissioner to resolve issues arising under the Act—including the issue of whether or not an individual such as defendant is a personal manager or an unlicensed talent agent. In Styne v. Stevens (2001) 26 Cal.4th 42 [109 Cal.Rptr.2d 14, 26 P.3d 343] (Styne), the Supreme Court held that the Commissioner’s exclusive original jurisdiction applies even where the Act is first raised by the artist as a defense to a claim for breach of contract by the personal manager/talent agent. (26 Cal.4th at pp. 58-59.) In the present case, defendant asserted a claim that plaintiff had breached his contract and plaintiff submitted the Petition to the Commissioner to determine the issue of whether the contract involved the services of a talent agency. The Commissioner found that plaintiff had raised a “colorable” defense to defendant’s claims, based on an alleged violation of the Act. The administrative procedures before the Commissioner must be resolved before resort may be had to another tribunal. Contrary to defendant’s suggestion, the fact that plaintiff is a sophisticated individual, with significant legal experience does not alter the decision of Styne or the procedure to follow.

As explained in Styne, supra, 26 Cal.4th at page 58, it is appropriate for the Commissioner to .resolve the dispute between the parties, for “[t]he Commissioner’s expertise in applying the Act is particularly significant in cases where, as here, the essence of the parties’ dispute is whether services performed were by a talent agency for an artist.” In addition, “the Commissioner's] . . . interpretation of a statute he is charged with enforcing deserves substantial weight.” (Id. at p. 53.) In the present case, defendant commenced an arbitration seeking damages for breach of contract. In Styne, the action was initiated in superior court. We find the distinction to be of no consequence.

The trial court here correctly applied Buchwald v. Superior Court (1967) 254 Cal.App.2d 347 [62 Cal.Rptr. 364] (Buchwald) in refusing to order arbitration and staying the proceedings until the Commissioner resolved the question before him. The facts of Buchwald are on point to the case at bar. In Buchwald, the rock band known as Jefferson Airplane claimed that section 1700.44 made their contract with their manager, Matthew Katz (Katz), void because the manager had obtained employment for them without being licensed as a talent agent. Katz sought arbitration based upon an arbitration clause in his contract. The band filed a petition with the Commissioner, contending that Katz was an unlicensed talent agent. The band also brought an action in superior court, attempting to prevent Katz from proceeding with arbitration. (254 Cal.App.4th at pp. 351-353.) The Court of Appeal held that the Commissioner had exclusive original jurisdiction over the controversy based upon the band’s petition, and that the exhaustion doctrine applied. (Id. at p. 359.) In the present case, defendant sought to compel arbitration with plaintiff. Then plaintiff sought an order staying the arbitration and sought to require defendant to exhaust his administrative remedies before the Commissioner. As in Buchwald, the trial court properly granted plaintiff’s request.

Defendant is unable to distinguish the facts in the present case from the facts in Buchwald and attempts to argue that Buchwald is no longer good law and has been overruled by Styne. However, the Styne opinion repeatedly cites Buchwald. Defendant relies on footnote 9 in Styne in support of the argument that Buchwald has been overruled. Styne at footnote 9 states that “the Talent Agencies Act specifically allows parties to provide in their contract that disputes thereunder shall be resolved by private arbitration, rather than by the Commissioner. (§ 1700.45.) Nothing in our reasoning restricts this right.” (Styne, supra, 26 Cal.4th at p. 59, fn. 9.)

The footnote makes reference to section 1700.45 of the Act, described “Contract provision for arbitration; Provisions prerequisite to validity.” Styne did not involve a contract containing an arbitration clause, so the court did not consider whether the prerequisites of section 1700.45 were met.² To be valid under section 1700.45, the contract must satisfy either subdivisions (a) or (b), and it must also satisfy subdivisions (c) and (d). The contract between plaintiff and defendant does not satisfy subdivisions (c) or (d), in that it does not provide for notice to the Commissioner of all arbitration proceedings or give the Commissioner the right to attend the hearings.

Defendant further argues that Buchwald is not applicable because it was decided under a repealed statute, the “Artists’ Managers Act.” Defendant claims that the current Act eliminated the requirement that managers must have a license. The argument is not well taken. The Artists’ Managers Act and the Talent Agencies Act are very similar in relevant aspects. While they differ slightly in the definitions of “artists’ manager” and “talent agent,”³ sections 1700.44 and 1700.45 of both acts are identical in relevant points.

While defendant argues that he is a manager and not required to obtain a license, the Commissioner denied defendant’s motion to dismiss for lack of subject matter jurisdiction, indicating that “this case presents a colorable basis for the exercise of the Labor Commissioner’s jurisdiction and therefore, the matter must be submitted to the Labor Commissioner for determination.” This being the case, the questions as to whether defendant is a talent agent and whether his contract with plaintiff is valid properly are submitted to the Commissioner in the first instance.

2. Federal Preemption

Defendant also argues that the Federal Arbitration Act (9 U.S.C. § 1 et seq.) (FAA) preempts California law requiring the Commissioner to first adjudicate the legality of the contract. Defendant relies on the case of Buckeye Check Cashing, Inc. v. Cardegna (2006) 546 U.S. 440 [163 L.Ed.2d 1038, 126 S.Ct. 1204] (Buckeye).

Buckeye is inapposite, however. Buckeye did not involve an administrative agency with exclusive jurisdiction over a disputed issue. Buckeye did not consider whether the FAA preempts application of the exhaustion doctrine. Buckeye held, as between a court and an arbitrator, the arbitrator and not the court hears “a challenge to the validity of the contract as a whole.” (Buckeye, supra, 546 U.S. at p. 448 [126 S.Ct. at p. 1210].) Buckeye did not discuss whether a challenge to a contract as a whole should first have been made to an administrative agency where there is a statute vesting the agency with exclusive original jurisdiction to decide a challenge based on specific grounds.

3. California Labor Code’s Application to the Dispute

Defendant finally argues that the California Labor Code does not apply, on the theory that plaintiff lives and works outside of California.⁴ However, defendant lives and works in California, he signed the contract in California, and he instituted arbitration in California. In addition, the contract contains a choice of law clause stating that “[t]his agreement shall be governed by the laws of the state of California, applicable to agreements wholly entered into and performed herein.” Defendant’s argument is without merit.

CONCLUSION

While there is a strong public policy in favor of contractual arbitration (Moncharsh v. Heily & Blase (1992) 3 Cal.4th 1, 9 [10 Cal.Rptr.2d 183, 832 P.2d 899]; Madden v. Kaiser Foundation Hospitals (1976) 17 Cal.3d 699, 702 [131 Cal.Rptr. 882, 552 P.2d 1178]), the Buchwald case is very clear and requires the Commissioner to determine first the issue of whether defendant is required to have a license in order to recover on a breach of contract from plaintiff. As noted in Styne, supra, 26 Cal.4th 42, “controversies colorably arising under the Talent Agencies Act are within the exclusive original jurisdiction of the Commissioner,” whether raised by the party bringing an action or as a defense. (Styne, supra, 26 Cal.4th at p. 59.) The fact that the losing party will have a right to a de novo hearing, involving additional time and money, does not excuse defendant from the legal requirement to exhaust his administrative remedies.

The order is affirmed.

Mallano, Acting P. 1, concurred.

Judge of the Los Angeles Superior Court assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

1

All statutory references hereinafter are to the Labor Code.

2

In relevant part, section 1700.45 states:

“Notwithstanding Section 1700.44, a provision in a contract providing for the decision by arbitration of any controversy under the contract or as to its existence, validity, construction, performance, nonperformance, breach, operation, continuance, or termination, shall be valid:

“(a) If the provision is contained in a contract between a talent agency and a person for whom the talent agency under the contract undertakes to endeavor to secure employment, or

“(b) If the provision is inserted in the contract pursuant to any rule, regulation, or contract of a bona fide labor union regulating the relations of its members to a talent agency, and

“(c) If the contract provides for reasonable notice to the Labor Commissioner of the time and place of all arbitration hearings, and

“(d) If the contract provides that the Labor Commissioner or his or her authorized representative has the right to attend all arbitration hearings.”

3

Former section 1700.4, the former Artists’ Managers Act, defined artists’ managers as follows: “An artists’ manager is hereby defined to be a person who engages in the occupation of advising, counseling, or directing artists in the development or advancement of their professional careers and who procures, offers, promises or attempts to procure employment or engagements for an artist only in connection with and as a part of the duties and obligations of such person under a contract with such artist by which such person contracts to render services of the nature above mentioned to such artist.” (Stats. 1959, ch. 888, § 1, p. 2921.)

Section 1700.4, subdivision (a), part of the Talent Agencies Act provides as follows: “ ‘Talent agency’ means a person or corporation who engages in the occupation of procuring, offering, promising, or attempting to procure employment or engagements for an artist or artists, except that the activities of procuring, offering, or promising to procure recording contracts for an artist or artists shall not of itself subject a person or corporation to regulation and licensing under this chapter. Talent agencies may, in addition, counsel or direct artists in the development of their professional careers.”

4

Plaintiff is a resident of Florida, employed in Texas, and signed the arbitration agreement in Nevada.