David Kayne v. The Thomas Kinkade Company

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
OCTOBER 3, 2007
No. 07-11983 THOMAS K. KAHN
Non-Argument Calendar CLERK
________________________

D. C. Docket No. 06-02168-CV-CAP-1

DAVID KAYNE,

Plaintiff-Appellant,

versus

THE THOMAS KINKADE COMPANY,
f.k.a. Media Arts Group, Inc.,

Defendant-Appellee.

________________________

Appeal from the United States District Court
for the Northern District of Georgia
_________________________

(October 3, 2007)

Before BLACK, MARCUS and WILSON, Circuit Judges.

PER CURIAM:

David Kayne (“Kayne”) appeals a district court decision granting the
Thomas Kinkade Company’s (“TKC”) motion to compel arbitration and to dismiss

this action. This case involves a contract dispute over the formation and terms of a

2001 credit application submitted by Kayne Art Galleries, of which Kayne is the

owner and president, to TKC. The application contains an arbitration clause

providing that all disputes arising out of the agreement shall be resolved by

arbitration. It also contains a Personal Guaranty in which Kayne personally and

individually guaranteed the payment of Kayne Art Galleries’ debts and agreed to

be bound by the arbitration clause. Following the initiation of arbitration

proceedings against him by TKC, Kayne filed this action, seeking declaratory and

injunctive relief against the enforcement of the arbitration clause against him on

several grounds, including the argument that the parties’ relationship was governed

by a series of prior agreements. The district court determined that the parties

properly entered into the 2001 credit agreement and that it obligates Kayne to

arbitrate the issue of his individual liability. We agree with the district court’s

interpretation of the pertinent agreements and find no error in its factual findings.

Accordingly, we affirm.

Background

TKC produces, markets, and distributes the work of the artist Thomas

Kinkade. Kayne is the owner and president of Kayne Art Galleries of GA, Inc.

2
Between 1998 and 2001, Kayne and Kayne Art Galleries entered into several

agreements with TKC and its affiliates. In April 1998, prior to the formation of

Kayne Art Galleries, Kayne in his individual capacity, submitted an application for

credit with TKC. Subsequently, TKC and Kayne Art Galleries executed a series of

Signature Dealer Agreements (“Dealer Agreements”) under which Kayne Art

Galleries was authorized to own and operate galleries with exclusive rights to sell

Kinkade works. Each of the Dealer Agreements contained a provision requiring

disputes to be resolved through arbitration.

In October 2001, Kayne signed and submitted a second credit application

(the “Credit Application”) to TKC. This application sought an extension of credit

to Kayne Art Galleries, rather than to Kayne personally. The Credit Application

contains an arbitration clause, which provides in pertinent part:

DISPUTES: ANY DISPUTE OR CONTROVERSY ARISING FROM THIS
AGREEMENT WILL BE RESOLVED BY ARBITRATION BY THE
AMERICAN ARBITRATION ASSOCIATION AT SANTA CLARA
COUNTY, CALIFORNIA.

In addition, the Credit Application contains a Personal Guaranty signed by

Kayne that provides:

THE UNDERSIGNED, FOR CONSIDERATION DO HEREBY
INDIVIDUALLY AND PERSONALLY GUARANTY THE FULL AND
PROMPT PAYMENT OF ALL INDEBTEDNESS HERETOFORE OR
HEREAFTER INCURRED BY THE ABOVE BUSINESS. THIS
GUARANTY SHALL NOT BE AFFECTED BY THE AMOUNT OF

3
 CREDIT EXTENDED OR ANY CHANGE IN THE FORM OF SAID
INDEBTEDNESS. NOTICE OF THE ACCEPTANCE OF THIS
GUARANTY, EXTENSION OF CREDIT, MODIFICATION OF THE
TERMS OF PAYMENT, AND ANY RIGHT OR DEMAND TO
PROCEED AGAINST THE PRINCIPAL DEBTOR IS HEREBY WAIVED
. . . . AS GUARANTOR, I AM ALSO BOUND BY THE ABOVE
ARBITRATION CLAUSE.

TKC never signed the Credit Application. It did, however, extend credit to

Kayne Art Galleries following its receipt of a signed copy from Kayne via

facsimile.

In late 2002, Kayne Art Galleries became delinquent in its obligations to

TKC. TKC initiated arbitration proceedings against Kayne and Kayne Art

Galleries pursuant to the arbitration provisions in the Dealer Agreements. An

arbitration panel in San Francisco, California, awarded TKC $588,555 and held

Kayne personally liable. TKC moved to confirm the award in the U.S. District

Court for the Northern District of California. The court confirmed the award

against Kayne Art Galleries but vacated the award against Kayne individually on

the ground that he was not a party to the Dealer Agreements governing the

arbitration. The Ninth Circuit affirmed the district’s court’s judgment. Thomas

Kinkade Co. v. Kayne, No. 05-15245, 2007 WL 1544430 (9th Cir. May 24, 2007).

Thereafter, TKC initiated arbitration proceedings in Santa Clara, California,

against Kayne individually pursuant to the Credit Application’s arbitration clause

4
and Personal Guaranty. In response, Kayne filed the instant action in the Northern

District of Georgia to enjoin enforcement of the arbitration clause against him.

TKC filed a motion to compel arbitration and to dismiss Kayne’s claims. On

March 29, 2007, the district court granted TKC’s motion to the extent that it sought

dismissal of the action and an order compelling arbitration. This appeal followed.

Jurisdiction

Under the Federal Arbitration Act, an immediate appeal is allowed from a

“final decision with respect to an arbitration.” 9 U.S.C. § 16(a)(3). A final

decision is one that “ends the litigation on the merits and leaves nothing more for

the court to do but execute the judgment.” Green Tree Fin. Corp.-Ala. v.

Randolph, 531 U.S. 79, 86 (2000) (quotations omitted). This Court has extended

the holding in Green Tree to situations in which the district court compels

arbitration but dismisses the action without prejudice, explaining that the district

court’s order is final “insofar as compelled arbitration is concerned.” Hill v. Rent-

a-Center, Inc., 398 F.3d 1286, 1288 (11th Cir. 2005). In the instant case, the

district court’s March 29, 2007 order is final because it left nothing for the court to

do but execute the judgment. Accordingly, this Court has jurisdiction to consider

the appeal.

Standard of Review

5
 We review de novo a district court order compelling arbitration. Jackson v.

Cintas Corp., 425 F.3d 1313, 1316 (11th Cir. 2005).

Discussion

Kayne argues that the district court erred in finding that the Credit

Application was supported by consideration and in finding that TKC accepted the

agreement by performance. In addition, he argues that the district court erred in

interpreting the Credit Application to require arbitration of issues arising from the

Personal Guaranty. Finally, he argues that the district court erred in finding that

there was no triable issue of fact regarding the existence of an agreement to

arbitrate. We find each of these objections to be without merit.

1. Consideration

The district court found that the extension of credit to Kayne Art Galleries

constituted consideration for the Credit Agreement/Personal Guaranty. We agree.

Under Georgia and California law,1 the lending of money or the extension of credit

is sufficient consideration to support the guaranty of a loan. Beard v. McDowell,

331 S.E.2d 104, 106 (Ga. Ct. App. 1985); Beverly Hills Nat’l Bank v. Glynn, 267

Cal. App. 2d 859, 867 (Cal. Ct. App. 1968). In this case, it is undisputed that TKC

extended credit to Kayne Art Galleries after Kayne executed the Credit

1
The parties are in dispute as to which state’s law should govern this action. We do not
reach this issue because the choice of law does not alter the outcome.

6
Application/Personal Guaranty. This extension of credit constituted adequate

consideration for the agreement.

We likewise agree with the district court’s finding that there existed

consideration to support the Personal Guaranty’s arbitration clause. In both

Georgia and California, mutual promises and obligations constitute sufficient

consideration to support a contract. Caley v. Gulfstream Aerospace Corp., 428

F.3d 1359, 1376 (11th Cir. 2005) (applying Georgia law); Johnson v. Holmes

Tuttle Lincoln-Mercury, Inc., 325 P.2d 193, 196 (Cal. Ct. App. 1958). Here, TKC

and Kayne mutually promised to be bound by arbitration in the event of a dispute

arising out of the Credit Application/Personal Guaranty. The district court

properly found that these mutual promises constituted consideration for the

arbitration clause.

Kayne contends that there was no consideration to support the Credit

Application/Personal Guaranty because TKC already was obligated to extend

credit to Kayne Art Galleries under the Dealer Agreements, which contained the

following provision: “DEALER is approved for extended, net 60 day (from date of

invoice), credit terms on all purchases.” This pre-existing obligation, he argues,

could not serve as consideration for an identical duty under the Credit

Application/Personal Guaranty.

7
 The district court rejected this interpretation of the Dealer Agreements,

finding that they did not require the extension of credit to Kayne Art Galleries, and

we agree. Nothing in the Dealer Agreements obliges TKC to extend credit to

Kayne Art Galleries indefinitely or in an unlimited amount. The language relied

upon by Kayne merely indicates that Kayne Art Galleries was approved for credit

at the time each Dealer Agreement was executed. Other provisions of the Dealer

Agreements contemplate that evaluations of Kayne Art Galleries’ credit worthiness

would be required on an ongoing basis. Moreover, the Dealer Agreements provide

no terms according to which credit would be extended. The district court properly

rejected Kayne’s interpretation of these agreements.

2. Acceptance

We agree with the district court’s determination that TKC accepted the

Credit Application/Personal Guaranty by performance when it extended credit to

Kayne Art Galleries. Under Georgia and California law, acceptance of an offer

may be accomplished by performance of the thing contemplated in the offer.

Moreno v. Strickland, 567 S.E. 2d 90, 93 (Ga. Ct. App. 2002); Estate of

Klauenberg, 108 Cal. Rptr. 669, 671 (Cal. Ct. App. 1973). An offer that specifies

the manner in which it is to be accepted must be accepted in that manner. Caley,

428 F.3d at 1374 (applying Georgia law); see In re First Capital Life Ins. Co., 40

8
Cal. Rptr. 2d 816, 819 (Cal. Ct. App. 1995). In this case, however, the Credit

Agreement/Personal Guaranty does not specify a manner of acceptance.

Accordingly, we conclude that TKC’s performance was sufficient to satisfy this

requirement.

Kayne argues that TKC did not accept the Credit Application/Personal

Guaranty by performance because TKC did not increase Kayne Art Galleries’

credit limit. According to Kayne, the Credit Application/Personal Guaranty

contemplated that Kayne Art Galleries would receive an increase in credit over the

amount provided under the Dealer Agreements. However, as discussed above,

nothing in the Dealer Agreements required TKC to extend credit to Kayne Art

Galleries in a specified amount or for an indefinite period. The district court

properly determined that these agreements did not preclude TKC’s acceptance of

the Credit Application/Personal Guaranty by performance.2

3. Applicability of Arbitration Clause to Kayne

Kayne argues that the Personal Guaranty does not obligate him to arbitrate

2
Kayne argues that the doctrine of collateral estoppel compels a finding that the Credit
Application/Personal Guaranty was intended to effect an increase in Kayne Art Gallery’s credit
limit. This argument is based on a statement in Judge Illston’s opinion the Northern District of
California proceeding that Kayne submitted the Credit Application/Personal Guaranty “in order
to increase [Kayne Art Galleries’] credit limit with TKC.” We conclude that this statement has
no preclusive effect on the instant case because the finding was not a “critical and necessary part
of the judgment in the first action.” I.A. Durbin Inc. v. Jefferson Nat’l Bank, 793 F.2d 1541,
1549 (11th Cir. 1986). The issue before Judge Illston was Kayne’s possible liability under the
Dealer Agreements, not the formation of the Credit Application/Personal Guaranty.

9
the issue of his personal liability to TKC. He interprets the arbitration clause in the

Personal Guaranty merely to require that he not object to an arbitration finding

against Kayne Art Galleries in a subsequent proceeding. We reject this

interpretation because it conflicts with the plain language of the agreement, which

provides: “AS GUARANTOR, I AM ALSO BOUND BY THE ABOVE

ARBITRATION CLAUSE.” It does not say that Kayne is bound to the result of an

arbitration between TKC and Kayne Art Galleries.

Moreover, as the district court found, Kayne’s interpretation renders the

Personal Guaranty’s arbitration clause meaningless. There would be no need for

Kayne to agree in his personal capacity that a dispute between TKC and Kayne Art

Galleries is subject to arbitration. That requirement was established by the

arbitration clause in the Credit Application. A contract should be interpreted in a

manner that gives effect to each of its provisions. VATACS Group, Inc. v.

HomeSide Lending, Inc., 623 S.E.2d 534, 538 (Ga. Ct. App. 2005); Comm. for

Responsible Sch. Expansion v. Hermosa Beach City Sch. Dist., 48 Cal. Rptr. 3d

705, 713 (Cal. Ct. App. 2006). We agree with the district court’s interpretation of

the Personal Guaranty.3

3
We also note the “unquestionably strong federal policy favoring obligation.” Blinco v.
Green Tree Servicing LLC, 400 F.3d 1308, 1311 (11th Cir. 2005). “Any doubts concerning the
scope of arbitrable issues should be resolved in favor of arbitration.” Id. (quoting Moses H.
(continued...)

10
 4. Triable Issues of Fact

Kayne argues that the district court erroneously found that there were no

triable issues of fact concerning the existence of an agreement to arbitrate. He

asserts that, contrary to the district court’s finding, he testified that neither he nor

Kayne Art Galleries purchased artwork from TKC pursuant to Kayne’s 1998 credit

application.

We “accept[] the district court’s findings of fact that are not clearly

erroneous.” Multi-Financial Securities Corp. v. King, 386 F.3d 1364, 1367 (11th

Cir. 2004). We find no clear error in the district court’s factual findings. While

Kayne in his affidavit did deny purchasing artwork pursuant to the 1998 credit

application, he did not explicitly deny that TKC extended him credit for that

purpose. The district court did not err in so finding.

Conclusion

We affirm the judgment of the district court.

AFFIRMED.

3
(...continued)
Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)).

11