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Note:Intertainment Licensing GmbH, a German firm in the business of distributing motion pictures, contracted with Franchise Pictures for the distribution rights to "Caveman's Valentine" starring Samuel Jackson. Under the contract, Intertainment agreed to pay a US$10.575 million license fee for delivery of the film directly to The National Bank of Canada (NBC), which lent money to Franchise to finance its production. In the event that the film was not technically acceptable, Franchise would be liable to the lender for the amount of the license fee under its guarantee.

The payment schedule for the contract was split into two installments, each for US$5,287,500. The first installment was secured by a letter of credit issued by HyposVereinsbank, payable upon receipt of certain documents, which included a laboratory certificate confirming receipt and acceptability of the film materials. The second installment was payable by wire transfer within ten business days of lender's drawing on the letter of credit. The contract also stipulated that in the event of a dispute, an arbitrator's certificate determining that the materials were technically acceptable could substitute for the lab certificate in order to allow NBC to draw on the letter of credit.

When the film materials were delivered to the laboratory, it issued a lab certificate. Intertainment, however, rejected the delivery and Issuer refused to accept the lab certificate for certain technical revisions. Lender immediately demanded arbitration pursuant to the contract under the rules of the American Film Marketing Association in order to obtain an arbitration certificate which could be presented under the LC instead of the lab certificate. After several days of hearings, the arbitrator issued an award in favor of lender finding that lender was entitled to payment of the licensing fee. The arbitrator also awarded lender interest on the first and second installments of the fee along with costs. Lender then filed an action to enforce the award and the trial court granted enforcement. On appeal, the California Court of Appeals, Second District, Boland, Cooper and Rubin, JJ., affirmed.

Intertainment argued that the award should be vacated because the only issue submitted to the arbitrator was whether the film materials were technically acceptable or not. It asserted that the issue of payment was never submitted or actually arbitrated and thus any holdings on such issues would fall outside of the arbitrator's scope of decision.

The appellate court agreed with the conclusion of the trial court and the arbitrator that the issue of fees was inseparable from that of delivery. The court also noted that the parties "made no agreement restricting the broad authority conferred on the arbitrator in the notice of assignment."

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