Filed 3/4/14 Legendary Pictures Productions v. Lin Pictures CA2/2

                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.



              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
                                     SECOND APPELLATE DISTRICT
                                                  DIVISION TWO

LEGENDARY PICTURES                                                      B248939
PRODUCTIONS, LLC et al.,
                                                                        (Los Angeles County
                   Plaintiffs and Appellants,                           Super. Ct. No. BC498786)

         v.

LIN PICTURES, INC., et al.,

                   Defendants and Respondents.




         APPEAL from an order of the Superior Court of Los Angeles County. Abraham
Khan, Judge. Affirmed.


         Kinsella Weitzman Iser Kump & Aldisert, Dale F. Kinsella, Gregory P. Korn;
Venable, Douglas C. Emhoff and Jennifer Levin for Plaintiffs and Appellants.


         Liner Grode Stein Yankelevitz Sunshine Regenstreif & Taylor, Stanton L. Stein,
Bennett A. Bigman, and Jordan S. Paul for Defendants and Respondents.


                                        _________________________
          Plaintiffs and appellants Legendary Pictures Productions, LLC (Legendary) and
Jon Jashni (Jashni) brought an action for declaratory relief against defendants and
respondents Lin Pictures, Inc., Vertigo Entertainment, Inc. (Vertigo), Dan Lin (Lin), Roy
Lee (Lee), and Doug Davison, and submitted a demand for arbitration. Respondents filed
a cross-complaint and denied that their dispute was subject to arbitration. Appellants
filed a motion to compel arbitration; the trial court denied their motion; and appellants
challenge that trial court order. Substantial evidence supports the trial court’s finding that
the parties never had a written agreement to arbitrate their dispute. Accordingly, we
affirm.
                    FACTUAL AND PROCEDURAL BACKGROUND
The Parties Negotiate and Reach an Oral Agreement to Produce the Film
          The parties are self-described successful and experienced motion picture
producers. Legendary acquired the rights to produce the film Godzilla, which is now in
production and intended for release in 2014. After Legendary acquired the rights to the
film, it began negotiating an agreement with respondents under which they would
develop and potentially produce the film with Legendary.1 Between September 2009 and
late February 2010, the parties’ counsel engaged in negotiations concerning a producer
agreement. During their negotiations, the parties and their counsel never discussed or
agreed to arbitrate their dispute.
          The parties appear to agree that by February 26, 2010, they had reached an oral
agreement pursuant to which they would develop and produce the film. And, the parties
began working on the film. In March 2010, Jashni instructed respondents to begin
working with the writer that they had selected to prepare the story and screenplay. On


1      Prior to Godzilla, Legendary and Vertigo had one dealing. According to
Legendary, they had developed a feature film project, and a written agreement had been
negotiated between Legendary and Vertigo concerning that film project. That agreement
contained an arbitration provision. Vertigo tells a different story. Through counsel,
Legendary and Vertigo negotiated the terms of another film project, and a draft
agreement was prepared. The project was abandoned by Legendary before the agreement
was finalized and signed.

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March 29, 2010, Legendary issued a press release announcing that respondents were
producers of Godzilla.
       Lee and Lin began working with the writer and Legendary creative executives in
developing the story, characters, and screenplay for Godzilla. Lin provided his producer
services “in reliance on the oral agreement reached in late February 2010.”
       Legendary never told respondents to refrain from working until a written
agreement was signed or that agreement to arbitration was a condition of their
engagement. Legendary also never advised respondents that continuing their producer
services would be considered assent to arbitration.
Legendary’s Draft Long-Form Agreement
       In March 2011, Legendary sent a draft of a long-form written contract to
respondents and their counsel. The cover letter indicates that the draft agreement
“includes negotiated language based on Vertigo’s . . . and Legendary precedent.” In
addition to other terms not discussed during the negotiations leading up to the 2010 oral
agreement, the draft agreement contained an arbitration provision.
       The draft agreement expressly provided that Legendary’s “obligations [thereunder
were] subject to the full execution of this Agreement.” In other words, Legendary had no
obligations under the draft written agreement until it was signed.
Respondents’ Comments to the Draft Long-Form Agreement
       Respondents did not comment on the draft long-form agreement for quite a while.
Legendary did not follow up until March 8, 2012, when one of its attorneys sent a follow-
up e-mail asking for comments to the draft.
       In October 2012, Lin’s counsel proposed revisions to the draft long-form
agreement, expressly reserving the right to make further changes. Other than a slight
modification to the attorney fee provision, respondents did not object to the arbitration
provision.




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Dispute Between the Parties
       A dispute arose between the parties in late 2012 and, by written correspondence on
January 4, 2013, Legendary notified respondents that it would not be exercising its right
to engage them as producers of the film.
Legendary’s Complaint and Respondents’ Cross-Complaint
       On January 9, 2013, Legendary filed a complaint for declaratory relief and
submitted a demand for arbitration with JAMS (Judicial Arbitration and Mediation
Services). On January 17, 2013, respondents filed a cross-complaint, notified JAMS that
the parties’ disputes were not subject to arbitration, and objected to any further
proceedings before JAMS. JAMS issued a stay of proceedings pending the trial court’s
determination of arbitrability.
Legendary’s Motion to Compel Arbitration; Appeal
       On March 8, 2013, appellants filed a motion to compel arbitration and stay the
underlying superior court action. Respondents opposed appellants’ motion.
       After entertaining oral argument, the trial court denied appellants’ motion, finding
“that opposing parties never impliedly or otherwise consented to the written arbitration
provisions, based upon the substantial evidence filed in opposition.”
       Appellants’ timely appeal ensued.
                                       DISCUSSION
I. Applicable law and standard of review
       “Code of Civil Procedure section 1281.2 provides in relevant part: ‘On petition of
a party to an arbitration agreement alleging the existence of a written agreement to
arbitrate a controversy and that a party thereto refuses to arbitrate such controversy, the
court shall order the petitioner and the respondent to arbitrate the controversy if it
determines that an agreement to arbitrate the controversy exists . . . .’ ‘“[T]he right to
arbitration depends upon contract; a petition to compel arbitration is simply a suit in
equity seeking specific performance of that contract. [Citations.]” [Citation.] There is
no public policy in favor of forcing arbitration of issues the parties have not agreed to
arbitrate. . . . It follows that when presented with a petition to compel arbitration, the trial


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court’s first task is to determine whether the parties have in fact agreed to arbitrate the
dispute. [¶] We apply general California contract law to determine whether the parties
formed a valid agreement to arbitrate.’ [Citation.]” (Gorlach v. Sports Club Co. (2012)
209 Cal.App.4th 1497, 1504–1505.)
       An order denying a petition to compel arbitration is appealable. (Code Civ. Proc.,
§ 1294, subd. (a).) Some courts have held that an order denying arbitration is reviewed
for abuse of discretion. (See Whaley v. Sony Computer Entertainment America, Inc.
(2004) 121 Cal.App.4th 479, 484.) Other courts have held, as the parties here urge, that
we review the trial court’s order for substantial evidence. (See, e.g., Laswell v. AG Seal
Beach, LLC (2010) 189 Cal.App.4th 1399, 1406.) Under either standard of review, we
affirm the trial court’s order.
II. The trial court properly denied arbitration
       The trial court properly denied appellants’ motion to compel arbitration for the
simple reason that there was no written agreement to arbitrate a controversy. (Banner
Entertainment, Inc. v. Superior Court (1998) 62 Cal.App.4th 348, 360 [while there may
be evidence that the parties orally agreed to certain terms, “there is no evidence of any
agreement, oral or otherwise, to arbitrate any disputes related to whatever oral agreement
. . . the parties did make”].)
       In urging us to reverse, appellants argue that the parties’ prior agreement to
arbitrate is evidence that they must have agreed to arbitration here. But, there is evidence
that the prior agreement was never finalized or signed, and, in fact, that project had been
abandoned by the parties. Thus, the cases cited by appellants are inapposite. As for
appellants’ suggestion that respondents knew that an agreement to arbitrate was a
condition of the business relationship, there is no such evidence here. While arbitration
agreements may be pervasive in feature film production deals, the evidence here shows




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that the parties never discussed arbitration and never anticipated that arbitration was a
condition of the continued business relationship.2
       Appellants further argue that “the parties always intended for any
development/production deal to be documented in writing.” “Thus, when [r]espondents
received the [draft long-form agreement] in March 2011, they would have understood it
as an attempt to document in writing the deal negotiated in 2010.” Again, we agree that
it appears that the parties intended to memorialize in writing the terms of their oral
agreement. The draft long-form agreement may have been an attempt to do so; but,
respondents objected to many of the terms and expressly reserved the right to object to
other terms. And, in any event, the draft long-form agreement indicated that it was not
final until executed by the parties—it never was.
       The parties dispute whether the draft long-form agreement could have become
binding without their signatures. Citing Banner Entertainment, Inc. v. Superior Court,
supra, 62 Cal.App.4th at page 361, appellants contend that the lack of signatures was not
fatal because “it is not the presence or absence of a signature which is dispositive; it is
the presence or absence of evidence of an agreement to arbitrate which matters.” (Ibid.)
Respondents disagree, also citing Banner Entertainment, Inc. v. Superior Court, supra, at
page 358: “When it is clear, both from a provision that the proposed written contract
would become operative only when signed by the parties as well as from any other
evidence presented by the parties that both parties contemplated that acceptance of the
contract’s terms would be signified by signing it, the failure to sign the agreement means
no binding contract was created.” We need to resolve the question of whether the draft
long-form agreement could have become binding without the parties’ signatures.
Substantial evidence confirms that there never was an agreement to arbitrate—the parties




2      It follows that we reject appellants’ unfounded assertion that: “The evidence here
supports that the parties agreed to arbitrate disputes when they negotiated [r]espondents’
deal in 2010.”

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never discussed it, they never negotiated it, and they never agreed to it.3 So, it is
irrelevant whether they signed the draft long-form agreement, and it is irrelevant whether
the parties intended that document to memorialize their oral agreement.
       Finally, appellants contend that respondents worked on the film pursuant to the
draft long-form agreement. Substantial evidence indicates otherwise. The parties began
working on the film as soon as the oral agreement was reached in February 2010; they
continued working on the project for a couple of years, even while the draft long-form
agreement was circulated between attorneys. But that does not compel the conclusion
that once the draft long-form agreement was prepared, the parties were no longer working
according to the terms of the oral agreement, but had adopted the terms of the proposed
written contract.
                                          DISPOSITION
       The order is affirmed. Respondents are awarded costs on appeal.
       NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS.



                                           ____________________________, Acting P. J.
                                                 ASHMANN-GERST
We concur:


_____________________________, J.
           CHAVEZ


_____________________________, J.*
           FERNS


3      For the same reasons, we reject appellants’ contention that even if the draft long-
form agreement is unenforceable because it was never signed, then the arbitration
provision is separately enforceable. The arbitration provision was never negotiated or
agreed to; thus, it cannot be enforced.

*       Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to
article VI, section 6 of the California Constitution.

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