David Kayne v. The Thomas Kinkade Company , 249 F. App'x 799 ( 2007 )

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
OCTOBER 3, 2007
No. 07-11983 THOMAS K. KAHN
Non-Argument Calendar CLERK
________________________
D. C. Docket No. 06-02168-CV-CAP-1
DAVID KAYNE,
Plaintiff-Appellant,
versus
THE THOMAS KINKADE COMPANY,
f.k.a. Media Arts Group, Inc.,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Georgia
_________________________
(October 3, 2007)
Before BLACK, MARCUS and WILSON, Circuit Judges.
PER CURIAM:
David Kayne (“Kayne”) appeals a district court decision granting the
Thomas Kinkade Company’s (“TKC”) motion to compel arbitration and to dismiss
this action. This case involves a contract dispute over the formation and terms of a
2001 credit application submitted by Kayne Art Galleries, of which Kayne is the
owner and president, to TKC. The application contains an arbitration clause
providing that all disputes arising out of the agreement shall be resolved by
arbitration. It also contains a Personal Guaranty in which Kayne personally and
individually guaranteed the payment of Kayne Art Galleries’ debts and agreed to
be bound by the arbitration clause. Following the initiation of arbitration
proceedings against him by TKC, Kayne filed this action, seeking declaratory and
injunctive relief against the enforcement of the arbitration clause against him on
several grounds, including the argument that the parties’ relationship was governed
by a series of prior agreements. The district court determined that the parties
properly entered into the 2001 credit agreement and that it obligates Kayne to
arbitrate the issue of his individual liability. We agree with the district court’s
interpretation of the pertinent agreements and find no error in its factual findings.
Accordingly, we affirm.
Background
TKC produces, markets, and distributes the work of the artist Thomas
Kinkade. Kayne is the owner and president of Kayne Art Galleries of GA, Inc.
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Between 1998 and 2001, Kayne and Kayne Art Galleries entered into several
agreements with TKC and its affiliates. In April 1998, prior to the formation of
Kayne Art Galleries, Kayne in his individual capacity, submitted an application for
credit with TKC. Subsequently, TKC and Kayne Art Galleries executed a series of
Signature Dealer Agreements (“Dealer Agreements”) under which Kayne Art
Galleries was authorized to own and operate galleries with exclusive rights to sell
Kinkade works. Each of the Dealer Agreements contained a provision requiring
disputes to be resolved through arbitration.
In October 2001, Kayne signed and submitted a second credit application
(the “Credit Application”) to TKC. This application sought an extension of credit
to Kayne Art Galleries, rather than to Kayne personally. The Credit Application
contains an arbitration clause, which provides in pertinent part:
DISPUTES: ANY DISPUTE OR CONTROVERSY ARISING FROM THIS
AGREEMENT WILL BE RESOLVED BY ARBITRATION BY THE
AMERICAN ARBITRATION ASSOCIATION AT SANTA CLARA
COUNTY, CALIFORNIA.
In addition, the Credit Application contains a Personal Guaranty signed by
Kayne that provides:
THE UNDERSIGNED, FOR CONSIDERATION DO HEREBY
INDIVIDUALLY AND PERSONALLY GUARANTY THE FULL AND
PROMPT PAYMENT OF ALL INDEBTEDNESS HERETOFORE OR
HEREAFTER INCURRED BY THE ABOVE BUSINESS. THIS
GUARANTY SHALL NOT BE AFFECTED BY THE AMOUNT OF
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CREDIT EXTENDED OR ANY CHANGE IN THE FORM OF SAID
INDEBTEDNESS. NOTICE OF THE ACCEPTANCE OF THIS
GUARANTY, EXTENSION OF CREDIT, MODIFICATION OF THE
TERMS OF PAYMENT, AND ANY RIGHT OR DEMAND TO
PROCEED AGAINST THE PRINCIPAL DEBTOR IS HEREBY WAIVED
. . . . AS GUARANTOR, I AM ALSO BOUND BY THE ABOVE
ARBITRATION CLAUSE.
TKC never signed the Credit Application. It did, however, extend credit to
Kayne Art Galleries following its receipt of a signed copy from Kayne via
facsimile.
In late 2002, Kayne Art Galleries became delinquent in its obligations to
TKC. TKC initiated arbitration proceedings against Kayne and Kayne Art
Galleries pursuant to the arbitration provisions in the Dealer Agreements. An
arbitration panel in San Francisco, California, awarded TKC $588,555 and held
Kayne personally liable. TKC moved to confirm the award in the U.S. District
Court for the Northern District of California. The court confirmed the award
against Kayne Art Galleries but vacated the award against Kayne individually on
the ground that he was not a party to the Dealer Agreements governing the
arbitration. The Ninth Circuit affirmed the district’s court’s judgment. Thomas
Kinkade Co. v. Kayne, No. 05-15245, 2007 WL 1544430 (9th Cir. May 24, 2007).
Thereafter, TKC initiated arbitration proceedings in Santa Clara, California,
against Kayne individually pursuant to the Credit Application’s arbitration clause
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and Personal Guaranty. In response, Kayne filed the instant action in the Northern
District of Georgia to enjoin enforcement of the arbitration clause against him.
TKC filed a motion to compel arbitration and to dismiss Kayne’s claims. On
March 29, 2007, the district court granted TKC’s motion to the extent that it sought
dismissal of the action and an order compelling arbitration. This appeal followed.
Jurisdiction
Under the Federal Arbitration Act, an immediate appeal is allowed from a
“final decision with respect to an arbitration.” 9 U.S.C. § 16(a)(3). A final
decision is one that “ends the litigation on the merits and leaves nothing more for
the court to do but execute the judgment.” Green Tree Fin. Corp.-Ala. v.
Randolph, 531 U.S. 79, 86 (2000) (quotations omitted). This Court has extended
the holding in Green Tree to situations in which the district court compels
arbitration but dismisses the action without prejudice, explaining that the district
court’s order is final “insofar as compelled arbitration is concerned.” Hill v. Rent-
a-Center, Inc., 398 F.3d 1286, 1288 (11th Cir. 2005). In the instant case, the
district court’s March 29, 2007 order is final because it left nothing for the court to
do but execute the judgment. Accordingly, this Court has jurisdiction to consider
the appeal.
Standard of Review
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We review de novo a district court order compelling arbitration. Jackson v.
Cintas Corp., 425 F.3d 1313, 1316 (11th Cir. 2005).
Discussion
Kayne argues that the district court erred in finding that the Credit
Application was supported by consideration and in finding that TKC accepted the
agreement by performance. In addition, he argues that the district court erred in
interpreting the Credit Application to require arbitration of issues arising from the
Personal Guaranty. Finally, he argues that the district court erred in finding that
there was no triable issue of fact regarding the existence of an agreement to
arbitrate. We find each of these objections to be without merit.
1. Consideration
The district court found that the extension of credit to Kayne Art Galleries
constituted consideration for the Credit Agreement/Personal Guaranty. We agree.
Under Georgia and California law,1 the lending of money or the extension of credit
is sufficient consideration to support the guaranty of a loan. Beard v. McDowell,
331 S.E.2d 104, 106 (Ga. Ct. App. 1985); Beverly Hills Nat’l Bank v. Glynn, 267
Cal. App. 2d 859, 867 (Cal. Ct. App. 1968). In this case, it is undisputed that TKC
extended credit to Kayne Art Galleries after Kayne executed the Credit
1
The parties are in dispute as to which state’s law should govern this action. We do not
reach this issue because the choice of law does not alter the outcome.
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Application/Personal Guaranty. This extension of credit constituted adequate
consideration for the agreement.
We likewise agree with the district court’s finding that there existed
consideration to support the Personal Guaranty’s arbitration clause. In both
Georgia and California, mutual promises and obligations constitute sufficient
consideration to support a contract. Caley v. Gulfstream Aerospace Corp., 428
F.3d 1359, 1376 (11th Cir. 2005) (applying Georgia law); Johnson v. Holmes
Tuttle Lincoln-Mercury, Inc., 325 P.2d 193, 196 (Cal. Ct. App. 1958). Here, TKC
and Kayne mutually promised to be bound by arbitration in the event of a dispute
arising out of the Credit Application/Personal Guaranty. The district court
properly found that these mutual promises constituted consideration for the
arbitration clause.
Kayne contends that there was no consideration to support the Credit
Application/Personal Guaranty because TKC already was obligated to extend
credit to Kayne Art Galleries under the Dealer Agreements, which contained the
following provision: “DEALER is approved for extended, net 60 day (from date of
invoice), credit terms on all purchases.” This pre-existing obligation, he argues,
could not serve as consideration for an identical duty under the Credit
Application/Personal Guaranty.
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The district court rejected this interpretation of the Dealer Agreements,
finding that they did not require the extension of credit to Kayne Art Galleries, and
we agree. Nothing in the Dealer Agreements obliges TKC to extend credit to
Kayne Art Galleries indefinitely or in an unlimited amount. The language relied
upon by Kayne merely indicates that Kayne Art Galleries was approved for credit
at the time each Dealer Agreement was executed. Other provisions of the Dealer
Agreements contemplate that evaluations of Kayne Art Galleries’ credit worthiness
would be required on an ongoing basis. Moreover, the Dealer Agreements provide
no terms according to which credit would be extended. The district court properly
rejected Kayne’s interpretation of these agreements.
2. Acceptance
We agree with the district court’s determination that TKC accepted the
Credit Application/Personal Guaranty by performance when it extended credit to
Kayne Art Galleries. Under Georgia and California law, acceptance of an offer
may be accomplished by performance of the thing contemplated in the offer.
Moreno v. Strickland, 567 S.E. 2d 90, 93 (Ga. Ct. App. 2002); Estate of
Klauenberg, 108 Cal. Rptr. 669, 671 (Cal. Ct. App. 1973). An offer that specifies
the manner in which it is to be accepted must be accepted in that manner. Caley,
428 F.3d at 1374 (applying Georgia law); see In re First Capital Life Ins. Co., 40
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Cal. Rptr. 2d 816, 819 (Cal. Ct. App. 1995). In this case, however, the Credit
Agreement/Personal Guaranty does not specify a manner of acceptance.
Accordingly, we conclude that TKC’s performance was sufficient to satisfy this
requirement.
Kayne argues that TKC did not accept the Credit Application/Personal
Guaranty by performance because TKC did not increase Kayne Art Galleries’
credit limit. According to Kayne, the Credit Application/Personal Guaranty
contemplated that Kayne Art Galleries would receive an increase in credit over the
amount provided under the Dealer Agreements. However, as discussed above,
nothing in the Dealer Agreements required TKC to extend credit to Kayne Art
Galleries in a specified amount or for an indefinite period. The district court
properly determined that these agreements did not preclude TKC’s acceptance of
the Credit Application/Personal Guaranty by performance.2
3. Applicability of Arbitration Clause to Kayne
Kayne argues that the Personal Guaranty does not obligate him to arbitrate
2
Kayne argues that the doctrine of collateral estoppel compels a finding that the Credit
Application/Personal Guaranty was intended to effect an increase in Kayne Art Gallery’s credit
limit. This argument is based on a statement in Judge Illston’s opinion the Northern District of
California proceeding that Kayne submitted the Credit Application/Personal Guaranty “in order
to increase [Kayne Art Galleries’] credit limit with TKC.” We conclude that this statement has
no preclusive effect on the instant case because the finding was not a “critical and necessary part
of the judgment in the first action.” I.A. Durbin Inc. v. Jefferson Nat’l Bank, 793 F.2d 1541,
1549 (11th Cir. 1986). The issue before Judge Illston was Kayne’s possible liability under the
Dealer Agreements, not the formation of the Credit Application/Personal Guaranty.
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the issue of his personal liability to TKC. He interprets the arbitration clause in the
Personal Guaranty merely to require that he not object to an arbitration finding
against Kayne Art Galleries in a subsequent proceeding. We reject this
interpretation because it conflicts with the plain language of the agreement, which
provides: “AS GUARANTOR, I AM ALSO BOUND BY THE ABOVE
ARBITRATION CLAUSE.” It does not say that Kayne is bound to the result of an
arbitration between TKC and Kayne Art Galleries.
Moreover, as the district court found, Kayne’s interpretation renders the
Personal Guaranty’s arbitration clause meaningless. There would be no need for
Kayne to agree in his personal capacity that a dispute between TKC and Kayne Art
Galleries is subject to arbitration. That requirement was established by the
arbitration clause in the Credit Application. A contract should be interpreted in a
manner that gives effect to each of its provisions. VATACS Group, Inc. v.
HomeSide Lending, Inc., 623 S.E.2d 534, 538 (Ga. Ct. App. 2005); Comm. for
Responsible Sch. Expansion v. Hermosa Beach City Sch. Dist., 48 Cal. Rptr. 3d
705, 713 (Cal. Ct. App. 2006). We agree with the district court’s interpretation of
the Personal Guaranty.3
3
We also note the “unquestionably strong federal policy favoring obligation.” Blinco v.
Green Tree Servicing LLC, 400 F.3d 1308, 1311 (11th Cir. 2005). “Any doubts concerning the
scope of arbitrable issues should be resolved in favor of arbitration.” Id. (quoting Moses H.
(continued...)
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4. Triable Issues of Fact
Kayne argues that the district court erroneously found that there were no
triable issues of fact concerning the existence of an agreement to arbitrate. He
asserts that, contrary to the district court’s finding, he testified that neither he nor
Kayne Art Galleries purchased artwork from TKC pursuant to Kayne’s 1998 credit
application.
We “accept[] the district court’s findings of fact that are not clearly
erroneous.” Multi-Financial Securities Corp. v. King, 386 F.3d 1364, 1367 (11th
Cir. 2004). We find no clear error in the district court’s factual findings. While
Kayne in his affidavit did deny purchasing artwork pursuant to the 1998 credit
application, he did not explicitly deny that TKC extended him credit for that
purpose. The district court did not err in so finding.
Conclusion
We affirm the judgment of the district court.
AFFIRMED.
3
(...continued)
Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)).
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