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When television’s Judge Alex was sued by his manager over unpaid fees, he did not turn to court or the parties’ arbitration agreement to settle the dispute. Instead, Judge Alex turned to the Commissioner of Labor, and a California appellate court supported his decision.
In Ferrer v. Preston, No. B188997, 2006 WL 3438255 (Cal. Ct. App. Nov. 30, 2006), Arnold Preston brought an arbitration claim against Alex Ferrer (Judge Alex) for failure to pay Preston’s management fees. The parties had entered into a management contract calling for all disputes to be resolved in arbitration.
Judge Alex filed a motion to stay arbitration with the arbitrator, the trial court, and the California Labor Commissioner (Commissioner). He also filed a petition to determine the controversy with the Commissioner. Meanwhile, Preston filed a motion to compel arbitration with the trial court. The trial court refused to compel arbitration and stayed the action pending resolution by the Commissioner. Preston appealed.
On appeal, the Court upheld the lower court and found the dispute was governed by the California Talent Agencies Act (Act). The Act requires all claims arising thereunder to be referred to the Commissioner. Because the statute vests exclusive original jurisdiction with the Commissioner, all of the Commissioner’s administrative procedures must be resolved before a dispute can be referred to “another tribunal.” The Court found this case to be on point with an earlier case involving the rock band Jefferson Airplane. See Buchwald v. Superior Court, 254 Cal.App.2d 347 (Cal. 1967).
Citing Buckeye Check Cashing, Inc. v. Cardegna, 126 S.Ct. 1204 (2006), Preston argued that the Federal Arbitration Act (FAA) preempted California law requiring the Commissioner to determine the validity of the management contract. In rejecting this argument, the Court found that Buckeye was inapposite. Buckeye held that the validity of a contract containing an arbitration clause is a question for the arbitrator, not the court, but as the Court observed, Buckeye did not address whether the FAA preempts the exhaustion doctrine (i.e., whether a challenge to the contract as a whole can first be made to an administrative agency vested with exclusive original jurisdiction).
In a strongly worded dissent, Judge Vogel noted that Judge Alex participated in the arbitration for six months, filed a petition with the Commissioner, and filed a superior court action, but at no time did he challenge the validity of the arbitration clause. The dissent further reasoned that Buckeye required the arbitrator to determine the validity of the management contract because the Act was in play based only on Judge Alex’s argument that the contract was “not what it appears to be.”
Judge Vogel concluded his dissenting opinion by expressing the following regret: “Instead of the speedy, efficient, and relatively inexpensive procedure contemplated by the parties’ contract, my colleagues have permitted [Judge Alex] to cause a delay of years and triple or quadruple the parties’ expenditures. That is not how it is supposed to work.”
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