Awuah v. Coverall North America, Inc., 843 F. Supp. 2d 172

Plaintiffs are current/former Cov**erall North America, Inc. franchisees in Massachusetts seeking relief on multiple claims including breach of contract, deceptive trade practices, and wage/labor violations.
Massachusetts precedent in Awuah v. Coverall North America, Inc. determined Coverall’s Massachusetts franchises are employers, prompting class certification of MA franchise owners/workers since February 15, 2004 who did not sign arbitration agreements or have claims adjudicated.
There is a dispute over whether 30 transferees, who obtained franchises via Consent to Transfer agreements, belong to the certified class because they did not receive class notice.
Consent to Transfer agreements lack an arbitration clause but state transferees “shall succeed to all rights and obligations” under the Janitorial Franchise Agreement, which contains an arbitration clause.
Coverall argues the Consent to Transfer agreements bind transferees to all terms, including arbitration, supported by guaranties and a Franchise Offering Circular provided to some transferees.
Court applies Massachusetts contract interpretation and determines whether the arbitration clause can bind nonsignatories, focusing on notice and mutual assent under state contract principles.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Who decides arbitrability for transferees?	Plaintiffs argue arbitration issues are for court, not arbitrators.	Coverall argues arbitrators should decide challenges to their own authority.	Court decides arbitrability; not arbitrator.
Are Consent to Transfer transferees bound by the arbitration clause in the Janitorial Franchise Agreement?	Transferees did not sign the arbitration clause and may not be bound.	Consent to Transfer binds transferees to all obligations, including arbitration.	Binding depends on notice; fifteen transferees bound, fifteen not.
Did Coverall provide adequate notice of arbitration to transferees under Massachusetts law?	Some transferees received no notice or relevant materials.	Offering Circular and its contents put transferees on notice of arbitration.	Adequate notice for those who received Circular; insufficient for those who did not.

First Options v. Kaplan, 514 U.S. 938 (U.S. 1995) (gateway question of arbitrability decided by court absent clear assent)
John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (U.S. 1964) (court decides whether an arbitration agreement survives a merger and binds)
AT&T Technologies v. Communications Workers of America, 475 U.S. 643 (U.S. 1986) (arbitration agreements require clear intent and mutual assent)
Massachusetts v. Ellerbee, 604 F. Supp. 2d 349 (D. Mass. 2009) (notice-based arbitration enforceability; direct notice and emphasis matter)
Awuah v. Coverall North America, Inc., 554 F.3d 7 (1st Cir. 2009) (First Circuit on enforceability of arbitration in Coverall context)