Fantastic Sams Franchise v. FSRO Association, Ltd.
683 F.3d 18
1st Cir.2012Background
- FSRO filed a Demand for Arbitration against FSFC on behalf of its members who are FSFC licensees.
- FSFC petitioned under FAA §4 to stay FSRO arbitration and compel its members to arbitrate individually.
- District court granted as to 25 agreements with explicit anti-class arbitration language; denied as to 10 remaining agreements.
- The 25 agreements preclude class arbitration; the 10 remaining agreements are broad but silent on class/arbitration structure and reference AAA rules.
- FSRO is an associational organization composed of licensed regional owners; FSRO’s claim seeks declaratory/injunction relief for breaches of the license agreements and related Mass. CCPA claims.
- The district court found the 10 broad agreements subject to arbitration under contract interpretation and AAA rules; FSFC appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Stolt-Nielsen precludes associational arbitration when agreements are silent on class arbitration | FSRO argues Stolt-Nielsen does not require express consent to associational arbitration. | FSFC argues Stolt-Nielsen bars associational arbitration absent express permission. | Stolt-Nielsen does not control; arbitrators may decide authorization. |
| Whether the broad, non-prohibitive arbitration clauses preclude associational arbitration | FSRO contends the language is broad but not an express bar to associational action. | FSFC argues broad clauses and AAA rules foreclose associational action or require separate arbitrations. | Arbitrators should decide whether associational action is authorized under the broad clauses. |
| Whether associational arbitration is a question for courts or arbitrators | FSRO contends the issue falls within arbitrability and should be decided by arbitrators per AAA rules. | FSFC argues it is a gateway question of arbitrability to be decided by courts. | Question is for arbitrators to decide under the specific clause language. |
| Whether the ten agreements' arbitrability should be decided by the arbitrators or the court | FSRO asserts arbitrators should determine scope and authorization under the agreements. | FSFC asserts this is a court-type determination under First Options/Howsam. | Arbitrators should decide the scope and authorization; district court erred in treating as non-arbitrable. |
Key Cases Cited
- Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (U.S. 2002) (narrow scope of 'dispositive gateway' questions of arbitrability)
- First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938 (U.S. 1995) (gateway questions of arbitrability; default presumption for courts to decide)
- John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (U.S. 1964) (whether a party can compel arbitration under a clause)
- AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (U.S. 1986) (when parties clearly provide otherwise, courts decide dispositive gateway questions)
- Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (U.S. 2003) (arbitration rules and purchasable scope of class arbitration)
- Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614 (U.S. 1985) (arbitration under bilateral international agreements; FAA scope)
- Volt Info. Sciences, Inc. v. Bd. of Trs. of Leland Stanford Junior Univ., 489 U.S. 468 (U.S. 1989) (contract interpretation governs arbitration decisions)