Producer Michael Benaroya is fighting a contract and fraud claim over Willis’ services for an aborted film
Yet another lesson in getting everyone’s signature on a deal came on Thursday when a California appeals court reversed Bruce Willis’ $5.9 million win against producer Michael Benaroya over the aborted film, Wake.
As previously described here, Willis was to star in the movie about a sociopath who attempts to reconnect with his estranged family. The picture was being produced by Benaroya Pictures, run by Mr. Benaroya (Margin Call, Lawless, The Words), which under an escrow agreement, was supposed to put up $8 million for the actor’s services. Only $3 million came into the escrow before production company ran into financing problems and the movie had to be shut down. Thereafter, Willis filed a demand for arbitration at JAMS claiming that Benaroya had breached contract and committed fraud and negligent misrepresentation. First, the arbitrator found in his favor, and then a Los Angeles Superior Court judge confirmed the judgment.
The big issue on appeal was the arbitrator’s finding that Benaroya was the alter ego of his production company and had to submit to arbitration even though he didn’t personally sign the agreement. As the arbitrator determined Benaroya was a proper party, he became jointly responsible for the judgment with the production company.
The core argument why Benaroya had to accept arbitration was that the escrow agreement stated that any dispute would be handled by the rules of JAMS (an arbitration forum), and those rules give the arbitrator the ability to determine its own jurisdiction.
But the California appeals court rules that it should have been a trial court and not the arbitrator to determine who among those who hadn’t signed the agreement was a proper party.
“Here, while it is true that the language of an arbitration agreement determines the scope of the arbitrator’s powers granted by the signatories, the agreement cannot bind nonsignatories, absent a judicial determination that the nonsignatory falls within the limited class of third-parties who can be compelled to arbitrate,” states the opinion.
The judgment against the production company stands, but for the moment, Michael Benaroya has been able to reverse a decision he’s liable as an alter ego.
Marty Singer, attorney for Willis, is ready for the next round.
“The Appellate Court ruling on whether Michael Benaroya should be an alter ego is a procedural issue,” he comments. “Per the Court of Appeal ruling, we will now be proceeding in the Los Angeles Superior Court and we are confident that the court will follow the undisputed evidence in the arbitration establishing the liability of Michael Benaroya as the alter ego of Benaroya Pictures.”