Chorley Enterprises, Inc. v. Dickey's Barbecue Restaurants, Inc.
807 F.3d 553
| 4th Cir. | 2015Background
- Dickey’s (franchisor) and two Maryland franchisee groups signed virtually identical franchise agreements containing (a) a broad arbitration clause (Article 27) requiring arbitration in Texas of disputes “arising out of or relating to” the agreements, and (b) a Maryland-specific clause (Article 29) stating the agreement “shall not require you to waive your right to file a lawsuit alleging a cause of action arising under Maryland Franchise Law in any court of competent jurisdiction in the State of Maryland.”
- Franchisees sued in federal court in Maryland alleging violations of the Maryland Franchise Registration and Disclosure Law; Dickey’s filed arbitration demands in Texas asserting common-law breach and fraud claims and moved to compel arbitration.
- The district court found the Arbitration and Maryland Clauses plausibly conflicting and denied motions to compel arbitration without prejudice, ordering a jury trial to resolve ambiguity.
- Dickey’s appealed the denial under the FAA’s interlocutory appeal provision; the Fourth Circuit accepted jurisdiction and consolidated the issues.
- The Fourth Circuit reversed: as a matter of Maryland contract law and FAA principles, the Arbitration Clause covers Dickey’s common-law claims, while the Maryland Clause carves out Maryland Franchise Law claims for litigation in Maryland courts; thus piecemeal proceedings are required.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the district court’s denial of motions to compel arbitration is immediately appealable under 9 U.S.C. §16 | (Franchisees) Denial not final because court ordered jury trial first, so interlocutory appeal premature | (Dickey’s) Section 16 authorizes immediate appeal from denial even if without prejudice | Appealable under §16(a)(1); Fourth Circuit exercised jurisdiction |
| Whether the parties are entitled to a jury trial under §4 of the FAA on arbitrability | (Franchisees) Ambiguity over clauses creates factual dispute warranting jury | (Dickey’s) No material factual dispute; interpretation is legal issue for court | No right to jury; party seeking jury must present sufficient factual evidence—none here—so court decides as matter of law |
| Whether Dickey’s common-law claims fall within the Arbitration Clause | (Franchisees) Arbitration clause is voided by Maryland Clause and thus all claims must proceed in court | (Dickey’s) Arbitration clause covers all disputes arising from the agreement; Maryland Clause does not bar arbitration of common-law claims | Arbitration clause unambiguously covers Dickey’s common-law claims; those must be compelled to arbitration |
| Whether Franchisees’ Maryland Franchise Law claims are arbitrable | (Franchisees) Maryland Clause preserves right to file suit in Maryland courts and therefore prevents arbitration of those claims | (Dickey’s) Maryland Clause merely preserves right to ‘‘sue’’ but doesn’t preclude arbitration; FAA would preempt any state rule forbidding arbitration | Maryland Clause unambiguously carves out Maryland Franchise Law claims for litigation in Maryland courts; provision is contractual choice and not preempted by FAA |
Key Cases Cited
- Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1 (U.S. 1983) (explains FAA §§2–4 and federal policy favoring arbitration)
- Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395 (U.S. 1967) (broad arbitration clauses cover arbitrability issues unless clear delegation)
- BG Group PLC v. Republic of Argentina, 134 S. Ct. 1198 (U.S. 2014) (arbitrability questions about condition precedents are for arbitrators when contract delegates)
- KPMG LLP v. Cocchi, 132 S. Ct. 23 (U.S. 2011) (FAA requires courts to compel arbitration of arbitrable claims even if some claims remain for litigation)
- CompuCredit Corp. v. Greenwood, 132 S. Ct. 665 (U.S. 2012) (arbitration not impliedly excluded by statutory phrasing like “right to sue” without clearer text)
- Saturn Distr. Corp. v. Williams, 905 F.2d 719 (4th Cir. 1990) (state law forbidding arbitration of certain contract claims may be preempted by FAA)
- Muriithi v. Shuttle Express, Inc., 712 F.3d 173 (4th Cir. 2013) (arbitrability is a question of contract interpretation reviewed de novo)