Court Opinion

ID: 2746924
Source: CourtListenerOpinion
Date Created: 2014-10-31 02:05:14.985111+00
Date Added: 2024-06-11T11:25:39.901548
License: Public Domain

Filed 10/30/14 DePhillips v. DirectTV CA2/1
                  NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.

              IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                     SECOND APPELLATE DISTRICT

                                                  DIVISION ONE

RUSSELL M. DEPHILLIPS, as Trustee,                           B250247
etc.,
                                                             (Los Angeles County
         Defendant and Appellant,                            Super. Ct. No. BS128925)

         v.

DIRECTV, INC.,

         Plaintiff and Respondent.

         APPEAL from a judgment of the Superior Court of Los Angeles County; Ruth
Ann Kwan, Judge. Reversed.
         Munger, Tolles & Olson, Ronald L. Olson, Fred A. Rowley, Jr., Anjan
Choudhury, Ray S. Seilie, Thomas P. Clancy; Kirby, Noonan, Lance & Hoge and
Michael L. Kirby for Defendant and Appellant.
         Quinn Emanuel Urquhart, Kathleen M. Sullivan, Michael E. Williams, Justin C.
Griffin, and A.J. Bedel, for Plaintiff and Respondent.
                                             ____________________
       This is a contract termination dispute. DirecTV contracted with Professional
Satellite to recruit new customers, but DirecTV terminated the contract without the
proper amount of notice. At arbitration, Professional Satellite won in a two-to-one split.
DirecTV petitioned the trial court to vacate this arbitration award. We assume without
deciding the trial court was right to review the arbitration award for errors of law or legal
reasoning. Our review is de novo. (Gravillis v. Coldwell Banker Residential Brokerage
Co. (2010) 182 Cal. App. 4th 503, 511.) The trial court concluded the arbitrators made
three legal errors. We disagree and therefore reverse the trial court’s order vacating the
arbitration award.
                                              I
       The parties differed about which document governed their relationship. There
were three relevant documents: the 1998 contract, the 2004 contract, and the 2006
contract proposal. The parties agree they signed the 1998 and 2004 documents and
thereby created effective contracts. With respect to the 2006 document, DirecTV does
not challenge the arbitrators’ majority finding that Professional Satellite never signed the
proposal.
       Rather, DirecTV takes the position that, through its conduct, Professional Satellite
ratified DirecTV’s 2006 proposal. The arbitrators rejected this ratification argument, but
the trial court mistakenly accepted it.
       Professional Satellite never ratified the 2006 proposal. Ratification requires that
the ratifier “affirmatively endorsed” the disputed contract proposal at a time that reveals
assent. (Rakestraw v. Rodrigues (1972) 8 Cal. 3d 67, 75; see also id. page 73 [“A
purported agent’s act may be adopted expressly or it may be adopted by implication
based on conduct of the purported principal from which an intention to consent to or
adopt the act may be fairly inferred, including conduct which is ‘inconsistent with any
reasonable intention on his part, other than that he intended approving and adopting it.’”
(Italics added.).]
       The facts do not show ratification. Neither DirecTV nor Professional Satellite
treated each other as though the 2006 proposal were in effect. DirecTV continued its

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contractual relations with Professional Satellite as if only the 2004 contract were in effect
by repeatedly making payments to Professional Satellite based on the 2004 contract.
DirecTV never attempted to enforce the 2006 document — until it decided to terminate
Professional Satellite at a time when Professional Satellite’s business was declining.
When DirecTV informed Professional Satellite the 2006 proposal was in effect,
Professional Satellite expressed surprise and “confronted [DirecTV executives] and
vociferously denied the existence of the 2006 contracts, insisting [to DirecTV] that [an
earlier contract] was the operative contract between the parties . . . .” DirecTV failed to
produce evidence to the arbitrators of its insistence that — in response to Professional
Satellite’s vociferous denial — the 2006 document indeed was the operative contract.
These facts do not show ratification. Indeed, they contradict it.
       DirecTV cites Behniwal v. Mix (2005) 133 Cal. App. 4th 1027, 1040, which did not
involve facts contradicting ratification.
       DirecTV also makes an erroneous argument about the so-called Nayna disclosure.
DirecTV argues that Professional Satellite included the 2006 proposal among some 90
contracts it listed in connection with a corporate transaction with a company called
Nayna, and that this listing signifies ratification. But what was the meaning of this
listing, which was not specifically addressed to or intended for DirecTV? What did the
listing reveal about the state of mind of Professional Satellite’s management? These
questions are factual. Professional Satellite may have included this document among 90
others out of a lawyerly abundance of caution, the inclusion of this one document among
dozens of others may have been simple inadvertence, or it may show that Professional
Satellite considered the 2006 proposal a contract. As finders of fact, the arbitrators were
positioned to gauge the significance of this corporate listing in the context of all
interactions between DirecTV and Professional Satellite. The arbitrators rejected the
conclusion of ratification, which in this case (as in most) was a largely factual issue. This
factual conclusion was not an error of law or legal reasoning. It was beyond the power of
the trial court to descend into this factual domain, which was the exclusive preserve of
the arbitrators.

                                              3
                                              II
       The second mistaken conclusion was that the arbitrators erred in their
understanding of the proper relationship between the 1998 and 2004 contracts. The
arbitrators correctly found the two agreements so inconsistent in their critical elements as
to cause their simultaneous application to be virtually impossible. The arbitrators were
right for an array of reasons. For instance, section 1.3 of the 1998 agreement permitted
Professional Satellite to promote and sell satellite television orders for companies that
competed with DirecTV, while section 1.3 of the 2004 agreement expressly barred this
practice. The 2004 agreement entitled Professional Satellite to one year’s notice before
termination. But on July 2, 2007 DirecTV wrote Professional Satellite that DirecTV was
terminating Professional Satellite on 30 days notice. This improper termination violated
the 2004 contract and entitled Professional Satellite to contract remedies, as the
arbitrators properly found.
       This contract analysis involves no parol evidence. The trial court faulted the
arbitrators for considering inadmissible parol evidence. It is not obvious this supposed
parol evidence affected the arbitrators’ thinking at all. Whether it did, however, does not
matter because, parol evidence or no, DirecTV’s termination gave Professional Satellite
rights to compensation under the 2004 contract, as the arbitrators correctly concluded.
                                             III
       The third mistaken conclusion was that the arbitrators erred by deciding one side’s
damages expert was right and the other side’s was wrong. DirecTV and Professional
Satellite both advanced their damages claims in the form of expert testimony. The
arbitrators decided this battle of the experts by accepting the Professional Satellite expert,
who was Dr. Kennedy, and by rejecting the DirecTV expert, who was Mr. Strong.
       After the arbitration and before the trial court, DirecTV amended Mr. Strong’s
damages figures to advance a “setoff” (or “off-set”) theory worth $25.4 million or
perhaps $36.6 million or perhaps “more than one hundred million dollars . . . .” But then
it was too late in the day to introduce new precise (or vague) damages figures. The finder
of fact — here, the arbitration panel — is entitled to have the contestants state their

                                              4
damages conclusions with precision and finality. (See Conrad v. Ball Corp. (1994) 24
Cal. App. 4th 439, 444–445.) This is so despite the fact that DirecTV mentioned setoff in
its answer and in passing in an arbitration brief. When DirecTV wrote that its expert
Strong’s calculations properly reflected the measure of damages, it was not legal error for
the arbitrators to accept this representation at face value.
                                       DISPOSITION
       The trial court’s order is reversed. The case is remanded for entry of an order
confirming the arbitration award. Appellant shall recover its costs on appeal.
       NOT TO BE PUBLISHED

                                                   WILEY, J.

We concur:

       ROTHSCHILD, P. J.

       JOHNSON, J.

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