Studio attorneys seek to vacate arbitrator’s $128 million award

Pitting the power of the arbitrator against the arbitration agreement, attorneys for Twenty-First Century Fox Inc. argued Monday a neutral overstepped his bounds with a $128 million punitive damage award.

Seeking to vacate the sizable punitive damage award, which comprised the bulk of the $179 million total award issued In February, Fox counsel Daniel M. Petrocelli of O'Melveny & Myers LLP said the language of the plaintiffs' contracts with the company should have precluded the arbitrator's decision.

The case was filed by actors Emily Deschanel and David Borneaz, stars of the long-running hit television series "Bones," over "sweetheart deals" they claimed the company has exploited to rob them of rightly earned profit participation rights for the show. Two producers for the show joined Deschanel and Borneaz as plaintiffs. Wark Entertainment Inc. v. Twentieth Century Fox, BC602287 (L.A. Sup. Ct., filed Nov. 25, 2015).

Fox successfully petitioned to have the case moved to arbitration in 2016, where it was handled by JAMS neutral Peter Lichtman, a retired Los Angeles County Superior Court judge. But things didn't proceed from there as Fox likely would have hoped, with Lichtman's sizable plaintiffs' award accompanied by a number of harsh words for company executives.

"It can only be concluded that the Fox witnesses lacked credibility and at times appeared to intentionally deviate from the truth," Lichtman wrote in his judgment, made public after plaintiffs filed to have the award entered by Los Angeles County Superior Court Judge Richard E. Rico.

With Rico telling both sides Monday to give him "their best shot" on Fox's request to vacate the award, Petrocelli argued punitive damages -- or "punies" as he called them -- should never have been on the table in the first place.

The language of the contracts between Fox and the plaintiffs prohibits an arbitrator from issuing punitive damages against the company, Petrocelli said. The fact that plaintiffs hadn't requested punitive damages in their prayer for relief essentially showed they agreed, he said.

"It's an afterthought to somehow shield this ruling from judicial review," Petrocelli said.

Daniel Saunders, a partner at Kasowitz, Benson, Torres & Friedman LLP and counsel to the plaintiffs, said if Fox had issues with the potential for punitive damages, the proper time to raise them would have been at the start of the arbitration -- not following an adverse judgment. Fox had gambled and lost, Saunders said, and was now scrambling for a redo.

Saunders said Petrocelli was "flat out wrong" to claim Lichtman was precluded from issuing punitives. He noted Petrocelli had not been involved in the arbitration and was only brought on following the adverse judgment.

"Maybe that's the reason why," Saunders said.

Dale Kinsella, a Kinsella Weitzman Iser Kump Aldisert LLP partner and counsel to plaintiff Wark Entertainment, also threw some barbs Petrocelli's way, asking him repeatedly to show "clear and unambiguous" limitations imposed by the contract. Near the close of the hearing, he said Petrocelli never provided one.

Though both sides of the conflict seemed eager for the last word, Rico called the hearing after several lively exchanges and said he would issue a written judgment soon.

Glenn A. Danas, a partner at Robbins Kaplan LLP not involved in the hearing, said the case is part of a trend seen recently with studios and other large employers. The companies insist on arbitration for purported efficiency and flexibility, Danas said, among other reasons.

"And no doubt for the ability to help select the arbitrator," Danas said. "Yet when they are occasionally hit with a large award, suddenly the 'efficiency' that led them to want to use the forum in the first place is cast aside and they are back in court crying foul."

Unfortunately for the studios, he said, an arbitrator's decision is extremely hard to disturb on appeal. Barring a showing of actual arbitrator bias or conflict of interest, Danas said, "There's no way the trial court should disturb this ruling.

"Giving up the right to appellate review is one of the considerations the studio should have weighed prior to forcing arbitration of the dispute," Danas said. "Now it shouldn't be heard to complain, and the studio's argument that the arbitrator 'exceeded his authority' is going to be a tough uphill climb."