Meadows v. Dickey's Barbecue Rests. Inc., Case No. 15–cv–02139–JST
| Decision Date | 12 November 2015 |
| Docket Number | Case No. 15–cv–02139–JST |
| Citation | 144 F.Supp.3d 1069 |
| Parties | Amy Meadows, et al., Plaintiffs, v. Dickey's Barbecue Restaurants Inc., Defendant. |
| Court | U.S. District Court — Northern District of California |
Rebecca B. Morrison, Vincent J. Bartolotta, Jr., Karen Rae Frostrom, Thorsnes Bartolotta McGuire LLP, San Diego, CA, for Plaintiffs.
Jordan David Grotzinger, Greenberg Traurig, LLP, Los Angeles, CA, Michael Ross Hogue, Greenberg Traurig, LLP, San Francisco, CA, Paul Ferak, Greenberg Traurig, LLP, Chicago, IL, for Defendant.
ORDER GRANTING DEFENDANT'S MOTION TO COMPEL ARBITRATION
Before the Court is Defendant Dickey's Barbecue Restaurants, Inc.'s Motion to Compel Arbitration. ECF No. 15. For the reasons set forth below, the Court will grant the motion.
Defendant Dickey's Barbeque Restaurants, Inc. (“Dickey's”) is a Texas-based corporation that operates a chain of corporate and franchise restaurants known as Dickey's Barbeque Pits. ECF No. 10 ¶ 8. Plaintiffs Amy Meadows, Dawn Toff, Donna Schiano, Alfred Pena, Christy Bagby, James Domsic, Charyl Hart, George Jones, and GJones3 Ventures, LLC1 (“Plaintiffs”) are California residents seeking to represent a class of owners and former owners of Dickey's Barbeque Pit franchises in California. Id. ¶¶ 1-7, 20. All of the Plaintiffs purchased a Dickey's franchise after receiving Dickey's Franchise Disclosure Documents and signing a Dickey's Franchise Agreement. Id.
On July 10, 2015, Plaintiffs filed their First Amended Complaint alleging fraud, violations of California's Franchise Investment Law, and violations of California's Unfair Competition Law. See ECF No. 10 ¶¶ 22-41. Plaintiffs allege that the Franchise Disclosure Documents contained several misrepresentations relating to the cost of converting franchise locations, the use of alternate suppliers by franchisees, the extent to which Plaintiffs' franchises would be protected from encroachment by other franchises, the level of on-site support and training Dickey's would provide to franchisees, the accommodations for menu change requests, and the percentage of Plaintiffs' sales they would owe to cover Dickey's royalty and marketing fund. Id. ¶ 13. Plaintiffs also allege that Dickey's employees made additional misrepresentations outside of the Franchise Disclose Documents, including that it would be easy it would be for franchisees to obtain bank financing, that franchisees could expect to earn substantial revenue in their first year of operation, that no prior restaurant experience was necessary, and other false and misleading representations. Id. ¶ 14. Plaintiffs seek damages, restitution, disgorgement, declaratory and injunctive relief, costs, and attorneys' fees. Id. at 10-11. Plaintiffs also seek a declaration that Article 27 of the Franchise Agreement, which requires that all disputes be resolved through arbitration, is unenforceable. Id. ¶ 41.
In support of its Motion to Compel Arbitration, Dickey's attached each Plaintiff's Franchise Agreement. See ECF No. 16, Decl. of Trinity Hall (“Hall Decl.”), Exs. 4-6; ECF No. 17, Decl. of Trinity Hall (“Hall Decl.”), Exs, 7-11.2 The Franchise Agreements signed by the Plaintiffs are each approximately sixty-pages long and printed in small type. Article 27, the provision regarding dispute resolution, appears near the end of the document. There are two materially different versions of Article 27: one in the Franchise Agreements signed by Plaintiffs Dawn Toff (Exhibit 5), Donna Schiano (Exhibit 6), Alfred Pena (Exhibit 7), and James Domsic (Exhibit 10) (collectively, the “Toff Plaintiffs”); and another in the Franchise Agreements signed by Plaintiffs Amy Meadows (Exhibit 4), Christine Bagby (Exhibits 8 and 9), and George Jones (Exhibit 11) (collectively, the “Meadows Plaintiffs”). See id.
Id. If mediation fails, the parties must submit to binding arbitration at the AAA office nearest Plano, Collins County, Texas on an individual basis. Id. The arbitration provision also requires that the “proceedings be conducted in accordance with the then current arbitration rules of the area.” Id.
Id. (emphasis added). Non-binding mediation must first be conducted by a mutually agreed upon mediator or by AAA at Dickey's corporate headquarters in Dallas, Texas. Id. If mediation fails, the parties must then submit to binding arbitration at the AAA office in Dallas, Texas. Id. The arbitration provision provides that the proceeding “shall be conducted in accordance with the then current commercial arbitration rules of the aura [sic].” Id.
Both sets of Franchise Agreements also include terms permitting Dickey's—but not its franchisees—to bring certain claims in court without participating in mediation or arbitration, as well as a Texas choice-of-law provision, and a venue clause. See id. at 51-52; Hall Decl., Ex. 5 at 51.
On July 17, 2015, Dickey's filed its motion to compel arbitration of each Plaintiff's claims on an individual basis, stay further judicial proceedings pending completion of arbitration, and strike Plaintiffs' class allegations. ECF No. 19. Dickey's argues that each of the claims in Plaintiffs' First Amended Complaint must be resolved through arbitration and on an individual basis. Plaintiffs oppose the motion, arguing that the arbitration provision in the Franchise Agreement is unconscionable and unenforceable. ECF No. 24. Plaintiffs challenge the arbitration provision as a whole. Id. ¶ 41. In reply, Dickey's contends that this Court is without jurisdiction to consider Plaintiffs' unconscionability argument because Plaintiffs are required to arbitrate whether the arbitration provision itself is enforceable. ECF No. 26.
After the hearing on the motion to compel arbitration, the Court directed the parties to provide supplemental briefing regarding whether the parties' choice-of-law provision is valid and whether the arbitration clause is unenforceable under Texas law. See ECF No. 32. The parties submitted supplemental briefs addressing these questions. See ECF Nos. 33, 34.
The Court has jurisdiction over this action under 28 U.S.C. § 1332(d)(2).
The Federal Arbitration Act (“FAA”) applies to arbitration agreements in any contract affecting interstate commerce. See Circuit City Stores, Inc. v. Adams , 532 U.S. 105, 119, 121 S.Ct. 1302, 149 L.Ed.2d 234 (2001) ; 9 U.S.C. § 2. Under the FAA, arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds that exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. This provision reflects “both a liberal federal policy favoring arbitration, and the fundamental principle that arbitration is a matter of contract.” AT&T Mobility LLC v. Concepcion , 563 U.S. 333, 131 S.Ct. 1740, 1745, 179 L.Ed.2d 742 (2011) (internal citations omitted).
On a motion to compel arbitration, the court's role under the FAA is “limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc. , 207 F.3d 1126, 1130 (9th Cir.2000). If the court is “satisfied that the making of the agreement for arbitration or the failure to comply therewith is not in issue, the court shall make an order directing the parties to proceed to arbitration in accordance with the terms of the agreement.” 9 U.S.C. § 4. Where the claims alleged in a complaint are subject to arbitration, the Court may stay the action pending arbitration. Id. § 3.
The first question the Court must resolve is who decides the question of arbitrability—this Court or an arbitrator? The answer to this question depends in part on the language of the parties' agreements.
“[P]arties can agree to arbitrate ‘gateway’ questions of ‘arbitrability,’ such as whether the parties have agreed to arbitrate or whether their agreement covers a particular controversy.” Rent–A–Ctr., West, Inc. v. Jackson , 561 U.S. at 63, 68–69, 130 S.Ct. 2772 (2010). “Just as the arbitrability of the merits of a dispute depends upon whether the parties agreed to arbitrate that dispute, so the question ‘who has the primary power to decide arbitrability’ turns upon what the parties agreed about that matter.” First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 943, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995) (emphasis in original) (internal citations omitted). Whether the court or the arbitrator decides arbitrability is “an issue for judicial determination unless the parties clearly and unmistakably provide otherwise.”
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