Big City Small World Bakery Café, LLC v. Francis David Corp.
265 F. Supp. 3d 750
E.D. Mich.2017Background
- Big City Small World Café signed a merchant agreement with Francis David Corp. (d/b/a EMS) on March 21, 2012 to have EMS process credit/debit card transactions; the agreement included a fee schedule ("Interchange + 0.80% + $0.10") and an arbitration clause.
- EMS processed the café’s transactions for ~18 months, issued monthly statements, and assigned a merchant account ID; neither EMS nor its bank ever countersigned the written agreement.
- Plaintiff filed a putative class action alleging overcharging (declaratory relief and unjust enrichment) and attempted to avoid the contract label in the amended complaint.
- EMS moved to dismiss or compel arbitration; the court conducted limited discovery on arbitrability and heard oral argument.
- The district court found the merchant agreement formed by signature and performance, held any signature condition was waived by EMS’s conduct, and ruled the arbitration clause enforceable; the amended complaint was dismissed without prejudice and the case ordered to arbitration.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Formation: whether a binding contract existed | Agreement was ineffective because EMS and its bank never countersigned; condition precedent not satisfied | Newell signed, parties performed for 18 months, EMS accepted by establishing account and processing — contract formed | Contract was valid: signature + mutual performance established acceptance; any signature condition was waived by EMS’s conduct |
| Waiver/estoppel based on performance | Big City says it can disavow the agreement despite performance | EMS says its continued performance and account setup waived any condition and manifested acceptance | Plaintiff cannot avoid contract after accepting benefits and prolonged mutual performance; no trial needed on formation |
| Enforceability of arbitration clause (unconscionability) | Clause is adhesive, buried in fine print, and economically coercive (no class remedy) | Clause is disclosed, labeled, commercially reasonable, and procedurally valid; class waiver is enforceable under Supreme Court precedent | Arbitration clause not unconscionable: plaintiff had opportunity to read/seek counsel; clause clear and enforceable; class-waiver argument foreclosed by American Express v. Italian Colors |
| Procedural posture: effect on court jurisdiction and remedy | Plaintiff sought to litigate in federal court | EMS sought dismissal/compel arbitration under appropriate procedural rule | Court treated motion as forum/venue issue and compelled arbitration; dismissed the amended complaint without prejudice to arbitration |
Key Cases Cited
- Scherk v. Alberto-Culver Co., 417 U.S. 506 (arbitration as forum-selection-type clause)
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (arbitration enforceability principles)
- Atlantic Marine Constr. Co. v. U.S. Dist. Court for W. Dist. of Texas, 571 U.S. 49 (forum-selection / enforcement principles)
- American Express Co. v. Italian Colors Restaurant, 570 U.S. 228 (class-action waiver in arbitration enforceable)
- Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (arbitration terms and parties’ choice)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (preemption of state rules that single out arbitration)
- Reed Elsevier, Inc. v. Crockett, 734 F.3d 594 (6th Cir.) (class-waiver/enforceability discussion)