ENTERTAINMENT LITIGATION: “JUDGE ALEX” LOSES SUPREME COURT APPEAL

TELEVISION JUDGE LOSES BID TO HAVE CASE AGAINST MANAGER DECIDED BY THE CALIFORNIA LABOR COMMISSIONER

Alex Ferrer, a former Florida judge now known as Fox’s “Judge Alex” on television, entered into a contract with Arnold Preston, a lawyer who provides “services” to people in the entertainment industry. The dispute between centered on the nature of those “services” — with Preston claiming that he was Ferrer’s personal manager and Ferrer claiming that Preston acted illegally as an unlicensed talent agent.

Pursuant to an arbitration clause in their contract, in 2005, Preston demanded arbitration on his claim that Ferrer failed to pay for his services. Ferrer countered with a petition to the California Labor Commissioner, claiming that the contract was void under the Talent Agencies Act because Preston acted illegally as an unlicensed talent agent.

And so began three years of litigation before the Labor Commissioner and the courts, culminating in the US Supreme Court’s decision yesterday.

THE DECISION

The parties’ journey through the Labor Commissioner and the court system is not an exciting read. The Supreme Court’s opinion here provides all the sordid details. The long and short of it is that Ferrer claimed that the Labor Commissioner had exclusive jurisdiction to decide whether Preston acted illegally as an agent and wanted to proceed before the Commissioner before any arbitration. Preston wanted the courts to compel Ferrer to arbitrate immediately his claim for fees. Two California courts sided with Ferrer and refused to compel arbitration. The US Supreme Court, in an 8-1 decision penned by Justice Ginsberg, reversed.

The Supreme Court ruled that the Federal Arbitration Act required enforcement of the parties’ agreement to arbitrate “any disputes” — including Ferrer’s defense that the agreement was void because it was made in violation of the Talent Agencies Act. The Court cited longstanding federal policies favoring arbitration to “achieve streamlined proceedings and expeditious results” and held that those policies also applied to require arbitration in administrative proceedings, such as the Labor Commissioner petition filed by Ferrer.

LESSONS TO BE LEARNED

A few lessons can be learned from the Judge Alex case. First, the case again brings attention to the somewhat tricky situation that managers face in the representation of clients in the face of the Talent Agencies Act. To be safe, managers need to ensure that their clients also have independent agency representation so that they cannot be said to have “procured employment” illegally under the act.

Second, at least where there is an arbitration agreement between the parties, the case eliminates the common strategy to delay a pending litigation by filing a petition before the Labor Commissioner. Those proceedings can delay cases for many months if not more when the Commissioner has jurisdiction to decide issues which may arise in a dispute. The Supreme Court made clear in this decision that, even though the Labor Commissioner may have the authority — even exclusive authority — to decide an issue, the arbitration provision will take precedence.

Finally, the case illustrates the irony that sometimes arises during a hotly contested litigation. The parties agreed to an arbitration provision which the Supreme Court found was intended to provide them with a “streamlined” and “expeditious” process to resolve their claims. The actual dispute between the parties — whether “Judge Alex” owes Preston fees for his services — has been delayed by their squabble over whether they are required to arbitrate the case. The case made its way to the US Supreme Court, and took three years to do so.

Even with the Supreme Court’s decision, the California courts still need to issue final orders “consistent” with that opinion. So it would not surprise me if the parties do not actually begin their arbitration until 2009, almost four years after the dispute first arose.

Hardly an “expeditious” process.