|FROM:||The Legal Taxi|
|RE:||Whether a franchiser can file for stay proceedings and compel arbitration?|
Validity & enforceability of Arbitration Clause.
Whether a franchiser can file for stay proceedings and compel arbitration?
The parties had a contract with an arbitration clause regarding resolution of any dispute arising between them. The defendant Beta was served with notice of termination pursuant to the "wind up" provisions of a franchise agreement with Acme.Beta’s restaurant was to have ceased operating; however, instead of "winding up" its businesses, Beta filed the instant complaint asserting, among other things, that the arbitration provisions of the agreementwereunconscionable and therefore unenforceable. Acme, a national restaurant chain, filed a motion to stay proceedings and compel arbitration. Can appellant Acmeobtain a stay of proceedings and compel arbitration?
Standard Research Memo
- Highlighted Copies of Key Cases.
- Summaries of Key Cases.
Whether a franchiser can file for stay proceedings and compel arbitration?
Whether a consent given when intoxicated amounts to a valid consent in sexual intercourse?
U.S.C.S, Mich.Comp.Laws and case law
In the present matter, the Acmehas a written contract with Beta. The contract specifically requires dispute resolution through arbitration. The statutes and laws are very clear about the submission of disputes to arbitration. The research for the present matterinvolves the validity and enforceability of the arbitration clause, and whether a party to it can obtain a stay of civil court proceedings and compel arbitration for alleged breach of contract.
Validity & enforceability of Arbitration Clause
In the present matter the parties had a written contract with an arbitration clause that requires arbitration of any dispute.
9 U.S.C.S § 2providesthe grounds establishing the validity, irrevocability, and enforcement of agreements to arbitrate:
"Mental incapacity" may extend to a transitory circumstance such as intoxication if the nature and degree of the intoxication has gone beyond the stage of merely reduced inhibition and has reached a point where the victim does not understand the nature or consequences of the sexual act. § 18.2-67.10(3).
MCLS § 600.5001 states that:
A provision in a written contract to settle by arbitration under this chapter, a controversy thereafter arising between the parties to the contract, with relation thereto, and in which it is agreed that a judgment of any circuit court may be rendered upon the award made pursuant to such agreement, shall be valid, enforceable and irrevocable save upon such grounds as exist at law or in equity for the rescission or revocation of any contract. Such an agreement shall stand as a submission to arbitration of any controversy arising under said contract not expressly exempt from arbitration by the terms of the contract. Any arbitration had in pursuance of such agreement shall proceed and the award reached thereby shall be enforced under this chapter.
That the agreement between the parties and arbitration clause contained therein are valid. However, the judge's findings of fact are devoid of a determination that plaintiff's claims are arbitrable under that agreement. Where a motion to dismiss a cause of action for lack of subject matter jurisdiction is based on an arbitration clause, the court should first determine whether or not the claim is arbitrable.
The Court in American Fidelity Fire Ins Co v Barry, has provided a three-stage analysis:
- whether there exists an arbitration agreement in a contract between the parties;
- whether the dispute is arguably covered by the contract; and
- whether the dispute is expressly exempted by the terms of the contract.
In the query, there is an arbitration agreement, the dispute is covered, and the topic of the dispute is not expressly exempted by the terms of the contract. Barring some unique argument, the arbitration provision is prima facie valid.
9 U.S.C.S. § 4 provides that
a party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition to any United States district court for an order directing that such arbitration proceed in a manner provided for in such agreement. The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement. If the making of the arbitration agreement or the failure, neglect or refusal to perform the same is in issue, the court shall proceed summarily to the trial thereof.
The court in Great Earth Cos. v. Simons, 288 F.3d 878 (6th Cir. Mich. 2002) held that:
When asked by a party to compel arbitration under a contract, a federal court must determine whether the parties have agreed to arbitrate the dispute at issue. If the district court is satisfied that the agreement to arbitrate is not in issue, it must compel arbitration. If the validity of the agreement to arbitrate is in issue, the court must proceed to a trial to resolve the question. 9 U.S.C.S. § 4. In order to show that the validity of the agreement is in issue, the party opposing arbitration must show a genuine issue of material fact as to the validity of the agreement to arbitrate.
The burden of proof here shifts to Betabecause it opposes the validity of arbitration agreement. Beta cannot prevail without a genuine issue of material fact.
‘There is an agreement to arbitrate; the FAA reflects a strong, well-established, and widely recognized federal policy in favor of arbitration.’ Section 3 of the FAA provides that if a suit is brought on an issue referable to arbitration under a written arbitration agreement, the court shall stay a matter until the arbitration "has been had in accordance with the Agreement.” (Emphasis added) 9 U.S.C. § 3. Likewise, § 4 of the FAA requires that a court, "upon being satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, . . . shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement." 9 U.S.C. § 4.
Based on the statutes, case law, facts, and prevailing circumstances, we believe that the defendant’s motion to stay proceedings and to compel arbitration against Betawill be upheld under 9 U.S.C.S.§ 2.The provision in the written contract between the parties requires dispute resolution by means of arbitration and thereforevalidatesAcme’s request to resolve the dispute by arbitration. Upon finding the arbitration clause in the contract valid, the court should order a stay of plaintiff’s proceedings and compel arbitration.
Please find the attached document for highlighted copy of key case:
Please find the attached document for summary of key case:
Please find the attached document for Referred Statutes/Laws:
Thank you for using The Legal Taxi. We hope that we that you will ask us to serve you again soon.
NEITHER MIND MERCHANTS, THE LEGAL TAXI, ANY OTHER SUBSIDIARY OF MIND MERCHANTS, OR ANY AGENTS OR VENDORS OF MIND MERCHANTS (TOGETHER, "MIND MERCHANTS"), NOR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, OR REPRESENTATIVES (TOGETHER, "PERSONNEL"), PROVIDES LEGAL SERVICES OR LEGAL ADVICE IN THE UNITED STATES, UNITED KINGDOM, OR INDIA. MIND MERCHANTS IS NOT A LAW FIRM, AND IT DOES NOT AND CANNOT RENDER LEGAL SERVICES OR LEGAL ADVICE TO THE GENERAL PUBLIC. MIND MERCHANTS IS NOT ENGAGED IN THE PRACTICE OF LAW, NOTWITHSTANDING ANY PERFORMANCE OR DELIVERY OF SERVICES BY LAWYERS WHO ARE OR MAY BE AUTHORIZED TO PRACTICE LAW IN THE UNITED STATES, UNITED KINGDOM, OR INDIA. THE SERVICES AND RELATED WORK PRODUCT PROVIDED BY MIND MERCHANTS AND ITS PERSONNEL ARE PERFORMED AND PROVIDED SOLELY AT THE REQUEST OF LAWYERS AND ARE BEING PROVIDED DIRECTLY TO THOSE LAWYERS, OR THEIR DESIGNEE(S), IN SUPPORT OF THE LEGAL SERVICES THAT THOSE LAWYERS ARE PERFORMING FOR THEIR CLIENTS.