Malek Media Group LLC v. AXQG Corp.

• Decision Date: 16 December 2020
• Docket Number: B299743
• Citation: 58 Cal.App.5th 817,272 Cal.Rptr.3d 775
• Court: California Court of Appeals Court of Appeals
• Parties: MALEK MEDIA GROUP LLC, Plaintiff and Appellant, v. AXQG CORP., Defendant and Respondent.

58 Cal.App.5th 817

272 Cal.Rptr.3d 775

MALEK MEDIA GROUP LLC, Plaintiff and Appellant,

v.AXQG CORP., Defendant and Respondent.

B299743

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

Filed December 16, 2020

Law Offices of Jeffrey S. Konvitz and Jeffrey Konvitz for Plaintiff and Appellant.

Eisner and Jeremiah Reynolds, Santa Monica, for Defendant and Respondent.

DHANIDINA, J.

Malek Media Group, LLC (MMG) appeals from a judgment confirming an arbitration award in favor of AXQG, Corp. (AXQG). MMG contends the arbitration award must be vacated because the arbitrator failed to disclose his prior affiliation with an LGBTQ rights organization, GLAAD, and failed to consider material evidence. For the reasons stated below, we affirm the judgment and grant AXQG's motion for sanctions.

BACKGROUND

AXQG and MMG agreed to start a film production company, Foxtail Entertainment, LLC (Foxtail). Anita Gou owns AXQG. MMG's principal is Matthew Malek. AXQG and MMG adopted a limited liability company agreement that governed their relationship and formed Foxtail (the Foxtail agreement).

Shortly after forming Foxtail, the relationship between Gou and Malek soured.

Malek routinely breached the Foxtail agreement by withdrawing Foxtail funds in excess of $1,000, including individual withdrawals up to $60,000, without AXQG's authorization and over Gou's objections.¹ Malek attempted to satisfy a personal debt by promising to invest Foxtail funds in a third party venture and, unbeknownst to Gou, entered into a separate agreement to produce another film while depriving Foxtail of an ownership interest. Malek had also sent sexually explicit text messages to a prospective employee and his temporary assistant, Francesca Salafia. Salafia informed Gou of the text messages, stating that Malek had pressured her to engage in inappropriate behavior and that Malek was "tarnishing [Salafia's] name and hindering leads for other opportunities of work."

Gou ultimately sought to terminate her business relationship with Malek after he made an individual withdrawal of $40,000 of Foxtail funds over her express objection. AXQG filed a demand for arbitration with JAMS. The core of AXQG's case was the contention that Foxtail could no longer operate as intended because Malek and Gou were irreconcilably alienated and deadlocked from working in a productive manner. AXQG's demand also alleged various claims against Malek and MMG for breach of fiduciary duty, fraud, and breach of the Foxtail agreement. MMG and Malek counterclaimed for breach of contract, breach of fiduciary duty, conversion, fraudulent concealment, and declaratory relief.²

The parties selected Ambassador David Huebner (Ret.) as arbitrator. The arbitrator had a decorated career as a diplomat and 25 years of experience handling complex commercial arbitrations. The parties did not question or comment on the arbitrator's fitness to preside over the proceedings. The arbitration was lengthy and hard fought, lasting seven days with 17 witnesses and over 800 exhibits. The arbitrator issued a comprehensive 96-page final award detailing his findings and conclusions.

The arbitrator found in favor of AXQG on its claims for breach of the Foxtail agreement and breach of fiduciary duty. The arbitrator gave AXQG the sole authority to wind down Foxtail's business in light of Malek's gross negligence, willful misconduct, and "propensity for destructive delay." AXQG was awarded its attorney fees and costs. MMG did not prevail on any of its counterclaims and the arbitrator noted that several of MMG's contentions appeared to be frivolous based on its failure to assemble a record of supporting evidence.

AXQG petitioned the trial court to confirm the award while MMG petitioned to vacate it. After the arbitrator issued the final award, Malek "commenced a deep-dive, internet search into [the arbitrator's] background." He found the GLAAD organization website which stated that the arbitrator had been a founding board member of GLAAD and its chief counsel decades ago. MMG argued that the arbitrator failed to disclose his background and "his self-proclaimed status as a gender, social, female and LGBTQ activist and icon, while facing a matter grounded in gender and social issues, particularly sexual harassment."

Specifically, MMG asserted that the arbitrator was obligated to disclose his prior affiliation with GLAAD once made aware of Malek's Catholic background. MMG claimed that GLAAD was at odds with the Catholic Church after the passage of Proposition 8, which banned same-sex marriage in California. Thus, MMG asserted that GLAAD and the Catholic Church were antagonistic to each other and, by extension, the arbitrator against Malek, casting doubt on the arbitrator's impartiality.

MMG also argued that the arbitrator failed to hear or consider evidence, specifically, witness testimony from Stephen Epacs, an attorney who assisted Malek during the drafting of the Foxtail agreement; an exhibit consisting of a chain of emails produced by AXQG that MMG asserted were fraudulent, and improperly limited MMG's cross-examination of Salafia of how she thought Malek perceived her responses to his sexually explicit text messages.

The trial court summarily rejected MMG and Malek's arguments, confirmed the arbitration award, and entered judgment in favor of AXQG.

DISCUSSION

MMG maintains the judgment must be overturned and the arbitration award vacated because the arbitrator violated Code of Civil Procedure ³ section 1286.2 by failing to disclose his prior affiliation with GLAAD; committed fraud and misconduct; and refused to hear evidence material to the controversy. We find MMG's arguments meritless and its appeal frivolous. We therefore affirm the judgment and award sanctions in favor of AXQG.

I. Requests for judicial notice

MMG filed two requests for judicial notice on March 26 and May 11, 2020.

MMG requested judicial notice of (1) "the existence of the #MeToo movement" and the phrase "a woman alleging sexual harassment must be believed"; (boldface and italics omitted) (2) GLAAD press releases; (3) rules promulgated by Twitter concerning the company's verified user accounts; (4) screen-captured tweets from the arbitrator's verified Twitter account; (5) exhibits that MMG attached to its petition to vacate the final award in the trial court; (6) JAMS Comprehensive Rules and Procedures; and (7) a portion of the arbitration evidentiary hearing transcript.

As a reviewing court, we are obligated by Evidence Code section 451 to take judicial notice of some matters and are given discretion under Evidence Code section 452 to take judicial notice of others. Proper subjects for judicial notice are facts and propositions that "are of such common knowledge within the territorial jurisdiction of the court that they cannot reasonably be the subject of dispute" or "not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy." ( Evid. Code, § 452, subds. (g), (h).) Any matter to be judicially noticed must be relevant to a material issue. ( People ex rel. Lockyer v. Shamrock Foods Co. (2000) 24 Cal.4th 415, 422, fn. 2, 101 Cal.Rptr.2d 200, 11 P.3d 956.) MMG's requests are neither appropriate subjects for judicial notice nor relevant to the issues here.

MMG requested judicial notice of the #MeToo movement and the phrase a woman alleging sexual harassment must be believed . MMG failed to provide sufficient evidence or explanation that the #MeToo movement and the phrase a woman alleging sexual harassment must be believed are facts of such generalized knowledge that they cannot reasonably be the subject of dispute. (See Evid. Code, § 451, subd. (f).) MMG asserts that "one would be hard pressed to find an adolescent or adult who has not heard of the #Me Too movement and understands what it stands for in the United States." This, however, does not make the existence of a contemporary social movement the proper subject of judicial notice. By their very nature, social movements do not have defined boundaries and their scope, meaning, and influence are subjects of debate is the subject of debate for years after they emerge.

Next, MMG requested judicial notice of various press releases from GLAAD's website concerning an awards dinner hosted by the organization and a webpage describing one of GLAAD's anti-discrimination campaigns. MMG asserted that these materials show a connection between GLAAD and the #MeToo movement, and thus, by extension, show a "kinship" between the arbitrator and the #MeToo movement. But these materials fail to show a connection between the arbitrator and GLAAD, the #MeToo movement, or GLAAD's anti-discrimination campaign. MMG admits that it does not even know if the arbitrator was at the awards dinner or whether he had any involvement in GLAAD's campaign. The materials are irrelevant.

MMG also requested judicial notice of screenshots of Twitter posts purportedly from the arbitrator's Twitter account. According to MMG, these posts show the arbitrator's perspective on "white privilege, men, religion, abuse of women and anything that does not comport with [the arbitrator's] social justice view of the world." Therefore, they show the arbitrator's inability to act impartially in a case involving a Catholic white male accused of sending sexually explicit texts to a prospective employee. However, the tweets are irrelevant to his disclosure obligations because the arbitration had nothing to do with social justice, religion, white privilege, or gender.

MMG requested that we take judicial notice of an extract from the evidentiary hearing during the arbitration. However, MMG has not described why this portion of the transcript is relevant to its appeal. The transcript shows a brief exchange between MMG's counsel and the arbitrator regarding a discovery issue and MMG's decision not to call an MMG witness, Carson Ulrich, who also served as MMG's counsel's litigation...