MITNICK v. YOGURTLAND FRANCHISING, INC. et al

Filing 22

OPINION filed. Signed by Judge Freda L. Wolfson on 8/16/2017. (mmh)

*NOT FOR PUBLICATION*
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
__________________________________________
:
STEVEN MITNICK, as assignee of CENTRAL
:
JERSEY ENTERPRISES, LLC,
:
:
Plaintiff,
:
:
Civil Action No. 17-00325 (FLW)
v.
:
:
OPINION
YOGURTLAND FRANCHISING, INC. and
:
PHILLIP CHANG, individually and in his
:
capacity as Chief Executive Officer of
:
Yogurtland Franchising, Inc.,
:
:
Defendants.
:
__________________________________________:
WOLFSON, United States District Judge:
Plaintiff Steven Mitnick (“Plaintiff”), as assignee of Central Jersey Enterprises, LLC
(“CJE”), filed this action against Defendants Yogurtland Franchising, Inc. (“Yogurtland”) and
Phillip Chang (collectively, “Defendants”), asserting various causes of action arising from several
franchise agreements existing between the parties. Presently before the Court is Defendants’
motion to compel arbitration and stay the action, or alternatively, to dismiss Plaintiff’s Complaint.
Defendants argue that the parties are bound, by the terms of their franchise agreements, to arbitrate
the claims asserted in Plaintiff’s Complaint. For the reasons set forth below, the Court finds that
Plaintiff’s claims fall within the scope of the parties’ arbitration agreements, and therefore,
Defendants’ motion to compel arbitration is GRANTED and this case is STAYED pending
arbitration.
I.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

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For the purposes of the instant motion, the Court will only recount the relevant facts.
Defendant Yogurtland is an international corporation, headquartered in Irvine, California, that is
engaged in the business of franchising frozen yogurt restaurants. See Compl. ¶ 3. Defendant
Phillip Chang (“Chang”) is the president and chief executive officer of Yogurtland. Id. at ¶ 4.
Between December 2010 and April 2014, CJE entered into seven franchise agreements
(collectively, the “Franchise Agreements”) with Yogurtland, pursuant to which CJE operated
Yogurtland franchises in New Jersey and Pennsylvania. Id. at ¶¶ 9-16. CJE subsequently
became insolvent, and on January 22, 2016, seeking to liquidate its assets for the benefit of its
creditors, CJE conveyed to Plaintiff Steven Mitnick a deed of assignment for the benefit of
creditors (the “Deed”), pursuant to New Jersey’s Assignment for the Benefit of Creditors Statute,
N.J.S.A. 2A:19-1 et seq.. Id. at ¶ 5.1
Each of the seven Franchise Agreements contains an arbitration provision. The first and
second Franchise Agreements, dated August 23, 2010 and February 3, 2011, respectively,
contain arbitration clauses that provide, in relevant part:
21.5. Arbitration. Any controversy or claim arising out of or relating to this Agreement
or its breach, including without limitation, any claim that this Agreement or any
provision is invalid, illegal, void or voidable shall be submitted to arbitration before and
in accordance with the commercial arbitration rules of the American Arbitration
Association. . . The arbitration shall be conducted before an arbitrator who is familiar
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Pursuant to N.J.S.A. 2A:19-13, Plaintiff, as assignee under the Deed, has the following
authority:
Every assignee shall have as full power and authority to dispose of all of the assignor's
property, except as otherwise may be provided, as the assignor had at the time of the
general assignment. He may sue for and recover in his own name everything belonging or
appertaining to the estate. He may compromise, settle and compound all claims, disputes
and litigations of the assignor, refer the same to arbitration, agree with any person
concerning the same, redeem all mortgages and conditional contracts, and generally act
as and do whatsoever the assignor might have lawfully done in the premises.
N.J.S.A. 2A:19-13.
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with franchising and franchise law. . . This arbitration provision shall be governed by and
construed under the Federal Arbitration Act (9 U.S.C. Section 1 et seq.). Judgment on an
arbitration award may be entered in any court having competent jurisdiction and shall be
final, binding and non-appealable. This arbitration provision shall be deemed to be selfexecuting and shall remain in full force and effect after expiration or termination of this
Agreement. . . Arbitration and/or mediation shall take place in Orange County,
California.
Declaration of John Carlson (dated January 20, 2017) (“Carlson Dec.”), Exs. A and B.
The third Franchise Agreement, dated February 2, 2012, contains an arbitration provision
that provides, in pertinent part:
15.3 Arbitration.
(a) Except as expressly provided below, any Dispute between (i) Franchisor, and (ii)
Franchisee or any Owner(s), arising out of or relating to this Agreement, its breach,
enforceability, or validity is not resolved through direct negotiations or mediation will be
resolved by submission to binding arbitration by and before a neutral, former judge
chosen by agreement of the parties, or, if not agreed within ten (10) business days of
written demand for arbitration, in accordance with the selection of a reputable arbitration
services, including CPR, JAMS, and other services of equally good reputation. . . . .
(b) All hearings and other proceedings will take place in Orange County, California, or
other county where Franchisor’s headquarters is then located. . . the arbitrator’s decision
will be final and binding on the parties, and judgment thereon may be entered in any
federal or state court having jurisdiction. . . . .
Carlson Dec., Ex. C. The remaining four Franchise Agreements, dated July 9, 2012, January 7,
2013, February 1, 2014, and May 15, 2014, respectively, contain identical arbitration provisions,
which provide, in relevant part:
15.3 Arbitration.
(a) Except as expressly provided below, any Dispute between (i) Franchisor, and (ii)
Franchisee or any Owner(s), arising out of or relating to the relationship of Franchisor
and Franchisee, or to this Agreement or to any other agreement between Franchisor and
Franchisee or any Owner(s), or to the actual or allege breach, scope, enforceability, or
validity of this Agreement or of any of such other agreements, or of any provision of any
of them (including the scope, enforceability, and validity of this Section 15.3) that is not
resolved through direct negotiations or mediation will be resolved by submission to
binding arbitration by and before a neutral, former judge chose by agreement of the
parties, or, if not agreed within ten (10) business days of written demand for arbitration,

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in accordance with the selection of a reputable arbitration services, including CPR,
JAMS, and other services of equally good reputation. . . . .
(b) All hearings and other proceedings will take place in Orange County, California, or
other county where Franchisor’s headquarters is then located. . . the arbitrator’s decision
will be final and binding on the parties, and judgment thereon may be entered in any
federal or state court having jurisdiction. . . . .
Carlson Dec., Exs. D-G.
Additionally, each of the Franchise Agreements contains a mediation clause. The 2010
and 2011 Franchise Agreements include mediation provisions that provide, in pertinent part:
21.4 Mediation. The parties agree to mediate any dispute or claim arising out of this
agreement, or any resulting transaction, before resorting to arbitration or court action in
Orange County, California. The parties shall share equally the cost of the mediator. . . . .
Carlson Dec., Exs. A and B. The remaining five Franchise Agreements include mediation
clauses that provide, in relevant part:
Except as expressly provided below to the contrary, in the event of any dispute between
Franchisor and any other party hereto (including the Owners) arising out of or otherwise
related to this Agreement, its alleged breach, enforceability, or validity (each a
“Dispute”) that is not resolved through direct negotiations within a reasonable time, each
party shall next attempt to resolve such Dispute through mediation before a mediator . . . .
Mediation will be conducted in Orange County, California, and will be conducted and
completed within forty-five (45) days following the date either party first gives notice of
mediation. The fees, charges, and reimbursements of the mediator shall be shared
equally by the disputing parties.
Carlson Dec., Exs. C-G.
The 2010 and 2011 Franchise Agreements also contain an identical exception to
mediation and arbitration clause (the “Exception Clause”), which provides as follows:
21.6 Exception to Mediation and Arbitration. The obligations to arbitrate or
mediate shall not bind either party regarding claims related to trademarks, patents, and
copyrights; any claim for fees or payments due from Franchisee to Franchisor or its
affiliates; any lease or sublease of real property between the parties or their affiliated
entities; requests by a party for provision or interim relief to preserve the status quo or
prevent irreparable harm pending the outcome of mediation or arbitration; any matter
within the jurisdiction of a probate, small claims, or bankruptcy court; filing of a court

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action to enable the recording of a notice of pending action; or any other matter provided
in this agreement to be excluded from arbitration or mediation.
Carlson Dec., Exs. A and B (emphasis added).
Plaintiff alleges a series of transactions between CJE and Defendants that form the basis
of his claims. To begin, Plaintiff avers that Defendants misrepresented to CJE that other parties
were interested in opening a Yogurtland location in CJE’s regional territory, in order to induce
CJE into opening additional franchises, when, in fact, no interested or qualified prospective
franchisee existed. See Compl. ¶ 18. Next, Plaintiff alleges that Yogurtland opened a companyowned store (the “Mt. Laurel store”) within CJE’s regional territory, in direct competition with
CJE’s stores. Id. at ¶¶ 19-21. Plaintiff alleges that the Mt. Laurel store did not perform well, and
that CJE subsequently purchased that location from Yogurtland in order to “avoid ruining the
reputation for the brand that CJE had built in the region.” Id. at ¶¶ 23-24.2 Plaintiff further
alleges that, in connection with CJE’s purchase of the Mt. Laurel store, Yogurtland agreed to
provide personnel and resources to its east coast franchisees, including $10,000 in marketing
support to CJE. Id. at ¶¶ 26-27. Plaintiff avers that, contrary to that agreement, Yogurtland
never provided CJE with marketing support. Id. at ¶ 26. Plaintiff also alleges that Yogurtland
fired several senior executives, including the operations support associate for the east coast, thus
leaving CJE without any contacts to address franchise-related issues. See id. at ¶¶ 29-34.
Additionally, Plaintiff alleges that Defendants engaged in a pattern of disparate treatment
with respect to its east coast franchisees and its company-owned west coast locations. In that
regard, Plaintiff avers that only CJE and other east coast franchisees were required to make

2

Specifically, on January 22, 2014, CJE and Yogurtland entered into an agreement for purchase
and sale (the “Agreement of Sale”), whereby CJE purchased the Mt. Laurel store from
Yogurtland, and entered into a franchise agreement to operate that store. See Compl. ¶ 23.
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contributions to Yogurtland to support Yogurtland’s marketing fund. Id. at ¶ 34. Plaintiff
further alleges that Defendants withheld certain flavors, including its most popular flavor, from
its east coast franchisees, and refused to address the seasonality issues faced by those locations.
See id. at ¶¶ 36-39. Finally, Plaintiff alleges that Defendants: (i) impeded CJE’s hiring
capabilities; (ii) required CJE to purchase equipment from overpriced distributors; (iii) received
kickbacks from those equipment distributors; (iv) failed to timely deliver required supplies to
CJE’s stores; (v) discontinued a loyalty card program, notwithstanding CJE’s statement that the
program was critical to its operations; (vi) failed to respond to CJE’s inquiries as to whether
Yogurtland’s products were kosher; (vii) sold its products to competing stores within CJE’s
regional territory; and (viii) that Chang diverted at least $20,000 away from Yogurtland each
month for his own personal use. See id. at ¶¶ 40-53.
On December 13, 2016, Plaintiff filed a five-count Complaint against Defendants,
asserting claims for breach of the duty of good faith and fair dealing, violations of the New
Jersey Franchise Practices Act, fraudulent inducement to contract, unjust enrichment, and breach
of contract. Compl. ¶¶ 54-79. On January 24, 2017, Defendants filed the instant motion to
compel arbitration and stay the action, or in the alternative, to dismiss. ECF Nos. 8-9. That
motion has been fully briefed. See ECF Nos. 14, 16.
II.

LEGAL STANDARD
The FAA “‘creates a body of federal substantive law establishing and regulating the duty

to honor an agreement to arbitrate . . . .’” Harris v. Green Tree Fin. Corp., 183 F.3d 173, 179 (3d
Cir. 1999) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25 n.32
(1983)). The FAA was designed by Congress “‘to reverse the longstanding judicial hostility to
arbitration agreements that had existed at English common law and had been adopted by American

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courts, and to place arbitration agreements upon the same footing as other contracts.’” Beery v.
Quest Diagnostics, Inc., 953 F. Supp. 2d 531, 536–37 (D.N.J. 2013) (quoting Gilmer v.
Interstate/Johnson Lane Corp., 500 U.S. 20, 24 (1991)). To achieve this end, the FAA provides
that contract provisions containing arbitration clauses “shall be binding, allows for the stay of
federal court proceedings in any matter referable to arbitration, and permits both federal and state
courts to compel arbitration if one party has failed to comply with an agreement to arbitrate.” 9
U.S.C. §§ 2–4. Collectively, “those provisions [of the FAA] ‘manifest a liberal policy favoring
arbitration agreements.’” Beery, 953 F. Supp. 2d at 537 (quoting Gilmer, 500 U.S. at 24).
Therefore, “‘as a matter of federal law, any doubts concerning the scope of arbitrable issues should
be resolved in favor of arbitration.’” Id. (quoting Mercury Constr. Corp., 460 U.S. at 24–25).
When a district court is presented with a motion to compel arbitration, it must affirmatively
answer the following two questions: (1) whether the parties entered into a valid arbitration
agreement; and (2) whether the dispute at issue falls within the scope of that agreement. Century
Indem. Co. v. Certain Underwriters at Lloyd's, 584 F.3d 513, 523 (3d Cir. 2009). In performing
this inquiry, courts apply “ordinary state-law principles that govern the formation of contracts,”
Kirleis v. Dickie, McCamey & Chilcote, 560 F.3d 156, 160 (3d Cir. 2009) (internal quotations and
citations omitted), and, “when determining whether [a] particular dispute falls within a valid
arbitration agreement’s scope, ‘there is a presumption of arbitrability[:] an order to arbitrate the
particular grievance should not be denied unless it may be said with positive assurance that the
arbitration clause is not susceptible of an interpretation that covers the asserted dispute.’” Century
Indem. Co, 584 F.3d at 524 (quoting AT & T Techs. v. Communs. Workers of Am., 475 U.S. 643,
650 (1986)).
III.

DISCUSSION

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Defendants move to compel arbitration of the claims asserted in the Complaint, on the
grounds that the arbitration provisions contained in the Franchise Agreements require the parties
to arbitrate claims relating to those Agreements, and each of the causes of action asserted in the
Complaint arise out of the Franchise Agreements.
At the outset, the Court notes that Plaintiff does not challenge the validity of the
arbitration provisions contained in the Franchise Agreements. Nor does Plaintiff dispute that the
claims asserted in the Complaint arise from the Franchise Agreements. See Pl.’s Opp. at 1
(“[Plaintiff] asserts claims against Defendants for breach of the duty of good faith and fair
dealing, violations of the New Jersey Franchise Practices Act, fraudulent inducement to contract,
unjust enrichment, and breach of contract. Each of these claims relates to multiple franchisee
agreements and an agreement of sale entered into by CJE and Defendant Yogurtland.”)
(emphasis added). Rather, Plaintiff argues that the Exception Clause contained in two of the
seven Franchise Agreements is triggered in this case, because his claims fall within the
jurisdiction of a probate or bankruptcy court. Plaintiff also contends that the Court should not
compel arbitration in this case, because the Franchise Agreements do not specify one uniform
method of arbitration. Finally, Plaintiff argues that, should the Court grant Defendants’ motion
to compel arbitration, the Court should order the parties to comply with the provisions of the
Franchise Agreements that require mediation before resorting to arbitration. I will address each
of those arguments in turn.
A.

The Exception Clause Is Not Applicable

Plaintiff argues that the claims at issue in this case are not subject to arbitration, because
this matter falls within the jurisdiction of a probate court or bankruptcy court, and thus, the
Exception Clause, contained in two of the seven Franchise Agreements, is applicable. Under

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section 21.6 of the 2010 and 2011 Franchise Agreements, “the obligation[] to arbitrate . . . shall
not bind either party regarding . . . any matter within the jurisdiction of a probate . . . or
bankruptcy court.” Accordingly, in deciding whether the Exception Clause relieves Plaintiff of
the obligation to arbitrate his claims, the Court must determine whether Plaintiff’s claims fall
within the jurisdiction of a probate or bankruptcy court.
1.

Plaintiff’s Claims are not within the Jurisdiction of a Probate Court

New Jersey probate courts have jurisdiction over a wide variety of matters, including “the
appointment of guardians and conservators, actions for settlement of fiduciary accounts, []
declarations of death, . . . [and] proceedings to probate wills and to settle questions that concern
or touch on a decedent's estate.” In re Estate of Stockdale, 196 N.J. 275, 301 (2008) (internal
citations omitted); see, e.g., NJ Ct. R. 4:82-85; 4:91-95. Additionally, probate courts have the
power to issue assignments for the benefit of creditors, see In re Gen. Assignment for Benefit of
Creditors of Brill's Hardware Co., 67 N.J. Super. 289, 291 (Co. Prob. Div. 1961), to adjudicate
disputes over the appointment of an assignee, to remove an assignee, and to adjudicate disputes
over the compensation of an assignee. See N.J.S.A. 2A:19-1 et seq. However, unlike a federal
bankruptcy court, there is no mechanism for a probate court to adjudicate substantive claims
asserted by an assignee following an assignment for the benefit of creditors. NJ Ct. R. 4:80 et
seq. Rather, the probate court’s jurisdiction is limited to issues regarding the assignment itself,
and once a valid assignment for the benefit of creditors occurs, any substantive claims asserted
by the assignee are brought outside of probate court. See N.J.S.A. 2A:19-1 et seq.3

For example, here, Plaintiff filed his Complaint in the New Jersey Superior Court’s Law
Division, rather than the Probate Part.
3

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In this case, Plaintiff argues that because the New Jersey Superior Court, Probate Part
issued an assignment for the benefit of creditors, assigning CJE’s rights to Plaintiff, his claims
fall within the jurisdiction of a probate court. However, contrary to Plaintiff’s contention, the
relevant question in determining whether the Exception Clause is triggered is not whether the
assignment from CJE to Plaintiff was subject to the jurisdiction of the probate court; but instead,
the critical question for the purposes of that inquiry is whether the claims asserted in the
Complaint fall within the subject matter jurisdiction of the probate court. In that regard, the
Exception Clause stipulates that the parties need not arbitrate “any matter within the jurisdiction
of a probate . . . court.” The language of that provision, taken at its plain and ordinary meaning,
compels a finding that the Exception Clause is only triggered where the disputed matter at issue
falls within the jurisdiction of a probate court. Here, the matter at issue – and that which would
be submitted to arbitration – is Plaintiff’s claims for breach of the duty of good faith and fair
dealing, violations of the New Jersey Franchise Practices Act, fraudulent inducement to contract,
unjust enrichment, and breach of contract. Compl. ¶¶ 54-79. To that end, the parties do not
dispute the validity of the assignment, or any other matter falling within the jurisdiction of a
probate court. Rather, this case involves a dispute arising from the Franchise Agreements, and
resolution of Plaintiff’s claims will not require this Court to determine any issues within the
jurisdiction of a probate court. Cf. Grey v. Johansson, No. 13-7497, 2014 WL 4259432, at *4
(D.N.J. Aug. 26, 2014) (remanding case under probate exception to federal diversity jurisdiction,
on the grounds that the “testamentary validity claims at issue in this litigation clearly lie at the
core of state probate, and therefore exceed the Court's jurisdiction.”). Moreover, the Court has
not been able to locate, and Plaintiff has failed to identify, any authority stating that a probate

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court has jurisdiction over the claims asserted in Plaintiff’s Complaint, without any involvement
of a will, estate, or appointment of guardianship.4
In short, even assuming that the assignment for the benefit of creditors was within the
jurisdiction of a probate court, the parties are not litigating the validity of the assignment in this
case. Rather, the instant action concerns Plaintiff’s contract-related claims against Defendants.
Because a probate court would not have subject matter jurisdiction over those claims, the
Exception Clause is not triggered.
2.

Plaintiff’s Claims are not within the Jurisdiction of a Bankruptcy Court

Similarly, the Court finds that this action is not within the jurisdiction of a bankruptcy
court, such that the Exception Clause would be applicable. Plaintiff argues that this case falls
within the jurisdiction of a bankruptcy court, because the manner in which Plaintiff brought this
suit – as an assignee of CJE, an insolvent company – “is similar in effect” to a chapter 7
bankruptcy proceeding. Pl.’s Opp. at 7. The Court disagrees.
Bankruptcy courts “fall outside of the constitutional authority of Article III and derive
their authority from federal statutes.” In re Resorts Int'l, Inc., 372 F.3d 154, 161 (3d Cir. 2004).

4

The two cases relied on by Plaintiff in support of his argument that the instant action falls
within the jurisdiction of a probate court - In re Gen. Assignment for Benefit for Creditors of
Xaviers, Inc., 66 N.J. Super. 561 (App. Div. 1961) and In re Kleinberg, 63 N.J. Super. 50 (Co.
Prob. Div. 1960) – are inapposite. Both of those cases concerned the rights of a probate court to
order the payment of commissions and counsel fees to an assignee, following an assignment for
the benefit of creditors. See In re Gen. Assignment for Benefit for Creditors of Xaviers, Inc., 66
N.J. Super. at 566 (“This appeal . . . is from a judgment of the Essex County Court, Probate
Division, awarding commissions to the assignee and counsel fees to his attorneys, as well as
reimbursing both for out-of-pocket disbursements on behalf of the estate.”); In re Kleinberg, 63
N.J. Super. at 52 (“This is an application by the assignee for commissions and allowances.”).
Because neither case analyzed whether a probate court has jurisdiction over state law claims
brought by an assignee, where the claims at issue did not relate to the assignment itself, they do
not support Plaintiff’s argument that the instant action is within the jurisdiction of a probate
court.
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Their jurisdiction is governed principally by 28 U.S.C. § 1334. See id. Section 1334 provides,
in pertinent part:
(a) Except as provided in subsection (b) of this section, the district courts shall have
original and exclusive jurisdiction of all cases under title 11.
(b) Except as provided in subsection (e)(2), and notwithstanding any Act of Congress that
confers exclusive jurisdiction on a court or courts other than the district courts, the
district courts shall have original but not exclusive jurisdiction of all civil proceedings
arising under title 11, or arising in or related to cases under title 11.
28 U.S.C. § 1334. Section 1334 thus grants district courts original jurisdiction over bankruptcy
cases and proceedings arising under title 11, including chapter 7 bankruptcy actions. Id.; see
Resorts, 372 F.3d at 161; 11 U.S.C. §§ 301-66.
Here, the Court finds that the instant action does not fall within the subject matter
jurisdiction of a bankruptcy court. Principally, at the time the Complaint was filed, Plaintiff,
while allegedly insolvent, had not filed a petition for bankruptcy protection, and thus, this action
cannot conceivably have an effect on an “estate” being administered in bankruptcy. In arguing
that the assignment from CJE to Plaintiff “is similar in effect to a bankruptcy proceeding,” Pl.’s
Opp. at 7, Plaintiff misconstrues the scope of the Exception Clause. As the plain language of the
Exception Clause indicates, the exception is only triggered where the claims asserted fall within
the jurisdiction of a bankruptcy court – not where one party is simply insolvent. Had the parties
wished to expand the scope of the Exception Clause to cover those claims, they were free to
contract accordingly. However, absent a clear manifestation of intent to encompass Plaintiff’s
claims in the Exception Clause, the Court will not rewrite the terms of that provision to preclude
arbitration in this case. Accordingly, because the instant action is not within the jurisdiction of

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either a probate or bankruptcy court, the Court finds that the Exception Clause is not triggered in
this case.5
B.

The Arbitration Provisions Are Not In Conflict

Next, Plaintiff argues that the Court should not compel arbitration because the arbitration
provisions contained in the various Franchise Agreements do not specify a uniform method of
arbitration. In response, Defendants contend that Plaintiff has failed to explain why the
differences in the arbitration clauses would require separate arbitrations. The Court agrees.
Here, the 2010 and 2011 Franchise Agreements provide, in relevant part, that “[a]ny
controversy or claim arising out of or relating to this Agreement . . . shall be submitted to
arbitration before and in accordance with the commercial arbitration rules of the American
Arbitration Association.” Carlson Dec., Exs. A and B. By contrast, the remaining Franchise
Agreements provide that the parties shall submit to “binding arbitration by and before a neutral,
former judge chosen by agreement of the parties, or, if not agreed within ten (10) business days
of written demand for arbitration, in accordance with the selection of a reputable arbitration
services, including CPR, JAMS, and other services of equally good reputation.” Carlson Dec.,
Exs. C-G. While these provisions differ slightly on the rules governing arbitration, those trivial
differences do not preclude the Court from compelling arbitration. See Joaquin v. Directv Grp.
Holdings, Inc., No. 15-8194, 2016 WL 4547150, at *4 n. 1 (D.N.J. Aug. 30, 2016) (“Any
differences between the two arbitration provisions do not render both unenforceable.”). More
importantly, the arbitration provisions in this case are not in fact incompatible. In that regard,

5

The Court notes that even if the Exception Clause were triggered, it would only require
arbitration of claims asserted in relation to the 2010 and 2011 Franchise Agreements. However,
in light of the Court’s finding that the Exception Clause is not applicable in this case, it need not
consider which claims stem from the 2010 and 2011 Franchise Agreements, and which claims
relate to the remaining five Franchise Agreements.
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Plaintiff has not explained, and the Court cannot find, that the parties could not comply with both
provisions by, for example, retaining as the arbitrator a neutral, former judge who is willing to
proceed in accordance with the commercial arbitration rules of the American Arbitration
Association. Accordingly, because the arbitration provisions contained in the Franchise
Agreements are not in conflict, the different language of the provisions provides no basis for this
Court to deny Defendants’ motion to compel arbitration.
C.

Mediation

Finally, relying on the mediation provisions of the Franchise Agreements, Plaintiff argues
that the Court should compel the parties to mediate their claims prior to resorting to arbitration.
Conversely, Defendants maintain that by filing the Complaint, Plaintiff waived his right to
invoke mediation as a shield to arbitration.
Here, however, the Court finds that it need not reach the issue of whether the parties are
required to mediate Plaintiff’s claims prior to resorting to arbitration. In that regard, the Third
Circuit has explained that where the substantive arbitrability of the underlying claims is not in
dispute, but the parties disagree as to the procedures to be followed, courts must compel
arbitration and leave the procedural dispute to the arbitrator. See Bell Atl.-Pennsylvania, Inc. v.
Commc'ns Workers of Am., AFL-CIO, Local 13000, 164 F.3d 197, 203 (3d Cir. 1999); see also
John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 558 (1964) (finding that courts should
compel arbitration where “arbitrability of the subject matter is unquestioned but a dispute arises
over the procedures to be followed.”); NeuroSource, Inc. v. Jefferson Univ. Physicians, No. 005401, 2001 WL 180264, at *5 (E.D. Pa. Feb. 14, 2001) (“Once the court has determined that the
parties consented to arbitrate a particular dispute, any further matters surrounding the dispute
must be resolved by the arbitrator.”). Procedural disputes that should be submitted to the

14

arbitrator include issues of “waiver” and “exhaustion of prearbitration steps.” Bell Atl.Pennsylvania, 164 F.3d at 203; see NeuroSource, No. 00-5401, 2001 WL 180264, at *5 (“Courts
traditionally hold that the question of whether the prerequisites to arbitration have been fulfilled
are questions for the arbitrator and not for the court.”). Here, the Court has already determined
that Plaintiff’s claims are subject to arbitration. Accordingly, to the extent the parties disagree as
to whether mediation is required before arbitration, that dispute should be presented to the
arbitrator.
IV.

CONCLUSION
For the foregoing reasons, the Court finds that Plaintiff’s claims are arbitrable. Because

Defendants requested a stay of the proceedings, the Court shall, pursuant to 9 U.S.C. § 3, stay
this action pending arbitration. See Lloyd v. Hovensa, 369 F.3d 263, 269 (3d Cir. 2004) (“[T]he
plain language of § 3 affords a district court no discretion to dismiss a case where one of the
parties applies for a stay pending arbitration.”). Accordingly, Defendants’ motion is GRANTED
and this action is STAYED. The action will be administratively terminated pending the outcome
of the arbitration proceeding.

Dated: August 16, 2017

/s/ Freda L. Wolfson
Hon. Freda L. Wolfson
United States District Judge

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