Doctor's Associates, Inc. v. Distajo, Civil No. 3:94CV349 (PCD).
| Decision Date | 14 February 1996 |
| Docket Number | Civil No. 3:94CV349 (PCD). |
| Citation | 944 F.Supp. 1010 |
| Parties | DOCTOR'S ASSOCIATES, INC., Plaintiff, v. Emily DISTAJO, et al., Defendants. |
| Court | U.S. District Court — District of Connecticut |
William J. Doyle, Edward Wood Dunham, Mark Richard Kravitz, Kevin M. Kennedy, Wiggin & Dana, New Haven, CT, for Plaintiff.
Nicholas E. Wocl, Tooher & Puzzuoli, Stamford, CT, David M. Duree, Robert L. Carter, Reinert, Duree & Crane, St. Louis, MO, for Defendants Emily Distajo, Renato Distajo, Constantino Lamando, and Milo Lamando.
Nicholas E. Wocl, Tooher & Puzzuoli, Stamford, CT, for Defendants Jose Alberto Brenes, Alvaro Guerrero, Maria T. Guerrero, Wesam S. Youmaran, Linda Youmaran, Julie Shino, Johnson Shino, Albert Yonan, Leylah Yonan, Louis Loenneke, Mary Ann Bookout, and John S. Papaleo.
Edward E. Angwin, Birmingham, AL, for Defendants John A. McCrary, Paul Riise, and Melissa Riise.
David M. Duree, Reinert, Duree & Crane, St. Louis, MO, for Defendants Ronald Rothmund, Patricia Rothmund, Sandra Bickel and Raymond Bickel.
RULING ON MOTION TO FOREGO TRIAL AND GRANT JUDGMENT AS A MATTER OF LAW
Plaintiff Doctor's Associates, Inc. ("DAI") is the national franchisor of Subway sandwich shops, and defendants are Subway franchisees. The parties entered into standard franchise agreements, which required arbitration of all contractual disputes in Bridgeport, Connecticut, under Connecticut law. When contractual disputes did arise, the franchisees sought judgments against DAI in numerous state courts around the country. DAI has petitioned this court to compel arbitration of the franchise disputes pursuant to section 4 of the Federal Arbitration Act ("FAA"), 9 U.S.C. § 4. The franchisees have opposed the petition on grounds including fraudulent inducement and waiver of the right to arbitration, which issues were remanded by the Second Circuit for determination by this court. See Doctor's Assocs., Inc. v. Distajo, 66 F.3d 438, 458 (2d Cir.1995). A trial on the franchisees' arbitration defenses is scheduled to begin on February 20, 1996.
DAI moves for the court to forego trial and render judgment as a matter of law. In support of this request, DAI relies principally on two Second Circuit cases construing FAA § 4: Manning v. Energy Conversion Devices, Inc., 833 F.2d 1096 (2d Cir.1987), and Oppenheimer & Company, Inc. v. Neidhardt, 56 F.3d 352 (2d Cir.1995). In Manning, the Second Circuit affirmed a district court's order compelling arbitration and held that there was no need for an evidentiary hearing on a fraudulent inducement defense when no affidavits had been offered in support thereof. 833 F.2d at 1103. "A party resisting arbitration ... must submit sufficient evidentiary facts in support of [its] claim in order to precipitate the trial contemplated by 9 U.S.C. § 4." Id. Moreover, "[a]rbitration is intended to be a process for the swift resolution of disputes, and parties endeavoring to resist arbitration must alert district courts promptly and fully to whatever claims they may have in opposition to arbitration and the evidentiary basis of such claims." Id.
In Oppenheimer, the Second Circuit affirmed a district court's order compelling arbitration and held that trial was unnecessary when no evidence had been offered in support of defendants' objection to arbitration. 56 F.3d at 357-58. "If the party seeking arbitration has substantiated the entitlement by a showing of evidentiary facts, the party opposing may not rest on a denial but must submit evidentiary facts showing that there is a dispute of fact to be tried." Id. at 358.
Manning and Oppenheimer suggest that § 4 petitions to compel arbitration should be treated as motions for summary judgment. Such a procedure is also suggested by decisions from other jurisdictions which have explicitly applied summary judgment principles to § 4 petitions. See Par-Knit Mills, Inc. v. Stockbridge Fabrics Co., 636 F.2d 51, 54 n. 9 (3d Cir.1980); Matterhorn, Inc. v. NCR Corp., 727 F.2d 629, 632 (7th Cir.1984). Accordingly, DAI's petition will be treated as a motion for summary judgment on the issues that remain to be adjudicated: the franchisees' defenses of waiver and fraudulent inducement, and the demand for abstention as to Raymond and Sandra Bickel.
The franchisees argue that DAI has waived its right to arbitration by pursuing eviction lawsuits against them through alter ego leasing companies. The Second Circuit has noted that the franchisees' waiver defense requires this court to determine three issues. See Doctor's Assocs., Inc., 66 F.3d at 456-57. The first two issues do not require trial because they are not in dispute: DAI has conceded that the leasing companies were its alter egos and that the eviction proceedings were based on the cross-default provisions of the franchisees' subleases. See Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191, 1196 (7th Cir. 1987) (). The third issue — whether the franchisees suffered prejudice from the eviction actions — also does not seem to involve any material factual disputes. See, e.g., Cotton v. Slone, 4 F.3d 176, 179 (2d Cir.1993) () (citations omitted). Nevertheless, the court will not decide this issue as a matter of law until the parties have briefed it according to the schedule specified below.
The franchisees argue that the franchise agreements were fraudulently induced because: (1) DAI misrepresented that arbitration is a condition precedent to litigation of franchise disputes, and (2) DAI failed to disclose that it regularly pursues eviction lawsuits through the alter ego leasing companies without first engaging in arbitration. The franchisees have not produced sufficient evidence to avoid summary judgment on the issue of fraudulent inducement. The only evidence suggesting that the alleged misrepresentation and nondisclosure actually occurred is contained in the February 12, 1996 affidavit of the franchisees' attorney, David M. Duree. (See Duree Aff. 4.) Duree's recitation of what DAI did and did not say in discussions with the franchisees would be inadmissible at trial as hearsay. See FED. R.EVID. 802. Inadmissible evidence may not be considered in connection with a motion for summary judgment. See, e.g., Fowler v. Smith, 68 F.3d 124, 126 (5th Cir.1995). Accordingly DAI is entitled to judgment, as a matter of law, on the franchisees' defense of fraudulent inducement.
The franchisees Raymond and Sandra Bickel argue that this court should abstain from exercising jurisdiction over DAI's claims against them in light of a related decision in Illinois state court. See Bickel v. Subway Sandwich Shops, Inc., No. 94-L-1428, slip op. at 2 (Cir.Ct., 3d J.Cir., Madison County, Ill. Dec. 5, 1995). This issue does not appear to involve any material factual disputes. Nevertheless, the court will not decide this issue as a matter of law until the parties have briefed it according to the schedule specified below.
The franchisees argue that judgment as a matter of law deprives them of their right to jury trial. This claim is without merit. It is well-established that absent genuine issues of material fact, summary judgment decides only questions of law and does not deny the losing party's right to jury trial. See, e.g., Benjamin v. Traffic Executive Ass'n E. R.R., 869 F.2d 107, 115 n. 11 (2d Cir.1989).
DAI's motion to forego trial and render judgment as a matter of law (docs. 181-1, 181-2) is granted. The trial scheduled to begin on February 20, 1996 is canceled. DAI is granted judgment, as a matter of law, on the franchisees' defense of fraudulent inducement. The court will decide the remaining issues as a matter of law after the parties brief the aforementioned issues of prejudice and abstention. The franchisees shall file a memorandum of law addressing these issues on or before February 21, 1996, and DAI shall file a memorandum in response on or before February 28, 1996.
SO ORDERED.
Plaintiff Doctor's Associates, Inc. ("DAI") is the national franchisor of Subway sandwich shops, and defendants are Subway franchisees. The parties entered into standard franchise agreements, which required arbitration of all contractual disputes in Bridgeport, Connecticut. When contractual disputes did arise, the franchisees sought judgments against DAI in numerous state courts around the country.
DAI has petitioned this court to compel arbitration of the franchise disputes pursuant to section 4 of the Federal Arbitration Act, 9 U.S.C. § 4. As defenses to arbitration, the franchisees have argued that DAI fraudulently induced their agreement to arbitrate and waived its right to arbitration. These issues were remanded by the Second Circuit for determination by this court. See Doctor's Assocs., Inc. v. Distajo, 66 F.3d 438, 458 (2d Cir.1995).
After the franchisees demanded a jury trial, and trial was scheduled to begin on February 20, 1996, DAI sought to forego trial and obtain judgment as a matter of law. On February 14, 1996, DAI's motion was granted: trial was...
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