Arbitration Update

Arbitrator's Jurisdiction. The Court of Appeal of California, Second Appellate Division, Division Four, held that an arbitrator should determine whether alleged breaches of an agreement to purchase a multimedia and entertainment company were arbitrable. Dream Theater Inc. v. Dream Theater, B174152. The Los Angeles Superior Court had found that the dispute wasn't subject to arbitration. The arbitration clause in this case had been included in the indemnification section of the purchase agreement, prompting the sellers to argue that arbitration applied only to third-party claims. But the court of appeal concluded: “Sellers do not point to any language of the Contract which specifically limits the arbitration clause to third party claims or otherwise excludes from arbitration the parties' dispute over Sellers' alleged breach of the representations and warranties concerning the loss of FX Networks business. [The buyers claimed that the sellers had failed to disclose that the sellers' largest customer, FX Networks, had given a termination notice to the sellers before the agreement with the buyers had been finalized.] … The terms 'Indemnification,' 'Indemnified Party,' and 'Indemnitor' in the Contract, in and of themselves, do not limit the scope of the arbitration clause to third party claims.” The court of appeal recently denied the sellers' petition for rehearing of the court's decision.

Arbitrator's Jurisdiction. The Court of Appeal of California, Second Appellate Division, Division Four, held that an arbitrator should determine whether alleged breaches of an agreement to purchase a multimedia and entertainment company were arbitrable. Dream Theater Inc. v. Dream Theater, B174152. The Los Angeles Superior Court had found that the dispute wasn't subject to arbitration. The arbitration clause in this case had been included in the indemnification section of the purchase agreement, prompting the sellers to argue that arbitration applied only to third-party claims. But the court of appeal concluded: “Sellers do not point to any language of the Contract which specifically limits the arbitration clause to third party claims or otherwise excludes from arbitration the parties' dispute over Sellers' alleged breach of the representations and warranties concerning the loss of FX Networks business. [The buyers claimed that the sellers had failed to disclose that the sellers' largest customer, FX Networks, had given a termination notice to the sellers before the agreement with the buyers had been finalized.] … The terms 'Indemnification,' 'Indemnified Party,' and 'Indemnitor' in the Contract, in and of themselves, do not limit the scope of the arbitration clause to third party claims.” The court of appeal recently denied the sellers' petition for rehearing of the court's decision.