A concert promoter's claims against hip hop artist 50 Cent have been compelled to arbitration by a federal district court in Virginia, even though the star was not a signatory to the contract requiring arbitration, because he received a "direct benefit" of a $150,000 "kill fee" under that contract.

In Jackson v. Iris.com, No. 1:07CV961, 2007 WL 4409790 (E.D. Va. Dec. 19, 2007), Iris sought to book Jackson, widely known as 50 Cent, for a concert series. Iris negotiated with G*Town to retain Jackson's services and entered into a contract with G*Town. This contract contained a liquidated damages provision in case of a breach by Iris or Jackson, as well as an agreement to arbitrate all disputes under that contract.

G*Town then proceeded to negotiate with ATA, Jackson's booking agent, to secure Jackson's performance promised under the Iris-G*Town contract. These negotiations eventually broke down, and no contract was executed between ATA and G*Town.

At a later date, legal counsel for Jackson and Iris directly negotiated for Jackson's performance in the concert series. Those negotiations also failed to produce anything more than an unexecuted draft contract, which, unlike the Iris-G*Town contract, did not contain an arbitration agreement.

Upon an alleged breach, Iris demanded arbitration against Jackson and G*Town pursuant to the arbitration agreement in the Iris-G*Town contract. Jackson responded by filing a complaint to stay arbitration and for summary judgment, alleging in part that he could not be compelled to arbitrate as a non-signatory to the Iris-G*Town contract.

The Court held that Jackson was not a signatory to the Iris-G*Town contract, but was nevertheless bound to arbitrate Iris's allegations of breach.

The Court first observed that there was no genuine issue of fact as to which contract controlled the dispute between Iris and Jackson; the Iris-Jackson contract was an unexecuted draft, and the Iris-G*Town contract was the only executed contract that could control the dispute.

Next, even assuming that G*Town had no actual or apparent authority to bind Jackson to the Iris-G*Town contract, the Court held that Jackson was bound to arbitrate Iris's breach claims. The Court was troubled by Jackson's retention of $150,000 paid by Iris to Jackson through G*Town upon execution of the Iris-G*Town contract.

Well-settled Fourth Circuit precedent established that a party claiming the benefit of a contract could not, at the same time, avoid the contract's burdens. To the Court, Jackson's retention of the $150,000 was the very type of received "direct benefit" that estopped him from avoiding the contract's arbitration agreement.

The Court rejected Jackson's contention that the $150,000 payment did not arise under the Iris-G*Town contract which contained the arbitration agreement; since there was no other executed contract, and the unexecuted Iris-Jackson draft contract was not written until well after payment was made through G*Town, it was illogical to find that the ultimate payment to Jackson arose under anything other than the Iris-G*Town contract.