Tanis Developments International v. Millennium Pictures CA2/7 ( 2022 )

Filed 7/19/22 Tanis Developments International v. Millennium Pictures CA2/7
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
TANIS DEVELOPMENTS B314817
INTERNATIONAL, INC.,
(Los Angeles County
Plaintiff and Respondent, Super. Ct. No.
20STCV35794)
v.
MILLENNIUM PICTURES INC.,
Defendant and Appellant;
NEIL MARSHALL,
Intervener and Respondent.
APPEAL from an order of the Superior Court of
Los Angeles County, Richard J. Burdge, Jr. Judge. Reversed and
remanded with directions.
Lavely & Singer, Martin D. Singer, Michael E. Weinsten
and Allison S. Hart for Defendant and Appellant.
Fagelbaum & Heller, Jerold Fagelbaum and Philip Heller
for Tanis Developments International, Inc. and Neil Marshall.
________________________
Tanis Developments International, Inc., a loan-out
company that furnishes the writing and directing services of Neil
Marshall, sued Millennium Pictures Inc. in mid-September 2020
for breach of a written contract (the Director’s Agreement)
between Millennium and Marshall. Although the Director’s
Agreement contained no arbitration clause, Millennium
petitioned to compel Tanis and Marshall to arbitrate the dispute
pursuant to the terms of a not-fully-signed letter agreement (the
Duchess Agreement), which purported to terminate the Director’s
Agreement and provided for arbitration of any controversy or
claim arising out of, or relating to, the Duchess Agreement. The
parties to the Duchess Agreement were to be Tanis, Marshall,
Charlotte Kirk, a cowriter of the Duchess screenplay, Millennium
Pictures and Millennium Reservoir, Inc., an affiliate of
Millennium Pictures.
After observing the Duchess Agreement had been signed
only by the Millennium entities and its chief executive officer, Avi
Lerner, the trial court denied the petition, ruling the Duchess
Agreement did not constitute a valid agreement to arbitrate “as
there was no meeting of the minds demonstrating an agreement
to arbitrate.” Because the evidence compelled a finding Tanis
and Marshall impliedly agreed to arbitrate the contract claim, we
reverse.
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FACTUAL AND PROCEDURAL BACKGROUND
1. The Director’s Agreement and the Duchess Agreement
In 2017 Marshall was directing a motion picture titled
Hellboy produced and to be distributed by Millennium.
Contemporaneously Marshall and Kirk cowrote a screenplay,
titled Duchess, with the intention that Marshall would direct the
motion picture and Kirk would be cast as the female lead.
To resolve certain creative and business disputes
concerning Hellboy, Marshall and Millennium entered into the
Director’s Agreement, effective as of February 22, 2019, and an
option purchase agreement, pursuant to which Millennium
acquired an option to develop and produce a motion picture based
on the Duchess screenplay and agreed to engage Marshall as
director and to approve Kirk as the female lead. The Director’s
Agreement also provided, subject to certain conditions, for
payment to Marshall of a $500,000 “kill fee” in the event
principal photography had not begun on the Duchess film by July
30, 2020. Marshall, in return, agreed not to seek to have his
name removed from the screen credits as director of Hellboy.
The Director’s Agreement included an amendment, also
effective February 22, 2019, specifying Marshall’s services under
the Director’s Agreement would be provided by Tanis and all
payments for those services would be made by Millennium to
Tanis. Exhibit A to the Director’s Agreement was a literary
option purchase agreement signed by Millennium Reservoir,
Tanis and Kirk granting Millennium Reservoir the exclusive
option to purchase the rights to the Duchess screenplay. Among
other provisions the option agreement stated, “If pursuant to
terms and conditions of the Director Agreement, this Agreement
is deemed terminated and/or a reversion of all [rights] granted
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hereunder to Owner [Tanis and Kirk] is provided for pursuant to
the terms of such Director Agreement, then the parties to this
Agreement acknowledge and agree that such termination and/or
reversion shall be effective and applicable hereunder,
notwithstanding that [Millennium Reservoir] and Kirk are not
parties to the Director Agreement.”
By late January 2020, following additional difficulties
between the parties related, at least in part, to financing for the
Duchess project, Marshall and Lerner discussed terminating the
Director’s Agreement; and their representatives began
negotiating what ultimately became the Duchess Agreement.
Pursuant to its terms (if effective), the Director’s Agreement
would be terminated, including the provision for payment of the
$500,000 kill fee, and all rights to the Duchess screenplay would
revert to Marshall and Kirk. The last iteration of this document,
dated as of March 2, 2020, contained an arbitration clause in a
lengthy “miscellaneous” paragraph, stating in part, “In the event
of any controversy or claim arising out of or relating to this
Agreement (including the scope or applicability of this Agreement
to arbitrate) or the breach of any term hereof, the parties agree it
will be resolved by confidential arbitration conducted in the
County of Los Angeles, and administered by JAMS in accordance
with its Comprehensive Rules and Procedures, including the
Optional Appeal Procedure.”
Paragraph 3 of the final document, “Kill Fee,” stated, “For
the sake of clarity, upon full execution of this Letter Agreement,
Owner [defined as Marshall, Kirk and Tanis] hereby waives the
Kill Fee as defined in the [Director’s] Agreement.” The
document, which is in the form of a letter agreement from
Marshall, Tanis and Kirk to Millennium, provided on its final
4
page, “Please indicate your understanding and acceptance of the
foregoing by signing and returning this Letter Agreement.” 1
Lerner and a representative for Millennium Pictures and
Millennium Reservoir signed the document. The signature lines
for Marshall, Kirk and Tanis remained blank.
2. Tanis’s Complaint and the Petition To Compel
Arbitration
Tanis filed its complaint for breach of written contract on
September 18, 2020, naming as defendants Millennium and
10 Does. The complaint alleged Millennium had breached the
Director’s Agreement and Tanis was entitled to the $500,000
kill fee because Millennium had not commenced principal
photography of the Duchess motion picture by the deadline of
July 30, 2020.2
On April 22, 2021 Millennium petitioned to compel
arbitration and to stay or dismiss the lawsuit, contending,
1 The document also provided that no modification,
alteration or amendment would be valid or binding “unless in
writing and signed by both of the parties hereto.”
2 Several months before Tanis filed its complaint, Lerner and
three other entertainment industry executives had initiated an
arbitration proceeding against Kirk, Marshall and other
individuals, primarily asserting claims for breach of contract,
interference with contract and civil extortion relating to the
potential disclosure of information in an August 2017 confidential
settlement agreement that resolved (with no admission of
wrongdoing) Kirk’s claims of sexual harassment, infliction of
emotional distress and defamation. (See Kirk v. Ratner (2022)
74 Cal.App.5th 1052, 1056-1057.) The demand for arbitration
also included a claim by Lerner against Marshall and Kirk for
violating the Duchess Agreement.
5
“[a]lthough Marshall and Tanis did not physically sign the
Duchess Agreement, their agreement to all the terms, including
the material terms, is confirmed in written emails exchanged
between the attorney for Marshall and Tanis and the attorney for
Millennium.”
3. The Parties’ Evidence Regarding Negotiation of the
Duchess Agreement
According to the evidence submitted by Millennium in
support of its petition to compel arbitration, because of
difficulties in casting actors who were capable of generating
financing for a motion picture based on the Duchess screenplay (a
condition for Millennium to move forward with production),
Marshall informed Lerner in January 2020 he wanted to
terminate the Director’s Agreement and have the right to the
screenplay revert to him.3 Millennium agreed.
In late January and February 2020 Lonnie Ramati,
Millennium’s executive vice president of business and legal
affairs, began negotiations with Phil Rymer, a British
entertainment attorney representing Marshall. They ultimately
agreed on basic terms, including termination of the Director’s
Agreement and with it Millennium’s obligation to pay Marshall a
kill fee if principal photography had not been commenced on the
project by the specified date; assignment of Millennium’s option
to purchase the Duchess screenplay to Marshall; and agreement
3 In his declaration in support of Millennium’s petition,
which identified the casting issue as the trigger for discussions to
terminate the Director’s Agreement, Lerner stated that, by this
point, Millennium had already spent thousands of dollars in
development costs and devoted a considerable amount of
employee time on the project.
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that Lerner would receive a producer credit and 5 percent of net
profits if a motion picture based on the Duchess screenplay was
ever produced. According to Ramati, “Once Mr. Rymer confirmed
his client’s agreement to the foregoing terms, he informed me
that Mr. Marshall would be turning the matter over to his
entertainment attorney in the U.S.”
On February 27, 2020 Ramati sent Marshall an email
confirming the basic terms of the agreement Ramati had
negotiated with Rymer and requested that Marshall have his
attorneys in the United States draft the documents. Marshall
responded to Ramati, “My lawyers should be reaching out to you
in due course,” and said he was now being represented by
Duncan Hedges and Adam Kaller. Marshall forwarded Ramati’s
email to Hedges and Kaller on the day it was received. Hedges
testified at his deposition he spoke with Marshall either before or
immediately after Marshall forwarded the Ramati email to him
and he understood his role was to draft a document and negotiate
with Ramati. Specifically, Hedges stated, “I was authorized to
draft the agreement—proposed agreement, and negotiate it with
Lonnie [Ramati]. That was the authorization I was given.”
Hedges sent an initial draft of the Duchess Agreement to
Ramati on March 5, 2020. Hedges’s transmittal email concluded
with the phrase, “Reserving rights.” Hedges could not remember
whether he had sent the draft to Marshall before providing it to
Ramati or just spoke to Marshall about it over the telephone.
Hedges acknowledged he had Marshall’s approval to send the
draft.
Ramati responded promptly in two emails within minutes
of each other with comments and proposed changes including the
request the agreement contain an arbitration provision: “Add
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JAMs provision.” Ramati also asked that the agreement include
an express statement that no kill fee was due. Hedges forwarded
this exchange to Marshall, and Marshall responded to Hedges’s
email. Although the substance of the communications between
Hedges and Marshall was redacted as privileged, at his
deposition Hedges testified, if a client told him not to include a
term in an agreement, he would not put that term in a draft.
On March 9, 2020 Ramati emailed Hedges asking for a
response and indicating, “We’d like to finish this today please.”
Hedges replied, “I will get you back a revised today” and later
that day sent Ramati a redlined revised draft and clean copy of
the Duchess Agreement. The new draft incorporated, with minor
modifications, Ramati’s revisions, including a JAMS arbitration
provision. A short while later Ramati requested a further
revision concerning the scope of services Lerner would provide
and expressed the “[h]ope to finish this ASAP.”
Hedges made the requested changes, returned the
agreement to Ramati, stating, “If this is acceptable, please have it
signed and returned to us.” Hedges’s email once again included
“Reserving rights.” Ramati, in turn, replied, “I am fine with this.
Can you get it signed and sent back to us? Then we can
countersign. Thank you.” The following morning, March 10,
2020, Hedges emailed back, “Given the fact that we are waiving a
kill fee as part of this agreement, we would like it signed on your
side first. Thanks.” On April 1, 2020 Ramati returned the signed
agreement with the request, “Please have it countersigned as
promised below,” referring to Hedges’s attached earlier email. In
fact, the document returned on April 1, 2020 had only Lerner’s
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signature and none from a representative of Millennium.4
According to Ramati, once Lerner had signed the agreement,
Millennium refrained from taking any further steps to finance or
produce a motion picture based on the Duchess screenplay.
Hedges testified at his deposition that he did not believe he
had any communications with Ramati after receiving the April 1,
2020 email. He also testified he did not believe he forwarded a
copy of the partially signed agreement to Marshall, although he
spoke to Marshall about it.
On May 7, 2020 Ramati emailed Hedges explaining it was
unclear from a review of the files whether the version of the
Duchess Agreement he had sent previously had all necessary
signatures from the Millennium/Lerner parties or only Lerner’s
signature. “In an abundance of caution,” Ramati sent a fully
signed (that is, by Lerner and Millennium representatives)
version. Hedges testified he had no communications with Ramati
after receiving the May 7, 2020 email.
In support of their opposition to the motion to compel
arbitration, Tanis and Marshall submitted Marshall’s declaration
that discussions about terminating the Director’s Agreement
began because, in Marshall’s view, Millennium was not
satisfactorily performing its responsibilities under the
agreement. Although Marshall agreed he and Lerner discussed
4 The initial draft of the Duchess Agreement prepared by
Hedges included exhibit A, Certificate of Ownership of Results
and Proceeds, by which Lerner confirmed all results of his
services in connection with the Duchess project were “‘work made
for hire’” for Tanis, Marshall and Kirk. This two-page document
remained unchanged throughout the March 5 through 9
negotiation and redrafting process and was signed by Lerner and
returned to Hedges by Ramati on April 1, 2020.
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the basic concept of waiving the kill fee in exchange for an early
reversion of rights to the Duchess screenplay, he declared they
did not discuss and did not agree to the numerous other terms
and conditions negotiated by Ramati and Hedges, specifically any
agreement to arbitrate disputes between the parties. In addition,
Marshall asserted Hedges “had no authority to bind me to any
oral or written agreement.” In the declaration Marshall also
noted the Director’s Agreement provided it could only be modified
by written agreement signed by all parties.
Kirk submitted her declaration stating, after reviewing the
draft of the proposed Duchess Agreement (prepared by lawyers
for Tanis, Marshall and Millennium, not her lawyer), “I did not
accept and refused to sign. . . . When I first saw the proposed
draft, I was unwilling to among other things waive the ‘Kill Fee’
or consent to binding arbitration in the event of a future dispute.
I so notified my co-writer and co-owner Neil Marshall.” Kirk also
declared, “I rendered no performance under the proposed
‘Duchess Agreement’ and received no benefit.”
Tanis and Marshall also emphasized Hedges’s deposition
testimony that he did not have the authority to bind Tanis or
Marshall to an agreement and did not even represent Kirk.
4. Comments by Marshall’s Attorneys Indicating Marshall’s
Acceptance of the Duchess Agreement
In support of its argument that Marshall had effectively
accepted the terms of the Duchess Agreement even though he
had not signed the document, Millennium submitted a heavily
redacted April 22, 2020 demand letter from attorney John Cowan
to Millennium’s counsel Martin Singer regarding, “My Client:
Neil Marshall.” In the legible portions of the letter, Cowan, after
referring to difficulties with financing the Duchess project,
10
stated, “Eventually Mr. Lerner then stepped back from the
project so far that Mr. Marshall had no alternative but to take
the project back from Millennium and produce it himself.”
Millennium also submitted redacted copies of Marshall’s
June 26, 2020 filings in opposition to a request for a preliminary
injunction in a related arbitration proceeding. In one of those
filings Marshall’s counsel stated, “On March 2, 2020, the parties
entered into a written agreement whereby the parties agreed to
rescind the Director’s Memorandum Agreement, reverting
ownership of Duchess back to Marshall (the ‘Duchess
Agreement’).” In a second filing Marshall’s arbitration counsel
argued the arbitrator lacked jurisdiction over Marshall because
he had only “agreed to arbitrate disputes related to the Duchess
Agreement” (italics in original).
In response to this evidence, Tanis and Marshall asserted
Cowan’s letter, contrary to Millennium’s argument, did not admit
the Duchess Agreement had been consummated and noted
Cowan was not involved in the negotiations of the agreement and
not qualified to characterize their status.5 Similarly, they argued
the arbitration filings were prepared by newly retained counsel
who had relied on a declaration filed in the proceedings by
Ramati that incorrectly stated the Duchess Agreement had been
“entered into” by all parties.
5 In his declaration in opposition to the petition to compel
arbitration, Marshall also noted Cowan’s statement on April 22,
2020 was made before Millennium (but not Lerner) had actually
signed the Duchess Agreement.
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5. The Ruling Denying the Petition To Compel Arbitration
After receiving the parties’ initial briefs and evidentiary
submissions, the trial court issued a tentative ruling to deny
Millennium’s petition. However, at the hearing on May 12, 2021
the court granted Millennium’s request to depose Hedges
regarding his authority to enter into the agreement on behalf of
his clients.
Following that deposition and supplemental briefing, the
court at the continued hearing on August 12, 2021 adopted its
May 2021 tentative ruling as the final order and denied the
petition, explaining, “I’ve seen your supplemental papers, but I
didn’t see anything in that deposition testimony or in your papers
that shows that discovery showed [Hedges] had any authority to
enter into the agreement.”
The court ruled the Duchess Agreement “does not
constitute a valid agreement to arbitrate, as there was no
meeting of the minds demonstrating an agreement to arbitrate.”
After quoting Banner Entertainment, Inc. v. Superior Court
(1998) 62 Cal.App.4th 348, 358—which held, when a proposed
written contract expressly provides it would become operative
only when signed by the parties, “the failure to sign the
agreement means no binding contract was created”—the court
found, “The Duchess Agreement on its face is signed by only
Lerner and MPI [Millennium], and states that parties
demonstrate their agreement to the Duchess Agreement’s terms
by signing the Duchess Agreement. Thus, the principle
articulated in Banner applies, as the Duchess Agreement is clear
on its face that it would become operative if signed by the parties.
Additionally, Marshall and Kirk have submitted admissible
12
evidence demonstrating that they did not agree to the Duchess
Agreement.”
Citing JSM Tuscany, LLC v. Superior Court (2011)
193 Cal.App.4th 1222, 1240—which held a plaintiff could be
equitably estopped from repudiating the arbitration clause in a
contract when suing to recover for breach of that contract, even
though not a signatory, on the basis of its relationship to one of
the parties that signed the agreement—the court rejected
Millennium’s argument Tanis and Marshall were estopped from
claiming the Duchess Agreement was not binding and
enforceable. The court explained, unlike the situations described
in JSM Tuscany as justifying application of equitable estoppel,
Millennium did not have a preexisting relationship to any parties
to the Duchess Agreement, “as the Duchess Agreement was
signed by only Lerner and MPI [Millennium].”
Millennium filed a timely notice of appeal.
DISCUSSION
1. Governing Law and Standard of Review
Code of Civil Procedure section 1281.2 requires the
superior court to order arbitration of a controversy “[o]n petition
of a party to an arbitration agreement alleging the existence of a
written agreement to arbitrate a controversy and that a party to
the agreement refuses to arbitrate such controversy . . . if it
determines that an agreement to arbitrate the controversy
exists.” As the language of this section makes plain, the
threshold question presented by every petition to compel
arbitration is whether an agreement to arbitrate exists.
(American Express Co. v. Italian Colors Restaurant (2013)
570 U.S. 228 [it is an “overarching principle that arbitration is a
matter of contract”]; Pinnacle Museum Tower Assn. v. Pinnacle
13
Market Development (US), LLC (2012) 55 Cal.4th 223, 236
(Pinnacle) [“‘“a party cannot be required to submit to arbitration
any dispute which he [or she] has not agreed so to submit”’”];
Gordon v. Atria Management Co., LLC (2021) 70 Cal.App.5th
1020, 1026 [“California has a strong public policy in favor of
arbitration, but ‘“a party cannot be compelled to arbitrate a
dispute that [he or she] has not agreed to resolve by
arbitration”’”].)
“In California, ‘[g]eneral principles of contract law
determine whether the parties have entered a binding agreement
to arbitrate.’ [Citations.] Generally, an arbitration agreement
must be memorialized in writing. [Citation.] A party’s
acceptance of an agreement to arbitrate may be express, as where
a party signs the agreement. A signed agreement is not
necessary, however, and a party’s acceptance may be implied in
fact [citation] or be effectuated by delegated consent [citation].
An arbitration clause within a contract may be binding on a party
even if the party never actually read the clause.” (Pinnacle,
supra, 55 Cal.4th at p. 236; accord, Mendoza v. Trans Valley
Transport (2022) 75 Cal.App.5th 748, 777; see generally Civ.
Code, §§ 1584 [“[p]erformance of the conditions of a proposal, or
the acceptance of the consideration offered with a proposal, is an
acceptance of the proposal”], 1589 [“[a] voluntary acceptance of
the benefit of a transaction is equivalent to a consent to all the
obligations arising from it, so far as the facts are known, or ought
to be known, to the person accepting”].)
The party seeking to compel arbitration bears the burden of
proving by a preponderance of the evidence an agreement to
arbitrate a dispute exists. (Pinnacle, supra, 55 Cal.4th at p. 236;
Rosenthal v. Great Western Fin. Securities Corp. (1996)
14
14 Cal.4th 394, 413; Nixon v. AmeriHome Mortgage Co., LLC
(2021) 67 Cal.App.5th 934, 946.) To carry this burden of
persuasion the moving party must first produce “prima facie
evidence of a written agreement to arbitrate the controversy.”
(Rosenthal, at p. 413; accord, Gamboa v. Northeast Community
Clinic (2021) 72 Cal.App.5th 158, 165 (Gamboa).) “If the moving
party meets its initial prima facie burden and the opposing party
disputes the agreement, then . . . the opposing party bears the
burden of producing evidence to challenge the authenticity of the
agreement.” (Gamboa, at p. 165; accord, Engalla v. Permanente
Medical Group, Inc. (1997) 15 Cal.4th 951, 972; Rosenthal, at
p. 413.) If the opposing party produces such evidence, then “the
moving party must establish with admissible evidence a valid
arbitration agreement between the parties.” (Gamboa, at p. 165.)
“Despite the shifting burden of production, ‘[t]he burden of
proving the agreement by a preponderance of the evidence
remains with the moving party.’” (Trinity v. Life Ins. Co. of North
America (2022) 78 Cal.App.5th 1111, 1120] (Trinity);
see Rosenthal, at p. 413.)
Absent conflicting evidence, we review de novo the trial
court’s interpretation of an arbitration agreement. (Rosenthal v.
Great Western Fin. Securities Corp., supra, 14 Cal.4th at p. 413;
Trinity, supra, 78 Cal.App.5th at p. 1120; Nyulassy v. Lockheed
Martin Corp. (2004) 120 Cal.App.4th 1267, 1277.) Where the
trial court’s ruling is based on a finding of fact, we review the
decision for substantial evidence. (Gamboa, supra,
72 Cal.App.5th at p. 166; Fabian v. Renovate America, Inc. (2019)
42 Cal.App.5th 1062, 1066.) Under this deferential standard,
“‘[A]ll factual matters will be viewed most favorably to the
prevailing party [citations] and in support of the judgment.’”
15
(Campbell v. Southern Pacific Co. (1978) 22 Cal.3d 51, 60;
accord, Western States Petroleum Assn. v. Superior Court (1995)
9 Cal.4th 559, 571; see Nissan Motor Acceptance Cases (2021)
63 Cal.App.5th 793, 818 [“We must not review the evidence to
determine whether substantial evidence supports the losing
party’s version of the evidence. Instead, we must determine if
there is any substantial evidence, contradicted or uncontradicted,
to support the trial court’s findings”].)
However, “[w]hen, as here, the court’s order denying a
motion to compel arbitration is based on the court’s finding that
petitioner failed to carry its burden of proof, the question for the
reviewing court is whether that finding was erroneous as a
matter of law.” (Fabian v. Renovate America, Inc., supra,42 Cal.App.5th at p. 1066; see also Dreyer’s Grand Ice Cream, Inc.
v. County of Kern (2013) 218 Cal.App.4th 828, 838 [“‘where the
issue on appeal turns on a failure of proof at trial, the question
for a reviewing court becomes whether the evidence compels a
finding in favor of the appellant as a matter of law’”].)
“‘Specifically, the question becomes whether the appellant’s
evidence was (1) “uncontradicted and unimpeached” and (2) “of
such a character and weight as to leave no room for a judicial
determination that it was insufficient to support a finding.”’”
(Dreyer’s Grand Ice Cream, Inc., at p. 838; accord, Phipps v.
Copeland Corp. LLC (2021) 64 Cal.App.5th 319, 333; see In re
R.V. (2015) 61 Cal.4th 181, 201 [where a party fails to meet its
burden on an issue in the trial court, “the inquiry on appeal is
whether the weight and character of the evidence . . . was such
that the [trial] court could not reasonably reject it”].)
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2. The Trial Court Erred in Denying the Petition To
Compel Arbitration
The propriety of the trial court’s order denying
Millennium’s petition to compel arbitration raises three distinct,
albeit related, questions: Did the Duchess Agreement (or at least
its arbitration provision) require the signatures of the parties to
become operative? If not, did the evidence require the trial court
to find Marshall’s implied-in-fact agreement? Even if Marshall’s
agreement should be inferred, what, if anything, is the
significance of Kirk’s lack of agreement, either express or
implied? The answer to the first question is no; to the second,
yes; and to the third, none under the circumstances of this case.
a. The signature of all parties was not required to form
a binding agreement to arbitrate
Whether the arbitration provision in the Duchess
Agreement would become operative only when the document was
signed by all parties is a question of contract interpretation that,
in the absence of conflicting extrinsic evidence, we review de
novo. (See Trinity, supra, 78 Cal.App.5th at p. 1120; Juen v.
Alain Pinel Realtors, Inc. (2019) 32 Cal.App.5th 972, 978.) Here,
there can be no question the language of the document (and of
Ramati’s and Hedges’s emails concerning the order of signing)
reflects an expectation all parties would sign the agreement.
Thus, as Tanis and Marshall emphasize, the final page provided,
“Please indicate your understanding and acceptance of the
foregoing by signing and returning this Letter Agreement.” The
anticipation of a fully signed agreement, however, does not
necessarily mean acceptance of its terms cannot be implied by the
nonsignatories’ conduct. (See Douglass v. Serenivision, Inc.
(2018) 20 Cal.App.5th 376, 387 [“parties may enter into an
17
implied in fact agreement to arbitrate through their conduct
(which may additionally be deemed to estop them from denying
such an agreement)”]; Craig v. Brown & Root (2000)
84 Cal.App.4th 416, 420 [a party’s acceptance of an agreement to
arbitrate may be express or implied-in-fact].)
As the court of appeal explained in Banner Entertainment,
Inc. v. Superior Court, supra, 62 Cal.App.4th 348, the basis for
the trial court’s determination on this point, while general
contract law recognizes both express and implied acceptance of
proposed contract terms, there is no binding agreement when it is
clear “that the proposed written contract would become operative
only when signed by the parties.” (Id. at p. 358.) The Banner
court held the language in the document before it demonstrated
the parties had unmistakably conditioned the binding effect of
their agreement on it being signed. That Banner language,
however, differs significantly from the language in the Duchess
Agreement.
The unsigned agreement in Banner provided, “The parties
hereto anticipate entering into a more formal agreement
incorporating the above terms, together with such other
provisions as are customary for arrangements of this kind. Until
such time, if ever, as such more formal agreement [is] concluded,
this agreement when signed by the parties hereto will constitute a
legal and binding obligation of the parties. [¶] Please
acknowledge your approval of the foregoing terms by signing a
copy of this letter in the space indicated below.” (Banner
Entertainment, Inc. v. Superior Court, supra, 62 Cal.App.4th at
p. 354.) Thus, the parties’ signatures in Banner did not merely
indicate understanding and acceptance of the terms of the
18
agreement, as here, but were expressly required for the
agreement to become binding.
Language similar to that in Banner does appear in
two places in the Duchess Agreement. In paragraph 3 regarding
the kill fee, added to the draft by Hedges in response to one of
Ramati’s March 5, 2020 notes, states, “For the sake of clarity,
upon full execution of this Letter Agreement, Owner hereby
waives the Kill Fee as defined in the Agreement.”6 And
miscellaneous paragraph 12, in addition to the arbitration clause
and a provision that California law would govern interpretation
of the agreement, provided no modifications or amendments to
the Duchess Agreement would be “valid or binding unless in
writing and signed by both parties hereto.” The absence of
similar language expressly conditioning the binding effect of the
arbitration provision or the agreement as a whole “upon full
execution” persuades us the absence of signatures by Tanis and
Marshall is not dispositive. (See Mendoza v. Trans Valley
Transport, supra, 75 Cal.App.5th at p. 777 [“‘A party’s acceptance
of an agreement to arbitrate may be express, as where a party
signs the agreement. A signed agreement is not necessary,
however, and a party’s acceptance may be implied in fact’”];
cf. Pacific Corporate Group Holdings, LLC v. Keck (2014)
232 Cal.App.4th 294, 311-312 [“‘[l]anguage referring to a
6 The Director’s Agreement, which provided for the kill fee if
other conditions had been met and principal photography had not
commenced by July 30, 2020, specified it could not be modified
“except by written document executed by the party to be
charged.” Whether an implied agreement to written terms
modifying or terminating the Director’s Agreement would be
effective is not an issue in this appeal.
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particular mode of acceptance is often intended and understood
as suggestion rather than limitation; the suggested mode is then
authorized, but other modes are not precluded,” quoting Rest.2d
Contracts, § 30, com. b, p. 85].)
b. The evidence compelled a finding Marshall and
Tanis impliedly agreed to the terms of the Duchess
Agreement
To reiterate the key events, in late January 2020 Marshall
and Lerner began discussions of an early termination of the
Director’s Agreement. Ramati and Rymer then agreed to the
basic terms, which remained unchanged throughout the
discussions—the Director’s Agreement would be voided, the
option to the Duchess screenplay would be returned to Marshall
and Lerner would receive a producer credit and 5 percent of net
profits on a motion picture if one was made. Rymer confirmed
Marshall’s agreement to the terms and told Ramati that
Marshall was turning the matter over to his entertainment
lawyers in the United States. Ramati then sent an email with
those basic terms directly to Marshall, who responded that
Marshall’s lawyers would be reaching out to Ramati.
With Marshall’s approval, an initial iteration of the
agreement was sent by Hedges to Ramati on March 5, 2020 in the
form of a letter agreement dated March 2, 2020. Ramati
responded with comments including a request for an arbitration
provision. Hedges forwarded Ramati’s comments to Marshall,
and Marshall and Hedges communicated about the agreement
before Hedges, on March 9, 2020, sent Ramati a revised version
that included the arbitration provision. After one further change
requested by Ramati, Hedges sent the document back to Ramati,
stating, “If this is acceptable, please have it signed and returned
to us.” Ramati replied the current version was fine, but asked
20
that Hedges have it signed first. The following day, March 10,
2020, Hedges replied, “Given the fact that we are waiving a kill
fee as part of this agreement, we would like it signed on your side
first.” Unlike several of his prior email communications with
Ramati, Hedges’s March 10, 2020 email did not include
“Reserving rights.”
On April 1, 2020 Ramati sent Hedges the Duchess
Agreement signed by Lerner and on May 7, 2020 another copy of
the agreement signed by Lerner and Millennium. On April 1,
2020 Ramati also sent the signed exhibit to the Duchess
Agreement confirming Lerner’s work on the project was owned by
Marshall, Kirk and Tanis. Thereafter, Millennium refrained
from taking any further steps to finance or produce the motion
picture.
At no time between April 1, 2020 and the filing of the
complaint in this lawsuit in mid-September 2020 did Hedges or
anyone else on behalf of Marshall or Tanis advise Millennium the
Duchess Agreement had not been accepted. To the contrary,
lawyers for Marshall in communications with counsel for
Millennium and in filings in arbitration proceedings involving
Lerner made statements unquestionably indicating their
understanding the Duchess Agreement had been consummated
and, as a result, Marshall had taken back all rights to the
Duchess screenplay and the related film project.
This chronology compels the conclusion that Marshall, and
through him Tanis, impliedly agreed to the terms of the Duchess
Agreement, including its arbitration provision. To be sure, in his
declaration Marshall avers he did not agree and, for that reason,
did not sign the document. But that lack of agreement was never
communicated prior to the filing of the lawsuit—certainly not on
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March 9 and 10, 2020 when Hedges sent signature copies of the
agreement to Ramati. Evidence of Marshall’s undisclosed
subjective intent is irrelevant to determining the existence of
mutual assent or the meaning of contractual language. (See
Reigelsperger v. Siller (2007) 40 Cal.4th 574, 579-580
[“uncommunicated subjective intent is irrelevant” to mutual
assent, which is determined from the reasonable meaning of the
parties’ words and actions]; Martinez v. BaronHR, Inc. (2020)
51 Cal.App.5th 962, 970 [“[t]he law is well settled that
unexpressed subjective intentions are irrelevant to the issue of
mutuality”]; Esparza v. Sand & Sea, Inc. (2016) 2 Cal.App.5th
781, 788 [“‘“[m]utual assent is determined under an objective
standard applied to the outward manifestations or expressions of
the parties, i.e., the reasonable meaning of their words and acts,
not their unexpressed intentions or understandings”’”]; Serafin v.
Balco Properties Ltd., LLC (2015) 235 Cal.App.4th 165, 173
[same]; see also Winet v. Price (1992) 4 Cal.App.4th 1159, 1166,
fn. 3 [evidence of subjective intent “was not competent extrinsic
evidence, because evidence of the undisclosed subjective intent of
the parties is irrelevant to determining the meaning of
contractual language”].)
Similarly, although Marshall and Hedges asserted Hedges
was authorized only to negotiate on Marshall’s behalf, not to bind
him to any agreement, Hedges conceded at his deposition he
would not put a term in a draft if a client had told him not to
include the term. And the evidence established that Hedges
provided Marshall with Ramati’s request for the arbitration
provision before sending Ramati the revised draft that contained
it, demonstrating Marshall’s acquiescence in the inclusion of such
a term in the agreement.
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Any doubt as to this conclusion is resolved by application of
the doctrine of equitable estoppel, which the trial court rejected
based on an unduly limited understanding of its scope: “An
estoppel may arise although there was no designed fraud on the
part of the person sought to be estopped. To create an equitable
estoppel, it is enough if the party has been induced to refrain
from using such means or taking such action as lay in his power,
by which he might have retrieved his position and saved himself
from loss.” (Lantzy v. Centex Homes (2003) 31 Cal.4th 363, 384
[cleaned up]; see Evid. Code, § 623 [“[w]henever a party has, by
his own statement or conduct, intentionally and deliberately led
another to believe a particular thing true and to act upon such
belief, he is not, in any litigation arising out of such statement or
conduct, permitted to contradict it”].)7
Marshall, through his counsel Hedges, unquestionably led
Millennium reasonably to believe he had agreed to all the terms
of the Duchess Agreement as set forth in the second iteration of
the document sent by Hedges to Ramati on March 9, 2020. Why
would Hedges ask Ramati to sign the agreement if Marshall were
not in accord? Indeed, why else, the following day, would Hedges
insist that “we”—a plural connoting not only Hedges but also his
7 “‘There are four basic elements of equitable estoppel:
(1) The party to be estopped must have known the facts; (2) the
party to be estopped must have intended that its conduct would
be acted upon, or it must have acted so as to have given the
party asserting estoppel the right to believe that it was so
intended; (3) the party asserting estoppel must have been
ignorant of the true state of facts; and (4) the party asserting
estoppel must have relied on the conduct to its injury.’”
(Komorsky v. Farmers Ins. Exchange (2019) 33 Cal.App.5th
960, 972.)
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client—wanted Millennium to sign the agreement “first”—
unmistakably implying a “second” signature would be
forthcoming, not that the terms of the agreement were still under
review?
Lerner and Millennium provided evidence they relied on
that state of affairs to cease further action with respect to
financing and producing a film based on the Duchess screenplay,
and Lerner executed the certificate confirming Marshall, Kirk
and Tanis’s ownership of Lerner’s work product in connection
with the project. Marshall is now estopped to assert he never
agreed to be bound. (See City of Hollister v. Monterey Ins.
Co. (2008) 165 Cal.App.4th 455, 486 [When the doctrine of
equitable estoppel is successfully invoked, “the court in effect
closes its ears to a point—a fact, argument, claim, or defense—on
the ground that to permit its assertion would be intolerably
unfair. It is commonly said that the party to be estopped, having
conducted himself in manner X, will ‘not be heard’ to assert Y”
(fn. omitted)].)
c. Kirk’s consent was unnecessary for the Duchess
Agreement to be binding as to Tanis and Marshall
Kirk did not sign the Duchess Agreement. According to her
declaration, she was not represented by Hedges and did not
participate in discussions leading to preparation of the final form
of the document, which was sent by Hedges to Ramati on
March 9, 2020. Nor, apparently, was she represented by the
attorneys who on Marshall’s behalf made statements in April and
June 2020 referring to a completed agreement.8 Accordingly,
8 In his declaration in support of the motion to compel
arbitration, Singer, the recipient of Cowan’s April 22, 2020
demand letter, stated Cowan was at the time representing both
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Tanis and Marshall assert, even if they could be found to have
impliedly agreed to the arbitration provision in the Duchess
Agreement, without Kirk’s agreement (express or implied) there
could be no binding agreement as to any of them.
This argument, made in the trial court but not addressed in
the court’s ruling, does not accurately reflect California’s more
nuanced law on this issue. As the court held in Angell v.
Rowlands (1978) 85 Cal.App.3d 536, 542, “[A] contract is invalid
if not signed by all parties purportedly bound only when it is
shown, either by parol or express condition, that the contract was
not intended to be complete until all parties had signed.
Conversely, in the absence of a showing that the contract is not
intended to be complete until signed by all parties, the parties
who did sign will be bound.” This legal principle was more
recently confirmed by our colleagues in Division Eight of this
court in Fagelbaum & Heller LLP v. Smylie (2009)
174 Cal.App.4th 1351, who agreed with the law firm it was
entitled to compel a former client to arbitrate a contractual
dispute based on the arbitration provision in a retainer
agreement that he had signed even though three other
represented parties had not signed it. The court concluded,
“Smylie did not meet his burden to prove ‘that the signatures of
all parties were contemplated as being a condition precedent to
the validity of the contract [citation].’ [Citation.] His signature
individually bound him to the agreement and to the arbitration
clause within it.” (Id. at p. 1365.)
Nothing in the Duchess Agreement indicated it was not
intended to be complete unless Kirk signed or otherwise agreed to
Marshall and Kirk. The unredacted portions of the letter,
however, referred only to Marshall as Cowan’s client.
25
be bound be it. Nor was there any reason it should. The purpose
of the Duchess Agreement was to terminate the Director’s
Agreement. Kirk was not a party to that agreement and had no
rights or responsibilities under it, including to the kill fee, which,
if due, would be paid to Tanis for the benefit of Marshall.
Moreover, although Kirk was a party to the literary option
agreement by which Millennium (through its affiliate,
Millennium Reservoir) acquired rights to the Duchess screenplay,
which Kirk cowrote, the option agreement expressly provided it
could be terminated and the rights granted would revert to Kirk
and Tanis by agreement of the parties to the Director’s
Agreement without Kirk’s approval. That is exactly what
happened by virtue of Marshall’s implied agreement to the
Duchess Agreement. That the arbitration provision (or the
release of claims) in the Duchess Agreement may not be binding
on Kirk does not affect the enforceability of the arbitration
provision with respect to Tanis and Marshall.
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DISPOSITION
The order denying the petition to compel arbitration is
reversed. The cause is remanded with directions to the trial
court to issue a new order granting the petition to compel
arbitration and staying further proceedings in the trial court
pursuant to Code of Civil Procedure section 1281.4. Millennium
is to recover its costs on appeal.
PERLUSS, P. J.
We concur:
SEGAL, J.
FEUER, J.
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