Synergistic International LLC v. Monaghan et al

Filing 20

ORDER Entered by Judge Sue E. Myerscough on 10/9/13. Defendants Motion to Compel Mediation and/or Arbitration and to Dismiss or Stay Proceedings Pending the Completion of Mediation and/or Arbitration 16 is DENIED. Defendants SHALL file an answer to Plaintiffs Complaint within 21 days from service of this Opinion. Answer deadline of 10/30/13 set. This matter is referred to Magistrate Judge Byron G. Cudmore for further pretrial proceedings. (DK, ilcd)

E-FILED

Thursday, 10 October, 2013 11:48:27 AM
Clerk, U.S. District Court, ILCD

UNITED STATES DISTRICT COURT
FOR THE CENTRAL DISTRICT OF ILLINOIS
SPRINGFIELD DIVISION
SYNERGISTIC INTERNATIONAL,
LLC,

)
)
)
Plaintiff,
)
)
v.
)
)
BECKY S. MONAGHAN, individually; )
MICHAEL D. MONAGHAN,
)
Individually; GLASS RX, INC.; and
)
GLASS 1 ONE, INC. d/b/a GLASS
)
ONE OF QUINCY,
)
)
Defendants.
)

12-3299

OPINION
SUE E. MYERSCOUGH, U.S. District Judge:
This matter is before the Court on Defendants’ Motion to Compel
Mediation and/or Arbitration and to Dismiss or Stay Proceedings
Pending the Completion of Mediation and/or Arbitration pursuant to
Federal Rule of Civil Procedure 12(b)(6), Local Rule 16.4 Alternative
Dispute Resolution, §§ 3 and 4 of the United States Arbitration Act, 9

U.S.C. §§ 1-16 and the general authority of the Court (d/e 16).
Defendants’ Motion is DENIED. Plaintiff has demonstrated that this
action falls under the Franchise Agreement’s exceptions to the
requirement that the parties settle any controversy or claim arising out of
or relating to the Franchise Agreement using alternative dispute
resolution.
I. BACKGROUND
On June 26, 2002, Synergistic International, Inc., predecessor in
interest to Plaintiff, Synergistic International, LLC, entered into a
Franchise Agreement with Vance Door, Inc., whereby Vance Door, Inc.,
agreed to operate as Plaintiff’s Franchisee in and around Quincy, Illinois.
Defendant Becky S. Monaghan was President, Agent, and Operating
Principal of Vance Door, Inc. Defendant Becky Monaghan signed as
guarantor of the Franchisee’s obligations under the Franchise Agreement.
By signing as guarantor, Defendant Becky Monaghan accepted and
agreed “to all of the provisions, covenants, conditions, representations,
warranties and agreements set forth in the [Franchise] Agreement and
[was] obligated to perform thereunder.” See d/e 1, Ex. 1 at 29.
Page 2 of 23 

The Franchise Agreement required Vance Door, Inc., to operate
under the franchise System. The System included use of “the service
mark GLASS DOCTOR®, the slogan, WE FIX PANES®, and the
GLASS DOCTOR logo and such other trade names, service marks and
trademarks as are now and may hereafter be designated by Franchisor for
use in connection with the System . . . .” See d/e 1, Ex. 1 at 2.
The Franchise Agreement contains a Texas choice-of-law provision.
However, an Addendum to the Franchise Agreement for Illinois
Residents, also executed by the parties on June 26, 2002, states:
If any of the provisions of the Franchise Agreement are
inconsistent with applicable Illinois state law, then Illinois
state law shall apply. Any provision which designates
jurisdiction or venue in a forum outside Illinois is void with
respect to any cause of action which is otherwise enforceable
in Illinois, provided that a Franchise Agreement may provide
for arbitration in a forum outside of Illinois.
See d/e 1, Ex. 1 at 27-28, 30.
Section 14 of the Franchise Agreement also states that disputes
arising out of the contract shall be settled using mediation and then
arbitration:
A.

Agreement to Use Procedure. Franchisor and
Franchisee have entered into this Agreement in good faith
Page 3 of 23 

and in the belief that it is mutually advantageous to them.
It is with this same spirit of cooperation that they pledge
to attempt to amicably resolve any controversy or claim
arising out of or relating to this Agreement or the breach
thereof or any transaction embodied therein or related
thereto (a “Dispute”), without the necessity of litigation.
Therefore, if any Dispute arises, the parties shall utilize the
procedures described herein before commencing any legal
action. If a party commences any legal action, other than
as provided for in Section 14.K. hereof, without having
first complied with all of the provisions of this Section 14
regarding mediation and arbitration, the other party shall
be entitled to a sixty (60) day abatement of the legal action
upon filing the appropriate procedural motion in the legal
proceeding and bringing this provision to the attention of
the court or other legal authority having jurisdiction over
the matter.
B.

Initiation of Procedure. Should a Dispute arise,
the initiating party shall give written notice to the other
party, describing the exact nature of the Dispute, its claim
for relief and identifying one or more individuals with
authority to resolve the Dispute on such party’s behalf.
The other party shall have (10) business days within which
to designate in writing one or more individuals with
authority to resolve the Dispute on it’s behalf (“Authorized
Individuals”).
****
J.
Arbitration. In order to resolve Disputes which
may arise between them more effectively and thereby
further their mutually beneficial business relationship, the
parties to this Agreement agree that if they are not able to
resolve the Dispute through . . . mediation . . . , the
controversy shall be submitted to binding arbitration. . . .
The arbitration shall be governed by the United States
Arbitration Act, 9 U.S.C. §§ 1-16.
Page 4 of 23 

See d/e 1, Ex. 1 at 24-26.
However, at Section 14.K., the Franchise Agreement contains
exceptions to using the alternative dispute resolution processes in Section
14 of the Franchise Agreement:
K.

Emergency Relief. During the course of a Dispute,
should a situation arise relating to the Marks or relating to
a situation in which Franchisor will suffer irreparable loss
or damage unless Franchisor takes immediate action,
including but not limited to threatened or actual conduct
in violation of Sections 10 and 13 of this Agreement,
Franchisor shall be free to seek declaratory relief,
restraining orders and/or preliminary injunctive relief
and/or other relief, and such actions or lawsuits shall not be
considered in violation of the provisions of this Section 14.

See d/e 1, Ex. 1 at 25.
Section 10 of the Franchise Agreement, titled Proprietary
Information and Covenants, protects Plaintiff’s franchise specific
manuals and confidential information and trade secrets. See d/e 1, Ex. 1
at 15-16 (Sections 10.A. and B.). Section 10.C. sets forth the In-Term &
Post-Term Covenants:
Recognizing that Franchisor would be unable to protect
its trade secrets against unauthorized use or disclosure and
would be unable to encourage a free exchange of ideas and
information among its franchisees if its franchisees were
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permitted to hold interests in any business other than the
Franchise which offers or sells any product or service or
component thereof which composes a part of Franchisor’s
System or which competes directly or indirectly with the
Franchise or Franchisor’s System (“Competing Business”) and
acknowledging that, pursuant to this Agreement, Franchisee
will receive valuable specialized training and Confidential
Information, including, without limitation, information
concerning the operational, sales, promotional, and marketing
methods and techniques of Franchisor and Franchisor’s
System, Franchisee therefore covenants and agrees that,
except for any interest which Franchisee has in a Competing
Business which is identified on Exhibit “A” hereof, to which
Franchisor specifically consents, Franchisee shall not directly
or indirectly, as a proprietor, partner, investor, shareholder,
member, director, officer, employer, employee, principal,
agent, adviser, franchisor, franchisee or in any other
individual or representative capacity or otherwise:
1.
During the term of this Agreement and any
extensions thereof:
(a)
engage in or participate in or derive any
benefit from a Competing Business without Franchisor’s
prior written consent. If Franchisor grants permission
for Franchisee to engage in the operation of a
Competing Business other than as set forth above,
Franchisee shall pay Franchisor a Royalty Fee in
accordance with Section 3.C. herein in addition to any
other sums owed to Franchisor unless specifically waived
in writing by Franchisor; and
(b)
employ, seek to employ or otherwise induce
any person who is employed by Franchisor or any other
franchisee to leave his employment; or
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(c) interfere or attempt to interfere with any of
the business relationships and/or advantages of
Franchisor or any other franchisee; or
(d) use any Confidential Information whatsoever
in any manner which is or is intended to be damaging or
derogatory or hinder the relationship of Franchisor with
its other franchisees, customers, suppliers or other third
parties, or the relationship of any other franchisee with
its customers or suppliers; or
(e) divert, attempt to divert, solicit, or endeavor
to obtain any customer, account or business from
Franchisor or any other franchisee.
2.
for a period of two (2) years immediately following the
later of the expiration, termination or non-renewal of this
Agreement for any reason whatsoever or the date on which
Franchisee actually ceases operation of the Franchise:
(a) engage in or participate in or derive any benefit
from a Competing Business (other than as set forth above) in
the Territory without Franchisor’s prior written consent. If
Franchisor grants permission for Franchisee to engage in
operation of a Competing Business other than as set forth
above, Franchisee agrees that Franchisee will pay Franchisor a
Royalty Fee in accordance with Section 3.C. herein in
addition to any other sums due and owing to Franchisor; or
(b) employ, seek to employ or otherwise induce any
person who is employed by Franchisor or any other franchisee
to leave his employment; or

Page 7 of 23 

(c) interfere or attempt to interfere with any of the
business relationships and/or advantages of Franchisor or any
other franchisee; or
(d) use any Confidential Information whatsoever in
any manner which is or is intended to be damaging or
derogatory or hinder the relationship of Franchisor with its
other franchisees, customers, suppliers or other third parties,
or the relationship of any other franchisee with its customers
or suppliers; or
(e) divert or attempt to divert any customer or
business from Franchisor or any other franchisee or solicit or
endeavor to obtain the business of any person who shall have
been a customer of Franchisee’s Franchise.
****
See d/e 1, Ex. 1 at 16-18.
Section 13 relates to the Franchisee’s obligations upon termination
or non-renewal of the Franchise Agreement. See d/e 1, Ex. 1 at 22-23.
The Franchisee’s obligations include ceasing use of the Franchisor’s
methods of operation, ceasing use of Franchisor’s Marks, transferring the
Franchise to Franchisor, transferring the customer and/or customer lists
and services to Franchisor, ceasing use of any telephone numbers listed in
a phone book under the name GLASS DOCTOR® or any other name
confusingly similar to GLASS DOCTOR®, paying debts to third-parties

Page 8 of 23 

and Franchisor, returning certain materials to Franchisor, resolving all
warranty claims or customer disputes, and not indicating that Franchisee
was a former franchisee of Franchisor. See d/e 1, Ex. 1 at 22-23.
On December 30, 2003, Vance Door, Inc., assigned the Franchise
Agreement to Defendant Glass Rx, Inc. Defendant Becky Monaghan is
President, Agent, Operating Principal, and owner of Glass Rx, Inc.
Again, Becky Monaghan signed as guarantor of the Franchisee’s
obligations to comply with all provisions of the Franchise Agreement. In
February and July of 2004, the Franchise Agreement was amended to add
additional business and counties to the franchise territory in West
Central Illinois and Eastern Missouri.
Also in 2004, Defendant Michael Monaghan entered into a
Confidentiality Agreement with Plaintiff. The Confidentiality Agreement
includes a Covenant Not to Compete in which Defendant Michael
Monaghan promised not to divert business or in any other way compete
with Plaintiff during the term of the Franchise Agreement and for two
years following termination of the Franchise Agreement. See d/e 1, Ex. 1
at 61. The Confidentiality Agreement also contains a Texas choice-ofPage 9 of 23 

law section, a Waco, McLennan County, Texas forum selection clause,
and a section that states the Confidentiality Agreement constitutes the
entire understanding between Plaintiff and Defendant Michael
Monaghan. See d/e 1, Ex. 1 at 61. The Confidentiality Agreement does
not contain a provision that mandates alternative dispute resolution for
disputes arising out of or relating to the Confidentiality Agreement.
On June 26, 2012, the Franchise Agreement expired. On that same
day, Defendants Glass Rx, Inc., and Glass 1 One, Inc., entered into a
purchase agreement for sale of assets. Defendant Michael Monaghan is
sole shareholder and owner of Defendant Glass 1 One, Inc. Later, on
July 27, 2012, Plaintiff sent Defendant Becky Monaghan, President of
Defendant Glass Rx, Inc., a letter accepting Defendants’ non-renewal of
the Franchise Agreement. See d/e 1, Ex. 14 at 2-4.
Plaintiff alleges that following termination of the Franchise
Agreement, Defendants breached their contractual obligations by failing
“to abide by the post-term non-compete and trademark cessation
provisions of the Franchise Agreement . . . .” See d/e 1 at ¶ 4.
Specifically, Plaintiff alleges that Defendants have, among other things,
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intentionally diverted and continued to intentionally divert business
from Defendants’ former GLASS DOCTOR® franchise to a new
business, which is operating in the same territory under the name “Glass
One of Quincy.” Plaintiff alleges further that Defendants have continued
using the identical GLASS DOCTOR® service marks, or substantially
indistinguishable versions thereof, in connection with that new business
and that Defendants have falsely informed customers that Defendants’
former GLASS DOCTOR® franchise has merged with and operates in
“combination [with] several companies” as “Glass One.” See d/e 1 at ¶ 4.
On November 9, 2012, Plaintiff filed a nine-count Complaint
against Defendants that alleges: (1) Federal Service Mark Counterfeiting
as to All Defendants; (2) Federal Service Mark Infringement as to All
Defendants; (3) Federal Unfair Competition and False Designation of
Origin as to All Defendants; (4) Common Law Trademark and Service
Mark Infringement and Unfair Competition and Injury to Business
Reputation as to All Defendants; (5) Breach of In-Term and PostTermination Non-Compete Provisions of the Franchise Agreement as to
Defendants Glass Rx, Inc., Becky Monaghan, and Glass 1 One, Inc., as
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Alter Ego of Glass Rx, Inc.; (6) Breaches of the Franchise Agreement for
failing to return materials, customer lists, and phone numbers as to
Defendants Glass Rx, Inc., Glass 1 One, Inc., and Becky Monaghan; (7)
Common Law Tortious Interference with a Contract or Advantageous
Business Relationship or Expectancy as to Defendants Michael
Monaghan and Glass 1 One, Inc.; (8) Breach of the Guaranty
Agreements as to Defendant Becky Monaghan; and (9) Breach of the
Confidentiality Agreement as to Defendant Michael Monaghan. See d/e
1, 29-41. Plaintiff seeks injunctive relief, money damages, and attorney’s
fees and costs. See d/e 1 at 41-43.
On January 7, 2013, Defendants filed the instant Motion to
Compel Mediation and/or Arbitration and to Dismiss or Stay
Proceedings Pending the Completion of Mediation and/or Arbitration.
See d/e 16. Plaintiff filed a Response to the instant Motion on January
25, 2013 that argues the claims in Plaintiff’s Complaint relate to
Plaintiff’s Marks, Plaintiff’s proprietary information, or the covenants in
the Franchise Agreement. Accordingly, Plaintiff asserts, all nine Counts
are properly before the Court.
Page 12 of 23 

II. LEGAL STANDARD
When deciding a motion to dismiss, the court must assume all facts
alleged in the complaint to be true, construe the allegations liberally, and
view the allegations in a light most favorable to the plaintiff. Wilson v.
Formigoni, 42 F.3d 1060, 1062 (7th Cir. 1994). Because a motion to
compel arbitration is essentially a claim that the court lacks subjectmatter jurisdiction, the Court may consider facts outside allegations in
the Complaint. Capitol Leasing Co. v. Federal Deposit Insurance Corp.,
999 F.2d 188, 191 (7th Cir. 1993).
The Federal Arbitration Act “‘is a congressional declaration of a
liberal federal policy favoring arbitration agreements' and ‘questions of
arbitrability must be addressed with a healthy regard for the federal
policy favoring arbitration.’” Continental Cas. Co. v. American Nat'l Ins.
Co., 417 F.3d 727, 730 (7th Cir. 2005) (citing Moses H. Cone Mem'l
Hosp. v. Mercury Const. Corp., 460 U.S. 1, 24, 103 S.Ct. 927, 74
L.Ed.2d 765 (1983)). Any doubts concerning the scope of arbitration
issues are resolved in favor of arbitration. Id. Further, courts broadly
interpret the Federal Arbitration Act to govern the interpretation,
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enforcement, and validity of arbitration agreements in commercial
contracts. See Moses H. Cone Mem’l Hosp., 460 U.S. at 24.
The Federal Arbitration Act provides that binding arbitration
agreements “shall be valid, irrevocable, and enforceable, save upon such
grounds as exist at law or in equity for the revocation of any contract.” 9
U.S.C. § 2. Section 3 of the Federal Arbitration Act provides that if an
agreement is governed by a valid arbitration provision, the Court “shall
on application of one of the parties stay the trial of the action until such
arbitration has been had in accordance with the terms of the agreement,
providing the applicant for the stay is not in default in proceeding with
such arbitration.” 9 U.S.C. § 3. Therefore, “if one party to a contract
containing an arbitration clause attempts to avoid arbitration and files
suit in the district court, the other party may move to stay or dismiss the
action on the ground that the Federal Arbitration Act requires the
arbitration clause of the contract to be enforced.” Volkswagen of Am.,
Inc. v. Sud's of Peoria, Inc., 474 F.3d 966, 970 (7th Cir. 2007) (citing 9
U.S.C. § 3 (authorizing a motion to stay); 9 U.S.C. § 4 (authorizing a
petition to compel arbitration)).
Page 14 of 23 

III.
A.

ANALYSIS

The Issue Presented Is One of Arbitrability that the Court Should
Decide
An issue not raised by the parties but important here is whether the

Court or an arbitrator should determine whether the Franchise
Agreement’s alternative dispute resolution provision applies to the claims
raised by Plaintiff in the Complaint. To that end, unless the arbitration
agreement is clear and unmistakable that an issue of arbitrability is for
the arbitrator, the issue should be resolved by the Court. Employers Ins.
Co. v. Wausau v. Century Indem. Co., 443 F.3d 573, 576 (7th Cir.
2006) (citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938,
944, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995)). Issues of arbitrability
include disputes regarding whether the parties are bound by a given
arbitration clause and disagreements over whether an arbitration clause
in a concededly binding contract applies to a particular type of
controversy. Id. (citing Howsam v. Dean Witter Reynolds, Inc., 537
U.S. 79, 84, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002)).
The dispute here is whether the Franchise Agreement’s alternative
dispute resolution processes in the concededly binding contract apply to
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the claims in Plaintiff’s Complaint. This is a question of arbitrability
that the Court should answer.
B.

Plaintiff’s Claims that Relate to the Marks Are Properly Before the
Court
Moving on, Defendants argue that Plaintiff’s claims against all

Defendants for Federal Service Mark Counterfeiting (Count I), Federal
Service Mark Infringement (Count II), Federal Unfair Competition and
False Designation of Origin (Count III), and Common Law Trademark
and Service Mark Infringement and Unfair Competition and Injury to
Business Reputation (Count IV) lack any indication of irreparable loss or
damage. Defendants contend that because Plaintiff has failed to allege
irreparable loss or damage in the Complaint, Plaintiff must follow the
mediation and arbitration processes in Section 14 of the Franchise
Agreement.
The Franchise Agreement contains a Texas choice-of-law provision
and an Addendum to the Franchise Agreement for Illinois Residents that
states: “If any of the provisions of the Franchise Agreement are
inconsistent with applicable Illinois state law, then Illinois state law shall
apply.” See d/e 1, Ex. 1 at 27-28, 30. Under both Texas and Illinois law,
Page 16 of 23 

if contractual language is unambiguous, the court will not look to parole
evidence and will interpret the contract according to its plain meaning.
Camico Mut. Ins. Co. v. Citizens Bank, 474 F.3d 989, 993 (7th Cir.
2007) (applying Illinois law). See also State of Texas v. American
Tobacco Co., 463 F.3d 399, 407 (5th Cir. 2006) (citing Sun Oil Co. v.
Madeley, 626 S.W.2d 726, 732-33 (Tex. 1982)) (applying Texas law and
stating that “unambiguous contracts are confined to the four corners of
the document”).
Under Section 14 of the Franchise Agreement, any dispute between
the parties must be handled by mediation and then arbitration. See d/e
1, Ex. 1 at 24-25. However, Section 14.K. plainly states that parties to
the Franchise Agreement may forego alternative dispute resolution and
file a lawsuit if, during a dispute, a situation arises “relating to the Marks
. . . .” See d/e 1, Ex. 1 at 25 (emphasis added). Section 14.K. further
states that in any such lawsuit, “Franchisor shall be free to seek
declaratory relief, restraining orders and/or preliminary injunctive relief
and/or other relief . . . .” See d/e 1, Ex. 1 at 25.

Page 17 of 23 

The language in Section 14.K. of the Franchise Agreement plainly
permits Plaintiff to seek money damages, injunctive relief, and attorney’s
fees and costs in this lawsuit. Additionally, Plaintiff’s claims against all
Defendants for Federal Service Mark Counterfeiting (Count I), Federal
Service Mark Infringement (Count II), Federal Unfair Competition and
False Designation of Origin (Count III), and Common Law Trademark
and Service Mark Infringement and Unfair Competition and Injury to
Business Reputation (Count IV) are based on Defendants’ alleged misuse
of the GLASSDOCTOR® Marks. Under Section 14.K., Plaintiff may
forego alternative dispute resolution and pursue litigation if a claim
relates to the GLASSDOCTOR® Marks. Clearly then, Plaintiff’s claims
in Counts I-IV relate to the GLASSDOCTOR® Marks, and Plaintiff has
not sought relief that would preclude application of Section 14.K. as to
Counts I-IV or any other Count in the Complaint. Accordingly, Section
14.K. applies and Counts I-IV need not undergo the alternative dispute
resolution processes in Section 14 of the Franchise Agreement.

Page 18 of 23 

C.

Plaintiff’s Claim Against Defendants Michael Monaghan and Glass
One 1, Inc., Also Relates to the Marks
Additionally, in Count VII, Plaintiff alleges that Defendants

Michael Monaghan and Glass 1 One, Inc., Tortiously Interfered With a
Contract or Advantageous Business Relationship or Expectancy by
attempting to divert customers and business from Plaintiff to Glass 1
One, Inc., through use of the GLASS DOCTOR® Marks and certain of
the GLASS DOCTOR® telephone numbers. Again, Count VII relates to
the Marks, and, therefore, Count VII need not undergo the alternative
dispute resolution processes in Section 14 of the Franchise Agreement.
D.

Plaintiff’s Claims that Relate to the Franchisor’s Proprietary
Information, Covenants In the Franchise Agreement, and the
Franchisee’s Obligations Upon Termination or Non-renewal of the
Franchise Agreement Are Properly Before the Court
Defendants Becky Monaghan, Glass Rx, Inc., and Glass 1 One,

Inc., also argue that Plaintiff’s claims for breach of the Franchise
Agreement’s covenants not to compete (Count V), the Franchise
Agreement’s terms that required Defendants to return franchise provided
materials and affiliated telephone numbers (Count VI), and Defendant
Becky Monaghan’s breach of the Guaranty Agreements (Count VIII) are
Page 19 of 23 

not properly before the Court. Defendants Becky Monaghan, Glass Rx,
Inc., and Glass 1 One, Inc., argue that, like Counts I-IV and VII, Counts
V, VI, and VIII must first undergo the alternative dispute resolution
processes in Section 14 of the Franchise Agreement.
However, the alternative dispute resolution requirement in Section
14 is not applicable if, “[d]uring the course of a Dispute, should a
situation arise . . . relating to a situation in which Franchisor will suffer
irreparable loss or damage unless Franchisor takes immediate action,
including but not limited to threatened or actual conduct in violation of
Sections 10 and 13 of this Agreement . . . .” See d/e 1, Ex. 1 at 25.
Sections 10 and 13 of the Franchise Agreement include limits on
Defendants’ ability to compete with Plaintiff following expiration of the
Franchise Agreement and that Defendants must return franchise
provided materials and cease use of franchise affiliated telephone
numbers after expiration of the Franchise Agreement. See d/e 1, Ex. 1 at
22-23.
Plaintiff’s claims for breach of the Franchise Agreement’s noncompete provisions (Count V), the Franchise Agreement’s terms that
Page 20 of 23 

required Defendants to return franchise provided materials and franchise
affiliated telephone numbers (Count VI), and the guaranty agreements
(Count VIII), in which Becky Monaghan personally guaranteed that she
would comply with the post-termination obligations of the Franchise
Agreement, are related to Defendants’ obligations upon termination or
non-renewal of the Franchise Agreement and the limits on Defendants’
ability to compete with Plaintiff following expiration of the Franchise
Agreement. Sections 10 and 13 specifically limit Defendants’ ability to
compete with Plaintiff following expiration of the Franchise Agreement
and call for Defendants to return franchise provided materials and cease
use of franchise affiliated telephone numbers after expiration of the
Franchise Agreement. Since claims alleging violations of Section 10 and
13 need not undergo the alternative dispute resolution processes in
Section 14 of the Franchise Agreement, Counts V, VI, and VIII are also
properly before the Court.

Page 21 of 23 

E.

The Confidentiality Agreement Signed By Plaintiff and Defendant
Michael Monaghan Does Not Contain a Mandatory Alternative
Dispute Resolution Provision
Finally, Defendant Michael Monaghan has joined in the instant

Motion to Compel Mediation and/or Arbitration. However, Defendant
Michael Monaghan is not a party to the Franchise Agreement and the
Confidentiality Agreement does not contain a provision that requires
alternative dispute resolution. Therefore, Plaintiff’s claim against
Defendant Michael Monaghan in Count IX for breach of the
Confidentiality Agreement need not undergo the alternative dispute
resolution processes in Section 14 of the Franchise Agreement.
Defendant Michael Monaghan has not referenced the forum
selection clause in the Confidentiality Agreement that states: “The
parties agree that any litigation or legal action to enforce or relating to
this [Confidentiality] Agreement shall be filed in Waco, McLennan
County, Texas.” See d/e 1 at 61. But Defendant Michael Monaghan has
briefly noted that Plaintiff’s Breach of the Confidentiality Agreement
claim (Count IX) belongs in a Texas court based on the Texas choice-oflaw provision in the Confidentiality Agreement.
Page 22 of 23 

However, Defendant Michael Monaghan has not developed this
argument. Nor has Defendant Michael Monaghan requested a dismissal
of the claim against him based on improper venue or transfer of the claim
to a Texas court. Therefore, the Court will not address whether
Plaintiff’s claim against Defendant Michael Monaghan for breach of the
Confidentiality Agreement should be dismissed or transferred based on
the forum selection and choice-of-law clauses in the duly executed
Confidentiality Agreement.
IV.

CONCLUSION

Defendants’ Motion to Compel Mediation and/or Arbitration and
to Dismiss or Stay Proceedings Pending the Completion of Mediation
and/or Arbitration (d/e 16) is DENIED. Defendants SHALL file an
answer to Plaintiff’s Complaint within 21 days from service of this
Opinion. This matter is referred to Magistrate Judge Byron G. Cudmore
for further pretrial proceedings. IT IS SO ORDERED.
ENTER: October 9, 2013
FOR THE COURT:

s/ Sue E. Myerscough
SUE E. MYERSCOUGH
UNITED STATES DISTRICT JUDGE
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