Opinion
B323543
10-29-2024
GERALD BANKS Defendant and Appellant, v. JANE DOE, Plaintiff and Respondent.
Ellis George, Keith J. Wesley, Lori Sambol Brody, and Guy C. Nicholson for Defendant and Appellant. Schimmel &Parks, Alan I. Schimmel, Michael W. Parks, and Arya Rhodes for Plaintiff and Respondent.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. 21STCV01747, Craig D. Karlan, Judge. Affirmed.
Ellis George, Keith J. Wesley, Lori Sambol Brody, and Guy C. Nicholson for Defendant and Appellant.
Schimmel &Parks, Alan I. Schimmel, Michael W. Parks, and Arya Rhodes for Plaintiff and Respondent.
BAKER, Acting P. J.
Defendant and appellant Gerald Banks (Banks), a nonsignatory to a contract between plaintiff and respondent Jane Doe (Doe) and defendant Ford Models, Inc. (Ford), moved to compel arbitration pursuant to that contract. The trial court denied Banks's motion both because it found Doe's claims were not within the scope of the arbitration agreement and because it applied a provision of the California Arbitration Act (CAA) that authorizes denying a motion to compel arbitration when pending litigation with a third-party would defeat the purposes of arbitration and risk inconsistent judgments. We consider whether the Federal Arbitration Act (FAA), not the CAA, governs the arbitration agreement and whether Doe's claims are within the scope of the arbitration provision in the contract.
I. BACKGROUND
A. The Facts Alleged in the Complaint
In February 2017, Ford offered Doe, who was then a model living in Los Angeles, a professional sportswear modeling job in Europe. Doe flew to New York and boarded a private plane headed to London with Jordan Doner (Doner), a photographer, Gerald Banks (Banks), then CEO of Ford, and another model. Contrary to Ford's representations, the ensuing events did not involve any professional photo shoots.
During the flight, Doe fell asleep and woke to Doner rubbing her thigh. Doner later told Doe he wanted to photograph her in a jacket and a sheer thong. Doe acquiesced because she was trapped and scared.
The situation did not improve after Doe and the others arrived in London. Doner wanted to photograph Doe wearing a white dress under running water in a shower, and Doner and Banks wanted to take Doe and the other model to a nightclub and photograph them there. Doner requested Doe and the other model accompany the men on what appeared to be dates. Doe also overheard Doner and Banks making sexual comments about other models and discussing how to get other women on trips with them. She became concerned she was being targeted for sex.
Doner instructed Doe to tell her agents that she wanted to go to Paris with him. Banks wanted to watch the Super Bowl in Paris, but he did not want to pay Doe's agency her day rate for another day. Doe contacted her agents in California and reported what was happening. When Doe's agency learned of the circumstances, they instructed her to leave. Doe then made her own arrangements to return to Los Angeles.
B. The Complaint and Ford's Motion to Compel
Doe filed a civil complaint against Ford, Doner, and Banks in January 2021. The complaint alleged two causes of action. First, Doe alleged Ford, Doner, and Banks violated Civil Code section 52.5 by acting with the intent to obtain forced labor or services, or with the intent to make unwanted sexual advances. She alleged they knowingly and substantially restricted her personal liberty through fraud and deceit, made false representations, removed Doe from California to isolate her in a foreign country, and placed her in fear for her well-being. Second, Doe alleged defendants engaged in unfair business practices in violation of Business and Professions Code section 17200: false imprisonment, trafficking Doe through fraud and deceit, misappropriation of her name and likeness, unwanted sexual touching and duress, and fraud and misrepresentation.
Ford filed a motion to compel arbitration in July 2021, which the trial court denied on two grounds. First, the court concluded Doe's claims of sexual misconduct or human trafficking did not arise out of her agreement with Ford regarding modeling work. Second, the court concluded compelling arbitration would split the action (because only Doe and Ford were parties to the agreement) and thus defeat the purposes of the arbitration statute-a scenario in which the CAA (specifically Code of Civil Procedure section 1281.2) states arbitration need not be compelled. When the court decided the motion, neither Doner nor Banks had moved to compel arbitration and the court found Doe's action against them would continue in superior court even if her claims against Ford were sent to arbitration.
Ford appealed the denial of the motion, arguing for the first time that the FAA, not the CAA, should have applied to the trial court's determination. In Doe v. Ford Models, Inc. (Aug. 3, 2023, B318923 [nonpub. opn.]), we affirmed the trial court's order on the ground that Ford forfeited any argument that the FAA applied by failing to raise the argument in the trial court.
C. Banks's Motion to Compel Arbitration
1. The motion and the arbitration clause
In March 2022, Banks filed his own motion to compel arbitration. Banks argued the FAA applied to the dispute because the contract between Doe and Ford implicated interstate commerce. To substantiate this assertion, Banks pointed to the term of the agreement appointing Ford as the "exclusive personal manager of [Doe] in the United States, Canada, Brazil and France...." Banks then argued that, under the FAA, the court was required to compel arbitration if a valid agreement to arbitrate existed and the agreement encompassed the dispute between the parties.
Banks contended he was entitled to enforce the agreement's arbitration provision even though he was not a signatory to the agreement because there was a sufficient identity of interest between himself and Ford, given that he was its CEO at the time of the alleged events and the claims against both him and Ford were intimately founded in and intertwined with the agreement. Banks additionally argued that since the arbitration agreement incorporated the American Arbitration Association (AAA) Rules, the scope of the agreement was a question for the arbitrator. Banks further argued that even if the court were to decide the question of arbitrability, the dispute must be arbitrated because of the breadth of the arbitration clause and the presumption in favor of arbitration.
Banks submitted a copy of Ford's agreement with Doe, which had previously been filed in the litigation, with his motion. The contract, an agency and management agreement, states Doe engaged Ford as her exclusive agent in Illinois and as her exclusive personal manager in the United States, Canada, Brazil, and France "with respect to advising, counseling, promoting, and contracting print, runway, fitting, modeling and talent work," which the contract defined as Doe's "services." The agreement provided that as her manager, Ford agreed to perform "one or more" of the following services: (1) "[a]dvise and counsel in the selection or consideration of career opportunities, photographers, advertisers and the selection or creation of vehicles for [Doe's services];" (2) "[a]dvise and counsel in any and all matters pertaining to modeling;" (3) "[a]dvise and counsel relative to the adoption of proper format of presentation of [Doe];" (4) "[a]dvise and counsel with regard to general practices in the modeling and advertising industries;" (5) "[s]end invoices and statements to [Doe's] clients, and collect fees for [Doe]; and" (6) "[a]dvise on personal appearance, composites, and the formation of a portfolio."
The agreement specified Ford did not guarantee employment for Doe, "in no manner supervise[d] the professional activities of" Doe, and did not control the terms and conditions of Doe's services. It further stated Doe was a self-employed model compensated only by her clients, Ford was performing promotional and management services for Doe as an independent contractor, and Ford was not obliged to pay for any of Doe's expenses, including travel or lodging.
The agreement also included the following arbitration provision:
"If a dispute arises out of or relates to this Agreement, or the breach thereof, and if the dispute cannot be settled through negotiation, [Doe] and [Ford] may mutually agree to first try in good faith to settle the dispute by mediation, by a sole mediator.... If the dispute cannot be resolved within three (3) hours of mediation, any dispute, controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration administered by the [AAA] under its Commercial Arbitration rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois, without regard to principles of conflicts of laws. The fees of arbitration shall be borne equally by [Doe] and [Ford] and each party shall pay their own attorneys' costs and fees. [Doe] and [Ford] agree that said mediation and/or arbitration shall be held . . . in Chicago, Illinois. The jurisdiction of the arbitration tribunal shall be exclusive regarding said claims and said claims shall not be tried in any other arbitration tribunal. The content and result of mediation and/or arbitration shall be held in confidence by all participants, each of whom will be bound by an appropriate confidentiality agreement."
By its terms, the agreement was made and entered into as of August 21, 2012. Based on the complaint's allegation that Doe was 21 years old in February 2017, she was under the age of 18 when she signed the agreement.
2. Doe's opposition
Doe opposed the motion to compel arbitration and argued, among other things, that the trial court's previously articulated Code of Civil Procedure section 1281.2 rationale for denying Ford's motion applied equally to Banks's motion. Doe also argued the scope of the arbitration clause did not extend to Doe's claims alleging sexual abuse and human trafficking, the confidentiality provision was illegal and unenforceable, the contract forced a waiver of Doe's statutory rights, and the burdens and costs created by the arbitration provision were unconscionable.
3. The trial court's ruling
The trial court denied the motion to compel arbitration. Looking first to whether Banks could move to compel under the arbitration agreement, the trial court concluded Doe's allegation that Banks was Ford's CEO at the relevant time meant the claims against Banks were intertwined with the claims against Ford such that Banks was entitled to invoke the arbitration provision.
The remainder of the trial court's ruling largely mirrored its ruling on Ford's motion. The court found it had no basis to conclude Doe agreed to arbitrate claims of sexual misconduct or fear of human trafficking when she entered into the agreement with Ford. Additionally, applying Code of Civil Procedure section 1281.2, the court again concluded compelling arbitration would split the action and defeat the purposes of California's arbitration statute because defendant Doner was not bound by the arbitration agreement and had not moved to compel arbitration.
II. DISCUSSION
We agree with Banks that the FAA, not the CAA, applies to the arbitration agreement, but that is where the agreement ends. We shall assume for the sake of argument that Banks, a nonsignatory to the agreement, was entitled to compel arbitration. Even so, the arbitration agreement does not clearly and unmistakably delegate the issue of arbitrability to the arbitrator in these circumstances given Doe's unsophistication. That means it was a question properly resolved by the trial court, and the trial court's resolution of it was correct. Doe's causes of action do not fall within the scope of the arbitration provision because Banks's alleged actions were so divorced from the professional relationship described in the agreement that they could not have been contemplated when the agreement was executed.
A. Background Law
A party seeking to compel arbitration bears the burden of proving the existence of an arbitration agreement, and the party opposing the petition bears the burden of establishing a defense to the agreement's enforcement. (Engalla v. Permanente Medical Group, Inc. (1997) 15 Cal.4th 951, 972.) On a petition to compel arbitration, the trial court sits as the trier of fact, weighing all the affidavits, declarations, and other documentary evidence to determine whether the parties agreed to arbitrate. (Ibid.; Rosenthal v. Great Western Fin. Securities Corp. (1996) 14 Cal.4th 394, 413-414.)
"'"There is no uniform standard of review for evaluating an order denying a motion to compel arbitration. [Citation.] If the court's order is based on a decision of fact, then we adopt a substantial evidence standard. [Citations.] Alternatively, if the court's denial rests solely on a decision of law, then a de novo standard of review is employed."'" (Chambers v. Crown Asset Management, LLC (2021) 71 Cal.App.5th 583, 591.) "'We do not review the trial court's reasoning, but rather its ruling. A trial court's order is affirmed if correct on any theory ....' [Citation.]" (J.R. v. Electronic Arts Inc. (2024) 98 Cal.App.5th 1107, 1114-1115.)
B. The Substantive Provisions of the FAA Apply
Under both the FAA and California law, arbitration agreements are enforceable unless revocable under state law on grounds that exist for any contract, such as fraud, duress, and unconscionability. (9 U.S.C. § 2; Code Civ. Proc., § 128; Viking River Cruises, Inc. v. Moriana (2022) 596 U.S. 639, 649-650; Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 97-98.) The FAA applies to arbitration agreements involving interstate commerce. (9 U.S.C. § 2; Tiri v. Lucky Chances, Inc. (2014) 226 Cal.App.4th 231, 240.)
The substantive provisions of the FAA apply to the agreement in this case because that agreement appoints Ford as Doe's personal manager in the "United States, Canada, Brazil, and France," and is thus a contract involving interstate commerce. (Cable Connection, Inc. v. DIRECTV, Inc. (2008) 44 Cal.4th 1334, 1350-1351 ["Section 2 of the FAA, declaring the enforceability of arbitration agreements, 'create[s] a body of federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.' [Citation.] The FAA governs agreements in contracts involving interstate commerce"]; 9 U.S.C § 1 [scope of FAA includes arbitration under any contract involving "'commerce among the several states or with foreign nations'"]; see Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth (1985) 473 U.S. 614, 631 [FAA's presumption in favor of arbitration "applies with special force in the field of international commerce"].)
C. The Question of Arbitrability Was for the Court
"[W]hen parties have agreed to arbitration, challenges to the validity of the underlying contract, including contract defenses such as fraud in the inducement or illegality, are for the arbitrator to decide." (Nielsen Contracting, Inc. v. Applied Underwriters, Inc. (2018) 22 Cal.App.5th 1096, 1107.) "However, challenges to the validity of the arbitration clause itself are generally resolved by the court in the first instance. [Citations.] An exception to this rule applies when the parties have clearly and unmistakably agreed to delegate questions regarding the validity of the arbitration clause to the arbitrator." (Id. at 1108.) "Under both [California law and the FAA], until shown otherwise, 'courts presume that the parties intend courts, not arbitrators, to decide . . . disputes about "arbitrability."' [Citation.]" (Nelson v. Dual Diagnosis Treatment Center, Inc. (2022) 77 Cal.App.5th 643, 655.)
"There are two prerequisites for a delegation clause to be effective. First, the language of the clause must be clear and unmistakable. [Citation.] Second, the delegation must not be revocable under state contract defenses such as fraud, duress, or unconscionability. [Citations.]" (Tiri, supra, 226 Cal.App.4th at 242.) "The 'clear and unmistakable' test reflects a 'heightened standard of proof' that reverses the typical presumption in favor of the arbitration of disputes." (Aanderud v. Superior Court (2017) 13 Cal.App.5th 880, 892; see also Cabatit v. Sunnova Energy Corp. (2020) 60 Cal.App.5th 317, 321 ["'"[T]he normal situation is that courts decide arbitrability; a party seeking to upset normal expectations must therefore make a 'clear demonstration' to the contrary"'"].)
Asserting the issue of arbitrability was delegated to the arbitrator, Banks points to the arbitration agreement's incorporation of the AAA commercial rules and contends that mere incorporation satisfies the clear and unmistakable requirement. He cites several cases that rely on such reasoning. (See, e.g., Brennan v. Opus Bank (9th Cir., 2015) 796 F.3d 1125, 130-132 [holding the "incorporation of the AAA rules constitutes clear and unmistakable evidence that contracting parties agreed to arbitrate arbitrability"]; Greenspan v. LADT, LLC (2010) 185 Cal.App.4th 1413, 1442 [incorporation of JAMS rules sufficient]; Rodriguez v. American Technologies, Inc. (2006) 136 Cal.App.4th 1110, 1123 [incorporation of AAA construction industry rules sufficient]; Dream Theater, Inc. v. Dream Theater (2004) 124 Cal.App.4th 547, 557 [holding agreement to arbitrate pursuant to AAA Commercial Arbitration rules was clear and unmistakable evidence of intent to delegate arbitrability]; Ramirez v. Elec. Arts Inc. (N.D.Cal. Mar. 5, 2021, No. 20-cv-05672-BLF) 2021 U.S.Dist.LEXIS 43032, at *10 [incorporation of AAA rules sufficient to delegate arbitrability].)
These cases are unpersuasive. We instead follow the line of authority holding this incorporation-by-reference-equals-clear-statement principle can apply only where all parties to an arbitration agreement are sophisticated in such matters. (See, e.g., Jack v. Ring LLC (2023) 91 Cal.App.5th 1186; Gostev v. Skillz Platform, Inc. (2023) 88 Cal.App.5th 1035, 1052; Beco v. Fast Auto Loans, Inc. (2022) 86 Cal.App.5th 292; Ajamian v. CantorCO2e, L.P. (2012) 203 Cal.App.4th 771, 790; see also MacClelland v. Cellco P'ship (N.D.Cal. 2022) 609 F.Supp.3d 1024, 1031; Nessim v. Fliff, Inc. (C.D.Cal. Jan. 5, 2024, No. 5: 23-cv-01048-SSS-SHKx) 2024 U.S.Dist.LEXIS 79453, at *14 [incorporation of AAA rules insufficient "where at least one party is unsophisticated"]; Slaten v. Experian Info. Sols., Inc. (C.D.Cal. Sep. 6, 2023, No. CV 21-09045-MWF (Ex)) 2023 U.S.Dist.LEXIS 158867, at *9 [where plaintiff appeared to be an "ordinary consumer rather than a sophisticated party . . . incorporation of the AAA rules on its own [did] not evince an intent to arbitrate questions of arbitrability"]; Eiess v. USAA Fed. Sav. Bank (N.D.Cal. 2019) 404 F.Supp.3d 1240, 1253 ["For an unsophisticated plaintiff to discover she had agreed to delegate gateway questions of arbitrability, she would need to locate the arbitration rules at issue, find and read the relevant rules governing delegation, and then understand the importance of a specific rule granting the arbitrator jurisdiction over questions of validity-a question the Supreme Court itself has deemed '"rather arcane"'"].)
Doe does not qualify as a sophisticated party. She was a minor when she signed the agreement, and there is no reason to think she would have understood-even if she had perused the AAA rules and understood their implication-that the arbitration provision would extend to Banks when he was not even a party to the agreement. (See, e.g., Sri Trang Gloves (Thai.) Pub. Co. v. Pac. Apex P'ship LLC (C.D.Cal. May 15, 2023, No. 2:22-cv-09114-MCS-E) 2023 U.S.Dist.LEXIS 85802, at *8 [even if arbitration clause incorporates by reference arbitration rules that purport to delegate arbitrability to the arbitrator, the incorporation is insufficient to constitute clear and unmistakable evidence supporting a delegation of claims as to a nonsignatory where the arbitration clause does not include any language indicating an intent to confer contractual rights to third parties].) Accordingly, the arbitration agreement did not contain a clear and unmistakable delegation clause and the issue of arbitrability was properly resolved by the trial court.
D. The Trial Court Correctly Found Doe's Claims Fall Outside the Scope of the Arbitration Clause
"When deciding whether the parties agreed to arbitrate a dispute, courts generally apply ordinary state-law principles of contract interpretation." (Khalatian v. Prime Time Shuttle, Inc. (2015) 237 Cal.App.4th 651, 659; see also Valencia v. Smyth (2010) 185 Cal.App.4th 153, 177 ["[g]enerally, the FAA obligates federal courts to apply state law when interpreting an arbitration clause"].)
The arbitration clause in the management agreement provides that "any dispute, controversy or claim arising out of or relating to this Agreement, or the breach thereof, shall be settled by arbitration ...." Courts have generally stated that in order for a party's claims to come within the scope of an arbitration clause covering matters "arising out of or relating to" an agreement, "the factual allegations of the complaint 'need only "touch matters" covered by the contract containing the arbitration clause.' [Citations.]" (Ramos v. Superior Court (2018) 28 Cal.App.5th 1042, 1052.) But precedent holds such clauses do not encompass "conduct that was so removed from the professional relationship between the parties that it could not have been contemplated when they executed their agreement to arbitrate disputes." (Bigler v. Harker School (2013) 213 Cal.App.4th 727, 740.)
Banks's conduct, as alleged in the operative complaint, is so removed from the professional relationship between Doe and Ford that it cannot have been contemplated when they executed their agreement. Doe alleges Banks personally piloted a private plane with Doe, another model, and Doner, to London for a purported sportswear photoshoot that did not materialize; Banks and Doner said they wanted to take Doe to a nightclub and photograph her and the other model there; Banks and Doner commented about other models in a sexual manner and speculated about how they could get other women on trips with them; Banks told Doe he wanted her to go to Paris with him and watch the Super Bowl; and Banks said he did not want to pay Doe's agency her day rate for that trip. The complaint can also fairly be read to allege Banks facilitated the other acts Doner is alleged to have committed. Pursuant to the management agreement, Ford agreed to advise and counsel Doe regarding career opportunities, matters pertaining to modeling, and general practices in the modeling and advertising industries; to handle billing and payment related to Doe's clients; and to advise Doe on her personal appearance and the formation of a portfolio. It expressly disclaimed any duty to provide for Doe's travel. None of the actions Banks was alleged to have taken arise out of or relate to the terms of the agreement. That means Doe's claims are not arbitrable.
Our conclusion is bolstered by a string of federal cases that have held an employer's alleged wrongful act did not "arise out of" or "relate to" an employment agreement where the employee "would still be able to bring a suit against the[ employer]" even if the employee "'had never been employed by defendants, assuming other conditions were met ....' [Citation.]" (United States ex rel. Welch v. My Left Foot Children's Therapy, LLC (9th Cir. 2017) 871 F.3d 791, 799; see also Jackson v. Amazon.com, Inc. (9th Cir. 2023) 65 F.4th 1093, 1103-1104; Doe v. Princess Cruise Lines, Ltd. (11th Cir. 2011) 657 F.3d 1204, 1214-1215, 1220 [employee's claims related to sexual assault were not within scope of arbitration agreement requiring arbitration of claims "relating to or in any way arising out of or connected with" an agreement where a third party could have "could have brought the[] same . . . claims . . . based on virtually the same alleged facts"]; Jones v. Halliburton Co (5th Cir. 2009) 583 F.3d 228, 231, 241 [sexual assault claims were not within scope of clause requiring arbitration of claims "related to [plaintiff's] employment" because language was not broad enough to "encompass any claim related to Jones' employer, or any incident that happened during her employment"].) Though the management agreement between Doe and Ford was not an employment agreement, the central teaching of these cases applies here all the same. Had Doe somehow agreed to undertake the purported sportswear modeling job without having an agreement with Ford, and had Banks engaged in the same conduct, Doe would be able to bring the same claims against Banks.
Banks contends Doe's claims do, in fact, fall within the scope of the arbitration provision because the arbitration clause is broad and courts have found claims that involve human trafficking or sexual assault are covered by arbitration clauses. The cases upon which Banks relies, however, are neither binding nor persuasive. Doe v. Steele (S.D.Cal. Mar. 11, 2021, No. 20-cv-1818-MMA (MSB)) 2021 U.S.Dist.LEXIS 46018, at *26 and Roy v. Kooyker (C.D.Cal. June 10, 2020, No. SA CV 20-00719-DOC-KES) 2020 U.S.Dist.LEXIS 249666 are inapposite because the plaintiffs in those cases, unlike Doe, did not dispute that the claims fell within the scope of the arbitration agreement. In Baricuatro v. Indus. Pers. &Mgmt. Servs. (E.D.La. 2013) 927 F.Supp.2d 348, 371, the arbitration clause covered claims arising from the plaintiffs' employment, and the court concluded plaintiffs' claims went to the very nature of that employment relationship. Here, in contrast, the arbitration clause was limited to claims relating to and arising out of the agreement, and as we have already concluded, the claims neither arise out of nor relate to the management agreement. Pambakian v. Blatt (9th Cir. 2021) 859 Fed.Appx. 808, 809, insofar as it is analogous here despite the different "involv[ed] or . . . concern[ed]" language, is unpersuasive and we decline to follow it.
Banks also argues Doe's claims fall within the scope of the arbitration agreement because her claims arose out of a modeling job and representations about what the modeling job would entail. But Doe's claims do not relate to the specifics of the purported modeling job, or to any obligations on Ford's part to counsel her regarding modeling matters. Rather, Doe alleges there was in fact no modeling job at all and Banks (and Doner) trafficked her to a location outside of the United States, stated an intent to traffic her to a secondary location, and acted with the intent to obtain forced labor or services, or sexual contact. Neither of Doe's claims arise out of the terms of her modeling contract with Ford.
Because we conclude Doe's claims do not fall within the scope of the arbitration provision, the trial court did not err in denying the motion to compel arbitration. Accordingly, we need not address any of the remaining arguments presented by the parties.
DISPOSITION
The order denying the motion to compel arbitration is affirmed. Respondent shall recover her costs on appeal.
We concur: MOOR, J. KIM, J.