Grigson v. Creative Artists Agency

• Decision Date: 24 April 2000
• Docket Number: No. 98-51016,98-51016
• Parties: (5th Cir. 2000) CHARLES O. GRIGSON, as Trustee for "The Texas Chainsaw Massacre"; RIVER CITY FILMS, INC.; ULTRA MUCHOS, INC., Plaintiffs-Appellants, v. CREATIVE ARTISTS AGENCY, L.L.C.; MATTHEW DAVID McCONAUGHEY, Defendants-Appellees
• Court: U.S. Court of Appeals — Fifth Circuit

Page 524

210 F.3d 524 (5th Cir. 2000)

CHARLES O. GRIGSON, as Trustee for "The Texas Chainsaw Massacre"; RIVER CITY FILMS, INC.; ULTRA MUCHOS, INC., Plaintiffs-Appellants, v. CREATIVE ARTISTS AGENCY, L.L.C.; MATTHEW DAVID McCONAUGHEY, Defendants-Appellees.

No. 98-51016

UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

April 24, 2000

Appeal from the United States District Court for the Western District of Texas

Before DUHE, BARKSDALE, and DENNIS, Circuit Judges.

RHESA HAWKINS BARKSDALE, Circuit Judge:

Solely at issue is whether the district court abused its discretion by applying equitable estoppel to compel arbitration for an action centered on tortious interference with a contract with an arbitration clause, brought by signatories to the contract against non-signatories, the court holding that, because this action is intertwined with, and dependent upon, that contract, its arbitration agreement should be given effect. We AFFIRM.

I.

"Return of the Texas Chain Saw Massacre" (the movie) was filmed in 1993-94; then "obscure actors" Matthew McConaughey and Renee Zellweger acted in it. The movie was produced by Ultra Muchos, Inc., and River City Films, Inc. The trustee for the movie's owners is Charles Grigson.

In October 1995, Ultra Muchos and River City entered into a distribution agreement with Columbia TriStar Home Video, Inc. It was given exclusive distribution rights and complete discretion on how to exercise them; the producers were to receive a percentage of the movie's gross revenue. And, by separate, earlier agreement, the owners were to receive a portion of the producers' percentage.

In the period post-acting in the movie and prior to the fall of 1996, McConaughey signed an agency contract with Creative Artists Agency, L.L.C. The movie's distribution was delayed by TriStar to take advantage of Zellweger and McConaughey's success in subsequent movies. Subsequently, however, TriStar gave the movie only a limited distribution.

In district court in mid-1997, Grigson, as trustee, sued Ultra Muchos, River City, and TriStar for breach of the distribution agreement. But, Grigson quickly and voluntarily had the action dismissed that fall, when TriStar sought to enforce the distribution agreement's arbitration clause, which contains a forum selection provision (Los Angeles County, California).

In late 1997, a few months after the voluntary dismissal of the first action, Grigson, now joined by Ultra Muchos and River City, filed this action in state court against McConaughey and Creative Artists (Defendants) for, inter alia, tortious interference with the distribution agreement, claiming that such interference occurred between McConaughey's signing with Creative Artists and the movie's limited distribution. In this regard, Defendants allegedly pressured TriStar to limit the release because they viewed it as an improper exploitation of McConaughey's success post-acting in the movie.

After the action was removed to federal court on the basis of diversity of citizenship, Defendants, although non-signatories to the distribution agreement, moved to compel arbitration under the agreement. The same district court that had permitted the voluntary dismissal of Grigson's first action ruled that Grigson, Ultra Muchos, and River City (Appellants) were equitably estopped from relying upon Defendants' being non-signatories. This was based upon holding that, because the claims are so intertwined with, and dependent upon, the distribution agreement, its arbitration clause should be given effect. Accordingly, in the light of the forum selection provision in the arbitration clause, the court dismissed the action so that the parties could proceed in the mandated forum (Los Angeles County, California).

II.

Arbitration is favored in the law. See Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983). Accordingly, parties to such agreements cannot avoid them by casting their claims in tort, rather than in contract. See e.g., Acevedo Maldonado v. PPG Indus., Inc., 514 F.2d 614, 616 (1st Cir. 1975). Likewise, proceedings against parties and non-parties to the arbitration agreement are stayed pending the outcome of arbitration, when the action against the non-party is dependent upon interpretation of the underlying contract. See Subway Equip. Leasing Corp. v. Forte, 169 F.3d 324, 329 (5th Cir. 1999). Similarly, as discussed infra, in certain limited instances, pursuant to an equitable estoppel doctrine, a non-signatory-to-an-arbitration-agreement-defendant can nevertheless compel arbitration against a signatory-plaintiff.

In the distribution agreement, Ultra Muchos, River City, and TriStar agreed

that any dispute or controversy relating to any of the matters referred to in clauses (d)(i),(ii), or (iii), above, shall be decided by a Rent-A-Judge, mutually selected by the parties (or, if they cannot agree, by the Presiding Judge of the Los Angeles Superior Court) appointed in accordance with California Code of Civil Procedure Section 638, sitting without a jury, in Los Angeles County California and the Parties hereby submit to the jurisdiction of such court.

The parties to this action agree that this procedure is the equivalent of arbitration, which would be subject to the Federal Arbitration Act, 9 U.S.C. 1 et seq. The clauses referenced in the arbitration provision concern

(i) the validity and interpretation of this agreement, (ii) the performance by the Parties of their respective obligations hereunder, and (iii) all other causes of action (whether sounding in contract or in tort) arising out of or relating to this Agreement....

Because the owners seek compensation through the distribution agreement, Grigson admits that he is a third party beneficiary of that agreement; and that, therefore, he is required, as are the signatory-producers, to arbitrate with TriStar all disputes concerning that agreement. Appellants contend, however, that they are not required to arbitrate with Defendants, because they are not parties to the distribution agreement; and because, in the alternative, Defendants do not fall within what Appellants view as the quite limited bases for application of equitable estoppel to compel arbitration: either a special relationship to the distribution agreement signatories, or a role in carrying out the agreement's obligations. Creative Artists and McConaughey counter that, because the charged tortious interference is intertwined with the distribution agreement, they are entitled, through application of equitable estoppel, to compel arbitration.

This is an issue of first impression for our circuit. Other circuits have, in a few instances, allowed a non-signatory to a contract with an arbitration clause to compel arbitration under an equitable estoppel theory, including when the action is intertwined with, and dependent upon, that contract. E.g., Sunkist Soft Drinks, Inc. v. Sunkist Growers, Inc., 10 F.3d 753, 757 (11th Cir. 1993), cert. denied, 513 U.S. 869 (1994); Hughes Masonry Co., Inc. v. Greater Clark County Sch. Bldg. Corp., 659 F.2d 836, 841 n.9 (7th Cir. 1981).

The Eleventh Circuit has taken the lead in applying equitable estoppel under the intertwined-claims basis. See also McBro Planning & Dev. Co. v. Triangle Elec. Constr. Co., 741 F.2d 342 (11th Cir. 1984). The test, which rejects the narrow strictures urged by Appellants, see Sunkist, 10 F.3d at 757-58, is framed nicely by that circuit in MS Dealer Serv. Corp. v. Franklin, 177 F.3d 942, 947 (11th Cir. 1999):

Existing case law demonstrates that equitable estoppel allows a nonsignatory to compel arbitration in two different circumstances. First, equitable estoppel applies when the signatory to a written agreement containing an arbitration clause must rely on the terms of the written agreement in asserting its claims against the nonsignatory. When each of a signatory's claims against a nonsignatory makes reference to or presumes the existence of the written agreement, the signatory's claims arise out of and relate directly to the written agreement, and arbitration is appropriate. Second, application of equitable estoppel is warranted when the signatory to the contract containing an arbitration clause raises allegations of substantially interdependent and concerted misconduct by both the nonsignatory and one or more of the signatories to the contract. Otherwise the arbitration proceedings between the two signatories would be rendered meaningless and the federal policy in favor of arbitration effectively thwarted.

(Internal citations and quotation marks omitted; emphasis added.)

We agree with the intertwined-claims test formulated by the Eleventh Circuit. Each case, of course, turns on its facts. Such equitable estoppel is much more readily applicable when the case presents both independent bases advanced by the Eleventh Circuit for applying the intertwined-claims doctrine. That is the situation here. The linchpin for equitable estoppel is equity - fairness. For the case at hand, to not apply this intertwined-claims basis to compel arbitration would fly in the face of fairness.

For the above-quoted statement from MS Dealer Serv. Corp. that equitable estoppel is applied in order to fulfill federal pro-arbitration policy, the Eleventh Circuit quoted from our court's decision in Sam Reisfeld & Son Import Co. v. S. A. Eteco, 530 F.2d 679, 681 (5th Cir. 1976), which used an intertwined-claims rationale for staying judicial proceedings against two defendants, with links to a third, pending arbitration with plaintiff. Unlike third-defendant, the other two were not signatories to the arbitration agreement with plaintiff. Our court held, accordingly, that the district court had "discretion" to stay the judicial proceedings as to all three defendants, even though, as noted, two were not parties to the arbitration agreement: "[t]he charges against these two defendants were based on the same operative facts and were inherently...