Arbitration: U.S. Supreme Court Agrees to Hear A Second Arbitration Case (Web)

A second arbitration case was added to the U.S. Supreme Court’s docket last week, just before the new 2007-2008 began on Monday.

The Court granted a petition for a writ of certiorari in Preston v. Ferrer, No. 06-1463, on Sept. 25, 2007. The Court is expected to hear the case before the term ends in June.

Last November, the California state Court of Appeal affirmed a lower court's judgment, 2-1, in Preston v. Ferrer, 145 Cal.App.4th 44 (Cal. App. 2nd Dist. 2006). The appellate court held that an arbitration provision within the petitioner's written contract was invalid, and the state’s labor commissioner had exclusive jurisdiction over the dispute.

The case involves the Fox television personality, “Judge Alex,” the show that Alex E. Ferrer stars in. See http://judgealex.com.

Ferrer acts as an arbitrator-judge on the daily half-hour show, deciding disputes that are argued before him. He is a former Florida state court judge.

Arnold M. Preston initiated an arbitration against Ferrer, claiming that the televison arbitrator failed to pay Preston fees based on Ferrer’s television earnings. The appellate court decision describes Preston as “an attorney who renders services for personnel in the motion picture-television industry.”

The two signed a 2002 management contract, according to the appeals court opinion, containing an American Arbitration Association arbitration clause.

Ferrer moved to stay Preston’s arbitration request. Ferrer also asked the state’s labor commissioner to stay the arbitration and decide the dispute. An arbitrator denied the motion to stay the arbitration.

Plaintiff Ferrer then filed a suit asking for a declaration that the case wasn’t arbitrable, and attorney Preston countered with a motion to compel. At the same time, the labor commissioner denied Preston’s motion to dismiss Judge Alex’s petition asking the commissioner to decide the dispute. But the commissioner also denied Ferrer’s motion to stay the arbitration, saying that the commission didn’t have the authority to issue a stay.

Judge Alex asked a trial court to stay the arbitration pending the commissioner’s decision; eventually, the arbitrator stayed the arbitration, pending the labor commissioner’s disposition.

Meantime, in December 2005, the trial court denied Preston’s motion to compel, and granted Ferrer’s request to allow the labor commissioner to decide the case.

The appeals court affirmed. After the California Supreme Court declined to review the decision, Preston filed the petition for writ of certiorari to the nation’s top court.

The appeals court took the case to review a couple of issue that likely will be under the Supreme Court’s microscope. First, the appellate court looked at who had the original jurisdiction to determine the parties’ contract’s validity under the California Talent Agencies Act, Cal. Labor Code Sec. 1700 et seq.

The act requires a license for acting as a talent agent. Judge Alex contended that Preston was an unlicensed talent agent, and their agreement, therefore, was void.

The appellate panel held that the validity of Preston’s argument that he was a manager, as well as the validity of the contract itself, was properly submitted by Ferrer to the state labor commission under the act.

The majority appeals court decision, by Los Angeles Superior Court Judge Frank Jackson, sitting by designation of the state Chief Justice Ronald M. George, also rejected Preston’s Federal Arbitration Act preemption argument. The opinion says that Buckeye Check Cashing Inc. v. Cardegna, 126 S.Ct. 1204 (2006), didn’t consider whether the federal law would preempt a California law requiring the labor commission to rule on the contract’s legality.

Buckeye held that a challenge to a contract’s validity goes to an arbitrator, as opposed to a challenge directed at the validity of the arbitration clause. The appellate opinion points out that Buckeye “did not consider whether the FAA preempts application of the exhaustion doctrine.”

Second District, Division 1 Acting Presiding Justice Miriam Vogel dissented. She wrote that “[the majority’s] approach ignores the fact that the parties signed a ‘Personal Management Contract,’ not a Talent Agent’s Contract, and the only reason the Talent Agencies Act is relevant is that Ferrer claims the agreement is not what it appears to be and that Preston was in fact acting as an unlicensed talent agent. Based on the parties’ agreement, this threshold issue . . . must be decided by the arbitrator, not the Commissioner or the trial court.”

The Supreme Court’s order set a briefing schedule: Petitioner Preston will have to file his brief and serve it on respondent Alex E. Ferrer by Nov. 5. Ferrer must file and serve his response brief by Dec. 3. If Preston files decides to file a reply brief, it will be due Dec. 28, 2007.

The Supreme Court already had agreed to hear Hall Street Associates LLC v. Mattel Inc. on Nov. 7. For more information on the case, which involves contracting for heightened judicial review for arbitration decisions, see http://www.cpradr.org/CPR_disp.asp?pg=news/scroll2831.htm&M=<b>Arbitration</b>:%20Supreme%20Court%20Grants%20Cert%20Request%20on%20Circuit%20Split%20Over%20Contracting%20for%20Expanded%20Judicial%20Review.%20%20(May%2030).

–Russ Bleemer, Editor, Alternatives, and Camie Joy Dart, CPR Intern