Fraser et al v. Brightstar Franchising LLC et al

Filing 47

MEMORANDUM OPINION Signed by the Honorable Samuel Der-Yeghiayan on 11/1/2016: Mailed notice (mw,)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
COSMO FRASER, et al.,

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Plaintiffs,
v.
BRIGHTSTAR FRANCHISING, LLC,
et al.,
Defendants.

No. 16 C 8179

MEMORANDUM OPINION
SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on Defendants’ motion to dismiss and motion in
the alternative to compel arbitration. For the reasons stated below, the motion to
compel arbitration is granted and the motion to dismiss is denied.

BACKGROUND
Defendant Brightstar Franchising LLC (Brightstar) is allegedly a franchisor in
the home healthcare industry and offers for sale franchises that provide home
healthcare services. On January 17, 2013, Plaintiffs allegedly entered into a
franchise agreement (Franchise Agreement) with Brightstar. Plaintiffs contend that
prior to signing the Franchise Agreement, Defendants indicated a desire for Plaintiffs
to open a franchise in a new area. Defendants allegedly failed to disclose certain

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information concerning that new area. Plaintiffs brought the instant action in Illinois
state court and included in their complaint claims alleging the unlawful offer and sale
of franchises in violation of California state law (Count I), fraud in the inducement
claims (Count II), conspiracy to commit fraud claims (Count III), unfair and unlawful
business practices claims (Count IV), and negligent misrepresentation claims (Count
V). Defendants removed the instant action to federal court and now move to dismiss
the instant action and move in the alternative to compel arbitration.

LEGAL STANDARD
The Federal Arbitration Act (FAA), 9 U.S.C. § 1 et seq., provides “that a
written provision in any contract evidencing an intent to settle by arbitration any
future controversy arising out of such contract shall be valid, irrevocable, and
enforceable, save upon such grounds as exist at law or in equity for the revocation of
any contract.” French v. Wachovia Bank, 574 F.3d 830, 834 (7th Cir. 2009)(internal
quotations omitted)(quoting Livingston v. Assocs. Fin., Inc., 339 F.3d 553, 556 (7th
Cir. 2003) and 9 U.S.C. § 2). A court “will compel arbitration unless it may be said

with positive assurance that the arbitration clause is not susceptible of an
interpretation that covers the asserted dispute.” United Steel, Paper and Forestry,
Rubber, Mfg., Energy, Allied Indus. and Service Workers Intern. Union v. TriMas
Corp., 531 F.3d 531, 536 (7th Cir. 2008)(internal quotations omitted)(quoting
United Steelworkers of America v. Warrior & Gulf, 363 U.S. 574, 582-83 (1960)).

When an arbitration agreement contains a broad arbitration provision, “there is a
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presumption in favor of arbitrability,” and “[a]ny ambiguities as to the scope of the
arbitration clause are resolved in favor of arbitration.” Id. (internal quotations
omitted)(quoting AT& T Techs., Inc. v. Communc’ns Workers of America, 475 U.S.
643, 650 (1986) and Volt Info. Sci., Inc. v. Board of Trs. of Leland Stanford, Jr.
Univ., 489 U.S. 468, 475-76 (1989)); see also Sweet Dreams Unlimited, Inc. v. DialA-Mattress Intern., Ltd., 1 F.3d 639, 642 (7th Cir. 1993)(stating that the Court should
“[b]ear[] in mind the Supreme Court’s instruction that ‘any doubt concerning the
scope of arbitrable issues should be resolved in favor of arbitration’”)(quoting in part
Moses H. Cone Mem. Hosp. v. Mercury Construction Corp., 460 U.S. 1, 24-25
(1985)).
DISCUSSION
Defendants contend that Plaintiffs agreed to the mediation and arbitration of
claims relating to the Franchise Agreement. Defendants contend, and Plaintiffs do
not dispute, that the Franchise Agreement provides the following: “All claims or
disputes between Franchisee and Franchisor or their respective affiliates arising
under, out of, in connection with or in relation to this Agreement, the parties’
relationship, Franchisee’s Agency or any of the parties’ respective rights and
obligations arising out of this Agreement, must be submitted first to mediation prior
to a hearing in binding arbitration.” (Mediation Provision). (Mot. 3). The parties
further agree that the Franchise Agreement further provides that “[i]f not resolved by
mediation,” the dispute “must be submitted to binding arbitration. . . .” (Arbitration
Provision). (Mot. 3); (Resp. 4). Plaintiffs argue that the Franchise Agreement
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includes as an exception to the Arbitration Provision “any action for . . . equitable
relief. . . .” (Resp. 6). Plaintiffs contend that since they are seeking a recision of the
Franchise Agreement the equitable relief exception is applicable. Plaintiffs further
indicate that, if the court were to find that the claims in this case fall within the
Arbitration Provision, the court should compel arbitration rather than dismiss the
instant action.
Plaintiffs allege in the complaint that they entered the Franchise Agreement.
(Compl. Par. 21). Plaintiffs further allege that the misconduct on the part of
Defendants related to the parties’ rights and obligations under the Franchise
Agreement. (Compl. Par. 19-29). Plaintiffs seek to challenge the validity of the
entire Franchise Agreement and seek a rescission. Such an action would fall within
the broad scope of the Mediation Provision and Arbitration Provision. Nothing in
the Franchise Agreement would prevent the arbitrator from considering the validity
of the Franchise Agreement. The equitable relief referenced in the Franchise
Agreement that ultimately may need to be obtained from a court would be the type of
injunctive relief that would be sought in enforcement proceedings after the
mediation/arbitration procedure has been followed. It is clear from the terms of the
Franchise Agreement that claims relating to the Franchise Agreement such as those
presented in this case fall within the Mediation Provision and Arbitration Provision
and not within the equitable relief exception. The parties clearly envisioned that
such disputes would first be presented before a mediator and then an arbitrator. See
Miller v. Flume, 139 F.3d 1130, 1136 (7th Cir. 1998)(stating that “once it is clear the
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parties have a contract that provides for arbitration of some issues between them, any
doubts concerning the scope of the arbitration clause are resolved in favor of
arbitration”); see also Gore v. Alltel Communications, LLC, 666 F.3d 1027, 1032
(7th Cir. 2012)(stating that “because arbitration is a matter of contract, ‘a party
cannot be required to submit to arbitration any dispute which he has not agreed so to
submit’”)(quoting Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002)).
Therefore, Defendants’ motion to compel arbitration is granted. Defendants’ motion
to dismiss is denied.

CONCLUSION
Based on the foregoing analysis, Defendants’ motion to compel arbitration is
granted and motion to dismiss is denied. The instant action is dismissed with leave
to reinstate within one year if the parties believe that the instant action should
proceed further after the arbitration is concluded.

___________________________________
Samuel Der-Yeghiayan
United States District Court Judge
Dated: November 1, 2016

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