Not in This “House of Cards” $31M Arbitration Award Upheld Against Actor Kevin Spacey

On August 4, 2022, the California Superior Court of Los Angeles enforced a $31 million arbitration award against actor Kevin Spacey for breach of contract based on reports that he sexually harassed multiple crew members on the set of the Netflix political drama House of Cards.

Spacey was accused in November 2017 of harassing and predatory behavior towards young crew members on the set of House of Cards. After the allegations about Spacey became public, the producers suspended Spacey and undertook an internal investigation into the claims. Based on the findings of the investigation and the multiple additional claims against him, the producers terminated Spacey’s contracts and eventually wrote his character out of the final season of the show. Spacey challenged his termination, claiming he only engaged in “sexual innuendo” and “horseplay” that did not violate the producers’ anti-harassment policies.

On January 30, 2019, the producers filed a demand for arbitration asserting claims against Spacey and his production companies for breaching their production contracts. The producers sought lost profits and other damages they incurred because they had to write Spacey out of the show and to cut the number of episodes in the final season. Spacey and his own production companies filed a cross-claim for breach of contract against the producers, alleging that they had no basis to terminate his contracts and breached them by refusing to continue to pay Spacey.

After an arbitration hearing and briefing, the arbitrator issued a 46-page decision in favor of the producers, awarding them more than $31 million in compensatory damages, attorney’s fees, and costs. The arbitrator held that Spacey materially breached his acting and executive production contracts with the producers and that those breaches excused the producers from paying him any further compensation for his role in House of Cards.

The producers filed a lawsuit in the California Superior Court to enforce the arbitration award. In the opinion upholding the award, the court held that Spacey failed to meet the high burden necessary to overturn the award. The Court held that an arbitrator’s decision may be overturned only if it “is so utterly irrational that it amounts to an arbitrary remaking of the contract between the parties.”  

The judge held that Spacey’s challenges as not even a “close case,” ruling that the damages award was a “fairly typical compensatory damages award and is directly relevant” to compensating the producers and alleviating the effects Spacey’s breach. The judge also held that Spacey had failed to establish that the damages were beyond the scope of the parties’ arbitration agreements.

As arbitration clauses become more and more common in professional and executive employment contracts, it is important to understand how courts review arbitration awards like the one against Spacey. As illustrated here, courts typically defer to the decisions of the arbitrator, unless his or her decision essentially remakes the contract at the center of the dispute. Professionals and executives whose employment and business contracts contain binding arbitration clauses should consult counsel as to the applicability and enforceability of the clauses.

Especially for parties who wish to keep contract disputes confidential, binding confidential arbitration can provide a discreet solution for resolving contractual disputes. However, if they are not satisfied with the results, they are extremely difficult to challenge and challenging them typically defeats one of the key purposes of arbitration – the confidential resolution of disputes.

Bertram LLP represents companies, professionals and executives in negotiating and resolving disputes concerning their employment and business contracts, including litigating their claims through confidential arbitration.