Contino et al v. Frontier Adjusters, Inc. et al

Filing 38

ORDER granting 18 Motion to Stay Pending Arbitration, denying as moot 34 Motion to Stay Initial Attorneys Conference. Defendants request for a preliminary hearing on the Motion to Stay Arbitration is DENIED. The parties are ORDERED to proceed to arbitration and submit reports to the Court every (90) days. Signed by Chief Judge Frank D. Whitney on 11/6/2014. (tmg)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
DOCKET NO. 3:14-CV-00550-FDW-DSC
JAYSON CONTINO, ET AL.
Plaintiffs,
vs.
FRONTIER ADJUSTERS, INC. ET AL.,
Defendants.

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ORDER

THIS MATTER is before the Court on Defendants’ Motion to Stay Pending Arbitration
and Request for Preliminary Hearing (Doc. No. 18) and Defendants’ Motion to Stay the Initial
Attorney’s Conference (Doc. No. 34). Having carefully considered the record in the abovereferenced case, the Court GRANTS Defendants’ Motion to Stay Pending Arbitration (Doc. No.
18) and DENIES Defendants’ Motion to Stay the Initial Attorney’s Conference (Doc. No. 34) as
moot.
On October 6, 2014, Plaintiffs filed the present action against Defendants alleging
numerous causes of action based on issues arising out of six franchise agreements entered into
between non-party Southern Claims Adjusting, Inc. (“Southern Claims”), a North Carolina
corporation owned by Plaintiff Jayson Contino, and Defendant Frontier Adjusters, Inc., the terms
of which Plaintiffs have individually guaranteed. (Doc. No. 1). Defendants move the Court for
an order pursuant to Section 3 of the Federal Arbitration Act, 9 U.S.C. §§ 1, et seq., staying the
case pending arbitration, and they additionally request that the Court hold a preliminary hearing
on his motion. (Doc. No. 18). In support of their motion, Defendants assert that the franchise
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agreements and personal guarantees are governed by Arizona law and contain an exclusive
Arizona forum selection provision and mandatory binding arbitration clause. (Doc. No. 18).
Defendants further assert that they have already commenced an arbitration proceeding before the
American Arbitration Association in Arizona seeking the adjudication of all of the claims
asserted in Plaintiffs’ Complaint. (Doc. No. 18).
Specifically, Defendants assert that each of the six franchise agreements entered into by
Defendant Frontier Adjusters, Inc., as the franchisor, and Southern Claims, as the franchisee,
includes Section 23, which provides, in pertinent part:
This Agreement is a written agreement evidencing a transaction
involving commerce and is, therefore, subject to the terms and
provisions of the Federal Arbitration Act Title 9 of the United
States Code. Except for a controversy or claim relating to the use
and/or ownership of any of the Marks, or the restrictive covenants
contained in Section 6, any controversies or claims arising out of
this Agreement or any other agreements between the parties or
with regard to their interpretation, formulation or breach, shall be
settled by binding arbitration conducted in Maricopa County,
Arizona, according to the commercial rules of the American
Arbitration Association as modified herein below.
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In the event that any controversy or claim arising from this
Agreement also involves any officer, director, employee, member,
partner, shareholder, representative, or agent of either party, then
any such controversy or claim shall also be submitted to binding
arbitration in the same manner as explained above.
(Doc. No. 18). Additionally, Defendants contend that each personal guarantee provides:
The undersigned agree that any action, suit or proceeding to
enforce this Guarantee or arising hereunder or concerning the
interpretation of this Guarantee shall be subject to arbitration to the
same extent as provided in Section 23 of the Agreement.

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(Doc. No. 18).
DISCUSSION
Under the Federal Arbitration Act (“FAA”), federal courts must stay “any suit or
proceeding” pending arbitration of “any issue referable to arbitration under an agreement in
writing for such arbitration.” 9 U.S.C. § 3. The FAA also authorizes a federal district court to
issue an order compelling arbitration if there has been a failure to comply with an arbitration
agreement. See 9 U.S.C. § 4. The FAA “manifest[s] a ‘liberal federal policy favoring arbitration
agreements.’” See Gilmer v. Interstate/Johnson Lane Corp., 500 U.S. 1647, 1651 (1991) (citing
Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24 (1983)).
Additionally, under Arizona law, which appears to govern the franchise agreements and
guarantees at issue, “[a] written agreement to submit any existing controversy to arbitration or a
provision in a written contract to submit to arbitration any controversy thereafter arising between
the parties is valid, enforceable and irrevocable, save upon such grounds as exist at law or in
equity for the revocation of any contract.” Ariz. Rev. Stat. Ann. § 12-1501. North Carolina law
is in accord and provides that “[a]n agreement contained in a record to submit to arbitration any
existing or subsequent controversy arising between the parties to the agreement is valid,
enforceable, and irrevocable except upon a ground that exists at law or in equity for revoking a
contract.” N.C. Gen. Stat. § 1-569.6(a) (2007).
When an enforceable arbitration agreement exists, and when the issues in the dispute fall
within its scope, a federal district court must stay the proceedings “when one party has failed,
neglected, or refused to comply with an arbitration agreement … .” Gilmer 500 U.S. at 1651
(citing 9 U.S.C. § 4); see also Adkins v. Labor Ready, Inc., 303 F.3d 496, 500 (4th Cir. 2002)

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(citing United States v. Bankers Ins. Co., 245 F.3d 315, 319 (4th Cir. 2001)) (“A district court
therefore has no choice but to grant a motion to compel arbitration where a valid arbitration
agreement exists and the issues in a case fall within its purview.”).
It appears to the Court that the arbitration agreements at issue are valid and enforceable
under general principles of contract law and Arizona state law arbitration provisions. It also
appears to the Court that Plaintiffs read and signed the franchise agreements and guarantees,
which include the arbitration provisions listed above, representing that they agreed to and
understood the terms of the documents. (Doc. Nos. 20-21, 23-32). Moreover, the terms of the
franchise agreements make clear that the arbitration provisions apply to any claims arising from
these agreements that involve Plaintiffs, in their capacities as officers, directors, employees,
members, partners, shareholders, representatives or agents of Southern Claims. (Doc. No. 18).
Here, Plaintiffs’ Complaint contains allegations that specifically relate to the parties’
franchise agreements. (Doc. No. 1). Consequently, the specific issues in the dispute clearly fall
within the scope of the arbitration clause.

Further, Plaintiffs will not be prejudiced by

enforcement of the arbitration provisions because the litigation is only in its beginning stages,
and neither party has yet expended significant amounts of time or money.
Plaintiffs’ clear, written and signed agreements to resolve disputes arising under the
franchise agreements and guarantees through binding arbitration fully satisfies the requirements
of the FAA and Arizona state law for enforceable arbitration agreements.

Accordingly,

Defendants’ motion to stay pending arbitration is GRANTED. Because the Court finds that a
hearing on this motion to stay is unnecessary, Defendants’ request for a preliminary hearing on
this matter is DENIED.

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Finally, in light of the Court’s decision on Defendants’ motion to stay pending
arbitration, the Court finds that arguments supporting Defendants’ motion to stay the initial
attorney’s conference are moot. Accordingly, Defendants’ motion to stay the initial attorney’s
conference is DENIED.
IT IS THEREFORE ORDERED that, for the reasons stated herein as well as those stated
in Defendants’ brief in support of their motion, Defendants’ Motion to Stay Pending Arbitration
(Doc. No. 18) is GRANTED and Defendants’ Motion to Stay Initial Attorneys Conference (Doc.
No. 34) is DENIED. Defendants’ request for a preliminary hearing on the Motion to Stay
Arbitration is DENIED. The parties are ORDERED to proceed to arbitration and submit reports
to the Court every ninety (90) days. The dispute must be resolved within twelve (12) months
from the date of this Order.1 Failure to do so will result in Court action.
IT IS SO ORDERED.

Signed: November 6, 2014

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Under this Court’s standing orders, the Court’s timeline sets trial in civil cases approximately twelve (12) months
from the filing of the complaint. Standing Order Governing Civil Case Management Before the Honorable Frank D.
Whitney, Misc. No. 3:07-MC-47. The time limit is put in place to protect all parties’ interests and promote judicial
efficiency.

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