Kaufman v. Sony Pictures Television Inc. et al
District Judge Leo T. Sorokin: ORDER ON MOTION TO DISMISS (DOC. NO. 13) entered. The Motion to Dismiss, Doc. No. 13, is ALLOWED under Fed. R. Civ. P. 12(b)(1). Accordingly, the Court need not reach Defendants other arguments or Finnmaxs personal jurisdiction argument. re 13 Motion to Dismiss for Failure to State a Claim; 13 Motion to Dismiss for Lack of Jurisdiction (Simeone, Maria)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
SONY PICTURES TELEVISION, INC.,
COMPANIES, INC., FINNMAX LLC,
and COMCAST CORP.,
Civil A. No. 16-12027-LTS
ORDER ON MOTION TO DISMISS (DOC. NO. 13)
July 19, 2017
Plaintiff Alan Kaufman filed a pro se complaint in state court against Defendants
American Broadcasting Company, Inc., Mark Burnett Productions, Inc., Sony Pictures
Television, Inc., and Comcast Corporation alleging one count of negligence and one count of
breach of fiduciary duty and covenant of good faith and fair dealing. Doc. No. 1-1. Defendants
removed to this Court based on diversity. Doc. No. 1. They subsequently moved to dismiss
Kaufman’s Complaint under Fed. R. Civ. P. 12(b)(1), (2) and (6). Defendants’ Motion to
Dismiss is ALLOWED. Doc. No. 13.
The allegations set forth in the Complaint, Doc. No. 1-1, surround Kaufman’s appearance
on the ABC reality television show Shark Tank. The Court considers “only facts and documents
that are part of or incorporated into the complaint” and takes all reasonable inferences in the
plaintiff’s favor. Trans-Spec Truck Serv., Inc. v. Caterpillar Inc., 524 F/3d 315, 321 (1st Cir.
In 2009 Defendants approached Kaufman with the opportunity to appear on the pilot
season of Shark Tank to attempt to get funding for his hands-free and wind resistant umbrella,
Nubrella. Doc. No. 1-1 at ¶¶ 2, 7. He then participated in a number of Skype interviews and a
background check. Id. at ¶ 8. In August 2009 Kaufman flew to Los Angeles, California to film
for the show, though it was not certain that his segment would actually be aired. Id. at ¶ 9. In
order to participate on the show, Kaufman signed a contract, the Participant Agreement. 1 Id. at 5.
The Agreement provides the following:
I acknowledge, understand and agree that if any dispute, controversy or claim
arising out of or relating to this Agreement, the breach of any term hereof, or any
effort by any party to enforce, interpret and/or construe, rescind, terminate or annul
this Agreement, or any provision thereof, including without limitation the
applicability of this arbitration provision, and any and all disputes or controversies
relating in any manner to my appearance on or participation in the Series
(collectively “Matters”), cannot be settled through direct discussions, the parties
agree to endeavor first to settle the matter by mediation conducted in the County of
Los Angeles and administered by JAMS under its Commercial Mediation Rules. If
any matter is not otherwise resolved through direct discussions or mediation, as set
forth above, then the parties agree that it shall be resolved by binding arbitration
conducted in accordance with the arbitration rules and procedures of JAMS, though
its Los Angeles, California office. Any such arbitration shall be conducted by a
single, neutral arbitrator, who shall be a retired judge of a state or federal court,
experienced in entertainment disputes, and selected from JAMS’ panel of
arbitrators proffered by its Los Angeles, California office. If the parties cannot
agree upon an arbitrator after good faith discussion, the arbitrator shall be chosen
by JAMS pursuant to the requirements of this paragraph. The parties agree that the
arbitrator’s ruling in the arbitration shall be final and binding and not subject to
appeal or challenge. Judgement upon the award rendered by the arbitration may be
entered in any court having jurisdiction thereof. As set forth more fully below,
Producer, but not I, shall have the right to seek injunctive or other equitable relief
pursuant to California Code of Civil Procedure Section 1281.8 and any successor
or similar statute. In any and all other respects, the Federal Arbitration Act (9 U.S.C.
The Participation Agreement can be properly considered with the Motion to Dismiss. See
Cogan v. Phoenix Life Ins. Co., 310 F.3d 238, 241 n.4 (1st Cir. 2002).
§1, et seq.) or its successor statute shall apply and govern the enforcement of this
Doc. No. 16-1 at 28, ¶ 66.
The episode featuring Kaufman originally aired on February 4, 2010 at 9:00 p.m. on
ABC. Doc. No. 1-1 at ¶ 9. On the show, Kaufman accepted a $200,000 deal with Daymond John
and Kevin Harrington for 51% ownership in his company. Id. at ¶ 10. Before John and
Harrington could negotiate a distribution deal with perspective national retailers, Defendants
asked Kaufman to reappear on the show in a “pre-scripted, fabricated” follow-up episode. Id. at ¶
11-13. The purpose of this follow up episode was “to show the audience not only are [John and
Harrington] following through with their proposed investment but playing an additional role in
trying to help the companies invested in build, grown distribution by utilizing their clout and
contacts.” Id. at ¶ 11.
Defendants had instructed John “to find a so called distribution ‘partner’ for Kaufman for
the sole purpose of making the audience believe [John and Harrington] indeed did invest but also
were playing an integral role in helping their invested companies.” Id. at ¶ 14. “Due [to] Mr.
John’s lack of ability and connection[s] to align [Kaufman’s company] with a valid prominent
national retailer he was left with pursing a falsified partnership with the recent bankrupt Sharper
Image company” in the follow-up episode. Id. at ¶ 15. In 2001, Sharper Image had closed all 450
of their retail locations after they were forced to file for bankruptcy as a result of class action
lawsuit brought against them by millions of consumers who had purchased defective air
purifiers. Id. at ¶ 16. The follow-up episode featured a partnership between Kaufman and a
private party who had bought the rights to the Sharper Image brand name. Id. at ¶ 17. This new
company was not concerned with the “fabricated deal,” in fact they were “delighted with the
opportunity to get their name on national TV helping show the consumer the brand was still in
business.” Id. at ¶ 18. “[P]laintiff was adamant about not wanting to participate in not only a
‘fabricated’ distribution deal but also associating its new brand with one of the most failed and
hated retailers in the country.” Id. at ¶ 19.
Subsequent to the taping of the follow-up episode featuring Kaufman, there was some
disagreement about the deal reached on air and it was never carried out. Id. at ¶ 20. The original
deal of $200,000 was ignored by the John and Harrington and a settlement for $20,000 was
reached between the parties. Id. at ¶¶ 20-21. “At the present time of the settlement agreement,
the current claim(s) could not be litigated as they were not present nor could be predicated.” Id.
at ¶ 22. After the settlement, Defendants began re-selling re-runs of both of the episodes
featuring Kaufman. Id. at ¶ 23. Those reruns continue to air on CNBC and other international
broadcasting networks that Kaufman is unaware of over six years later. Id. at ¶ 24. Due to Shark
Tank’s popularity and high ratings Defendants have received significant financial returns from
selling these re-runs and from commercials. Id. at ¶¶ 49-50. “Plaintiff has estimated that just
CNBC alone cycles through all of its Shark Tank episodes at least once per quarter.” Id. at ¶ 44.
“Thus . . . Plaintiff has estimated approximately 8 re-runs per year times 5 year[s] or 40 re-runs
just with CNBC alone.” Id. at ¶ 45.
In 2012, after his appearance on Shark Tank, Kaufman “returned to the design table” to
made significant changes to his product, Nubrella. Id. at ¶ 26. He overhauled the design to add
various enhanced features, ultimately resulting in a higher production cost and therefore a higher
retail price than $29.99, as he originally stated on the show. Id. at ¶¶ 26-27, 30. When
Defendants air re-runs of the show they do not notify the viewers of the date the episode
originally aired or the fact that Kaufman’s product has since changed. Id. at ¶¶ 30-31. Since ABC
is one of the largest networks in the world, the audience “100% believes everything they view on
the show to be true and accurate” and up-to-date. Id. at ¶ 32.
Kaufman’s Complaint, removed to this Court on the basis of diversity, alleges two
counts. First, Kaufman alleges that Defendants are negligent in continuing to air the episodes
because they show an older model of the product which was sold at a lower price, damaging his
“reputation, brand image, and revenues.” Id. at ¶¶ 25-32. Second, Kaufman claims that
Defendants breached their fiduciary duty and the covenant of good faith and fair dealing because
they do not reveal that the follow up episode is “fabricated and pre-scripted.” Id. at ¶ 33. This
had led to many consumers being upset and sending “negative sometimes threatening emails,”
negative internet reviews and even threats to contact the media. Id. at ¶ 31. “[The consumers]
claim fraud, bait and switch and threats to call the show Shark Tank and John to complain about
the fact he is not honoring the aired price of $29.99.” Id. at ¶ 30. Additionally, this has also
caused issues with Kaufman’s ability to fundraise.
The . . . distribution fabrication has . . . severely hampered the plaintiff’s ability to
secure distribution/ retail partners. Most all whom the plaintiff has met with have
seen the plaintiff’s Shark Tank follow up and assume that TV doesn’t lie and indeed
he plaintiff has partnered with the Sharper Image companies. Due to Sharper
Image’s serious litigation issues, its recent bankruptcy filing and closing of its
stores has led to no one wanting to be associated with the brand name.
Id. at ¶ 37. Kaufman has repeatedly asked for an additional chance to come on the show and
accurately update the audience on his business in order to reverse some of the damage that has
been caused, but the Defendants have ignored him. Id. at ¶¶ 38-39, 52. Further, Defendants have
never attempted to communicate with Kaufman about them having sold the rights of Shark Tank
to networks all over the world or offered him any royalties generated from the sale. Id. at ¶¶ 4143. “[Defendants] . . . sold the rights of the show to other networks . . . at their own discretion
purely to maximize revenues and profits all with no concern what effect this may have on the
plaintiff’s business.” Id. at ¶ 42.
Defendants have moved to dismiss the Complaint under Fed. R. Civ. P. 12(b)(1), (2) and
(6). Doc. No. 13. Defendants’ arguments center on this Court being the incorrect venue and
forum for Kaufman’s complaints. Defendants point to the signed Participant Agreement which
includes an arbitration clause that mandates for alternative dispute resolution options. Doc. No.
13-14. Kaufman’s Opposition argues that the Participant Agreement, including the arbitration
clause, is unconscionable and should not be enforced. Doc. No. 21. Defendants reply by
reiterating that the Agreement is a binding contract that Kaufman voluntarily signed after
consulting legal counsel and conducting an arm’s length negotiation. Doc. No. 26. Additionally,
Defendant Finnmax argues that this Court lacks personal jurisdiction over it. Doc. No. 13-14.
a. STANDARD OF REVIEW
To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(6), “a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007)). The Court “must take the allegations in the complaint as true and must make all
reasonable inferences in favor of the plaintiff.” Watterson v. Page, 987 F.2d 1, 3 (1st Cir.
1993). Dismissal for failure to state a claim is appropriate when the pleadings fail to set forth
“factual allegations, either direct or inferential, respecting each material element necessary to
sustain recovery under some actionable legal theory.” Centro Medico del Turabo, Inc. v.
Feliciano de Melecio, 406 F.3d 1, 6 (1st Cir. 2005) (quoting Berner v. Delahanty, 129 F.3d 20,
25 (1st Cir. 1997)).
Because Kaufman is proceeding pro se, this Court construes his filings liberally. See
Rodi v. S. New Eng. Sch. of Law, 389 F.3d 5, 13 (1st Cir. 2004) (“[T]he fact that the plaintiff
filed the complaint pro se militates in favor of a liberal reading.”). Allegations made in a pro se
complaint are held to less stringent standards than formal pleadings drafted by lawyers. Haines v.
Kerner, 404 U.S. 519, 520 (1972). Even so, “pro se status does not insulate a party from
complying with procedural and substantive law.” Ahmed v. Rosenblatt, 118 F.3d 886, 890 (1st
b. SHARK TANK’S ARBITRATION CLAUSE
The Agreement Kaufman signed prior to his appearance on Shark Tank contains a section
entitled “Dispute Resolution and Limitation of Remedies” which calls for arbitration for “any
dispute, controversy or claim arising out of or relating to this Agreement . . . and any and all
disputes or controversies relating in any manner to my appearance on or participation in the
Series.” Doc. No. 16-1 at 29 ¶ 66. Each of Kaufman’s claims falls comfortably within the scope
of any and all disputes or controversies relating in any manner to his appearance on or
participation in the series. State and federal law requires dismissal in favor of arbitration when
both parties have agreed to it in a signed contract or agreement. Broughton v. Cigna Healthplans
of Cal., 988 P.2d 67, 72 (Cal. 1999); see also 9 U.S.C. § 2; Cal. Civ. Proc. Code § 1281. Thus,
the Court must dismiss this case in favor of arbitration pursuant to the terms of the contract
unless an exception applies. 9 U.S.C. § 2; Cal. Civ. Proc. Code § 1281.
Whether an arbitration clause is enforceable in a contract involving interstate commerce
is governed by the Federal Arbitration Act (FAA), 9 U.S.C. §§ 1-14, as well as the California
Arbitration Act, Cal Civ. Proc. Code § 1281, which governs this Agreement. See Doc. No. 16-1
at 26 ¶ 55 (“This agreement . . . shall be governed by and interpreted in accordance with the
substantive laws of the State of California.”). Under both Acts, arbitration agreements are
favored and are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in
equity for the revocation of any contract.” 9 U.S.C. § 2; Cal. Civ. Proc. Code § 1281. Kaufman
asserts that the contract is unconscionable. Unconscionability is one ground for an arbitration
clause to be found unenforceable. 9 U.S.C. § 2. “The party opposing arbitration . . . has the
burden of proving the arbitration is unconscionable.” Szetela v. Discover Bank, 118 Cal. Rptr. 2d
862, 866 (Cal. Ct. App. 2002).
Unconscionability has two elements. The first is procedural unconscionability which
looks at the unequal bargaining power of the parties resulting in a level of “oppression” or
“surprise.” Armendariz v. Found. Health Psychcare Serv., Inc., 6 P.3d 669, 689 (Cal. 2000). The
second is substantive unconscionability, which looks at whether the results “shock the
conscience” because they are “overly harsh” or “one-sided.” Id. To meet the burden of proof
under California law, the plaintiff must show that the arbitration agreement meets both elements
of unconscionability, though each element does not have to be present to the same degree. Id.
i. PROCEDURAL UNCONSCIONABILITY
Under California law, procedural unconscionability “concerns the manner in which the
contract was negotiated and the respective circumstances of the parties at that time, focusing on
the level of oppression and surprise involved in the agreement.” Chavarria v. Ralphs Grocery
Co., 733 F.3d 916, 922 (9th Cir. 2013). The oppression inquiry focuses on “the weaker party’s
absence of choice and unequal bargaining power that results in ‘no real negotiation.’” Id.
(quoting A&M Produce Co. v. FMC Corp., 186 Cal. Rptr. 114, 121-22 (Cal. Ct. App. 1982)).
The surprise inquiry “involves the extent to which the contract clearly discloses its terms as well
as the reasonable expectations of the weaker party.” Id. (citing Parada v. Super. Ct., 98 Cal. Rptr.
3d 743, 757 (Cal. Ct. App. 2009)).
In Higgins v. Superior Court, 45 Cal. Rptr. 3d 293 (Cal. Ct. App 2006), the California
Court of Appeal dealt with a signed agreement containing an arbitration clause in order to appear
on a reality show. Id. at 295. In that case five orphaned siblings were living with acquaintances
from their church and were chosen to appear on the show Extreme Makeover: Home Edition to
have their acquaintances’ home completely renovated. Id. at 296. Prior to their appearance, the
siblings had to sign an Agreement which included an arbitration provision. Id. The siblings were
given only five to ten minutes to read and sign the lengthy Agreement. Id. at 303. After the
renovation, the acquaintances forced the siblings to move out of the house. Id. at 298. The
siblings attempted to file a petition against the television producers for breach of their promise to
provide the siblings with a home and negligent misrepresentation for continuing to rebroadcast
their episode of Extreme Makeover, portraying a false narrative of the siblings’ living situation.
Id. The defendants argued that because the siblings signed the Agreement which contained an
arbitration clause their claims had to be arbitrated outside of court. California’s Second District
Court of Appeal found that arbitration provision to be unenforceable due to it being
unconscionable, both procedurally and substantively. Id. Procedurally, the Agreement was
completely drafted by the Defendants, a powerful television production company, while the
siblings were “young[,] unsophisticated and had recently lost both parents” and there is no
evidence of any negotiations that took place between the parties to create the Agreement. Id. at
304. Additionally, the Agreement was made up of 24 page single-spaced pages and 72 numbered
paragraphs, with the arbitration provision buried in the last section under the heading
“Miscellaneous” without any bold or capitalized font to highlight it. Id. at 296, 304.
Substantively, the arbitration provision barred only the siblings from seeking appellate review of
the outcome of the arbitration, but not the Defendants, creating a “harsh, one-sided” Agreement.
Id. at 305.
The Higgins Court found a strong showing of procedural unconscionability due to the
vulnerable nature of the young siblings and the placement of the arbitration provision at the end
of the Agreement mixed in with twelve paragraphs of other miscellaneous topics that could
easily be missed. Id. at 304. Those circumstances are not present here. First, the arbitration
clause was fully disclosed in bold, capital letters under the section heading “Dispute Resolution
and Limitation of Remedies.” Doc. No. 16-1 at 28. Kaufman initialed each page and each
section. Id. at 28-29. Kaufman has failed to sufficiently allege facts as to the surprise element of
procedural unconscionability. As to the oppression element, while it appears there was no real
negotiation between the parties, “[c]ommercial practicalities . . . dictate that unbargained-for
terms only be denied enforcement where they are also substantively unreasonable.” Lasao v.
Stearns Lending Co., No. 2:10-CV-01864, 2011 WL 3273923, at *8 (D. Nev. July 29, 2011)
(quoting A&M Produce Co., 186 Cal. Rptr at 122). Thus, the Court turns to substantive
ii. SUBSTANTIVE UNCONSCIONBILITY
Substantive unconscionability addresses the fairness and mutuality of the contract, in
other worlds whether the terms of the contract impose similar limitations on each party or
provide reasonable justification if it does not. Perez v. DirecTV Group Holdings, LLC, No. 8:16CV-1440, 2017 WL 1836357, at *11 (C.D. Cal. May 1, 2017). “[A] contract can provide for a
margin of safety that provides the party with superior bargaining strength a type of extra
protection for which it has a legitimate commercial need without being unconscionable.”
Baltazar v. Forever 21, Inc., 367 P.3d 6, 15 (Cal. 2016); see also Cal. Civ. Code § 1670.5.
In Higgins, the arbitration provision was deemed to be “one sided” due to the unequal
options of relief afforded to the two parties without a valid justification for the difference.
45 Cal. Rptr. 3d at 305. Here, the Agreement limits both Kaufman and Defendants to a majority
of the same legal remedies in the same forum, at least initially. The Agreement states that “[i]n
agreeing to arbitration, both producer and I acknowledge that we have waived the right to a jury
trial.” Doc. No. 16-1 at 29-30 (emphasis added). The Agreement also provides:
I acknowledge . . . [that] all disputes or controversies relating in any manner to my
appearance on or participation in the Series (collectively “Matters”), cannot be
settled through direct discussions, the parties agree to endeavor first to settle the
matter by mediation conducted in the County of Los Angeles and administered by
JAMS under its Commercial Mediation Rules. If any matter is not otherwise
resolved through direct discussions or mediation, as set forth above, then the parties
agree that it shall be resolved by binding arbitration conducted in accordance with
the arbitration rules and procedures of JAMS, though its Los Angeles, California
Doc. No. 16-1 at 28 ¶ 66. This paragraph calls for both parties to first discuss the issue among
themselves then use mediation in the County of Los Angeles. If mediation is unsuccessful, the
parties will arbitrate under the rules of the Judicial Arbitration and Mediation Services, Inc.
(JAMS), which will result in a binding final decision not subject to appeal or challenge. Id.
Within each of the aforementioned alternative methods of dispute resolution, both parties are
limited to only monetary damages. Id. This is largely contrasted from Higgins, where only the
petitioners were required to arbitrate their claims, as evidenced by the repeated use of “I” instead
of “the parties,” as used here. 45 Cal. Rptr. 3d at 304-05; Doc. No. 16-1 at 28 ¶ 66.
However, here, under certain limited circumstances only the Defendants have the right to
seek injunctive or other equitable relief. Id. at 29 ¶ 68. The Agreement states, “Producer, but not
I, shall have the right to seek injunctive or other equitable relief pursuant to California Code of
Civil Procedure section 1281.8 and any successor or similar statute.” Doc. 16-1 at 28 ¶ 66
(emphasis added). The Agreement goes on to validate this caveat by highlighting the fragility of
the television reality competition business where divulging certain information prematurely can
result in large financial losses not covered by monetary damages to Defendants:
I further acknowledge and agree that the business realities of reality competition
television production, including the Series, create special circumstances for
which Producer must be able to maintain its ability to seek injunctive relief
and/or other equitable and/or provisional remedies. For example, a participant’s
premature or threatened disclosure in violation of the confidentiality or
publicity provisions of this Agreement could result in a reduction of audience
interest or their diminution in the value of the Series or SPT, and/or Network
irreparable injury and damage that could not be law. Accordingly, under such
circumstances, Producer, SPT and Network hereby reserve the right to seek
injunctive relief and I hereby expressly agree that Producer, SPT and Network
shall be entitled to injunctive and other equitable relief, without posting any
bond, to prevent and/ or cure any breach or threatened breach of this Agreement.
Id. at 29 ¶ 68. The contract itself spells out the “legitimate commercial need” for the lopsided
provision. Baltazar, 367 P.3d at 15.
This provision is markedly different from that in Higgins, where only the petitioners were
barred from seeking appellate review after arbitration. 45 Cal. Rptr. 3d at 305. This Agreement
states, “[t]he parties agree that the arbitrator’s ruling in the arbitration shall be final and binding
and not subject to appeal or challenge.” Doc. 16-1 at 29 ¶ 66 (emphasis added). Even with the
provided justification and relevant statute, this Court recognizes that the presence of injunctive
and other equitable relief options allotted only to Defendants, in certain situations, creates some
potential level of substantive unconscionability in this Agreement. However, the burden is on
Kaufman to set forth sufficient factual allegations to challenge the legitimate commercial need
for the different treatment. Kaufman has failed to do this.
Because Kaufman’s Complaint does not make out a factual basis for either procedural or
substantive unconscionability, the contract and its arbitration clause are valid and enforceable.
Kaufman must follow the procedure set forth in the contract to resolve his disputes with
The Motion to Dismiss, Doc. No. 13, is ALLOWED under Fed. R. Civ. P. 12(b)(1).
Accordingly, the Court need not reach Defendants’ other arguments or Finnmax’s personal
/s/ Leo T. Sorokin
Leo T. Sorokin
United States District Judge
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