Preston v. Ferrer, a Celeb. Case Gone Crazy

This is a hilarious and ironic case. It is both because the plaintiff in this case is a celebrity--"Judge Alex" on Fox TV, who solves small disputes between people as entertainment-- but this case deals with an issue that is as dull as you can imagine (see below), i.e., it could never make it on his show. It is humorous and ironic also because Judge Alex is an arbitrator of disputes on TV, and the whole issue in this case is whether Judge Alex (Alex Ferrer, in real life) has to arbitrate a contract dispute with his "artist's manager" (I will call him his "agent") or can pursue his action before the California Labor Commissioner. Does art imitate life, or is it the opposite? I think the reason the US Supreme Court stepped in here is because it perceived that Judge Alex might be jerking around his agent (himself a lawyer), even though the ultimate result of the case is unclear. So, let's patiently recite some facts.

Important Facts

Judge Alex wasn't born as Judge Alex. In fact, before he got his TV gig he was a "lowly" Judge Ferrer--a Florida Circuit Court Judge. But, in order to get the Fox gig, he had to have an agent. Preston, an attorney, is his agent. They signed a contract which provided that Preston would get a 12% "management fee" for his work on Ferrer's behalf. It is probably a good deal for Ferrer, since he has certainly gotten what he wanted--a national audience. Well, in the contract between the two of them there is also a standard arbitration clause. Such a clause says that if a controversy arises between the parties under the contract, it would be adjudicated in arbitration through the American Arbitration Association. This is generally a good idea--you keep issues out of court and you can solve disputes much more quickly.

To make a short story even shorter, Judge Alex refused to pay his 12% fee to Mr. Preston. Why? He contends that Preston really functions as a "talent agency" under CA law and as such, a different provision of law, and not the contract, applies to Mr. Preston. Therefore, the contract is void. Therefore he doesn't have to pay Mr. Preston. I think I haven't done disservice to Judge Alex here--if I have, I may end up on his TV show and lose! There may have been other reasons why Judge Alex doesn't want to pay his bills--but the record, at least as accessible to me, doesn't reveal it.

Digging Deeper

By now you should be saying: "But why does the US Supreme Court have to wade into this? Don't they have real criminals to put behind bars or real corporate crooks to catch?" Read on. Well, when he wasn't paid, Preston did what any normal person would do. He submitted his case to the American Arbitration Association ("AAA") as provided under the contract. But Ferrer's attorney said that a different law applied: the California Talent Agencies Act (Cal. Labor Code sec. 1700 et seq.) which says, in relevant part, that:

"in cases of controversy arising under this chapter, the parties involved shall refer the matters in dispute to the Labor Commissioner, who shall hear and determine the same..." (Cal. Labor Code sec. 1700.44(a)).

So, Ferrer's attorney filed an action with the CA Labor Commissioner to stop proceedings with the AAA and make a decision about the validity of the contract between Ferrer and Preston. To make things bog down more, the Labor Commissioner's hearing officer decided that she lacked power to stay the arbitration with the AAA. So, Ferrer's attorney filed an action in the Los Angeles Superior Court seeking to stop (enjoin) the arbitration. The Superior Court issued the injunction, stopped the whole action and said that the legality of the contract between the two of them under the Talent Agencies Act had to be determined by the Labor Commissioner, not the Arbitrator.

So, of course, Preston couldn't take this sitting down, and he appealed the decision to the California Court of Appeal. In a 2-1 decision, that court decided the LA Superior Court was right--the Labor Commissioner would determine whether the contract was valid. Note that we haven't gotten to the issue of the case--whether Judge Alex owes his agent the money. We are still dithering on the issue of which agency or person would decide if the contract is valid. Then it was appealed to the CA Supreme Court, but they didn't want to touch this case with a 10-foot pole, so they denied review. As a last ditch effort, Preston decided to appeal this to the US Supreme Court. Maybe they would intervene. For, look at it this way. If the US Supreme Court doesn't intervene, and the Labor Commissioner determines the validity of the contract in a way that Preston doesn't like, that ruling will be appealed all the way up the line. Finally, some day, five or six years down the line, they might get to the issue of whether Judge Alex actually owes Preston the money. By this time, however, Preston would either have died, given up or become in such straits that there is a good chance that the case would be dropped. That, probably, is what Judge Alex is counting on.

The Supreme Court Steps In

So, the US Supreme Court stepped in, but the sole question they are going to decide is whether the CA Labor Commissioner or the Arbitrator will determine the validity of the contract between the two of them. The danger, from Preston's perspective, is if the Labor Commissioner decides that he is an unlicensed talent agent under the CA statute, then the contract may be declared invalid. But even under the common law of contracts, he could then sue for an action called quantum meruit (the value of services provided). Which would take several more years...

There are two cases that both sides agree will bulk large in the Court's decision: a CA case (Styne v. Stevens, 26 P3d 343) and a US Supreme Court case (Buckeye Check Cashing v. Cardegna, 126 S Ct 1204 (2006)). The CA court held that Buckeye was inapposite because it did not involve an administrative agency with exclusive jurisdiction over a disputed issue (as here). Thus, the Styne case applied for them: and it held that the Commissioner, becaues of it expertise in applying the CA Talent Act, was the right one to resolve the dispute.

The US Supreme Court will thus make a narrow decision. It is a decision that seems to affect almost no one other than these two parties. But it may be the opportunity for the Court to send a signal to Judge Alex that he needs to submit his own case to an Arbitrator. It wouldn't be the first Fox celeb who gotten his comeuppance (see my review of Bill O'Reilly's sexual harassment case).

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