Neal Moritz v. Universal City Studios, LLC.

Over the course of approximately 16 years, respondents

Neal Moritz and Neal H. Moritz, Inc. (collectively, Moritz) worked

for appellants, Universal City Studios LLC and its wholly-owned

subsidiary, FFSO Productions LLC (collectively, Universal),

rendering services as a producer for the film The Fast and the

Furious (Universal Pictures 2001) and several sequels thereto

(collectively, the Fast & Furious franchise). The lawsuit underlying

this appeal involves a “spin-off” of the Fast & Furious franchise, a

project ultimately released as Fast & Furious Presents: Hobbs &

Shaw (Universal Pictures 2019) (Hobbs & Shaw), on which Moritz

allegedly worked as a producer pursuant to an oral agreement with

Universal. Moritz named Universal, as well as appellant Jimmy

Horowitz, president of Universal City Studios LLC (collectively,

appellants) as defendants in the suit. Appellants moved to compel

arbitration of the suit based on arbitration agreements in written

producer contracts regarding Moritz’s work for Universal on the

Fast & Furious franchise. The court concluded that these

arbitration agreements did not apply to the Hobbs & Shaw dispute,

and denied appellants’ motion.

Appellants contend the court erred by deciding whether the

Hobbs & Shaw dispute was arbitrable under the arbitration

agreements contained in the Fast & Furious contracts, as those

agreements are valid and binding on all parties and delegate the

question of arbitrability to an arbitrator. We disagree, and

therefore affirm.

FACTUAL AND PROCEDURAL BACKGROUND

A. The Parties’ Producer Contracts Regarding

the Fast & Furious Franchise

It is undisputed that Moritz and Universal entered into seven

written producer contracts setting forth the terms under which

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Moritz rendered services as a producer on the films in the Fast &

Furious franchise, and that all these contracts (collectively, the Fast

& Furious contracts) remain valid and binding. Specifically, that

Moritz and Universal entered into separate contracts for

the first, second, third, fourth, sixth and seventh movies in the

franchise: The Fast and the Furious (Universal Pictures 2001),

2 Fast 2 Furious (Universal Pictures 2003), The Fast and the

Furious: Tokyo Drift (Universal Pictures 2006), Fast & Furious

(Universal Pictures 2009), Fast & Furious 6 (Universal Pictures

2013), and Furious 7 (Universal Pictures 2015) (respectively,

the FF1 contract, FF2 contract, FF3 contract, FF4 contract,

FF6 contract, and FF7 contract). They entered into no written

contract regarding the fifth movie in the franchise, Fast Five

(Universal Pictures 2011). Finally, they entered into a single

written producer contract to govern the eighth, ninth, and tenth

movies in the franchise (the FF8-10 contract). The FF8-10 contract

is less than two pages long and requires that the terms of the FF7

contract (with limited modifications) apply to any movie

constituting a “sequel” or “remake” of earlier films in the franchise.

Of the movies contemplated by the FF8-10 contract, only the eighth

movie in the franchise, The Fate of the Furious (Universal Pictures

2017), has been made to date. The parties agree The Fate of the

Furious (Universal Pictures 2017) constitutes as a sequel for the

purposes of the FF8-10 contract.

It is also undisputed that the first six of the Fast & Furious

contracts contain valid arbitration clauses. Specifically, the FF1,

FF2, FF3, and FF4 contracts all provide, in pertinent part, that

“[a]ny controversy, claim, or dispute arising out of or related to

this [a]greement or the interpretation, performance, or breach

hereof . . . shall be resolved according to the procedures set

forth in this paragraph which shall constitute the sole dispute

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resolution mechanism hereunder.” In all four contracts, these

procedures require arbitration when initial mediation is

unsuccessful.

The FF6 and FF7 contracts provide that “[a]ny controversy,

claim, or dispute arising out of or relating to this [a]greement or

this agreement to arbitrate, including, without limitation . . . any

such controversy, claim or dispute against or involving any officer,

director, agent, employee, [or] affiliate . . . of a party to this

Agreement . . . shall be fully and finally adjudicated by binding

arbitration to the fullest extent allowed by law.”

The FF8-10 contract includes no separate arbitration clause,

but the contract subjects movies produced as “sequels” or “remakes”

to the arbitration clause in the FF7 contract.

The arbitration clauses in the FF1-FF4 contracts delegate

questions of arbitrability to an arbitrator by providing that “[t]he

arbitration shall be initiated and conducted according to the

JAMS/Endispute Comprehensive Arbitration Rules and Procedure”

(JAMS rules). The JAMS rules, in turn, require that

“[j]urisdictional and arbitrability disputes, including disputes over

the existence, validity, interpretation or scope of the agreement

under which [a]rbitration is sought . . . shall be submitted to and

ruled on by the [a]rbitrator. The [a]rbitrator has the authority to

determine jurisdiction and arbitrability issues as a preliminary

matter.” We will call this a delegation clause.

The arbitration clauses in the FF6 and FF7 contracts contain

no similar delegation clause, but provide that “[a]ny controversy,

claim, or dispute arising out of or relating to this [a]greement or

this agreement to arbitrate . . . shall be fully and finally adjudicated

by binding arbitration to the fullest extent allowed by law.” (Italics

added.)

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B. The Hobbs & Shaw Project

During work on the eighth movie in the Fast & Furious

franchise, Moritz and Universal began discussing a spin-off film

referred to as Hobbs & Shaw, which would be based on characters

from prior films in the franchise. The FF8-10 contract did not

subject Hobbs & Shaw to the modified terms of the FF7 contract, as

the film was neither a “remake” nor a “sequel.”

Moritz and Universal exchanged written drafts of a producer

contract for Hobbs & Shaw, which included a proposed arbitration

agreement, but the parties never finalized or signed any written

contract agreement for Moritz’s work on the film.

Shortly before filming of Hobbs & Shaw was set to begin,

Universal informed Moritz that “Universal is under no obligation

to involve . . . Moritz in the production [of Hobbs & Shaw], nor

to compensate [him] in connection with it,” and instructed Moritz

not to “render any services in connection with the [p]icture or be

involved with the production in any capacity” “until such time as an

agreement is reached.”

C. Moritz’s Complaint Regarding Hobbs & Shaw

Soon after Universal advised Moritz of its view that the

parties had no binding agreement regarding Hobbs & Shaw,

Moritz sued Universal,1

alleging that Moritz and Universal had

reached a binding oral agreement regarding Moritz’s work on the

film, which Universal had breached. The operative version of

Moritz’s complaint is the first amended complaint (FAC), filed June

28, 2019.

1 Moritz later added appellant Jimmy Horowitz as a

defendant as well.

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In the FAC, Moritz alleges that in connection with the

Fast & Furious contracts, Moritz and Universal had “fully

negotiated and agreed upon an oral producer deal before any

writings were exchanged” (italics omitted), and that “[t]ypically,

Moritz would begin working on the production of the film prior to

the oral producer deal being reduced to writing.” Moritz alleges

that this again occurred with respect to Hobbs & Shaw, but this

time, Universal failed to honor the terms of the parties’ oral

agreement.

The FAC summarizes key financial provisions of the various

Fast & Furious contracts, and alleges that “[f]or purposes of this

[c]omplaint, there is one written producer agreement between

Moritz and Universal that is relevant[,] . . . [t]he FF8-10 [contract].”

More specifically, Moritz alleges that “before beginning substantial

work on the [p]icture, the [p]resident of Universal [City Studios

LLC] . . . orally agreed with Moritz that [Moritz’s] . . . compensation

for producing Hobbs [&] Shaw would be . . . the first dollar gross

compensation option in the FF8-10 [a]greement.” (Italics omitted.)

Similarly, the FAC alleges that the financial terms for the Hobbs &

Shaw producer contract were “modeled after the first dollar gross

compensation option in the FF8-10 [a]greement,” and that “[t]he

parties had never discussed or agreed that the financial terms of

the Hobbs & Shaw producer deal would be anything other than the

first dollar gross option that had been contained in [Moritz’s] last

producer deal, which was the FF8-10 [a]greement.” (Italics

omitted.)

The FAC also references the Fast & Furious contracts in

various other ways. Specifically, Moritz alleges that “[i]t was

always clearly and fully understood between the parties that

[Moritz] would receive . . . [Moritz’s] customary credit and full

financial compensation for producing Hobbs & Shaw,” and that a

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proposal made by Universal after the parties had entered into an

oral agreement was contrary “to what Moritz had received on all of

the [Fast & Furious] films since approximately 2012 (and had

received on many [Fast & Furious] films before that).” (Italics

omitted.)

The FAC asserts breach of contract, breach of implied

contract, and promissory fraud causes of action and seeks both

damages and enforcement of the alleged oral agreement.

D. Appellants’ Motion to Compel Arbitration

Appellants moved to compel arbitration based on the

arbitration clauses in the Fast & Furious contracts. Appellants’

motion first asked the court to compel arbitration of the threshold

question of arbitrability: that is, whether the parties’ dispute was

arbitrable under the arbitration clauses in any of the Fast &

Furious contracts. Appellants argued in the alternative that, if the

court concluded it had jurisdiction to decide arbitrability, the court

should compel arbitration of the parties’ dispute in the FAC,

because it “related to” one or more of the Fast & Furious contracts.

The court rejected the argument that arbitrability was a

question to be decided by an arbitrator. In so doing, the court

considered only one potentially applicable arbitration agreement:

the agreement reflected in the FF7 contract and made applicable

to further “sequels” and “remakes” under the FF8-10 contract.

The court disagreed that the question of arbitrability should be

decided by the arbitrator, explaining that “ ‘[u]nless the parties

clearly and unmistakably provide otherwise, the question of

whether the parties agreed to arbitrate is to be decided by the

court, not the arbitrator,’ ” and that “the parties [here] did not

clearly and unmistakably provide otherwise.” The court observed

that the FF8-10 contract was “hardly a model of clarity,” and

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further noted that even if the arbitration agreement did clearly

delegate the arbitrability issue to the arbitrator, that agreement

would not apply to the Hobbs & Shaw dispute in the FAC, because

“the parties agree . . . [Hobbs & Shaw] is not a [remake or sequel]

within the meaning of the [FF8-10 contract].” (Italics omitted.)

The court therefore considered the merits of appellants’

arguments that the FAC dispute fell within the scope of the parties’

arbitration agreements in the Fast & Furious contracts, and

concluded the dispute was not arbitrable. It therefore denied

appellants’ motion to compel arbitration.

Appellants timely appealed.

DISCUSSION

As the basic facts underlying appellants’ motion to compel

arbitration are undisputed, this appeal presents a purely legal

issue, which we review de novo. (See Robertson v. Health Net of

California, Inc. (2005) 132 Cal.App.4th 1419, 1425 [“evaluating an

order denying a motion to compel arbitration,” “if the court’s denial

rests solely on a decision of law, then a de novo standard of review

is employed”].)

The parties do not dispute that the Federal Arbitration Act

(FAA) applies to the arbitration agreements at issue. Nor do we see

any basis for concluding otherwise, as the agreements are contained

in contracts “involving” interstate commerce (9 U.S.C. § 2; see

Allied-Bruce Terminix Companies, Inc. v. Dobson (1995) 513 U.S.

265, 276-277) that do not clearly elect some other law to govern

arbitrability. (See Brennan v. Opus Bank (9th Cir. 2015) 796 F.3d

1125, 1129.)

Section 2 of the FAA provides: “A written provision in . . . a

contract . . . to settle by arbitration a controversy thereafter arising

out of such contract . . . shall be valid, irrevocable, and enforceable,

save upon such grounds as exist at law or in equity for the

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revocation of any contract.” (9 U.S.C. § 2; hereafter sometimes “§

2.”)

Arbitration “is a matter of consent, not coercion.” (Volt Info.

Sciences, Inc. v. Board of Trustees of Leland Stanford Jr. Univ.

(1989) 489 U.S. 468, 479; see also Atkinson v. Sinclair Refining Co.

(1962) 370 U.S. 238, 241 [“a party cannot be required to submit to

arbitration any dispute which he has not agreed so to submit”].)

“[A]rbitrators derive their authority to resolve disputes only

because the parties have agreed in advance to submit such

grievances to arbitration.” (AT & T Technologies, Inc. v.

Communications Workers of America (1986) 475 U.S. 643, 648-649.)

Arbitration of a claim is appropriate “only where the court is

satisfied that the parties agreed to arbitrate that dispute.” (Granite

Rock Co. v. Int’l Broth. of Teamsters (2010) 561 U.S. 287, 297.)

An arbitration agreement is tied to the underlying contract

containing it, and applies “only where a dispute has its real source

in the contract. The object of an arbitration clause is to implement

a contract, not to transcend it.” (Litton Fin. Printing Div. v. NLRB

(1991) 501 U.S. 190, 205 (Litton).) No authority permits sending a

matter to arbitration simply because the same parties agreed to

arbitrate a different matter.

“[W]hether parties have agreed to ‘submi[t] a particular

dispute to arbitration’ is typically an ‘ “issue for judicial

determination.” ’ [Citations.] [W]here the dispute at issue concerns

contract formation, the dispute is generally for courts to decide.”

(Granite Rock Co. v. Int’l Broth. of Teamsters, supra, 561 U.S. at p.

296; see also AT & T Technologies, Inc. v. Communications Workers

of America, supra, 475 U.S. at p. 649 [the “question of whether the

parties agreed to arbitrate is to be decided by the court, not the

arbitrator”].) “When deciding whether the parties agreed to

arbitrate a certain matter (including arbitrability), courts generally

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. . . should apply ordinary state-law principles that govern the

formation of contracts.” (Cullinane v. Uber Techs., Inc. (1st Cir.

2018) 893 F.3d 53, 61; see also First Options of Chicago, Inc. v.

Kaplan (1995) 514 U.S. 938, 944 [“When deciding whether the

parties agreed to arbitrate a certain matter . . . courts generally . . .

should apply ordinary . . . principles that govern the formation of

contracts”].)

To form a valid contract there must be a meeting of the

minds, i.e., mutual assent. (Code Civ. Proc., § 1281; see Civ. Code,

§§ 1550, 1565.) “ ‘Mutual assent is determined under an objective

standard applied to the outward manifestations or expressions of

the parties, i.e., the reasonable meaning of their words and acts.’ ”

(Chicago Title Ins. Co. v. AMZ Ins. Services, Inc. (2010) 188

Cal.App.4th 401, 422.)

Here, the parties agreed to arbitrate “any controversy, claim,

or dispute arising out of or relating to” the FF6 and FF7

agreements. But the Hobbs & Shaw dispute neither arises from nor

relates to the FF6 or FF7 agreements. Although Moritz referenced

the agreements in his complaint when explaining the historical

background of the Hobbs & Shaw, the mere mention of a contract

does not mean the dispute relates to it in any substantive sense. If

it did, a party could make any contract relate to a dispute simply by

mentioning it. There is no reasonable probability that when the

parties agreed to arbitrate any dispute relating to the FF6 and FF7

contracts that they meant every dispute in which a party mentions

the contracts, no matter how tangentially.

Appellants nevertheless argue that the arbitration

provisions in the FF6 and FF7 agreements apply here because the

delegation clauses go on to provide that “[a]ny controversy, claim, or

dispute arising out of or relating to . . . this agreement to

arbitrate . . . shall be” arbitrated (italics added), and such a dispute

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now exists because they created it by invoking the delegation

clause. The argument is without merit.

“[P]arties may delegate threshold arbitrability questions to

the arbitrator, so long as the parties’ agreement does so by ‘clear

and unmistakable’ evidence.” (Henry Schein, Inc. v. Archer & White

Sales, Inc. (2019) ___U.S.___ [139 S.Ct. 524, 530, 202 L.Ed.2d 480,

487] (Schein).) We conclude not only is it not clear and

unmistakable here that the parties agreed to delegate arbitrability

questions concerning Hobbs & Shaw to an arbitrator, no reasonable

person in their position would have understood the F6 and F7

arbitration provisions to require arbitration of any future claim of

whatever nature or type, no matter how unrelated to the

agreements nor how distant in the future the claim arose.

“For example, if two small business owners execute a sales

contract including a general arbitration clause, and one assaults the

other, we would think it elementary that the sales contract did not

require the victim to arbitrate the tort claim because the tort claim

is not related to the sales contract. In other words, with respect to

the alleged wrong, it is simply fortuitous that the parties happened

to have a contractual relationship.” (Coors Brewing Co. v. Molson

Breweries (10th Cir. 1995) 51 F.3d 1511, 1516.) When an

arbitration provision is “read as standing free from any [underlying]

agreement,” “absurd results ensue.” (Smith v. Steinkamp (7th Cir.

2003) 318 F.3d 775, 777.)

Appellants’ proffered construction of the delegation clause

would not only transcend the purpose and terms of the F6 and F7

agreements, contrary to Litton, supra, but would operate to deprive

both sides of all future rights to either a jury trial or court

resolution of completely unrelated matters arising potentially

decades in the future.

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Appellants rely on Schein for the proposition that only an

arbitrator can determine whether the arbitration clause should be

enforced, and to what extent. We disagree.

Prior to Schein, many federal and California state courts

considered the merits of the parties’ arbitrability arguments to a

certain extent in determining who should decide the arbitrability

of a dispute under an arbitration agreement governed by the FAA.

Namely, if the argument for arbitrability was “wholly groundless,”

some courts declined to submit the question of arbitrability to the

arbitrator, even when the parties expressly delegated that question

to the arbitrator. (Schein, supra, 139 S.Ct. at pp. 528-529; Smythe

v. Uber Technologies, Inc. (2018) 24 Cal.App.5th 327, 332.) But

Schein explicitly “reject[ed] th[is] ‘wholly groundless’ exception” to

determinations of arbitrability under the FAA.

2

(Schein, at p. 531.)

2 Before the United States Supreme Court’s decision in

Schein, California courts repeatedly held that the California

Arbitration Act (CAA) is “consistent with federal law on the

question of who decides disputes over arbitrability,” including with

respect to the judicially-created “wholly groundless” exception.

(See Dream Theater, Inc. v. Dream Theater (2004) 124 Cal.App.4th

547, 553.) Namely, these cases recognized a “wholly groundless”

exception to enforcing an agreement that an arbitrator decide the

issue of arbitrability under both the CAA and the FAA. (See, e.g.,

ibid.; Smythe v. Uber Technologies, Inc., supra, 24 Cal.App.5th at

p. 332 [noting that under the FAA, “[a] delegation clause will be

given effect when there is a plausible argument that the arbitration

agreement requires the merits of the claim to be arbitrated, and

cases where an assertion of arbitrability is ‘wholly groundless’ are

exceptional. [Citation.] California law is consistent with federal

law on this question”].) Because the CAA does not apply here,

we need not consider whether the CAA will continue to recognize a

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The Court further clarified that a party seeking to compel

arbitration need show only that “the parties’ [valid arbitration]

contract delegates the arbitrability question to an arbitrator.” (Id.

at p. 529.) Once it has done so, “a court may not override the

contract . . . [and] possesses no power to decide the arbitrability

issue. That is true even if the court thinks that the argument that

the arbitration agreement applies to a particular dispute is wholly

groundless.” (Ibid.)

But 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.” (9 U.S.C. § 2.) Schein expressly understood

that the Act requires enforcement of arbitration clauses with

respect to disputes “ ‘thereafter arising out of such contract.’ ”

(Schein, supra, 139 S.Ct. at p. 529 (quoting 9 U.S.C. § 2).) The FAA

requires no enforcement of an arbitration provision with respect to

disputes unrelated to the contract in which the provision appears.

Appellants’ argument that an arbitration provision creates a

perpetual obligation to arbitrate any conceivable claim that Moritz

might ever have against them is plainly inconsistent with the FAA’s

explicit relatedness requirement.

judicially-created “wholly groundless” exception, now that the FAA

no longer does so.

The order denying the motion to arbitrate is affirmed. Respondents are to recover their costs on appeal.