Ward v. Goossen et al

Filing 34

ORDER Denying 26 Defendants' Motion to Compel Arbitration by Judge Thelton E. Henderson. (tehlc2, COURT STAFF) (Filed on 10/15/2014)

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1 UNITED STATES DISTRICT COURT 2 NORTHERN DISTRICT OF CALIFORNIA 3 4 ANDRE WARD, Plaintiff, 5 v. 6 7 DAN GOOSSEN, et al., Case No. 14-cv-03510-TEH ORDER DENYING DEFENDANTS’ MOTION TO COMPEL ARBITRATION Defendants. 8 9 Professional boxer Andre Ward (“Plaintiff”) has brought a civil suit against Dan 10 United States District Court Northern District of California 11 Goossen,1 Ward’s former promoter, and Goossen Tutor Promotions, LLC (“Defendants”). 12 Compl. (Docket No. 1). Plaintiff seeks damages resulting from Defendants’ alleged 13 violation of the Muhammad Ali Boxing Reform Act, which, in relevant part, requires 14 promoters to make certain financial disclosures to their boxers. Plaintiff also seeks an 15 accounting of profits derived from several boxing matches. In the instant motion, 16 Defendants ask the Court to compel the arbitration of Plaintiff’s claims. August 29, 2014 17 Mot. (Docket No. 26). On September 12, 2014, Plaintiff filed his opposition (Docket No. 18 30), and the Court subsequently heard oral argument. After considering the parties’ 19 written and oral submissions, the Court now DENIES Defendants’ motion to compel 20 arbitration for the reasons set forth below. 21 22 BACKGROUND Plaintiff and Defendants have been involved in a protracted dispute over 23 24 Defendants’ work promoting Plaintiff as a professional boxer. Previously, the parties have 25 both litigated and arbitrated the validity of their 2004 and 2011 Promotional Agreements. 26 27 28 1 On October 3, 2014, Plaintiff filed notice with the Court of Dan Goossen’s death and Plaintiff’s intention to file a motion to substitute Mr. Goossen’s estate into the action in place of Mr. Goossen. (Docket No. 32). The Court has not yet received this motion. 1 To date, Plaintiff has not been successful in disputing the Agreements’ validity. Plaintiff 2 has now shifted his focus away from the issue of contractual validity, and is now suing 3 Defendants in federal court for several alleged violations of the Muhammad Ali Boxing 4 Reform Act. Specifically, Plaintiff claims that since 2004, Defendants have failed to 5 provide certain required financial disclosures to Plaintiff in connection with fights they 6 promoted on his behalf. Compl. ¶¶ 24-46. Plaintiff has also asserted a separate cause of 7 action for an accounting. Compl. ¶¶ 47-51. 8 The business relationship between the parties is governed by a Contract composed of two documents: a Promotional Agreement and a mandatory Addendum, the latter of 10 which is provided by the State Athletic Commission. In California, the State Athletic 11 United States District Court Northern District of California 9 Commission (“Commission”) has jurisdiction over the professional boxing industry. Cal. 12 Bus. & Prof. Code §§ 18602, 18640. Pursuant to this authority, the Commission has 13 promulgated a number of regulations, including a requirement that boxers and promoters 14 execute a form contract entitled “Addendum to Promotional Contract,” which must be 15 attached to any promotional agreement between the boxer and promoter, and submitted to 16 the Commission for final written approval. Cal. Code Regs., tit. 4, §§ 220-22, 230(b). 17 Plaintiff and Defendants entered into Promotional Agreements in 2004 and 2011. 18 These Promotional Agreements attach and incorporate the Addendum required by the 19 Commission. The 2011 Promotional Agreement provides: 20 21 22 23 17. Forum Selection Any controversies and/or disputes concerning and/or arising under this Agreement and/or arising under the Addendum shall be conducted in accordance with the California State Athletic Commission: Addendum to Promotional Contract, Sections C(1) and C(2) which is incorporated herein. 24 Ex. D to Goossen Decl. § 17 (Docket No. 26-2). The relevant provision of the 2011 25 Addendum provides: 26 27 28 C. BOXER AND PROMOTER FURTHER AGREE: 1. That all contests or exhibitions of boxing which are conducted during the term of the promotional contract in the State of California shall in all respects be held in conformity with the laws of the State of California and the rules and 2 1 regulations now or hereafter adopted, amended, or repealed by the commission. Said laws and rules are incorporated herein and made a part hereof by reference. 2 3 2. All controversies concerning the validity and/or enforceability of the promotional contract and this addendum shall be submitted for arbitration in the following manner: [A detailed procedure for arbitration follows.] 4 5 6 Ex. E to Goossen Decl. §§ C(1)-(2) (Docket No. 26-2). The 2004 Agreement and 7 Addendum also contain these provisions. Finally, both the 2004 and 2011 Addenda 8 provide, on their first page: 9 Any and all inconsistences or ambiguities between the promotional agreement and this addendum which is attached to it and made a part of it shall be resolved in favor of this addendum, the Boxing Act, and the commission’s rules. 10 United States District Court Northern District of California 11 12 Because the contents of the 2004 and 2011 documents are so similar, they will 13 hereinafter be referred to as the “Promotional Agreement” and “Addendum,” or 14 collectively, the “Contract.” 15 The current controversy over the construction and scope of the arbitration provision 16 results from the reference to, and incorporation of, sections C(1) and C(2) of the 17 Addendum by the Promotional Agreement’s Forum Selection provision. Specifically, the 18 Promotional Agreement provides that disputes “concerning and/or arising under [the 19 Contract] shall be conducted in accordance with” the Addendum, which itself requires, in 20 relevant part: (1) that state law and Commission regulations apply to all boxing matches; 21 and, more importantly, (2) that “[a]ll controversies concerning the validity and/or 22 enforceability of the [Contract] shall be submitted for arbitration” according to a specified 23 procedure. 24 As a result of the Contract’s two-document composition, Plaintiff and Defendants 25 present two competing constructions for the Contract’s arbitration requirement. 26 Defendants contend that the Forum Selection clause of the Promotional Agreement 27 purposefully expands the Addendum’s scope of arbitration from applying only to those 28 disputes that concern the “validity and/or enforceability” of the Contract, to all disputes 3 1 “concerning and/or arising under” the Contract. As such, Defendants argue, Plaintiff’s 2 newest claims should be arbitrated because they fall under the broader range of disputes 3 described in the Promotional Agreement. 4 Conversely, Plaintiff argues that the applicable arbitration requirement is the one 5 provided in Addendum section C(2): “All controversies concerning the validity and/or 6 enforceability” of the Contract. Under Plaintiff’s narrow construction, the scope of 7 arbitration provided by the Addendum is unchanged by the language in the Promotional 8 Agreement, which instead merely clarifies the procedure for determining the appropriate 9 forum and choice of law for disputes. Consequently, Plaintiff argues, litigating violations of the Ali Act in court would be conducting the matter “in accordance with” the 11 United States District Court Northern District of California 10 Addendum’s requirement that Contract validity/enforceability disputes be arbitrated. 12 Opp’n at 8. 13 14 15 LEGAL STANDARD Under the Federal Arbitration Act (FAA), a court must compel arbitration where: 16 (1) A valid agreement to arbitrate exists; and (2) The dispute falls within the scope of that 17 agreement. Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 18 2000). “When deciding whether the parties agreed to arbitrate a certain matter . . . courts 19 generally . . . should apply ordinary state-law principles that govern the formation of 20 contracts.” First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944 (1995). 21 Where parties have agreed to arbitrate, courts apply a presumption of arbitrability as 22 to particular grievances, “and the party resisting arbitration bears the burden of 23 establishing that the arbitration agreement is inapplicable.” Wynn Resorts, Ltd. v. Atlantic- 24 Pacific Capital, Inc., 497 Fed.Appx. 740, 742 (9th Cir. 2012) (internal citations omitted). 25 Courts should therefore “construe ambiguities concerning the scope of arbitrability in 26 favor of arbitration . . . .” Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 66 27 (1995). 28 4 1 However, “[a]bsent some ambiguity in the agreement . . . it is the language of the 2 contract that defines the scope of disputes subject to arbitration.” E.E.O.C. v. Waffle 3 House, Inc., 534 U.S. 279, 289 (2002) (internal citations omitted). Consequently, a court 4 should look first to whether the parties agreed to arbitrate the dispute, not to general policy 5 goals. Id. at 294. Ultimately, “[w]hile ambiguities in the language of the agreement 6 should be resolved in favor of arbitration, we do not override the clear intent of the parties, 7 or reach a result inconsistent with the plain text of the contract, simply because the policy 8 favoring arbitration is implicated.” Id. 9 10 United States District Court Northern District of California 11 DISCUSSION The Court first applies California law governing contract formation to determine the 12 appropriate construction of the arbitration provision for the parties’ Contract. Next, the 13 Court determines whether Plaintiff’s claims are covered by this arbitration provision such 14 that they must be arbitrated. 15 16 A. The application of California law governing contract construction reveals a 17 narrow arbitration provision. 18 In order to decide whether parties agreed to arbitrate a particular set of disputes, 19 courts apply state-law principles governing contract formation. First Options of Chicago, 20 Inc. 514 U.S. at 944. In this case, Plaintiff’s narrow interpretation of the applicable 21 arbitration provision best adheres to California’s state-law principles governing the 22 construction of contracts. 23 Under California law, contract interpretation must construe the contract as a whole, 24 being sure “to give effect to every part, if reasonably practicable, each clause helping to 25 interpret the other.” Pinel v. Aurora Loan Services, LLC, 814 F. Supp. 2d 930, 943 (N.D. 26 Cal. 2011) (quoting Cal. Civ. Code § 1641) (internal quotation marks omitted). 27 Importantly, “Courts must interpret contractual language in a manner that gives force and 28 effect to every provision, and not in a way that renders some clauses nugatory, inoperative 5 1 or meaningless.” Id. When necessary, a court can look to the subsequent conduct of the 2 parties as evidence of their intent. Crestview Cemetery Assn. v. Dieden, 54 Cal.2d 744, 3 754 (1960). Finally, “In cases of uncertainty not removed by the preceding rules, the 4 language of a contract should be interpreted most strongly against the party who caused the 5 uncertainty to exist.” Cal. Civ. Code § 1654. 6 7 1. Plaintiff’s interpretation is the only one that does not render any provision 8 “nugatory, inoperative or meaningless.” 9 Under Plaintiff’s construction, a dispute “concerning and/or arising under [the Contract],” must be conducted “in accordance with [Addendum sections C(1) and C(2)].” 11 United States District Court Northern District of California 10 Ex. D to Goossen Decl. § 17. As provided in section C(1), the dispute would therefore be 12 governed by state law and Commission regulations. As provided in section C(2), if the 13 dispute concerns “the validity and/or enforceability of the [Contract],” it must be 14 arbitrated. Under this construction, which relies solely upon the plain language of the 15 Contract, nothing is added to or taken away from the Contract. Accordingly, each 16 provision of the Contract is given effect: the Promotional Agreement clarifies the 17 application of the Addendum’s choice of law and arbitration provisions to all Contract- 18 related disputes. Conversely, Defendants’ proposal negates a substantial portion of 19 Addendum section C(2) by allowing the Promotional Agreement’s broader language to 20 supersede the narrow language of section C(2). 21 Further, Defendants’ interpretation also renders the Promotional Agreement’s 22 reference to Addendum section C(1) entirely meaningless. Defendants claim that by 23 viewing the Forum Selection clause as expanding Addendum section C(2), the Forum 24 Selection clause is saved from being rendered superfluous; however, the Forum Selection 25 provision refers to both C(1) and C(2). Defendants’ proposal, therefore, saves the 26 reference to C(2) from being superfluous by arguing that it serves to expand the 27 Addendum, but does nothing to give the reference to section C(1) any similar non- 28 superfluous purpose. When pressed on this issue at oral argument, Defendants failed to 6 1 provide any explanation for how their construction does not give meaning to the reference 2 to section C(2) at the expense of rendering the reference to section C(1) meaningless. 3 Conversely, Plaintiff offers a reasonable interpretation of the Forum Selection clause that 4 renders the entire clause non-superfluous: the Forum Selection provision, a standard 5 component of most contracts, clarifies the application of the Addendum to questions of 6 forum selection by explicitly, rather than merely implicitly, incorporating the Addendum’s 7 choice of law and arbitration provisions. 8 9 Most importantly, however, Defendants’ construction of the applicable arbitration provision contradicts the plain language of the Contract by negating the Addendum’s express instruction that “[a]ny and all inconsistencies or ambiguities between the 11 United States District Court Northern District of California 10 promotional agreement and this addendum . . . shall be resolved in favor of this addendum 12 . . . .” Exs. B & E to Goossen Decl. at 1 (Docket No. 26-2). As a result, any ambiguity or 13 inconsistency between the language of the Agreement’s Forum Selection clause and 14 Addendum section C(2) must be resolved in favor of the Addendum’s provision that 15 arbitration be required only for disputes “concerning the validity and/or enforceability of 16 the [Contract].” Defendants dismiss this clause by arguing that there is no ambiguity or 17 inconsistency, while also imploring that any ambiguity be resolved in favor of arbitration 18 in accordance with the pro-arbitration policy created by the FAA. Reply at 2, 5-6 (Docket 19 No. 31). The Court disagrees with Defendants’ contention that there is no ambiguity, and 20 does not believe that the pro-arbitration policy applies. According to Pinel, “[I]f an 21 instrument is capable of two different reasonable interpretations, the instrument is 22 ambiguous.” 814 F. Supp. 2d at 943. Here, the parties present two different reasonable 23 interpretations of the Contract’s applicable arbitration clause. While the Court finds 24 Plaintiff’s interpretation to be far more reasonable than Defendants’, it recognizes that the 25 Contract presents an ambiguity on which reasonable minds can differ. However, where 26 the Contract explicitly requires the resolution of all such ambiguities in favor of the 27 Addendum, as it does here, reasonable minds can arrive at only one conclusion: that the 28 Addendum’s provision controls. Because arbitration is “a matter of consent and not 7 1 coercion,” the Court must not, and will not, require the parties to arbitrate where they have 2 not agreed to do so. See Waffle House, Inc., 534 U.S. at 294 (“While ambiguities in the 3 language of the agreement should be resolved in favor of arbitration . . . Arbitration under 4 the [FAA] is a matter of consent, not coercion.”) (internal quotation marks and citations 5 omitted); Volt Information Science Inc. v. Board of Trustees of Leland Stanford Junior 6 Univ., 489 U.S. 468, 478 (1989) (“[W]e have recognized that the FAA does not require 7 parties to arbitrate when they have not agreed to do so . . . .”). Consequently, the inclusion 8 of the Addendum’s supremacy clause alone is sufficient to find that the Addendum’s 9 narrow arbitration provision controls. 10 United States District Court Northern District of California 11 12 2. Defendants’ interpretation is inconsistent with the parties’ subsequent actions. After the filing of this suit, but before the current dispute over the scope of 13 arbitration, Defendant Goossen filed a state court defamation suit against Plaintiff for 14 allegedly defamatory comments regarding Defendants’ noncompliance with the Ali Act. 15 Surely, if Plaintiff’s claims against Defendants for violations of the Ali Act are arbitrable 16 as issues “concerning” the parties’ Contract, as Defendants contend, then so too is 17 Defendant Goossen’s defamation claim, which will require him to prove that he did not 18 violate the Ali Act. See Phoenix Trading, Inc. v. Loops LLC, 732 F.3d 936, 944 (9th Cir. 19 2013) (falsity is a required element of a defamation suit). As a result, Defendant 20 Goossen’s conduct belies his argument in this motion. 21 Defendants attempt to rebut this point by saying the lawsuit is “manifestly 22 irrelevant” because there was “no basis for Goossen to submit his claims against these 23 defendants to arbitration” because two of the defendants in the defamation suit are not 24 parties to the Promotional Agreement. Reply at 11. The Court does not find this 25 explanation convincing. Defendant Goossen could have pursued his defamation claim 26 against Plaintiff separately, by arbitrating the case as it applies to Plaintiff and litigating 27 the case as it applies to the other defendants. The ultimate efficacy of such a course of 28 action is irrelevant. Defendant Goossen’s decision not to even pursue this approach 8 1 demonstrates that he does not feel contractually obligated to arbitrate all matters 2 concerning his professional relationship with Plaintiff, as he here contends. 3 4 3. Because Defendants drafted the Promotional Agreement, any uncertainty 5 resulting from the Agreement’s language should be interpreted against them. 6 While the Court finds that the Addendum’s supremacy clause resolves the question 7 of arbitrability, even if it were unclear from the Promotional Agreement whether the 8 parties intended the mandatory arbitration of disputes “concerning and/or arising under 9 [the Contract]” or just disputes “concerning the validity and/or enforceability of the [Contract],” the Court should resolve this uncertainty against the party that drafted the 11 United States District Court Northern District of California 10 Agreement. See Cal. Civ. Code § 1654 (“In cases of uncertainty not removed by the 12 preceding rules, the language of a contract should be interpreted most strongly against the 13 party who caused the uncertainty to exist.”). At oral argument, Defendants conceded that 14 they were likely the drafters of the Promotional Agreement. 15 The rationale for interpreting uncertainties against the drafter is clear: If Defendants 16 had intended for the Promotional Agreement’s Forum Selection clause to expand the scope 17 of the Addendum’s arbitration clause, then they should have drafted the Contract to make 18 this intent more explicit. At the very least, Defendants could have specified that all 19 disputes “concerning and/or arising under [the Contract]” must be conducted in accordance 20 with Addendum section C(2)’s arbitration procedure. They did not do this, however, and 21 so should not now be allowed to benefit from the uncertainty they have created. 22 Only Plaintiff offers an explanation that avoids inconsistency between the 23 Promotional Agreement and the Addendum, gives effect to all provisions, comports with 24 the parties’ subsequent conduct, and appeals to the Court’s common sense: the Forum 25 Selection clause of the Promotional Agreement explicitly, rather than merely implicitly, 26 incorporates the Addendum’s choice of law and arbitration provisions, nothing more. 27 Alternatively, where any inconsistencies or ambiguities between the Promotional 28 Agreement and Addendum remain, the language of the Addendum prevails. 9 1 Consequently, the Addendum’s narrow arbitration provision controls, and the parties are 2 only obligated to arbitrate disputes concerning the validity and/or enforceability of the 3 parties’ Contract. 4 5 B. Plaintiff’s claims do not concern the validity and/or enforceability of the 6 Contract. 7 Having identified the appropriate construction of the Contract’s arbitration clause, the Court must now determine whether Plaintiff’s claims fall within the scope of that 9 clause. When making this determination, the Court must resolve any ambiguities in the 10 language of the arbitration provision in favor of arbitrating Plaintiff’s particular claims. 11 United States District Court Northern District of California 8 Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 66 (1995) (Courts should 12 “construe ambiguities concerning the scope of arbitrability in favor of arbitration . . . .”). 13 Plaintiff’s suit raises two causes of action. First, Plaintiff alleges that Defendants 14 violated the Muhammad Ali Boxing Reform Act by failing to make certain required 15 financial disclosures. Second, Plaintiff asserts a state-law claim mandating Defendants to 16 provide an accounting for the profits received from a number of boxing matches. Neither 17 of these two claims “concern[] the validity and/or enforceability of the [Contract].” 18 The term “concerning” is among the broadest words available in the context of an 19 arbitration provision. See Fairchild v. National Home Ins. Co., 17 F. App’x 631, 633 (9th 20 Cir. 2001) (listing the broadest terms as “arising out of or related to,” “regarding,” 21 “concerning,” and “in connection with.”). Nonetheless, the parties are only obligated to 22 arbitrate those matters to which they have privately agreed to arbitrate. Waffle House Inc., 23 534 U.S. at 294 (The FAA is “at bottom a policy guaranteeing the enforcement of private 24 contractual arrangements . . . .”). Even the most generous application of the phrase 25 “concerning the validity and/or enforceability of the [Contract]” demands the Court find 26 that violations of the Ali Act and a claim for accounting are entirely unrelated to questions 27 regarding the Contract’s validity or enforceability, contract disputes explicitly disclaimed 28 10 1 by Plaintiff. Opp’n at 1. Further, Defendants’ motion does nothing to dispute this 2 conclusion. 3 Because this Court has determined that only disputes concerning the validity and/or 4 enforceability of the Contract must be arbitrated, and that Plaintiff’s claims do not concern 5 questions of contractual validity or enforceability, it does not need to address the other 6 arguments raised by the parties’ submissions. 7 8 CONCLUSION An application of California contract law to the plain text of the parties’ Contract 10 strongly favors the finding of a narrow arbitration provision that applies only to disputes 11 United States District Court Northern District of California 9 involving the validity and/or enforceability of the Contract. Despite the state and federal 12 policy favoring arbitration, parties are not required to arbitrate matters to which they have 13 not contractually agreed to arbitrate. Put another way, the pro-arbitration presumption 14 does not mandate the Court to ignore a Contract’s plain language in crafting a broader 15 arbitration clause than the one actually provided. Ultimately, because the Addendum’s 16 supremacy clause expressly requires that ambiguities or inconsistencies between the 17 Promotional Agreement and Addendum be resolved in favor of the Addendum, upon 18 finding that Plaintiff and Defendants each offer a reasonable interpretation of the 19 Contract’s arbitration provision, this Court resolves that ambiguity in favor of the 20 Addendum. Accordingly, only disputes concerning the validity and/or enforceability of 21 the Contract must be arbitrated, and the Court therefore DENIES Defendants’ motion to 22 compel arbitration. 23 24 IT IS SO ORDERED. 25 26 27 Dated: 10/15/14 _____________________________________ THELTON E. HENDERSON United States District Judge 28 11

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