GLAMOROUS INC., ETC. VS. ANGEL TIPS, INC. (C-235-16, BERGEN COUNTY AND STATEWIDE)
A-0985-16T1
| N.J. Super. Ct. App. Div. | Jun 23, 2017Background
- Glamorous, Inc. operated an Angel Tips franchise in Wyckoff under a franchise agreement containing a broad arbitration clause (New York arbitration) with limited exceptions, including an exception for claims by the franchisor for money owed.
- The parties renewed the franchise agreement in 2014 and discussed a required redesign/renovation of the Wyckoff premises.
- In 2015 Angel Tips, Inc. (franchisor) demanded that Glamorous perform the renovations; Glamorous hired designers and made partial payments but later sued to avoid the renovation obligation.
- Glamorous sought temporary restraints and argued the dispute fell within the arbitration exception (a franchisor claim for money owed) so it was not subject to arbitration.
- The Chancery judge denied restraints, concluded the dispute was arbitrable (a contractual dispute to enforce a renovation obligation, not a claim for money owed to franchisor), compelled arbitration in New York, and dismissed the complaint without prejudice.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of arbitration clause / public policy | Enforcement violates NJ public policy under the Franchise Protection Act and deprives franchisee of statutory rights | FAA governs and preempts state policy; arbitration enforceable absent general contract defenses | FAA governs; federal policy favoring arbitration preempts conflicting state policy; arbitration enforced |
| Characterization of dispute: "money owed" exception | The franchisor’s renovation demand is effectively a claim for money owed and thus exempt from arbitration | The demand is to compel performance of a contractual renovation obligation (not a direct claim for money owed to franchisor) | Court agreed with franchisor: the dispute seeks enforcement of renovation obligation and is arbitrable; exception for money owed does not apply |
| Applicability of New York franchise registration law | NY Gen. Bus. Law § 683(1) renders franchise void and thus non-arbitrable (argued on appeal) | NY law was not shown to bar arbitration; any law issues go to merits for arbitrator | Argument raised first on appeal; court declined to consider; left NY-law merits to arbitrator |
| Alleged judicial "rewriting" of arbitration clause | Judge rewrote the arbitration provision to compel arbitration | Judge properly interpreted the clause and its exception as written | No rewriting: judge correctly interpreted exception scope; arbitration compelled |
Key Cases Cited
- Kindred Nursing Ctrs. v. Clark, 137 S. Ct. 1421 (2017) (FAA displaces state law that prohibits or disfavors arbitration agreements)
- AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011) (general contract defenses may not be applied to defeat arbitration where FAA governs)
- Instructional Sys., Inc. v. Computer Curriculum Corp., 130 N.J. 324 (1982) (New Jersey policy favoring protection of franchisees)
- Atalese v. U.S. Legal Services Grp., L.P., 219 N.J. 430 (2014) (state law contract-defenses framework discussed in arbitration context)
- Nieder v. Royal Indem. Ins. Co., 62 N.J. 229 (1973) (appellate consideration limited for issues raised first on appeal)