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vs. Case No. CV 19-1862-GW
THURSDAY, MAY 23, 2019
8:30 A.M.

Attorney at Law
1901 Avenue of the Stars, Suite 500
Los Angeles, California 90067
Attorneys at Law
808 Wilshire Boulevard, 3rd Floor
Santa Monica, California 90401
Attorney at Law
333 South Grand Avenue
Los Angeles, California 90071
Attorney at Law
1999 Avenue of the Stars, 8th Floor
Los Angeles, California 90067

ALSO PRESENT: Stephanie Aberton, In-house counsel

8:30 A.M.
THE COURT: Okay. In that case, let me call Optimum
Productions versus HBO.
MR. WEITZMAN: Good morning, Your Honor. Howard
Weitzman on behalf of Optimum Productions and the Estate of
Michael Jackson.

THE COURT: All right.

MR. STEINSAPIR: Good morning, Your Honor. Jonathan
Steinsapir for the plaintiff and the petitioners.
THE COURT: All right.
MR. FREEDMAN: Good morning, Your Honor. Bryan
Freedman on behalf of the same parties.

THE COURT: All right.

MR. PETROCELLI: Good morning, Your Honor. Daniel
Petrocelli for the defendant Home Box Office, Inc., together
with Theodore Boutrous and Stephanie Aberton, who is the
in-house chief litigation counsel for Home Box Office. She's
the client.
THE COURT: All right. So do I have to be nice to
her, too?
MS. ABERTON: No, Your Honor.

THE COURT: All right. We're here on a motion to remand and a

motion to compel arbitration.
I have issued a tentative on the matters. I presume both
sides have seen it?
MR. STEINSAPIR: Thank you for your excellent and
your law clerks' excellent work.
Too much?

THE COURT: Too much. I feel a little drippy after

I hear all of that.
Yes, does somebody want to argue something?
MR. STEINSAPIR: Yes, Your Honor. Of the motion to

remand –


MR. STEINSAPIR: -- we will submit on the tentative.

MR. STEINSAPIR: My only comment is that on the
arbitration issue, it looks like the best case for them is from
the California Court of Appeal, and it might be that they would
want to go back to state court, in which case we would be okay
with it.
But with that said, I will turn to the issue Your Honor
And the issue is whether arbitrability has been delegated
to the arbitrator under this agreement.
I want to argue that issue, but it's a tricky issue.
There is a split of authority on it.
There is no binding authority from either the NinthCircuit or
the Supreme Court as Your Honor recognizes.I think Your Honor
can skip right over it and just go to arbitrability.
If you look at Footnote 7 of Your Honor's tentative, that
decides the issue of arbitrability right there, which is Your
Honor says correctly under Supreme Court precedent, challenges
to the validity of the agreement as a whole go to the
arbitrator. Only challenges to the arbitration clause are for
Your Honor. You can read their opposition papers.

THE COURT: But the problem is that is not their

only argument, that is one of their arguments and if that was
their sole argument then I can understand your argument here to
me on that point.
MR. STEINSAPIR: I would actually say it is their
sole argument.
They do not make a single argument -- not a single one
that is addressed to the validity of the arbitration clause as
such -- not a single one.

THE COURT: They're raising the issues -- they are

raising First Amendment issues, although they don't flesh that
out, but they kind of like dangle that.
They didn't make a Slapp motion, which is weird because if
they going to do that I thought they would have made a Slapp

MR. STEINSAPIR: I will tell you why they didn't

because the California Courts have said you can't make a Slapp
motion to a petition to compel arbitration. That would explain
to that.
On the First Amendment issue, those defenses are for the
The defenses are always for the arbitrator, that is what their
own case Henry Schein says.

Henry Schein says that any challenges to the merits of the

claim are for the arbitrator, even if they are frivolous.

THE COURT: Is the plaintiff conceding then the

point, so that I don't have to decide the issue?
I can say it is for me to decide, then just go forward and
then have you guys come back at a later date where I will then
-- because I haven't considered the arbitrability myself,
because I didn't feel I should do that unless I make the
determination that it's for me to make the decision on.
MR. STEINSAPIR: Well, if we're not going to
entertain argument on that issue, then I'm certainly not going
to concede the first issue, just come back here.
If what Your Honor is telling me to move on to the actual
issue that you discussed in your tentative, I will do that, and
I got the message, but that is it, I think this issue can be
Let me get to the issue of delegation.

In 1992, two very sophisticated parties here -- we're not

dealing with consumers, we're not dealing with employees, we're
dealing with a multi-billion dollar corporation, and Michael
Jackson at the time was worth some money -- maybe not a
billion, but it was a lot -- the biggest performer in the world
at the time.

THE COURT: In other words, after he passed away his

estate was worth more.

MR. STEINSAPIR: Well, it certainly was, but that is

for a lot of reasons. One of which, you don't have the
individual to spend money anymore, so it's easier to preserve
assets when that is the case, but that is a side issue.
The point is that these are two very sophisticated parties
represented by very sophisticated lawyers.
They agreed to the broadest possible arbitration clause
under the Ninth Circuit precedent and then they took it a step
farther and said this arbitration would be governed by the
Rules of the AAA.
Now at the time, and this is the issue, Rule 1 of the AAA
said these rules will apply as they exist at the time the
demand for arbitration is made, okay.
They, therefore, delegated clearly and unmistakably to
AAA --
THE COURT: Let's put it this way: I said I found
-- is it Gilbert?
MR. STEINSAPIR: Gilbert, the Court of Appeals case.

THE COURT: In Gilbert, it would be somewhat

persuasive. It seems to me, you know, I have no problem with
what you are arguing except for the fact that the Courts have
always said, and the Supreme Court has just recently this year
in a unanimous decision, that, you know, a decision by the
parties to give the arbitrator the jurisdiction or the
authority to decide the issues of arbitrability in and of
itself have to be clear and unmistakable.
In other words, it cannot be by silence, it cannot be just
as an afterthought, it has to be really explicit.
So the thing I can't understand is if I look at an
agreement in and of itself between the parties that actually
talk about this issue, I have to make sure that it's clear and
unmistakable from the language of the agreement itself, which
talks about it.
How am I supposed to say that well, if we have an
agreement that the parties entered into that doesn't reference
that specifically, but just simply says at some point in time
in the future if the rules of the AAA are changed by the AAA,
and the AAA can change its rules for whatever reason it wants
to, and for example, I gave some perhaps preposterous examples,
but let's say the AAA decides that none of its arbitrators have
to give a written decision that states a reason for their
They can say you win and you lose. Does that mean the
parties unmistakably agreed to that and are bound by that
because it's a clear indication of their agreement?
What happens if the AAA says if you lose in front of us,
not only does the loser has to pay the obviously -- attorney's
fees or whatever and the damages of the prevailing party, but
it also has to throw in a half million dollars to the AAA for
the insult of AAA of having to deal with a bad type of claim.
Has that loser agreed? "Oh yes, I did agree to give the
AAA a half million dollars if I lose."
MR. STEINSAPIR: Well, to address your two specific
examples, if the AAA were to purport to repeal the rule that
would violate the California Arbitration Act and the Federal
Arbitration Act so it would be unlawful, they both require
decisions from the arbitrator.
Certainly, the California Arbitration Act does, which is
-- there is a choice of law clause.
THE COURT: But can't you waive that?
MR. STEINSAPIR: I don't --

THE COURT: You are sophisticated parties, can't you

waive that?
MR. STEINSAPIR: I don't know.

THE COURT: That is the issue.

MR. STEINSAPIR: Let me get back to delegation.
The point is here and the case is -- I understand that

Your Honor is not bound by any of the cases, but I don't think
it's noteworthy but at least the overwhelming majority of other
district judges across the nation and the Second Circuit in an
unpublished decision, have gone my way on this issue.
One of the things they have said is a sophisticated party
HBO, you know what Rule 1 says, and you can opt out of it.
You can say we don't want that.
And let me just finish my thought, because I see where
Your Honor is going, but they have clearly and unmistakably
delegated the issue of what the rules of the arbitration are to
the arbitrator -- to the arbitration service, AAA.
They are clearly on notice that AAA changes its rules
because they change its rules all of the time.
AAA wasn't some new organization in 1992. We have cases
here talking about arbitration clauses from the AAA from the
'70s, in fact AAA goes back to the '30s. They have also always
changed their rules.
So HBO was certainly on notice as were we that it could
change this rule, and they certainly clearly and unmistakably
delegated the rules of the arbitration to the AAA.

THE COURT: In that recent Supreme Court case, the

Henry Schein, I think that is the case, that case wasn't a AAA.
The Supreme Court remanded it, and it was so clear that
the AAA rules would apply, and you would have to consider that
in and of itself to be clear and unmistakable, I don't
understand why the Supreme Court sent anything back.
The Supreme Court should have reached its decision because
it is clear as to what the language was.
MR. STEINSAPIR: Why they sent it back -- it was AAA
rules, wasn't it, or JAMS -- same thing.


MR. STEINSAPIR: They sent it back simply as -- I
think Mr. Boutrous would know the rules of the Supreme Court
better than I, but they didn't grant cert on the issue of that
They took it as assumed, and because that issue had not
been addressed by the Appeals Court, I believe it was for the
Appeals Court to address in the first instance, so that is a
procedural issue.

THE COURT: That's what I think, too.

This issue really has to be addressed by Appeals Court or
by the Supreme Court.
I understand your point, and I'm not saying that you are
necessarily wrong, it just seems to me there is a conflict
between a requirement that requires the assent of the parties
to be clear and unmistakable as a requirement -- as the first
step to saying that this important decision has been decided by
the parties versus a situation where, well, if the AAA decides
to do it later on, you know, that is clear and unmistakable no
matter what the AAA decides to do, because it was possible that
the AAA could have done it.

If that is all you need to have clear and unmistakable,

then okay, then it seems to me that clear and unmistakable
means you could get -- if you forget to, you know, to not
include something of that sort, that you are bound.
It's just, to my mind, is kind of flaky.
MR. STEINSAPIR: It's kind of flaky.
I mean, these are sophisticated parties that have
delegated the rules of the arbitration to AAA.
They know that those rules can change. They clearly and
unmistakably delegated the rules to AAA. There is no doubt
about that.
The question is whether they have clearly and unmistakably
delegated arbitrability.

THE COURT: The problem is that there are certain

types of areas that Supreme Court has said, and this is one of
them that has to be clear and unmistakable.
There are other types of changes that you could do, for
example, purely procedural rules. There is no requirement that
an agreement to purely procedural rules have to be shown by
clear and unmistakable evidence, but this is one area where it
does, and that is my problem.
I don't understand how I could find clear and unmistakable
in this context.
MR. STEINSAPIR: Well, I think you could find it by citing all of
the cases that we cited that did find it.

THE COURT: The problem is I look at those cases and

I don't understand why they say that.
I mean, you know, again, sometimes there is certain
fiction that come up and people just assume something and they
don't really analyze it. I don't understand how these other
Courts say it is clear and unmistakable.
I can say that they want some sort of rule that is easy to
follow, and therefore, okay, just do it. I suppose you could
do that, but again, to my mind it's not clear and unmistakable.
But I'm perfectly willing to accept if the Ninth Circuit
or Supreme Court tells me that, yes, this is clear and
unmistakable, I would say, fine, I have done my duty. I have
done the analysis that you forced me to make, and I'm saying
that a person can agree clearly and unmistakably to a very
important issue by simply not saying anything about it, okay,
that is fine, I'm willing to do that.
MR. STEINSAPIR: Well, Your Honor, I don't think
we're going to need the Ninth Circuit or Supreme Court to do
that in this case because I think once we get to the second
question on the arbitrability, it's going to be an easy issue
for you.
So then the question I have for Your Honor since you are
not prepared to address the issue now, is when we come back to
address that issue, which is fully briefed, and I don't thinkwe
need any further briefing, there has been enough on it.

THE COURT: What I would do is this: If I ruled the

way of my tentative, I will send out to the parties an
indication as to whether or not I want any further briefing on
that issue. And obviously, if I do, I will give you both sides
time to brief it.
But if I decide it is sufficiently briefed enough, I will
simply have you guys back and we will argue it on a new day.
MR. STEINSAPIR: Okay, that is fine.

THE COURT: Let me hear from the defense.

Did you decide to split up the argument or is it just you?
He hogged his entire side.
MR. PETROCELLI: For this issue, it is just me
unless Mr. Boutrous decides to sit me down because I am not
doing a good job.
MR. BOUTROUS: I may not be able to resist, but we
will let him start.
MR. PETROCELLI: Your Honor, without repeating what
you wrote on your tentative and your discussion that just
ensued, there might be a case where this could be a closer call
given the authorities on both sides of the issue.
But I would submit, Your Honor, that this is not such a
The reason I say that is because obviously --

THE COURT: Before you go any further, are all of the other
judicial officers just idiots?
Is that what you are saying?
MR. PETROCELLI: Your Honor, to be frank, I can't
fathom the logic of those cases. I can't imagine that anybody
could be bound by something that did not exist except if it was
a mere procedural addition or improvement or change.

THE COURT: Let's be charitable.

I think what it is, is that there has been such a swing in
the Supreme Court insofar as arbitration is concerned that
pretty much, you know, whatever is a pro-arbitration
determination seems to be automatically agreed upon by the
Supreme Court.
So, it could very well be in light of the last maybe
decade or two decades of Supreme Court precedent that people
are willing to say, okay, it seems that this is something they
will agree to.
But the problem is that the Henry Schein case --
MR. PETROCELLI: Actually, Your Honor, even more
recently than that, just several weeks ago, you have the U.S.
Supreme Court decision in Lamps Plus, perhaps that was the case
Your Honor had in mind, but in Lamps Plus which refused to find
a class action arbitrable because of failure to -- because the
refusal to infer consent.
The Court said, although parties are free to authorize
arbitrators to resolve such questions, referring to the very
kind of gateway questions we're now addressing, we will not
conclude that they have done so based on silence or ambiguity
in their agreements, which is precisely the comment Your Honor
Now that phrase, "silence or ambiguity" happens to be,
although they didn't cite to it, the precise language that the
California Court in Gilbert Street used.
So, ten years earlier in 2009, Gilbert Street says you
can't incorporate, because we don't have clear and unmistakable
consent, particularly, and we're not going to infer consent
where there is silence or ambiguity.
And ten years later, just several weeks ago, the Supreme
Court says exactly that same thing.
And here, Your Honor, the one thing I do want to emphasize
which may not have been so apparent from our papers, although
it's in there, the arbitration clause that is bringing us here
is a general arbitration clause in the body of the agreement.
I'm looking at the exhibit to Mr. Steinsapir's
declaration, I think it's Exhibit D.
But the sentence in the document that is alleged to have
been violated, this non disparagement sentence is not in the
body of the agreement. It is in the attachment to the
agreement, which is incorporated by reference.
But, Your Honor, in this attachment, this confidentiality
provision which is the sole basis of their claim, there is in
the final paragraph a provision assigning disputes to the Court
having jurisdiction.

THE COURT: I quote that.

MR. PETROCELLI: You did quote that, Your Honor.
In the face of this, I would suggest, and we can deal with
this in Part 2, that we don't even have an arbitration
provision that applies to this dispute, we have a Court
provision that applies to the dispute.
But at the very least for purposes of Issue 1, who is the
decision-maker, we have absolute ambiguity because we have two
directly conflicting provisions.
And I would say the only way that that conflict can be
resolved is because -- is by the principle that the specific
overrides the general, and here we have a very specific court
adjudication provision, not an arbitration provision, so that's
why I say while there is an interesting debate on perhaps a
different record, it's not this record.
Getting past that, Your Honor, as Your Honor has pointed
out, there is absolutely nothing even in the generic
arbitration provision, even assuming that were to apply to this
dispute, that suggests that has been delegated.
We're talking about not some mere procedural issue.
This is a fundamental issue of who is going to make these
threshold critical decisions. An arbitration is a matter of
consent and it's pure contract interpretation.
However, in this case the Courts have made clear that thedefault
is to the Court being the decision-maker. That isright out of
Section 2 of the Federal Arbitration Act.If we go to the Schein
case, Your Honor, which is the other recent Supreme Court
decision, the Court says that to be
sure before referring a dispute to the arbitrator the Court
determines rather a valid arbitration agreement exists.
And it goes on to say, that only if you have a valid
arbitration agreement do we start talking about issues of
But the default is always to the Court unless there is
clear and unmistakable evidence that the parties assigned this
to the arbitrator.
We have no such evidence in this case, and we have direct
evidence of the opposite because of the presence of the Court
provision in this document.
At the very minimum, we have silence.
If we have silence, we're right in the throes of these
competing cases, and I would suggest that the winner is the
Supreme Court's most recent pronouncement just a couple of
weeks ago, Your Honor, in the Lamps Plus case.
There is no dispositive Ninth Circuit case on this issue.
We have the California case, which, by the way, the
California case while applying California law relied on Federal
law because the whole discussion in the California case, the
Gilbert Street case started with the language from the AT&T
case back in 1986, where the Supreme Court laid down this
principle that there has to be evidence of clear and
unmistakable delegation.
So we're really looking at the same law here.
Beyond all of that, it just doesn't make any sense to
incorporate something that doesn't exist. It makes no sense.
I mean, maybe at the margins, Your Honor, but not as a
fundamental proposition as to this.
I don't want to waive our argument, Your Honor, that we
don't even have the question of who the decision-maker is under
the Supreme Court law -- under the Federal Arbitration Act with
respect to the question of the validity of the arbitration
There has to be a valid agreement, otherwise what are we
doing here?
The question that we're tackling really deals with
Once it's been established that we have a valid
arbitration agreement -- you can imagine a situation, for
example, extreme hypo, where the plaintiff files a motion to
compel arbitration and there is no arbitration agreement, or,
one that said that this arbitration agreement applies only for

responsibility as it has in all cases, to look and see if we

have an arbitration agreement that even brings us here.
Now, this argument spills over on the merits, but it also
has relevance to your threshold determination.
We don't have to reach it, Your Honor, because even if you
assume there is a valid arbitration agreement because of the
generic provision, we don't have the clear and unmistakable
delegation of authority.

THE COURT: All right. Anything else for me to

MR. STEINSAPIR: Just very briefly.
First of all, just to correct the record, we did cite the
Gilbert Street case. They didn't.
We brought it to your attention as part of our duty of
candor to bring contrary authority to your attention, it was us
who cited it.
But more importantly on this question of whether Exhibit I
is part of the arbitration agreement, it is by -- right above
the arbitration agreement it says: It is understood that HBO
shall comply with the confidentiality provisions set forth in
Exhibit I, attached hereto and incorporated herein by this
reference. So clearly it is subject to the arbitration
Now, with the respect to the Court provision, that is very
easily explained.
three days, 25 years ago.
In that case, the Court would have the threshold responsibility
as it has in all cases, to look and see if we have an
arbitration agreement that even brings us here.
Now, this argument spills over on the merits, but it also
has relevance to your threshold determination.
We don't have to reach it, Your Honor, because even if you
assume there is a valid arbitration agreement because of the
generic provision, we don't have the clear and unmistakable
delegation of authority.

THE COURT: All right. Anything else for me to

MR. STEINSAPIR: Just very briefly.
First of all, just to correct the record, we did cite the
Gilbert Street case. They didn't.
We brought it to your attention as part of our duty of
candor to bring contrary authority to your attention, it was us
who cited it.
But more importantly on this question of whether Exhibit I
is part of the arbitration agreement, it is by -- right above
the arbitration agreement it says: It is understood that HBO
shall comply with the confidentiality provisions set forth in
Exhibit I, attached hereto and incorporated herein by this
reference. So clearly it is subject to the arbitration
Now, with the respect to the Court provision, that is very
easily explained. There is a provision in Exhibit I which allows
for injunctive relief. We didn't bring that, but in that case
youwould need to go to a Court, not an arbitrator, most likely.
Arbitrators can recommend injunctions, they certainly can't
enter them.

Secondly, as to the substantive question of arbitrability,

which we are not here for, but I just want to make this
absolutely clear, the case that Mr. Petrocelli is referring to,
he says it is the AT&T case, it is actually the First Options
case, which holds it has to be clear and unmistakable.
But Justice Breyer in that case for a unanimous court,
makes it very clear that although delegation is governed by
this clear and unmistakable rule, the question of arbitrability
when a Court is determining it, is governed by the exact
opposite rule. All doubts and all ambiguities, and
Mr. Petrocelli just admitted there was an ambiguity, all
ambiguities are construed in favor of arbitration, unless the
Court can say with positive assurances that it is not
arbitrable, and there is no way that just because there is one
little reference to a Court in Exhibit I that you could say
with positive assurances that it's not arbitrable, but that
goes to the Phase 2 issue.
With that, we would submit.

THE COURT: I do want a response from defense to his

two points that he just raised.
MR. PETROCELLI: I'm not sure I understood what the
two points were.

THE COURT: The first point was you were arguing the
reference to other Courts in the confidentiality provisions,
and he's making an argument that was not necessarily a
demonstration that the parties were taking it outside of an
arbitration -- arbitration situation.
It was simply to recognize if injunctive relief was called
for as a remedy or whatever, that that would have to be sought
by the Courts because an arbitrator cannot issue injunctive
MR. PETROCELLI: We disagree with that, Your Honor,
you have to understand this is a document that -- this is their
document attached to our document. These were two documents.
They were not created in --

THE COURT: Well, one references the other, though.

MR. PETROCELLI: Well, but to be clear, if we want
to get precise about it -- first of all, there is nothing in
this document which says it applies only to injunction actions.
Okay, I mean you can read it, Your Honor, we will read it.
And secondly, all that is incorporated is the
confidentiality provisions, and there is nothing in the
incorporation statement that says they are incorporating the
nondisparagement statement or sentence in the confidentiality
At the very minimum we have absolute ambiguity, and
counsel is dead wrong about the second point on this issue on
the delegation issue that there has to be clear and
unmistakable evidence of delegation.
THE COURT: He's admitted that it is clear and
unmistakable. But insofar as the issue of arbitrability
itself, not who decides the arbitrability, the issue of
arbitrability or the -- I can't remember how you phrased it.
MR. PETROCELLI: I think what he is saying once it's
determined that the Court is the decision-maker here in round
one, and we're now in round two, and we're dealing with
arbitrability, where you have an arbitration provision that is
clearly free from any kind of challenge, and we challenge it,
the Court put in a footnote and they prominently featured in
his opening argument that we're only challenging the overall
No, that is not true, Your Honor.
We're challenging the over -- we're challenging the
arbitration provision that is included in the overall
You can't divorce the two. The cases that they are
talking about and that Your Honor probably had in mind in the
footnote, are cases where someone is trying to get out of an
arbitration clause in an agreement because there is some
usurious provision in the agreement or there is some defect in
some substantive provision where they say it's induced by fraud
and all of those other arguments. That is not what we're
saying here.
THE COURT: Also that gets to the subject that we
will be discussing later on anyway if I make a determination as
to who decides the issue of arbitrability.
MR. PETROCELLI: I would suggest, Your Honor, that
if you do decide to stick with your tentative, it might make
more sense to have a rebriefing of the arbitrability issue.

THE COURT: Let me put it this way: I will take a

look at it. I understand the plaintiff would not prefer that.
But let me just stop you. It doesn't make any difference
what you say, I'm going to make the decision myself.
MR. PETROCELLI: I just thought that we could clean
and refine the arguments for Your Honor.
MR. STEINSAPIR: Your Honor, if I could be precise
on why we are against that is because they did not raise the
issue. They have waived it. They did not make a single
argument challenging the arbitration clause.
I read their brief 15 times. They don't do it, and they
want a do-over. They blew it on that.

THE COURT: Let me stop you again. He doesn't say

anything, he just passes you paper. That is funny, his lips
don't move.
MR. WEITZMAN: Your Honor, for purposes of the record, the
arbitration clause that we're talking about is on
page 9 of the body of the agreement itself.
Also on page 9 of the body agreement itself, right next to
it, one paragraph above it, it says "confidential information.
It's understood that HBO shall comply with the confidentiality
provision set forth in Exhibit 1 attached hereto and
incorporated herein by reference."
The confidentiality provisions are the entire exhibit.
It's what it's titled, it's what is here, it's where the
disparagement clause comes from.

THE COURT: Thank you very much, everybody. I will

think about this, and I will have something out hopefully by no
later tomorrow one way or the other.
MR. STEINSAPIR: Thank you, Your Honor.
MR. BOUTROUS: Thank you, Your Honor.
(The proceedings concluded at 10:32 a.m.)