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The California Court of Appeal has ruled that the son of a deceased Hollywood actor was not bound by his father's arbitration agreement because the son was neither a signatory to the agreement nor a third party beneficiary and because there was no agency relationship.
In Matthau v. Superior Court, No. B194637, 2007 WL 1532347 (Cal. Ct. App. May 29, 2007), four years after the death of Hollywood legend Walter Matthau (Walter), his son Charles Matthau (Charles) stopped paying annual commissions on profits from his father's acting career to his father's talent agent, the William Morris Agency (William Morris).
There was an arbitration agreement between Walter and William Morris. The agreement was part of "Rule 16(g)," the collective bargaining agreement between the Screen Actors Guild (SAG) and the Association of Talent Agents (ATA). Walter belonged to the former, William Morris to the latter.
When Charles stopped paying commissions, William Morris sought to invoke the arbitration agreement. In reversing the trial court's order compelling arbitration, the Court noted that Charles was not a signatory to the agreement and, accordingly, that the only way he could be held to it was by some legal principle binding non-signatories to such agreements. The Court found that none of those principles was present in this case.
The Court summarized the principle guiding non-signatory arbitration cases as follows: "The common thread… is the existence of an agency or similar relationship between the non-signatory and one of the parties to the arbitration agreement." Because there was nothing in the father/son relationship that granted Walter actual or implied authority to bind his son, no such agency relationship existed.
The Court also rejected William Morris' argument that Charles was bound as a "third party beneficiary" of the contract. In rejecting this argument, the Court explained that a person does not assume the legal status of a "third party beneficiary" simply because he benefits from a contract.
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