News & Events
Gladstone Michel Wins Appellate Victory for Film Completion Guarantor
The California Court of Appeal affirmed a trial court's judgment, finding that an arbitrator did not exceed his authority in granting an arbitration award in favor of insurers and exonerating their completion bond.
An arbitrator found that TF1 International breached its contractual obligation to pay the motion picture production lender and assignee in a film distribution deal -- the Royal Bank of Scotland (the bank) -- a $1.5 million advance that was payable by TF1 upon delivery of the film. The arbitrator's award directed TF1 to pay the advance to the bank, thereby effectively exonerating Fireman's Fund Insurance Co. and International Film Guarantors (collectively, Fireman's Fund ), on a completion bond they had issued to the bank guaranteeing the film's completion and delivery.
The arbitrator's award also found that TF1 had wrongfully insisted on a theatrical release of the film in the United States as a condition to the payment, and that it had previously waived that same condition expressly for the benefit of the bank and Fireman's Fund. The arbitrator's award further determined that TF1 had waived a delivery deadline when it tried to postpone the film's delivery, and that TF1 's efforts to delay and impede delivery estopped it from later invoking the deadline as a reason for refusing to pay the advance. TF1 appealed.
The court of appeal affirmed the trial court's judgment. TF1 argued the award should be vacated because, inter alia, the arbitrator exceeded the authority provided under Code of Civil Procedure §1286.2 (4) by permitting nonsignator and assignee Fireman's Fund to join the arbitration.
While acknowledging that the question of whether a nonsignatory is a party to an arbitration agreement is one for the trial court in the first instance, the court of appeal noted that a special body of California law, §§1287.11 et seq., governs international commercial disputes. The court found that this law gave the arbitrator the discretion exercised and that, in any event, the parties had agreed to follow the international procedures from the outset.
Counsel for Fireman's Fund : Leon J. Gladstone, Michael J. Aiken, Gladstone Michel Weisberg Willner & Sloane, 310-821-9000, Marina del Rey, Cal.
Counsel for TFI : Bryan J. Freedman, Bradley H. Kreshek, Freedman & Taitelman, 310-201-0005, Los Angeles.
Source: California Insurance Law and Litigation Alert, 11/30/2009