Fantastic Sams Franchise Corp. v. FSRO ASS'N, LTD.
824 F. Supp. 2d 221
D. Mass.2011Background
- Fantastic Sams filed a complaint and a motion to stay an arbitration brought by FSRO on behalf of its members on August 22, 2011.
- FSRO seeks declaratory relief for alleged breaches of contract and Massachusetts Consumer Protection Act violations arising from franchise relationships.
- Twenty-five of the thirty-five contracts prohibit class-wide arbitration and require arbitration of a regional licensee's individual claim only.
- Fantastic Sams seeks a court stay and to compel arbitration on an individual basis, arguing the associational claim violates the class-wide prohibition.
- The arbitration provisions call for AAA Commercial Arbitration Rules; ten contracts do not mention class arbitration and are broad enough to cover all contract-related claims.
- The court must determine whether the associational claims can proceed on a class basis and whether to stay arbitration pending resolution.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FSRO's associational claim may be stayed and compelled to arbitrate on an individual basis | Fantastic Sams argues the class-wide prohibition applies to FSRO's claims. | FSRO contends the associational claim is not prohibited and should be arbitrated collectively or left to arbitration. | Granted for contracts with class-wide prohibition; individual arbitration compelled. |
| Whether contracts without class-wide prohibition require arbitration of FSRO's associational claims | Arbitration should proceed only for individual claims under broad arbitration clauses. | The absence of a specific class arbitration ban creates ambiguity, potentially allowing arbitration to decide applicability. | Denied for those contracts; arbitration interpretation remains for court or arbitrator per contract. |
| Who decides whether a contract forbids class arbitration when ambiguity exists | Arbitrator should determine arbitrability in ambiguous circumstances per precedent. | Court should resolve ambiguity when class arbitration is not clearly addressed by the contract. | Arbitrator decides in ambiguous cases; court defer to contract interpretation framework. |
Key Cases Cited
- AT&T Techs., Inc. v. Communications Workers of Am., 475 U.S. 643 (1986) (arbitration as contract-based; stay power implied with compel.)
- Awuah v. Coverall North America, Inc., 554 F.3d 7 (1st Cir.2009) (arbitrator can decide arbitrability when contract clearly so provides.)
- Skirchak v. Dynamics Research Corp., 508 F.3d 49 (1st Cir.2007) (class arbitration questions resolved by arbitrator when ambiguity exists.)
- Green Tree Fin. Corp. v. Bazzle, 539 U.S. 444 (2003) (contract interpretation first; arbitrator determines whether class arbitration is permitted.)
- Stolt-Nielsen S.A. v. AnimalFeeds Intl. Corp., 130 S. Ct. 1758 (2010) (cannot compel class arbitration absent express contractual basis; decision on arbitrator/court who decides ambiguity.)
- PCS 2000 LP v. Romulus Telecomm., Inc., 148 F.3d 32 (1st Cir.1998) (stay power accompanies power to compel arbitration; §4 silence not to prohibit stay.)