Affirming a trial court ruling ordering arbitration of a film dispute, a California appellate court held that an arbitration agreement in one contract requires arbitration of a dispute arising under a separate contract when both contracts substantially involve the same transaction.

In Answar, LTD v. Bold Entertainment, LLC, No. B194924, 2007 WL 4472698 (Cal. Ct. App. Dec. 24, 2007), Answar hired Bold Entertainment to produce a film for $175,000 and credit on the screen titles. The parties signed two loan-out agreements containing arbitration clauses. However, the parties later disputed whether they entered into a third agreement (The Animation Production Agreement).

In 2004, Bold Entertainment completed the film and delivered the film to Answar. Answar paid the $175,000 and credited the film on the screen titles. However, it did not pay the fee specified in the Production Agreement.

Bold Entertainment submitted an arbitration claim seeking to recover the $75,000 production fee from the Production Agreement. In response, Answar sought declaratory and injunctive relief seeking to avoid arbitration. Answar asserted that there was no arbitration agreement between the parties. Bold Entertainment countered that the duty to arbitrate arose from the two earlier contracts because the parties entered into the three contracts that involved the same transaction. The trial court ordered arbitration finding the two contracts Answar entered into contained agreements requiring the parties to arbitrate disputes about the film production. The arbitrator awarded Bold Entertainment $75,000, interest, and attorney fees. Answar appealed.

The Court held that Answar had agreed to arbitrate the dispute over the Production Agreement because two loan-out agreements and the third disputed Production Agreement involved the same transaction. The arbitration agreements in the loan-out contracts expressly mandated arbitration of "any and all disputes arising out of or in connection with this Agreement or its Performance."

Under California Civil Code section 1642, "Several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together." Because all three contracts relate to the same transaction, the film's production, Answar agreed to arbitrate disputes falling under the ambit of the Production Agreement by agreeing to arbitrate in the loan-out agreements. Therefore, the dispute about whether the parties entered into the Production Agreement was for the arbitrator to resolve.