Denied Franchise Applicant was Not Required to ArbitratePlaintiff filed an online application with Subway’s seeking to become a Franchisee. The application included the following term: I agree that the arbitration will be administered by either the American Arbitration Association or its successor (‘AAA’) or the American Dispute Resolution Center or its successor (‘ADRC’) at the discretion of the party first filing a demand for arbitration.”

The application was rejected, twice.

The Plaintiff filed suit asserting the following claims: racial discrimination in the making of a contract pursuant to 42 U.S.C. § 1981; tortious interference with prospective business advantage; extreme and outrageous conduct; deceit based on fraud; violations of state consumer law; breach of contract – implied covenant of good faith and fair dealing; and civil conspiracy.

In June 2018, the Court denied Subway’s motion to compel arbitration, finding that the Franchise Application was not supported by consideration, which component is essential to any binding contract. Therefore, the Court held, the parties did not agree to arbitrate any disputes arising from the application.

Subway’s took the decision up on appeal. Plaintiff’s effort, here, to dissolve the stay of appeal, was denied.

Citation: Alemayehu v. Gemignani, et als., 2018 U.S. Dist. LEXIS 137131/ 2018 WL 3861161

This article is not intended to be relied upon as advice for your particular circumstances. Therefore, consult with a qualified FRANCHISE ATTORNEY before offering or signing a franchise agreement or franchise disclosure document.

© Kilcommons Law, P.C. 2018