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Hobbs & Shaw: Starting work before signing can roll the dice

It can be risky to start work on a services project without having something in writing to nail down what will be done and how much is to be paid. Consider a California case about the Fast & Furious movies and a dispute about whether a producer was entitled to a percentage of the studio’s earnings. See Moritz v. Universal City Studios LLC, No. B299083, slip op. (Cal. App. Sept. 2, 2020) (affirming denial of defendant’s motion to compel arbitration in lieu of litigation).

Neal Moritz was a producer who worked for Universal Studios on the Fast & Furious series of movies. He and the studio entered into a series of written contracts with the studio that covered “sequels” and “remakes.”

Moritz started work on the Hobbs & Shaw movie, which was not a sequel nor a remake. (The parties agreed that this was the case.) Moritz did this without a finalized, signed written contract for the H&S movie, although the parties had exchanged written drafts. See id. at 5. The court recounted that:

… Moritz alleges that in connection with the Fast & Furious contracts, Moritz and Universal had fully negotiated and agreed upon an oral producer deal before any writings were exchanged, and that typically, Moritz would begin working on the production of the film prior to the oral producer deal being reduced to writing.

Moritz alleges that this again occurred with respect to Hobbs & Shaw, but this time, Universal failed to honor the terms of the parties’ oral agreement.

Id, slip op. at 6 (cleaned up, emphasis and extra paragraphing added).

Moritz sued for breach of the alleged oral contract. In response, the studio asked the court to transfer the case to private, confidential arbitration, based on the arbitration provisions in the written contracts for the “sequels” and “remakes.”

The district court and appeals court both held that arbitration was not required because the Hobbs & Shaw spinoff did not “relate to” the written contracts for the other F&F movies, so the arbitration clauses in those other contracts did not apply.

The court’s ruling means both parties will very likely have to take their chances in front of a jury (which in turn suggests that the case will likely be settled).

Drafting lesson: The parties likely could have avoided litigation altogether if they had signed even a very-short written contract. The court noted that for the Fast & Furious movies 8 through 10, the parties’ contract was less than two pages long because it simply adopted a previous written contract with limited modifications. See id., slip op. at 3.