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SUPERIOR COURT OF THE STATE OF CALIFORNIA

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FOR THE COIINTY OF LOS ANGELES

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WARK ENTERTAINMENT, INC
Plaintiff,

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)

Case No. BC 602287
Related to
Case No. BC 602548

Ruling

vs.

TWENTIETH CENTURY FOX FILM CORP,
et al.,

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Defendants.
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The motions to Vacate or Correct Arbitration Award, Confrrm Arbitration Award and to
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,f
i

Seal were heard on

April 29,20Ig. Appearing on behalf of Plaintiffs Temperance Brennan, L.

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P., Snooker Doodle Productions, Inc. and Bertha Blue, Inc. was Daniel A. Saunders, esq.,
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appearing for Plaintiff Wark Entertainment, Inc., was Dale F. Kinsella, esq. and appearing for
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Defendants, Twentieth Century Fox Fihn Corporation, Fox Broadcasting Company and Fox
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Entertainment Group, Inc., were Daniel M. Petrocelli, esq. and Glenn D. Pomerantz, esq. The
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court heard extensive oral argument and took the matter under submission. The court now rules
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as

follows.

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At issue are the claims of Plaintiffs Wark Entertainment, Inc. flslo Barry Josephson
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("Josephson"); femperance Brennan, L.P. f/s/o Kathleen Reichs ("Reichs"); Snooker Doodle
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Productions, Inc. f/s/o Emily Deschanel ("Deschanel"); and Bertha Blue, Inc. f/s/o David

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Ruling

 "Plaintiffs") against Twentieth Century Fox Film

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Boreanaz ("Boreanaz") (collectively,

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Corporation ("TCF"); Fox Entertainment Group, LLC; Twenty-First Century Fox, Inc., and Fox

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Broadcasting Company (collectively, "Fox") relating to the television series Bones'

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The claims emanate from Plaintiffs' agreements with Fox which include contingent

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compensation. To ensure Plaintiffs' contingent compensation remained fair, TCF was required

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transact with its affiliate distributors on equally favorable terms when compared to its

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transactions with its non-affrliate distributors. Plaintiffs contend that TCF breached this

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obligation in multiple licensing transactions

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streaming

-

- domestic

broadcasting, international licensing, and

and they assert claims against TCF (the party with whom they contracted) and its

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affiliates (nonparlies to the agreements) for breach of contract, fraud, tortious interference with

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contract and inducing breach of contract. TCF denies the claims brought by Plaintiffs and asserts

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that it carried out all its contractual obligations and duties.

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On

April 15,20l6,this court ordered the action

stayed pursuant to Defendants' Motion

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Compel Arbitration. (Declaration of Molly M. Lens ("Lens Decl.") fl 3; Exh. B.) On February

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20,2019, a JAMS Arbitrator issued an Amended Final Award, Case Reference No. 1220052735

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(Lens Decl. fl 4; Exh. C.) The Arbitrator found for Plaintiffs, awarding them a total of

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5178,695,778.g0,of which 5128,455,730 was punitive damages. (Amended Final Award, p. 65.)
The following motions are made:

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(1) Plaintiffs' motion to confitm the arbitration award;

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(2) Fox's motion to vacate or correct the arbitration award;

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(3) Fox's motion to seal portions of the exhibits fìled in support of its motion

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to vacate or correct the arbitration award.

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l.

Confirm, vacate, or correct award

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The Arbitrator awarded Plaintiffs a total of 532,769,473 in actual damages, plus

prejudgment interest, attorneys' fees, costs, and arbiter's fees. In addition, the Arbitrator a

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Ruling

 1

plaintiffs 5128,455,730 in punitive damages. Plaintiffs move to confirm the award. Fox moves to

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vacate or correct the award on the ground that the Arbitrator exceeded his powers by awarding

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punitive damages.

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The Plaintiffs in this action are creators, producers, and actors involved in the television

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series Bones'.In late 2004 and early 2005, plaintiffs each entered into contracts with TCF, under

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which they licensed their rights in Br¡nes to TCF, in exchange for certain guaranteed and

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contingent compensation. Each contract contains a materially identical "Distribution Controls"

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paragraph. (Lens Decl., Exh. A, ''ll 10.) The paragraph reads in relevant part:

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b. Dealings with Affiliates: . . . Each of Company and Artist further

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acknowledges that Fox has informed Company and Artist that Fox intends to make use

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Affiliated Companies in connection with its distribution and exploitation of the Series

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. Each

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exploitation . . . or assert any claim that Fox should have offered the applicable

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distribution/exploitation rights to unaffiliated third parties . . . . In consideration thereof,

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Fox agrees that Fox's tran.çactions with Affiliated Companies will be on monetary terms

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comparable to the terms on vvhich the Affiliated Company enters into similar transacti

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utith unrelated third party distributors.f'or comparable programs. Each of Company and

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Artist agrees thaî Company's and Artist's sole remedy against Foxfor any alleged fail

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by Fox to comply with the terms of this paragraph shall be actual damages, and

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Company and Artist hereby waive any right Ío seek or obtain preliminary or permanent

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equitable relief or punitive relief in connecíion with any such allegedfailure. (Emphasis

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added.)

of Company and Artist expressly waive any right to object.to such distribution and

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.

c.

Arbitration: Any dispute arising under the provisions of this Paragraph l0

shall be arbitrated . . . in binding arbitration in Los Angeles, California . . .

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Ruling

.

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Plaintiffs' claims arise from Fox's alleged breach of the porlion of paragraph 10(b)

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requiring Fox to engage in transactions with its own Affiliated Companies on monetary terms

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similar to its comparable transactions with unrelated third party distributors. Accordingly, this

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court in its April 15,2016 Ruling, determined that this paragraph required arbitration of certain

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of Plaintifß' claims. As part of its Ruling, this court noted that because the arbitration agreement

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in the Distribution Controls paragraph applies to "any dispute arising under Paragraph l0," the

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provision also applied to Plaintiffs' tort, statutory, and equitable claims, including those against

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borh TCS and against the Affiliated Entities. (See Bigler v. Harker School (2013) 213

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Cal.App.4th 727 ,739 l*A long line of California and federal cases holds that claims framed in

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tort are subject to contractual arbitration provisions when they arise out of the contractual

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relationship between the parties. . . . It is the dispute, not the named cause of action that is the

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focus of inquiry"] (internal citations omitted).)

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Delendants' principal argument on these motions is that the award must be corrected

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besause the Arbitrator "exceeded fhis] powers" by awarding punitive damages when the

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Distribution Controls paragraph specifically disallows an award of punitive relief. (Code Civ.

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Proc., ç 1286.2, subd. (a)(4).)

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P

ar

tie

s to agr

ee

ment/Thir d-par ty b enefi c iary

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Plaintifß first point out that the agreement itself defines Fox

as

only "Twentieth Century

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Fox Television, a unit ofTwentieth Century Fox Film Corporation," and not affiliated entities,

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and argues that tlie punitive damages limitation applies only to claims brought against Fox, such

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that claims for punitive relief may brought against the remaining defendants (the "Affiliated

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Entities"). (Lens Decl., Exh. A, p. 1.)

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Plaintiffs'argument contradicts this court's reasoning in its April 8,2016 Ruling. The

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court compelled Plaintiffs to arbitrate their claims against the Affiliated Entities according to

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principles of agency and collateral estoppel. The court cited Sourcing Unlimited, Inc. v. Asimco

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International, Inc. (1st Cir. 2008) 526F.3d 38, in which the First Circuit examined the very

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Ruling

 1

issue and concluded that since the claims of the nonsignatory defendant were "intertwined with

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the subject matter within the scope of the arbitration clause," equitable estoppel applied such that

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the

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supra, 526 F.3d at P. 47 .)

plaintiff was estopped from avoiding arbitration with the nonsignatory. (Sourcing Unlimited,

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The same reasoning applies here with respect to whether the nonsignatory Affiliated

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Entities can invoke the punitive damages limitation. The Affiliated Entities have the right to

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invoke the punitive damages limitation because the contract interftrence claiins against the

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nonsignatories are inextricably intertwined with the breach of contract claims against Fox. The

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very same violation of Paragraph 10(b) supports both causes of action. Although TCF was

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originally the party which compelled arbitration (on its own behalf and on behalf of the

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Affiliated Entities), it is Plaintiffs who are now enjoying the benefits of arbitration; Plaintiffs

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equitably estopped from reaping the rewards of having arbitrated its claims against the Affiliated

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Entities without also respecting the limitations to which they agreed.

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are

It would be illogical for this court to hold in one Ruling that the Affiliated Entities were

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able to invoke the arbitration clause and compel Plaintiffs to arbitrate, and hold in another

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that the Affiliated Entities were not able to invoke one of the limitations in the arbitration clause

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Wavier by submission oJ'issue to Arbitrator

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Plaintiffs also argue that Fox submitted the punitive damages issue to the Arbitrator, thus

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granting the Arbitrator power to decide on the issue despite the language in the Distribution

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Controls paragraph. (Mot. Vacate; pp. 8-9.) In support of their argument, Plaintiffs cite Safar¡

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Associates v. Superior Courr (2014) 23 1 Cal.App.4th 1400 , 1410-1411, in which the fact that the

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parties had submitted the issue of prevailing party attorney's fees to the arbitrator rendered the

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arbitrator's decision on the attorney fee issue nonreviewable. As factual support for their

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argument, Plaintiffs assert that Fox expressly stipulated that Plaintiffs' request for punitive

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damages were among the issues to be decided by the Arbitrator by color-coding all

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arbitrable claims in the cornplaint in yellow. (Kinsella Decl., Exh. E (Exh. B thereto) fln ß-52.)

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Ruling

fully

 The court does not find that Fox submitted the punitive damages issue to the arbitrator.

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causes of action to the

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All that the yellow highlighting shows is that Fox submitted Plaintiffs'

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arbitrator. Every paragraphof each cause of action designated by the parties as "fully arbitrable"

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is highlighted in full, including the parts of each claim that allege that Plaintiffs are entitled to

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punitive damages. The highlighted punitive damages paragraphs in the complaint are boilerplate.

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The court

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express contractual term limiting the power of the arbitrator to award punitive relief. Moreover,

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as counsel

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pursuant to this court s ruling on which issues were arbitrable, not as any substantive statement

will not give an implication arising from highlighted boilerplate precedence over an

for Fox pointed out at the hearing,

(i)

the parties prepared the color-coded document

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of the issues or remedies that the parties were stipulating were arbitrable; and (2) at no point

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during the arbitration proceedings did Plaintiffs advance their argument about the color-coded

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pages.

From pre-hearing to post-hearing, Fox objected to punitive relief in light of the express

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contractual prohibition. (Lens Decl., Exh. G at 5305-06 (Wark); 5345,5365-66 (Brennan et al.).)

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Fox did not submit the question of punitive damages to the arbitrator, and accordingly, Fox did

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not waive the limitation.

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[4/aiver by non-objection to

1B

arbitrability

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Plaintiffs also argue that Fox waived its ability to challenge the arbitrability of the

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validity of the punitive damages waiver clause (as opposed to the actual question whether

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Plaintiff would receive punitive relief by not raising it until closing argument. (Plaintifß' Reply,

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p. 4.) This argument is not well taken. Fox never explicitly submitted to the arbitrator the

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question of the validity of the waiver clause, nor did Fox ever waive its objection to the

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arbitrability of the validity of the waiver clause by silence. On the contrary, Fox clearly and

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cogently raised its objections to the arbitrability of anything other than (i) Plaintiffs' 10(b) clai

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and

(ii) the release issue. (Lens Decl, Exh. G at 5366.)

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Ruling

 Plaintiffs appear to insist that Fox have made the following explicit objections during

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arbitration proceedings in order to preserve the right to have punitive damages reviewed by this

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court:

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waiver clause was valid; and (3) that the arbitrator did not have the right to consider the validity

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of the waiver clause in the f,rrst place. The court will not split hairs to this degree. Irr reviewing

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the record of the arbitration proceedings, the coutt hnds that Fox raised its objections to punitive

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damages in all three senses sufficiently so as to avoid waiving the issue. Moreover, as Fox's

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counsel pointed out at oral argument, Fox had no choice but to argue on the issue of punitive

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damages when the arbitrator requested briefing on the issue. Under these circumstances, the

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(l)

that punitive damages were not warranted by the case; (2) that the punitive damages

courl will not interpret Fox's having argued the issue as its having capitulated to the issue.
Even if Fox is deemed to have agreed to allow the arbitrator to decide the validity of the

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punitive damages clause, as discussed below, the Arbitrator exceeded his powers by declaring

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the clause invalid.

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Rational relationship

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"The scope of an arbitrator's authority is not so broad

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as

to include an award of remedies

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'expressly forbidden by the arbitration agreement or submission.' fCitation.]" (Gueyffier v. Ann

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SLtmmers, Ltd. (2008)

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unambiguously" in the parties' agreement, and the arbitrator exceeds his authority in awarding

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relief beyond the limitation, then the court is empowered to vacate or correct the award. (See

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Advctnced Miuo Devices, Inc.

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court does not find any express and unambiguous restriction on the arbitrator's power, then the

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court's only inquiry is whether the remedy "bears a rational relationship to the underlying

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contract as interpreted, expressly or impliedly, by the arbitrator." (San Francisco Housing

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Authority v. Service Entployees International Union, Local 790 (2010) 182 Cal.App.4th 933,

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944.)

43 CaL th 1179,1185.) If a limitation on relief is set out "explicitly and

v Intel Corp. (1994) 9 Cal.4th

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Ruling

362,383.) On the other hand, if the

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At oral argument, Plaintiffs argued that the fact that waiver clause required interpretation

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by the Arbitrator demonstrated that the waiver clause was not unambiguous. The Arbitrator's

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interpretation of an ambiguous contract clause, argued Plaintifß, is beyond the review of the

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couft, and accordingly, the award must be confirmed.

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A contract provision, however. is not ambiguous merely because it requires a modictlm

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of interpretation. All contract terms must be interpreted; the issue here is whether and when the

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Arbitrator's interpretive efforts caused him to exceed the powers granted him by the parties.

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A contract is ambiguous "when it is capable of two or more constructions, both of which

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reasonable." (Pov,erline Oil Co. v. Superior Court (37 Ca\.4th377,390.) Accordingly, an

are

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unambiguous contract is one that admits only one reasonable meaning. Here, the court finds that

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the punitive damages waiver clause is unambiguous in the context of this lawsuit. The clause

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waives punitive relief "in connection with" any breach by TCF of paragraph l0(b). The contract

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interference claims against the Affiliated Entities are quite obviously made "in connection with"

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TCF's breach; in fact, as this court previously ruled, the claims are inextricably intertwined.

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There is only one reasonable interpretation of the provision, and that is that the arbitrator did not

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have the power to award punitive damages on any of the claims, or against any of the parties, in

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this case. The arbitrator exceeded his powers by interpreting the waiver clause to mean

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otherwise.

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At oral

argLrment,

Plaintifß maintained that the court was not permitted to inquire into

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the reasonableness of an arbitrator's award in this way. The couft does not agree. The court's job

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on this motion is to determine whether the arbitrator exceeded his powers. (Code Civ. Proc.,

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1286.2, subd. (a)(4).) Under Advanced Micro Devices, supra, and as the parties agreed at oral

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argument, an arbitrator exceeds his powers when the arbitrator ignores an "explicitf] and

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unambiguous[]" limitation on his powers. (Advanced Micro Devices, supra,9 Cal.4th at p. 383.)

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Accordingly, in order to issue a ruling consistent with Advanced Micro Devices, the court must

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make a determination as to whether the limitation is explicit and unambiguous. Analyzing

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contract ambiguity, by definition, involves analyzing which interpretations of the contract are

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I
Ruling

$

 1

reasonable. Here, because the limitation was unambiguous under the only reasonable reading

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the contract, the Arbitrator exceeded his powers by awarding otherwise.

of

Even if the contract containecl an ambiguity with respect to the applicability of the

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punitive damages waiver such that the Arbitrator did not exceed his powers in interpreting the

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ambiguity, the court nevertheless finds that the resulting award does not bear a rational

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relationship to the Agreement.

plaintiffs argue that the award is rationally related to the agreement

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because the

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Arbitrator determined rationally determined that the punitive damages limitation (1) did not

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apply to the Affiliated Entities as nonsignatories to the Agreement, and (2) was void as against

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public policy under Civil Code section 1668, and thus, the remedy bears a rational relationship

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the underlying contract.
Case law runs counter to

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Plaintiffs' position. Here, the agreements provide that Fox and

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..hereby waive any right to seek or obtain preliminary or permanent equitable relief
the plaintiffs

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or punitive relief in connection with" any violation of Paragraph 10(b). Both Plaintiffs and Fox

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are sophisticated entities represented by sophisticated counsel who can be presumed to have

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understood both the individual and public policy ramifications of a punitive damages waiver. To

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flout the express terms of the pafties' agreement in favor of

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favor of recovery for those wronged ignores the clear intent of the parties. (See Cal. Faculty

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Association v. Superior Court (199S) 63 Cal.App.4th935,953 ["it is diffìcult to see how the

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violation of an express and explicit restriction on the arbitrator's powers could be considered

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'rationally related' to a plausible interpretation of the agreement']; see also Volt Information

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Sciences, Inc. v. Board oJ Trustees of'Lelancl Stanford .Iunior [Iniv. ( 19S9) 489 U.S. 468, 479

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f'Tust as [parlies] may limit by contract the issues which they will arbitrate fcitation],

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they specify by contract the rules under which that arbitration will be conducted"].) Rather than

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offer

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provisions of the plain text in an effort to prevent what the Arbitrator deemed an unfair result.

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Such an award is 'irrational."' (Aspic Engineering & Construction Co. v. EEC Centcom

a

a broadly-stated

public policy in

So

too may

plausible interpretation of the contract, the Arbitrator simply "disregarded specific

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I
Ruling

 1

Constructors LLC (9rh Cir. 2019) 913 F.3d 1162,1169.) Accordingly, in awarding punitive

2

damages, the Arbitrator exceeded his powers.

The motion to confirm the award is denied, the motion to correct the award is granted.

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punitive damages shall be stricken from the award. The award will be corrected and confirmed

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as so modified.

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Motions to seal

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Having ruled on the motions to confirm, correct or vacate, the coutt now turns to Fox's

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motions to seal. One motion seeks to seal Fox's own motion to vacate, and the other motion

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seeks to seal the unredacted version

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Fox brings this motion on the ground that the Sealed Materials contain non-public financial

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information that the parties agreed to keep confidential pursuant to a protective order filed in

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their arbitration proceedings. (Mot. Seal, p. 3.) The motion is unopposed.

of the Arbitrator's Award (together, the "Sealed Materials").

California Rules of Court, Rules 2.550 and2.551 governs sealed records. Before

15
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ordering substantive courtroom proceedings closed, or transcripts sealed, judges must hold a

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hearing and make factual findings supporting the order, including "(i) there exists an overriding

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interest supporting closnre and/or sealing; (ii) there is a substantial probability that the interest

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will

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narrowly tailored to serve the overriding interest; and (iv) there is no less restrictive means of

21

achieving the overriding interest. [Citation.]" (Mercury Interactive Corp. v. Klein (2007) 158

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Cal.App.4th 60, 96.) Moreover, an application to seal must be accompanied by a declaration

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containing facts sufficient to justify sealing. (CRC Rule 2.551(b)

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be prejudiced absent closure andlor sealing;

(iii)

the proposed closure and/or sealing is

(l).)

The court finds the following with respect to these requirements:

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26

Overriding interest that supports sealing. The parties demonstrated their interest in

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maintaining the confidentiality of their private financial, personal, and business information by

2B

stipulating to a protective order during arbitration in which they agreed to keep this information

10

Ruling

 1

confidential. (Mot. Seal Lens Decl. fl 3.)

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Interest prejudiced absent sealing. The parties' interest in maintaining the confidentiality

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4

of their private financial information would obviously be prejudiced if the financial information

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is not sealed. (See Cassidy v. Caliþrnia Board of Accounrancy (2013) 220 Cal.App.4th 620,625

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[finding that a corporation's right of privacy and confidentiality as to its financial records would

7

be prejudiced

if the documents were not ordered sealed].)

I
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Narrowly tailored/no less restrictive means. The redacted versions of the Sealed

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Materials are in the unsealed case hle. By redacting only the confidential information from the

11

Sealed Materials, the parties have used the least restrictive means of sealing the confidential

12

information.

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The motions to seal are granted. The unredacted versions of the Agreement between Wark and

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TCF (Lens Decl., Exh. A) and the Amended Final Award (Lens Decl., Exh. C) are ordered

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sealed.

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Defendants to prepare the appropriate documents.

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Clerk to give notice.

,lo

DATED: May

2, 2019

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RICHARD E. RICO

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Judge of the Superior Court

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Ruling