Arbitration Clause Doesn't Cover Dispute Over Movie Payments

The U.S. District Court for the Southern District of New York decided that a suit, alleging a distributor of made-for-TV-movies failed to pay amounts owed the films' producer, wasn't subject to an arbitration clause in the parties' distribution agreement. MAT Movies & Television Productions GmbH & Co. v. RHI Entertainment Distribution LLC, 10 CIV. 1405. The distribution contract stated that MAT and RHI would arbitrate “any dispute between the parties hereto with respect to this Agreement.” But after a dispute arose over the monies RHI owed MAT, the distributor and the producer entered into a settlement agreement that provided for an audit by PricewaterhouseCoopers ' and arbitration in the event that either MAT or RHI “disputes the Audit Amount.” MAT later sued claiming that RHI breached the settlement agreement by not paying MAT installments of the audit amount.

Allowing the suit to proceed, District Judge Sidney H. Stein noted that “in this action neither party disputes the Audit Amount or even suggests that plaintiff's claim falls within the Settlement Agreement's narrow arbitration clause. Instead, this motion [by RHI to dismiss MAT's suit or stay it pending arbitration] turns on whether the broader arbitration clause in the earlier Distribution Agreement applies to a claim alleging breach of the later Settlement Agreement.”

The district judge then reasoned: “If the broad arbitration provision in the Distribution Agreement governs all disputes arising out of the later Settlement Agreement, then the narrow arbitration provision in the Settlement Agreement would be superfluous. ' The specific agreement to arbitrate disputes over the Audit Amount suggests that the parties did not intend to arbitrate other disputes arising under the Settlement Agreement.” The judge added: “Construction of the Distribution Agreement is not required to resolve the parties' dispute, and their rights or obligations under the Distribution Agreement are not implicated. Except for providing context to the underlying dispute, and for deciding the issue RHI raises in this motion, the Distribution Agreement plays no role. Accordingly, the Distribution Agreement's arbitration clause covering 'any dispute' arising under that agreement does not apply here.”

The U.S. District Court for the Southern District of New York decided that a suit, alleging a distributor of made-for-TV-movies failed to pay amounts owed the films' producer, wasn't subject to an arbitration clause in the parties' distribution agreement. MAT Movies & Television Productions GmbH & Co. v. RHI Entertainment Distribution LLC, 10 CIV. 1405. The distribution contract stated that MAT and RHI would arbitrate “any dispute between the parties hereto with respect to this Agreement.” But after a dispute arose over the monies RHI owed MAT, the distributor and the producer entered into a settlement agreement that provided for an audit by PricewaterhouseCoopers ' and arbitration in the event that either MAT or RHI “disputes the Audit Amount.” MAT later sued claiming that RHI breached the settlement agreement by not paying MAT installments of the audit amount.

Allowing the suit to proceed, District Judge Sidney H. Stein noted that “in this action neither party disputes the Audit Amount or even suggests that plaintiff's claim falls within the Settlement Agreement's narrow arbitration clause. Instead, this motion [by RHI to dismiss MAT's suit or stay it pending arbitration] turns on whether the broader arbitration clause in the earlier Distribution Agreement applies to a claim alleging breach of the later Settlement Agreement.”

The district judge then reasoned: “If the broad arbitration provision in the Distribution Agreement governs all disputes arising out of the later Settlement Agreement, then the narrow arbitration provision in the Settlement Agreement would be superfluous. ' The specific agreement to arbitrate disputes over the Audit Amount suggests that the parties did not intend to arbitrate other disputes arising under the Settlement Agreement.” The judge added: “Construction of the Distribution Agreement is not required to resolve the parties' dispute, and their rights or obligations under the Distribution Agreement are not implicated. Except for providing context to the underlying dispute, and for deciding the issue RHI raises in this motion, the Distribution Agreement plays no role. Accordingly, the Distribution Agreement's arbitration clause covering 'any dispute' arising under that agreement does not apply here.”