Distribution, Competition, and Antitrust / IP Law

A Way To Avoid Arbitration?

In EA Independent Franchisee Ass’n, LLC v. Edible Arrangements International, Inc. (D. Conn. No. 3:10-cv-1489-WWE, July 19, 2011) (no link yet), the court denied the franchisor’s motion to dismiss for lack of standing, allowing an association of franchisees to assert a declaratory judgment claim.  (The association alleges various failures to disclose affiliate relationships and undisclosed fees associated with franchisees’ mandatory use of an online ordering system, among other things.)

The court allowed the suit to proceed even though the EA franchise agreement requires arbitration of disputes.  The association has no right or obligation to arbitrate on behalf of its members, the court concluded.

Lesson: even if a franchisor has arbitration clauses in all its franchise agreements, its franchisees may neverthless find (or invent) a novel vehicle that takes them directly to federal court.

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About Howard Ullman

Antitrust, competition, and IP law enthusiast.

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