Amicus Curiae Brief — Preston v. Ferrer

Seet

1

2604 No. 06-1463

IN THE

Supreme Court of the Anited States

ARNOLD M. PRESTON,

Petitioner

V.

ALEX E. FERRER,

Respondents

ON WRIT OF CERTIORARI TO THE COURT OF APPEAL OF

CALIFORNIA

BRIEF OF SCREEN ACTORS GUILD, INC. AND

AMERICAN FEDERATION OF TELEVISION &

RADIO ARTISTS, AFL-CIO AS AMICI CURIAE

IN SUPPORT OF RESPONDENT

Thomas R. Carpenter

American Federation of

Television & Radio

Artists, AFL-CIO

260 Madison Ave., 7th Fl.

New York, NY 10016

Tel.: (212) 532-0800

Facsimile (212)532-2242

Counsel for Amicus Curiae

American Federation of

Television and Radio

Artists, AFL-CIO

Duncan Crabtree-Ireland

(Counsel of Record

Danielle S. Van Lier

Screen Actors Guild, Inc.

5757 Wilshire Blvd.

Los Angeles, CA 90036

Tel.: (323) 549-6627

Facsimile: (323) 549-6624

Counsel for Amicus Curiae

Screen Actors Guild, Inc.

TABLE OF CONTENTS

eee i

TABLE OF AUTHORITIES. . . iil

INTEREST OF AMICUS CURIAE. .. 1

SUMMARY OF ARGUMENT. . . . . 4

REE EES TERRE re ORO . ͤ Re OD 7

I. The Talent Agencies Act is an Exercise of

California’s Police Power to Regulate in a

Creative Industry Where Individuals are

, ̃ 2 7

A. The Talent Agencies Act is a Remedial

Law Intended to Protect Artists from Those

Who Hold the Keys to Their Careers and

Could Take Advantage of Them 9

1. History of the Talent Agencies Act ... 9

2. The California Entertainment

Commission Concluded that, for the

Protection of Artists, Anyone who Procures

Employment for Artists Should be Licensed

and Subject to Regulation by the Labor

| TAT eT ee 12

3. The Talent Agencies Act and the

Unions’ Franchise System Provide a

Comprehensive Regulatory and

Enforcement Scheme for the

Representation of Artists in the

Entertainment Industry. 15

II. There is No Conflict between the Federal

Arbitration Act and the Talent Agencies Act

Sufficient to Divest the Labor Commissioner of

. 18

ii

A. The Administrative Remedy Set Forth

in the TAA does not Stand as an Obstacle to

Effecting the Purposes of Congress in Enacting

the Federal Arbitration Act 19

1. Administrative Adjudication By The

Labor Commissioner Does Not Bar

Enforcement Of The Parties’ Agreement To

Arbitrate And Is Therefore Not In Conflict

r 20

2. The TAA Expressly Allows For

Arbitration in Lieu of Administrative

Remedies When the Arbitration Provision

Complies With Standard Set Forth in the

TAA 22

B. The TAA's Administrative Exhaustion

Requirement is Consistent with Prior Cases

Interpreting the FAA. 24

C. The Labor Commissioner is Best

Situated, in the First Instance, to Review

Cases that Arise Under the TAA................... 27

III. Reversal of the Decision Below Would

Create a Potential Loophole to Enforcement of the

Talent Agencies Act Against Unlicensed

Individuals to the Detriment of Those it is

D 0 29

— ——— — 31

iii

TABLE OF AUTHORITIES

Cases

Armendariz v. Found. Health Psychare Servs., Inc.,

Fe . Ramer e Ane 25

Broughton v. Cigna Healthplans of California, 21

ee 25

Buchwald v Katz, 8 Cal. 3d 493 (1972)........... 10, 17, 21

Buchwald v. Superior Court, 254 Cal App. 2d 347.. 17

Buchwald v. Superior Court, 254 Cal. App. 2d 347

EL ET Ä 9, 16

Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S.

rr 18, 19

Collier & Wallis, Lid. v Astor, 9 Cal. 2d 202,

n . 21

Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213

1 26

EE OC. Waffle House, Inc., 534 U.S. 279 (2001) 25

Ferrer v. Preston, 145 Cal. App. 4th 440 (2006)....... 27

Marathon Entertainment v. Blasi, 140 Cal. App. 4th

Mastrobuono v. Shearson Lehman Hutton, Inc., 514

. inet cs 26

McKart v. United States, 395 U.S. 185, 193 (1969). 24

Mitsubishi Motors v. Soler Chrysler-Plymouth, 473

e 25

Myers v. Bethlehem Shipbuilding Corp., 303 U.S. 41

r SEL wee neo 24

Perry v. Thomas, 482 U.S. 483 (1987) . . . 20

Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388

e 26

Southland Corp. v. Keating, 465 U.S. 1 (1984)... 19, 20

Styne v. Stevens, 26 Cal. 4% 42 (2001)............. 9,17, 27

iV

Volt Information Sciences, Inc. v. Board of Trustees

of Leland Stanford Junior Univ., 489 U.S. 468

Fenn . 26

Waisbren v. Peppercorn Productions, Inc. 41 Cal.

r ceili passim

Woodford v. Ngo, 126 S. Ct. 2378 (2006) . 24

Statutes

a Ne ee one aN eES eee 10

, e an aI 10

, scssalehideipasaliel 10

, AAT I PIED fr 11

, TERT a 10

e re nC an aE cre 5

EET / /// Ree eR EE 20

CAL. CODE. CIV. PROC. §§1281 et Sei. 22

CAL. LAB. CODE § 1700, et. Se. . . . . . . 4

CAL. LAB. CODE 51700. 44 . . . 11, 12, 15, 17, 19

CAL. LAB. CODE 51700. 45 . . . . . . . . . . .. . . . r. 23

Other Authorities

3 K. Davis, Administrative Law Treatise § 20.01 et

seq. (1958 ed., 1965 Supp.) . . . . . 24

CAL. DEP’T OF INDUS. RELATIONS, CAL.

ENTERTAINMENT COMM’N REP. (1985) . . passim

L. Jaffe, Judicial Control of Administrative Action

D ichataeiceaiiinrniamienialii 24

O’Brien, Regulation of Attorneys Under California's Talent

Agencies Act: a Tautological Approach to Protecting

Artists 80 Cal.L.Rev. 471 (1982) . 12

|

INTEREST OF AMICUS CURIAE!

Amici are labor unions representing artists in

the motion picture, television, commercial and new

media industries.

Amicus Screen Actors Guild, Inc. (“SAG”) is

the nation’s largest labor union representing working

actors. Established in 1933, SAG represents more

than 120,000 working actors and other performers in

film, television, industrials, commercials, music

videos, and new media. SAG exists to protect and

enhance actors’ working conditions, compensation

and benefits and to be a powerful, unified voice on

behalf of artists’ rights.

Amicus American Federation of Television and

Radio Artists, AFL-CIO (“AFTRA”) is a national

labor organization with a membership of over 80,000

professional artists, including but not limited to,

actors, broadcasters and recording artists who work

in the television, radio and sound recording

industries nationwide.

Amici have collective bargaining agreements

with all of the major motion picture and television

production companies, television networks, and/or

i No counsel for a party authored this brief in whole or in

part, and no counsel or party made a monetary contribution

intended to fund the preparation or submission of this brief. No

person other than amicus curiae, its members, or its counsel

made a monetary contribution to its preparation or submission.

The parties have consented to the filing of this brief. Letters

evidencing the parties’ consent to the filing of this brief are on

file with the Court and copies are attached hereto.

2

commercial producers. These collective bargaining

agreements govern the wages, hours, and working

conditions of Amicis members.

Through their internal regulations and, as

applicable, through agreements with non-profit trade

associations, such as the Association of Talent

Agents (“ATA”) and National Association of Talent

Representatives (“NATR”), Amici extensively

regulate the relationships between their members

and the talent agents who represent them and

require that talent agents who represent their

members be bound by a comprehensive set of

regulations referred to as a franchise.2? Other

entertainment unions, including Directors Guild of

America (“DGA”), and Writers Guild of America

(“WGA”),3 similarly regulate their members’

relationships with their agents. The Unions’

franchises establish standards of conduct for talent

agents and require them to comply with certain

conditions and limitations which augment and

supplement provisions in the California Talent

Agencies Act, including, but not limited to, the

establishment of separate client trust accounts,

posting of surety bonds, and limits on commission

rates. The franchises also create standard form

contracts for talent representation and place

restrictions on talent agents’ economic interests in

production activities. As allowed under the

arbitration language in the TAA, the franchises

2 See infra.

3 SAG, AFTRA, DGA, and WGA are referred to

collectively herein as the “Unions”.

3

require that disputes between agents and their

clients be arbitrated.

The consistent enforcement of the TAA against

those who encroach on its jurisdiction is essential to

protecting those who are the most vulnerable to

abuse by those who seek to profit from them. As the

effective enforcément of the TAA is critical to the

Unions’ agency franchise systems and to the

protection of their members, the Amici and their

members have a fundamental interest in ensuring

these protections are not eroded.

4

SUMMARY OF ARGUMENT

The entertainment industry has a unique

culture that attracts diverse participants with

varying motives. Some are attracted by the

opportunity for artistic expression, others by

business and profit motives. And still others seek to

manipulate both the system and those most

vulnerable within it to reap personal gain. This

vulnerability combined with the unique mechanisms

by which artists gain employment, as well as the

very brief duration common to most industry jobs for

artists, gives those who control the procurement of

artists’ employment immense power. For these

reasons, and in light of recurring abuses at the

expense of artists, the California Legislature has

long recognized the need to regulate those who

procure employment for artists.

For nearly a century, California has regulated

the act of procuring employment on behalf of artists.

The current incarnation of that regulation is the

Talent Agencies Act, CAL. LAB. CODE § 1700, et. seg.

(hereafter “TAA” or the “Act”), a comprehensive

regulatory and licensing scheme which mandates

that anyone who procures employment on behalf of

an artist be licensed. For nearly three quarters of a

century, the Labor Commissioner has been

empowered to create rules and regulations under the

Act and its predecessor laws and has had original

jurisdiction to hear controversies arising under it,

subject to de novo review.

In the instant ma ter, Petitioner Arnold

Preston, challenges the Labor Commissioner's

5

jurisdiction to hear a claim arising out of his personal

management contract with Alex Ferrer. Petitioner

basis his challenge on an arbitration provision

included in the management contract, a provision

that incorporated California law, contending that the

Federal Arbitration Act (hereafter, “FAA”), 9 U.S.C.

§1, et. seg., mandates arbitration and divests the

Labor Commissioner of her statutory authority.

Although the contract between the parties was for

management services, Respondent alleged that

Petitioner had acted as an unlicensed talent agent by

attempting to procure employment on his behalf.

When a dispute arose between the parties, the

Petitioner initiated arbitration proceedings and the

Respondent, as mandated by the TAA, sought the

Labor Commissioner’s review. The Labor

Commissioner found there was a colorable basis for

the exercise of her jurisdiction under the TAA and

agreed to hear the dispute. Believing the Labor

Commissioner’s opinion could be informative, the

arbitrator stayed the arbitration pending the Labor

Commissioner’s determination.

The TAA is a remedial statute crafted by the

California Legislature in an exercise of the state’s

police power. It is critical to protecting vulnerable

individuals in an environment where aspirants will

do almost anything to “make it big.” The TAA is

carefully balanced to protect the interest of both the

artists it protects and the agents it regulates. The

consistent enforcement of the TAA is critical to

maintain this careful balance, as the court below

recognized.

6

Nothing in the TAA conflicts with the FAA, as

the Petitioner claims. There is no state statute that

acts as a complete bar to arbitration. At best, the

TAA delays arbitration while the Labor

Commissioner completes her inquiry through a cost-

effective administrative hearing process that is

subject to de novo review. Nothing prevents the

parties from seeking that de novo review before an

arbitrator, rather than through the courts. Further,

as the arbitrator in this matter recognized when he

stayed the proceedings, the Labor Commissioner's

expertise may provide valuable guidance to the

arbitrator.

Petitioner seeks to divest the Commissioner of

her jurisdiction to hear a large class of controversies

arising under the TAA based on a private agreement

between the parties. Such a divestment of the Labor

Commissioner’s jurisdiction potentially opens a

loophole that could be devastating to the enforcement

of the TAA against unlicensed individuals. If

Petitioner’s approach is adopted, an individual could

simply insert an arbitration provision in a contract

and then blatantly flout the TAA’s licensing

requirements with confidence that the Labor

Commissioner lacks jurisdiction to hear any disputes

under that contract. Such an approach would also

divest the Labor Commissioner of her most

important tool in effectively administering her

responsibility to enforce the TAA.

The Amici therefore urges this Court to affirm

the decision below.

7

ARGUMENT

I. The Talent Agencies Act is an Exercise of

California’s Police Power to Regulate in a

Creative Industry Where Individuals are

Vulnerable to Abuse

Artists in the entertainment industry typically

rely on a small army of people to help support their

careers — an army that grows in size as the artist’s

career grows. Agents find job opportunities and

assist them in securing employment and negotiating

its terms; personal managers counsel and guide their

careers, often advising them which job opportunities

to pursue or which agent to engage; business

managers assist with the artists’ financial

management; attorneys provide legal services;

publicists promote the artist and guide him in his

dealings with the media; and the Unions provide

protections in the form of minimum standards for |

wages and working conditions. Each of these support

functions, as well as many others, plays a particular

role in an artist’s career. Some of the role

differentiation arises from the individuals’ skills;

others are the result of regulatory schemes designed

to protect the artist.

The unique nature of the entertainment

industry gives those who guide artists’ careers and

those who control the procurement of employment

immense power over artists. Few artists are in a

position to scrutinize or challenge these trusted

advisors. And even fewer have sufficient expertise or

clout to effectively negotiate the terms of their

representation, especially when faced with the take-

8

it-or-leave it choice of accepting representation under

unfavorable terms or having no representation at all.

For these reasons, and in light of recurring abuses at

the expense of artists, the California Legislature has

long recognized the need for regulation of those who

hold the keys to artists’ careers.

Recognizing the power dynamic between

artists and those who hold the keys to their

employment, the state, exercising its police power to

protect artists, determined that one must be

regulated to hold those keys. One of the primary,

and empirically most effective, enforcement

mechanisms to ensure compliance with the TAA has

been administrative adjudication before the

California Labor Commissioner, who is tasked with

such enforcement. When an unlicensed individual

has procured employment in violation of the TAA, a

regulatory statute prohibiting such conduct, the

Labor Commissioner has discretion to declare the

resulting contract void.“ The possibility of losing all

commissions is a tremendous disincentive to

violating the Act.

1 For decades, and with only few exceptions, the Labor

Commissioner and the California courts have held that when an

unlicensed individual violates the TAA, the resulting contract is

void, ab initio. The California Supreme Court is currently

weighing the issue of whether the contract is always to be void

ab initio or whether it is appropriate to sever commissions

earned for the unlawful conduct from those earned for lawful

conduct under the parties’ agreement. See, Marathon

Entertainment v. Blasi, 140 Cal. App. 4th 1001, review granted,

143 P.3d 656; 49 Cal. Rptr. 3d 656.

9

A. The Talent Agencies Act is a Remedial Law

Intended to Protect Artists from Those Who

Hold the Keys to Their Careers and Could

Take Advantage of Them

The TAA is a carefully crafted statute that

balances the interests of artists and those who

represent them. The Act provides a detailed

regulatory and licensing scheme and includes various

protections against misconduct by licensed agents.

The Labor Commissioner is charged with enforcing

the TAA and adjudicating claims arising from alleged

violations of it, whether by licensed or unlicensed

individuals.

The Act strictly regulates procurement of

entertainment-related employment to ensure the

welfare of artists. Waisbren v. Peppercorn

Productions, Inc. 41 Cal. App. 4% 246 (1995). It is a

remedial law, within the police power of the state,

designed to correct abuses and enacted for the

protection of artists. Buchwald v. Superior Court,

254 Cal. App. 2d 347, 350-351 (1967). See, also,

Styne v. Stevens, 26 Cal. 40 42 (2001).

Histo he Talent ncies Act

The act of procuring employment for artists

has been regulated for nearly a century and the

Labor Commissioner has had original jurisdiction to

hear disputes arising from such conduct for nearly as

long. The Private Employment Agencies Law

(hereafter “PEAL”), enacted in 1913, included

regulations covering “theatrical employment

agencies,” which, at the time, operated within the

context of “circuses, vaudeville, theatrical and other

10

entertainers, exhibitors, and performers.” Buchwald

v Katz, 8 Cal. 3d 493 (1972); CAL. DEPꝰTH oF INDUS.

RELATIONS, CAL. ENTERTAINMENT COMM’N REP. (1985)

at 6 (citing 1913 Cal. Stat. 282). In 1923, the PEAL

was amended to empower the Labor Commissioner to

make rules and regulations and to give the Labor

Commissioner original jurisdiction to hear and

determine all controversies arising under it.

Buchwald, 8 Cal. 3d at 500 (citing 1923 Cal. Stat.

412). The language in the 1923 amendment was

virtually identical to the language that remains in

the TAA to this day. 1d

The PEAL was incorporated into the

California Labor Code when it was enacted in 1937

and another category of employment agency — the

“motion picture employment agency” was added. Id.

at 501; CAL. ENTERTAINMENT COMM N REP. at 7

(citing 1937 Cal. Stat. 230). The “artist manager”

was added to the Employment Agencies Act

(hereafter “EAA”) in 1943 and then, in 1959, was

separated from that Act into their own section. Jd at

7 (citing 1959 Cal. Stat. 888).

The California Legislature repealed the EAA

in 1967 but left the regulation of artist managers —

the Artists’ Manager Act — in the Labor Code. CAL.

ENTERTAINMENT COMM N REP. at 8. From 1943, when

first added to the EAA, until 1978 when the law was

renamed the TAA, “artist manager” was defined as:

“A person who engages ir he

occupation of advising, counseling, or

directing artists in the development

or advancement of their careers and

11

who procures, offers, promises or

attempts to procure employment or

engagements...” CAL.

ENTERTAINMENT CON REP. at 7,

(quoting 1943 Cal. Stat. 1326)

When the Act was renamed in 1978, the term “artist

manager” was removed and replaced with “talent

agent,” which was, and still is, defined as:

“tal person or corporation who

engages in the occupation of

procuring, offering, promising

or attempting to procure

employment engagement for an

artist or artists.” CAL.

ENTERTAINMENT COMM’N REP.

at 8-9 (quoting Cal. Lab. Code §

1700.4)

The definition further states that a talent agent

“may, in addition, counsel or direct artists in the

development of their professional careers.” Cal. Lab.

Code §1700.4. These definitional changes placed the

regulatory emphasis on the act of procuring

employment, the domain of agents, and

deemphasized the advisory functions typically

performed by managers. 5

5 As noted by the California Court of Appeal in Waisbren,

“the primary function of the personal manager is that of

advising, counseling, directing and coordinating the artist in

the development of the artist’s career.’ The manager’s task

encompasses matters of both business and personal

significance. As business advisors, they might attend to the

artist’s finances, and they routinely organize the economic

12

The legislature made several amendments to

the Act in 1982 including creating several safe

harbors. Specifically, and most relevant to the

instant matter, the legislature added a safe-harbor

provision for unlicensed individuals working “in

conjunction with, and at the request of, a duly

licensed and franchised talent agency in the

negotiation of an employment contract.” CAL. LAB.

CODE §1700.44 (emphasis added). These same

amendments also removed the criminal penalties for

violation of the Act and exempted procuring of

recording contracts from its prohibitions. CAL.

ENTERTAINMENT COMM’N REP at 9, 25. At the same

time, the Legislature created the California

Entertainment Commission (hereafter, the

“Commission”) to study the Act and, if applicable, to

suggest changes. Id at 11.

2. The California Entertainment

Commission Concluded that, for the

P : f Arti , —

The California Legislature created the

California Entertainment Commission in 1982 to

study the laws and practices of this and other states

elements of the artist's personal and creative life necessary to

bring the elient's product to fruition...” Waisbren, quoting

O’Brien, Regulation of Attorneys Under California’s Talent

Agencies Act: a Tautological Approach to Protecting Artists 80

Cal.L.Rev. 471, 481-483 (1982),fns. omitted. But a manager may

not procure employment for an artist without first being

licensed as an agent. Waisbren at 259.

*

13

relating to the regulation of artists’ agents and

representatives in the entertainment industry.

Waisbren, 41 Cal. App. 4th at 256. The Commission

was comprised of the Labor Commissioner, three

talent agents, three personal managers, and three

artists. CAL. ENTERTAINMENT COMM’N REP. at 1- 4. Its

1985 report to the Legislature and Governor formed

the basis for the 1986 amendments to the TAA.

Waisbren, 41 Cal. App. 4th at 258.

In its report, the Commission addressed six (6)

principal issues, three (3) of which are especially

relevant in the present case. Those three issues are:

1. Under what conditions or

circumstances, if any, should a

personal manager or anyone other

than a licensed talent agent be

allowed to procure, offer, promise, or

attempt to procure employment or

engagements... for an artist without

being licensed as a talent agent? ...

3. Should the criminal sanctions of

the Act ... be reinstated and, if so, in

what form? ...

5. Should the entire Act be

repealed and/or should there be a

separate licensing law for personal

managers? ...” CAL. ENTERTAINMENT

COMM'N REP., at 12.

The Commission’s response to the first and

fifth issues were straightforward and clear — the Act

regulates the procurement of employment and, for

the protection of artists, anyone who procures

14

employment for an artist must be licensed.

Specifically, the Commission concluded that

“personal managers or anyone not licensed as a

talent agent should not, under any condition or

circumstances, be allowed to procure employment for

an artist without being licensed as a talent agent,”

other than as already permitted by the Act, no

matter how incidental, occasional or infrequent. CAL.

ENTERTAINMENT COMM’N REP. at 13, 19.

In addressing whether the criminal penalties

should be reinstated into the Act, the Commission

found them to be unnecessary because existing

remedies were adequate. Id at 26-27. Specifically,

the Commission stated that “[plerhaps the most

effective weapon for assuring compliance with the

Act is the power of the Labor Commissioner... to find

that a personal manager or anyone has acted as an

unlicensed talent agent and, having so found, declare

the contract void from the inception and order

restitution to the artist of all fees paid by the artist

and the forfeiture of all expenses advanced to the

artist.” Jd. at 27.

In response to the fifth issue, the Commission

concluded that there is no need to separately license

personal managers because it is the act of

procurement that must be regulated, not the

individual person. The Commission reasoned that

such a licensing scheme would be needlessly

duplicative with the Act, stating that llt is not, in

fact, the person who is being licensed by the [Act]:

rather, it is the activity of procuring employment.”

Id. at 31. In the words of the Commission, “one either

is, or is not, licensed as a talent agent...” and

15

unlicensed individuals may not engage in acts of

procurement. Id. at 31.

In summary, the Commission concluded that

the Act proscribed any acts of procuring employment

for an artist without a talent agency license — a view

that was adopted by the Waisbren Court in its

holding and has remained the prevailing law to date.

Waisbren, 41 Cal. App. 40% at 259.

3. The Talent Agencies Act and the

The TAA provides a comprehensive regulatory

scheme for the licensing and oversight of talent

agents by the Labor Commissioner.* Under the TAA,

anyone who seeks to procure employment for an

artist, whether or not he is successful in that regard

and regardless of whether he calls himself an agent,

must be licensed as a talent agency.’ The Act is

6 Similarly, each of the Unions has its own regulatory

scheme for the franchising of talent agents. The Unions’

requirements are often parallel to the TAA’s regulations and, in

some instances provide for stricter scrutiny of and additional

assurances from the applicant agent.

7 The Act defines “talent agency” as “a person or

corporation who engages in the occupation of procuring,

offering, promising, or attempting to procure employment or

engagements for ... artists...” CAL. LAB. CODE §1700.4. The

Act defines “artists” to include a range of individuals in the

entertainment industry, including actors, radio artists,

16

clear in that regard, as are the decades of

administrative and judicial decisions interpreting it.

See, e.g., Buchwald, 254 Cal. App. 2d 347 at 355

(“artists’ managers (as defined by the Act), whether

they be licensed or unlicensed, are bound and

regulated by the Artists’ Managers Act“) Maisbren,

41 Cal. App. 40% 246.

In addition to complying with the Act’s

requirements, each of the Unions requires that

agents wishing to represent its members, and

individuals working within the Union’s jurisdiction,

obtain a franchise from the Unions The franchises

set forth additional protections for each Union’s

members that expand upon and supplement those in

the Act. These franchises establish standards of

conduct for talent agents and require them to comply

directors, writers, and “other artists and persons rendering

professional services” in the entertainment industry. Id. The

terms “talent agency”, “talent agent”, “agency,” and “agent” as

used herein are all intended to refer to a “talent agency” as

defined in the Act.

. The Basic Contract between SAG and the ATA and

NATR, which governed the formal relationship between them,

expired on or about October 20, 2000. No amendment or

extension has since been entered into, other than a fifteen (15)

month period during which ATA and/or NATR-member agents

maintained the status quo. Although SAG's membership rules

include a complete prohibition of its members working with

agents who are not franchised, SAG has temporarily stayed

enforcement of this rule for those members who are represented

by ATA and/or NATR-member agents pending further action.

The formal relationship between AFTRA and the ATA and

NATR remains in full effect.

17

with certain conditions and limitations that augment

and supplement the provisions in the Act. 9

Recognizing that talent agents may need

periodic assistance, the TAA includes a “safe harbor”

exception for unlicensed individuals. Specifically, it

allows unlicensed individuals to work “in conjunction

with, and at the request of, a licensed talent agency

in the negotiation of an employment contract.” CAL.

LAB. CODE §1700.44 (emphasis added). This is the

sole exception for unlicensed individuals and nothing

in the Act allows them to actually procure

employment on an artist’s, other than a recording

artist’s, behalf.

Consistent with its predecessor statutes, the

TAA grants the Labor Commissioner exclusive

original jurisdiction to hear disputes arising under

the Act, subject to de novo appeal. CAL. LAB. CODE §

1700.44 The Labor Commissioner has exclusive

jurisdiction to determine whether claims fall within

her jurisdiction and, having so determined, to

adjudicate those claims. Styne v. Stevens, 26 Cal. 4‘

42 (holding that when a case presents a colorable

basis for exercise of the Labor Commissioner's

jurisdiction, the Labor Commissioner has exclusive

original jurisdiction). See, also, Buchwald v. Katz, 8

Cal. 3d 493; Buchwald v. Superior Court, 254 Cal

App. 2d 347.

e Each of the Unions requires that a talent agent seeking

to represent its members have a valid license as a prerequisite

to becoming franchised.

as See infra.

18

The Act includes many protections for artists

that are not legally imposed on unlicensed

individuals, including an express fiduciary duty and

dispute resolution mechanism. Without the

protections and remedies incorporated in the TAA

and the Union franchises, vulnerable artists may

find themselves without a remedy in instances of

malfeasance.

II. There is No Conflict between the Federal

Arbitration Act and the Talent Agencies Act

Sufficient to Divest the Labor Commissioner of

Original Jurisdicti

At the center of the instant dispute is

whether an administrative proceeding under the

TAA is pre-empted by the FAA. Petitioner relies

largely on Buckeye Check Cashing, Inc. v. Cardegna,

546 U.S. 440 (2006), in support of his pos tion that

the Federal Arbitration Act requires that a challenge

to the validity of the contract be raised in arbitration,

rather than before the administrative agency tasked

win enforcing an applicable licensing scheme. While

Buckeye does address a challenge to the validity of a

contract based on a statutory violation, it does not

address the situation where an administrative

agency has been tasked with enforcing a regulatory

statute.

The provision of the TAA at issue in the

instant matter, Section 1700.44!'(hereafter, “Section

1 Section 1700.44 provides:

(a) In cases of controversy arising under this

chapter, the parties involved shall refer the matters

19

1700.44”), grants the Labor Commissioner original

jurisdiction to hear all disputes arising under the

TAA. CAL. LAB. CODE §1700.44. The Labor

Commissioner’s determination is subject to appeal

and de novo review. CAL. LAB. CODE §1700.44. While

Section 1700.44 provides for appeal to the superior

court, there is no prohibition on the parties then

instituting arbitration proceedings pursuant to the

terms of their contract.

A. The Administrative Remedy Set Forth in

the TAA does not Stand as an Obstacle to

Effecting the Purposes of Congress in

Enacting the Federal Arbitration Act

Congress enacted the Federal Arbitration Act

to overcome judicial resistance to arbitration.

Buckeye, 546 U.S. at 443. It established a national

policy favoring arbitration and placing arbitration

agreements on an equal footing with other types of

contracts. Id., Southland Corp. v. Keating, 465 U.S.

1 (1984). Specifically, it provides that:

A written provision in any maritime

transaction or a contract evidencing

a transaction involving commerce to

settle by arbitration a controversy

thereafter arising out of such

in dispute to the Labor Commissioner, who shall

hear and determine the same, subject to an appeal

within 10 days after determination, to the superior

court where the same shall be heard de novo....”

CAL. LAB. CODE §1700.44

20

contract or transaction, or the

refusal to perform the whole or any

part thereof, or an agreement in

writing to submit to arbitration an

existing controversy arising out of

such a contract, transaction, or

refusal, shall be valid, irrevocable,

and enforceable, save upon such

grounds as exist at law or in equity

for the revocation of any contract. 9

U.S.C. §2

The Court has held that the FAA is violated by

state laws that declare arbitration provisions

unenforceable. See e.g. Southland, 465 U.S. 1.

(holding that a state law requiring judicial

consideration of claims under the statute violated the

FAA); Perry v. Thomas, 482 U.S.483 (1987) (a

statute’s requirement that litigants be provided a

judicial forum for resolving wage disputes was in

conflict with the FAA). But the Court has not directly

addressed whether the FAA pre-empts a state

regulatory statute that merely delays arbitration

while a state administrative agency reviews an

alleged violation of a statute it is tasked with

administering.

a — ; — Does Not B

Enforcement Of The Parties’ Agreement

To Arbitrate An Not In

Conflict With The FAA.

The administrative review and adjudication

required under the TAA, adjudication which is

21

subject to de novo review, does not invalidate the

parties’ arbitration agreement. At most, it simply

delays resort to arbitration until the parties

administrative remedies have been exhausted.

Section 1700.44(a) specifically provides that the

administrative adjudication by the Labor

Commissioner is subject to appeal and de novo

review. The appeal is, in essence, a new trial and not

merely a review of the Labor Commissioner's

decision. Buchwald v. Katz, 8 Cal. 3d 493, 502. As

the California Supreme Court, interpreting an

earlier, but nearly identical, version of Section

1700.44 points out:

“A hearing de novo literally means a

new hearing, or a hearing the second

time... It is in no sense a review of

the hearing previously held, but is a

complete trial of the controversy, the

same as if no previous hearing had

ever been held. A hearing de novo

therefore is nothing more nor less

than a trial of the controverted

matter by the court in which it is

held.” Buchwald at 501 (quoting

Collier & Wallis, Ltd. v Astor, 9

Cal.2d 202, 205(1937)).

Although the TAA provides that appeal from

the Labor Commissioner’s decision is to be brought in

the superior court, nothing in the language of Section

1700.44(a) provides, nor even suggests, any intent to

preclude resort, on de novo appeal, to arbitration.

While Section 1700.44(a)’s language requires the

appealing party bring its appeal in the superior

22

court, the parties may then freely enforce their

agreement to arbitrate their claims, through

application of either the California Arbitration Act,

CAL. CODE. CIV. PROC. §§1281 et seg. or the FAA.

A statutory requirement, such as the one

found in the TAA, that claims be brought initially

before an administrative agency for nonbinding

adjudication does not deprive the parties of their

right to arbitrate. At most, it causes a brief delay in

when the parties may initiate arbitration. As such, it

does not run contrary to the FAA or the lines of cases

interpreting it.

What must not be lost, in this matter, is that

the arbitration was stayed by the arbitrator,

irrespective of any proceedings in the superior court

to stay arbitration. The parties freely exercised their

right to arbitration but, recognizing the value of the

proceedings before the Labor Commissioner, the

arbitrator chose to defer to the administrative agency

with specific expertise in the area of dispute.

2. The TAA Expressly Allows For

\rbitration in Lieu of Administrativ

Forth in the TAA

The TAA also expressly allows parties to

provide that disputes be arbitrated in lieu of

proceeding before the Labor Commissioner, provided

certain conditions are met. Section 1700.45 provides

that, notwithstanding Section 1700.44’s requirement

that disputes be referred to the Labor Commissioner,

an provision in a contract requiring arbitration of

23

“any controversy under the contract or as to its

existence, validity, construction, performance,

nonperformance, breach, operation, continuance, or

termination, shall be valid

“(a) If the provision is contained in a

contract between a talent agency and a

person for whom the talent agency

under the contract undertakes to

endeavor to secure employment, or

(b) If the provision is inserted in the

contract pursuant to any rule,

regulation, or contract of a bona fide

labor union regulating the relations of

its members to a talent agency...” CAL.

LAB. CODE § 1700.45

However, because the TAA is an exercise of

the state’s police power that the Labor Commissioner

is charged with enforcing, to be effective, the

arbitration provision must provide the Labor

Commissioner notice of and an opportunity to be

present at the hearings. Specifically, it provides that

an arbitration provision, in addition to complying

with either subsection (a) or (b), is valid:

“(c) If the contract provides for

reasonable notice to the Labor

Commissioner of the time and place of

all arbitration hearings, and

(d) If the contract provides that the

Labor Commissioner or his or her

authorized representative has the right

to attend all arbitration hearings.” CAL.

LAB. CODE § 1700.45

24

The arbitration provision at issue in the

instant matter did not comply with any of the

requirements to be valid under Section 1700.45.

Because it did not adequately comply with Section

1700.45, it was not adequate to bypass the Labor

Commissioner’s origina! jurisdiction to hear the

dispute.

B. The TAA’s Administrative Exhaustion

Requirement is Consistent with Prior

Cases Interpreting the FAA

The importance of the role played by

administrative agencies in adjudicating disputes

relating to the laws they are tasked with enforcing

has long been recognized by the Court. The doctrine

of exhaustion is well established in administrative

jurisprudence and provides that a party may not

seek its judicial remedies until its administrative

remedies have been exhausted. See e.g., McKart v.

United States, 395 U.S. 185, 193 (1969) (citing 3 K.

Davis, Administrative Law Treatise § 20.01 et seq.

(1958 ed., 1965 Supp.); L. Jaffe, Judicial Control of

Administrative Action 424-458 (1965); Myers v.

Bethlehem Shipbuilding Corp., 303 U.S. 41, 50-51

(1938). In fact, just last year, the Court held that, in

the context of prison litigation, that one must

exhaust his administrative remedies prior to any

resort to a judicial forum. Woodford v. Ngo, 126 8.

Ct. 2378 (2006) This principle should apply no less

when a party seeks to resort to arbitration prior to

exhausting the administrative process, especially

when that administrative process acts only as a

delay to arbitration and not a complete bar.

25

In EE OC. Waffle House, Inc., 534 U.S. 279

(2001), the Court recognized the importance of

allowing an administrative agency to fulfill its

statutory mandate, even where the parties had

agreed to arbitrate their dispute. The Court stated

that that the “policy goals of the FAA do not require

the agency to relinquish its statutory authority if it

has not agreed to do so.” Id. at 294. The Court

further went on to state that binding the E. E. O. C to

the private arbitration agreement “would [have]

undermineld] the detailed enforcement scheme

simply to give greater effect to an agreement

between private parties that does not even

contemplate the [agency’s) statutory function.” Id. at

296. These same principles are no less important

when, as here, it is a state agency tasked with

enforcing an important public policy.

This Court has also recognized that, while

statutory claims may be arbitrated, just as those

arising out of contract, “not ... all controversies

implicating statutory rights are suitable for

arbitration.” Broughton v. Cigna Healthplans of

California, 21 Cal. 4* 1066, 1075 (1999) (quoting

Mitsubishi Motors v. Soler Chrysler-Plymouth, 473

U.S. 614, 627 (1985)). The California Supreme Court,

recognizing the state’s police power to protect its

residents, has followed that line in holding that

arbitration agreements cannot “serve as a waiver of

[certain] statutory rights” when that waiver would be

contrary to public policy. Armendariz v. Found.

Health Psychare Servs., Inc., 24 Cal. 4 83, 100-101

(2000). The Labor Commissioner is tasked with

protecting the public policy concerns underlying the

26

TAA and her jurisdiction to hear those matters, in

the first instance, should not be diminished.

The Court has previously recognized that a

state statute which acts merely as a delay to

arbitration does not conflict with the FAA and may

be enforced. Where the parties have incorporated

state laws or remedies through their choice of forum,

that choice should be upheld as long as they do not

bar the arbitrator as the ultimate arbiter of the

claim. As the Court has stated, “[t}he FAA’s central

purpose is to ensure ‘that private agreements to

arbitrate are enforced according to their terms.”

Mastrobuono v. Shearson Lehman Hutton, Inc, 514

U.S. 52 (1995) (quoting Volt Information Sciences,

Inc. v. Board of Trustees of Leland Stanford Junior

Univ., 489 U.S. 468, 479 (1989)).

In Volt, the Court addressed whether the FAA

pre-empted a state statute that permitted a stay of

arbitration pending the outcome of related litigation.

Volt, 489 U.S. at 471. In upholding the arbitration-

delaying statute, the Court reasoned that the

purpose of the FAA was “motivated... by a

congressional desire to enforce agreements into

which the parties had entered,” Id. at 478 (quoting

Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, at

220 (1985)), and to enforce them according to their

terms. /d. (citing Prima Paint Corp. v. Flood &

Conklin Mfg. Co., 388 U.S. 395, 404, n.12 (1967)).

The Court in Vo/t refused to apply the FAA to pre-

empt a state law that merely delayed arbitration

even though the end result was that “arbitration

[was] stayed where the [FAA] would otherwise

permit it to go forward.” /d. at 479.

27

The parties to the instant dispute specifically

incorporated the laws of California into their contract

and provided that the contract would be interpreted

in accordance with those laws. As a result, the

parties agreed to be bound by the provisions of the

TAA, including the Labor Commissioner's

jurisdiction. If Petitioner’s actions violated that

regulatory scheme such that he was acting as an

unlicensed talent agent, as Respondent contended,

the Labor Commissioner has exclusive original

jurisdiction to hear the dispute in order to fulfill her

statutory mandate to enforce the Act and the parties

must first exhaust their administrative remedies. As

in Volt, when that proceeding is concluded, and the

parties’ administrative remedies have been

exhausted, the parties are free to proceed to

arbitration.

C. The Labor Commissioner is Best Situated,

in the First Instance, to Review Cases that

Arise Under the TAA .

The California Court of Appeal, in reaching its

decision in this case, found that it is appropriate for

the Commissioner to resolve the dispute between the

parties, for Itlhe Commissioner's expertise in

applying the Act is particularly significant in cases

where, as here, the essence of the parties dispute is

whether services performed were by a talent agency

for an artist.” Ferrer v. Preston, 145 Cal. App. 4th

440, 445 (2006) (quoting Styne v. Stevens 26 Cal.4th

42 at 58). The Court of Appeal added, "the

Commissioner|'s] ... interpretation of a statute he is

charged with enforcing deserves substantial weight."

Id. This Court has recognized that “since agency

28

decisions are frequently of a discretionary nature or

frequently require expertise, the agency should be

given the first chance to exercise that discretion or to

apply that expertise.” McKart, 395 U.S. at 194

For three-quarters of a century, the Labor

Commissioner has been charged with interpreting

and applying the TAA and its predecessor statutes

governing the procurement of employment in the

entertainment industry. The Labor Commissioner’s

expertise in this area is extensive and well

established through decades of administrative and

judicial precedent. Based on that expertise, the

Commissioner’s interpretation of the statute as

applied to the facts of a particular case may be of

value, even upon de novo review. The Labor

Commissioner’s decision may also aid the parties in

settling the case prior to review, whether in court or

by arbitration, as they will have received an objective

evaluation of the merits of their respective position.

In the instant matter, the arbitrator

recognized the value of the Labor Commissioner's

expertise when he granted a stay of the arbitration

proceedings pending the outcome of the hearing

before the Labor Commissioner. The arbitrator

reasoned that a stay was appropriate, in part,

“because the results of the Labor Commissioner

hearing also could inform the Arbitrator as to the

remedy or relief that would be just and equitable

under the circumstances of this case.” JOINT

APPENDIX at 38.

In addition to the expertise the Labor

Commissioner brings, the requirement that all

29

proceedings involving violations of the TAA be heard

by her, or that she be given notice of and an

opportunity to attend arbitrations, serves an added

benefit to the public as a whole, even if it causes

some delay to individual parties. This oversight

ensures that the Labor Commissioner is aware of the

nature and details of all claims arising out of the

statute so she can most effectively enforce it. It also

provides her relevant information to advise the

Governor and Legislature of changes to the Act that

may be necessary to serve its ultimate purpose of

protecting artists in an industry rife with abuse. The

minor inconvenience caused the parties by any delay

is outweighed by the public policy interest in |

protecting a broader class of vulnerable individuals.

III. Reversal of the Decision Below Would Create a

Potential Loophole to Enforcement ofthe |

Talent Agencies Act Against Unlicensed

Individuals to the Detriment of Those it is

Intended to Protect

The Petitioner asks the Court to open a

potential loophole in the TAA that could prove

disastrous to its enforcement and to the enforcement

of the Unions’ franchise systems — even to the point

of potentially unraveling the entire regulatory

scheme. As the TAA does not contain criminal

provisions, the most effective deterrent to individuals

crossing the line to unlawfully procure employment

for artists has long been the risk that the Labor

Commissioner would void a contract in its entirety

when that line has been crossed. But, by inserting an

arbitration provision in a representation contract,

even where the representative is acting as an

30

unlicensed agent, much of the disincentive to

violating the TAA may be eliminated.

Artists often find themselves in a position

where they have little to no leverage to negotiate the

terms of their representation agreements. They may

not have the understanding or the negotiating clout

to negotiate around an arbitration provision in the

representation agreements they are presented. Few

artists would comprehend that agreeing to such a

provision might divest the administrative agency

tasked with protecting them of jurisdiction over their

claims in situations where an individual trusted to

guide their career abuses that trust.

If the decision below is reversed, the likely

consequence is a deterioration of the Labor

Commissioner’s ability to enforce the TAA against

unlicensed individuals. Individuals seeking to avoid

the TAA’s licensing requirements could potentially

do so simply by inserting an arbitration clause into

their representation agreements. As the TAA does

not contain criminal provisions or enforcement

mechanism against unlicensed individuals other

than individual claims, where there is an arbitration

provision in an individual representation agreement,

the Labor Commissioner is left with no way to

enforce the act she is charged with enforcing.

CONCLUSION

For the foregoing reasons, the Court should affirm

the decision below.

Thomas R. Carpenter

American Federation of

Television & Radio

Artists, AFL-CIO

260 Madison Ave., 7th Fl.

New York, NY 10016

Tel.: (212) 532-0800

Facsimile (212)532-2242

Counsel for Amicus Curiae

American Federation of

Television and Radio

Artists, AFL-CIO

Respectfully submitted,

Duncan Crabtree-lreland

(Counsel of Record)

Danielle S. Van Lier

Screen Actors Guild, Inc.

5757 Wilshire Blvd.

Los Angeles, CA 90036

Tel.: (323) 549-6627

Facsimile: (323) 549-6624

Counsel for Amicus Curiae

Screen Actors Guild, Ine.