Banner Entertainment, Inc. v. Superior Court (Alchemy Filmworks, Inc.)

• Decision Date: 19 March 1998
• Docket Number: No. B116436,B116436
• Citation: 62 Cal.App.4th 348,72 Cal.Rptr.2d 598
• Court: California Court of Appeals Court of Appeals
• Parties: , 98 Cal. Daily Op. Serv. 1998, 98 Daily Journal D.A.R. 2763 BANNER ENTERTAINMENT, INC., Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent; ALCHEMY FILMWORKS, INC., Real Party in Interest.

Page 598

72 Cal.Rptr.2d 598

62 Cal.App.4th 348, 98 Cal. Daily Op. Serv. 1998,

98 Daily Journal D.A.R. 2763

BANNER ENTERTAINMENT, INC., Petitioner, v. The SUPERIOR COURT of Los Angeles County, Respondent ALCHEMY FILMWORKS, INC., Real Party in Interest.

No. B116436.

Court of Appeal, Second District, Division 3, California.

March 19, 1998.

As Modified March 30, 1998.

Review Denied June 10, 1998.

Katten Muchin & Zavis, Steve Cochran and Raymond Wu, Los Angeles, for Petitioner.

No appearance for Respondent.

Fox & Spillane, Jay M. Spillane, Los Angeles, for Real Party in Interest.

CROSKEY, Associate Justice.

Petitioner Banner Entertainment, Inc. (Banner) seeks a writ of mandate directing the trial court to vacate its order compelling Banner to arbitrate a dispute between Banner and real party in interest, Alchemy Filmworks, Inc. (Alchemy). We issued an alternative writ of mandate and stayed the arbitration pending determination of this writ proceeding. For the reasons explained below, we conclude that no enforceable agreement to arbitrate exists, that the trial court therefore erred by entering an order to compel arbitration, and that Banner is entitled to the writ of mandate which it seeks.

FACTUAL AND PROCEDURAL BACKGROUND ¹

Banner, as plaintiff, has filed a complaint which alleges causes of action for declaratory relief, constructive fraud, intentional and negligent interference with prospective business relations, and common counts (the action). Banner filed the action after Alchemy After filing the action, Banner then filed therein a motion to determine the non-arbitrability of the claims Alchemy had submitted for arbitration. Alchemy filed a cross-motion in the action to compel arbitration of not only the claims it had submitted to the AAA, but also of all disputes arising out of Banner's relationship with Alchemy. ²

submitted to the American Arbitration Association (AAA) a demand for arbitration of the parties' dispute over a purported agreement between Banner and Alchemy.

In support of its motion, Banner presented the following evidence in the form of declarations:

Mickey Liddell, Banner's president, stated that in the spring of 1996, Banner, which was seeking to market its films "Traveler" and "Telling Lies in America" (the Films), met with Ann Dubinet, Alchemy's president, and other representatives of Alchemy to discuss Alchemy's ability to act as a sales agent for the Films in countries outside the United States and Canada (the Foreign Territories). Banner agreed to send Alchemy to Cannes in May, 1996 to market the films, and to pay Alchemy a ten percent commission on its sales. At that time, Banner and Alchemy were still negotiating the terms of an arrangement by which Alchemy would act as overseas sales agent for the Films. It was Liddell's understanding, as well as the understanding of others at Banner, that when Banner agreed to send Alchemy to Cannes, "Alchemy and Banner were to continue negotiating a longer term relationship and, if an agreement could be reached, would eventually memorialize that relationship in writing."

According to Liddell, on or about April 16, 1996, Banner received from Alchemy two proposed draft agreements which purportedly were intended to create a more formal and permanent relationship between Alchemy and Banner. He reviewed the agreements (one for each of the two Films), and noted they contained provisions which had never before been discussed nor negotiated between Banner and Alchemy. He then forwarded them to Banner's outside legal counsel for review.

In mid-May, 1996, Liddell and Alchemy's representatives traveled to Cannes to market the Films. He learned from representatives of a Spanish distributor that Alchemy was misrepresenting its authority vis-a-vis the Films, as well as misrepresenting other information about the Films, such as budget size and endorsement and distribution arrangements. ³

On or about June 21, 1996, Banner's outside legal counsel, Dennis Cline, returned the preliminary draft agreements to Liddell with Cline's typewritten comments in the margins. However, because of what Liddell had observed in Cannes, Banner decided to terminate Alchemy's authority to act as a sales agent, and on July 31, 1996, Liddell and Brian Swardstrom, who was also affiliated with Banner, spoke with Dubinet by telephone and notified her that Alchemy was no longer authorized to act as Banner's sales agent with respect to the Films. Banner then confirmed this oral notification with a letter from Cline to Alchemy, dated August 2, 1996. Shortly after Banner notified Alchemy that it no longer authorized Alchemy to act as its agent, it received from Alchemy a revised draft of the preliminary draft agreements regarding the Films.

Banner never signed any version of the preliminary draft agreements. In late June Bonnie Voland, the president of a company in the business of providing advice regarding international sales and marketing of motion pictures, declared that she had worked in the film marketing industry since 1985, and was familiar with the people operating both Banner and Alchemy; Banner as an existing client, and Alchemy as a former employee during the period of January 1, 1996 through September 15, 1996. In 1996, Voland attended the Cannes Film Festival as a member of Alchemy's staff. She attended meetings with Dubinet, during which meetings Dubinet was attempting to make deals for the foreign distribution of films produced by Banner and other companies. She recounted various representations made by Dubinet during these meetings, and also stated that Dubinet did not return all of Banner's calls (calls made by Liddell, Banner's president), and that Alchemy and Banner did not meet twice a day during the festival to strategize about marketing strategy, as apparently agreed upon between Alchemy and Banner.

1997, Banner received a demand for arbitration from Alchemy.

In addition to the Voland and Liddell declarations, Banner supported its motion on the issue of arbitrability with copies of (1) the August 2, 1996 letter from Cline to Alchemy, (2) the demand for arbitration by Alchemy, and (3) the April 16, 1996 letters from Alchemy to Banner with the proposed terms for the parties' contractual relationship with respect to the engagement of Alchemy as Banner's sole and exclusive sales agent for the Films in countries other than the Foreign Territories. These April 16, 1996 letters provided, in relevant part: "15. More formal agreement; The parties hereto anticipate entering into a more formal agreement incorporating the above terms, together with such other provisions as are customary for arrangements of this kind. Until such time, if ever, as such more formal agreement in [sic--is] concluded, this agreement when signed by the parties hereto will constitute a legal and binding obligation of the parties. [p] Please acknowledge your approval of the foregoing terms by signing a copy of this letter in the space indicated below." (Italics added.)

In its opposition to Banner's motion, Alchemy objected to the Voland and Liddell declarations to the extent they addressed the substance of Alchemy's performance, on the grounds that such matters were irrelevant on the issue of whether an agreement to arbitrate had been created, and to other irrelevant material related to Alchemy's alleged wrongdoing. More to the point as to the issue on review in this opinion, Alchemy also objected to Liddell's declaration on the grounds that Banner's "subjective and unarticulated 'understanding' of the situation" was not relevant and that Liddell's testimony concerning the purported intention surrounding Alchemy's delivery to Banner of the draft contracts lacked foundation and was speculative.

In addition to objecting to Banner's evidence, Alchemy presented its own evidence in opposition to Banner's motion: (1) a "to whom it may concern" letter from a Spanish film distributor (which was entirely irrelevant on the issue of whether there was an agreement to arbitrate, and which went only to the issue of Alchemy's purported misbehavior as an agent); and (2) the declaration of Monica Hsu, an employee of a Taiwanese film distributor (which also was irrelevant to whether Banner and Alchemy had entered into a binding agreement to arbitrate).

As noted above, the parties had filed cross-motions on the issue of arbitrability. Alchemy supported its own motion to compel arbitration with a request for the court to take judicial notice of the declaration of Dubinet, which Alchemy previously had filed in support of Alchemy's petition to compel arbitration in Alchemy Filmworks, Inc. v. Banner Entertainment, Inc., supra, No. 175185. ⁴

Dubinet's declaration provided, in relevant part, that (1) in February 1996, Banner contacted her about Alchemy's acting as foreign sales agent with respect first to "Traveler" and, a few weeks later, to "Telling Lies in America"; (2) Banner agreed to grant Alchemy the exclusive right to license rights to the Films in the Foreign Territories and to advance Alchemy's expenses incurred on behalf of Banner; (3) Alchemy prepared the April 16, 1996 draft agreements and delivered them to Banner; (4) Banner, as required by paragraph 6 of the draft agreements, sent Alchemy some $91,645 for Alchemy's anticipated expenses in attending the Cannes Film Festival; (5) after the film festival, Dubinet reminded Banner that it had not yet provided comments on the draft agreements; (6) on June 20, Alchemy received a copy of Cline's June 20, 1996 letter to Banner with his suggested annotations to the draft agreements, which contained no comments about the arbitration clause; (7) on June 25, 1996, she sent the draft agreements and Cline's comments to Alchemy's legal counsel, who then prepared new versions of the draft agreements incorporating Cline's proposed changes and a few of their own and sent them to Alchemy on July 26, 1996; (8) on July 31, 1996, Dubinet signed the revised...