Is Your Franchise Claim Subject to Arbitration?

Back in 1925, Congress passed a law allowing for the enforceability of arbitration clause in contracts.  

A written provision in . . . a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract . . . shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.  9 U. S. C. §2.

Throughout the almost a hundred years later since enactment, the enforceability of arbitration clauses has repeatedly been upheld.  In a case argued before the United Supreme Court on October 29, 2019[i], the high court has again reinforced the bounds of arbitration.  The question at issue before the high court was:

Who decides if a dispute is subject to arbitration pursuant to a contractual arbitration clause- an arbitrator or a judge in a court of law?

The Supreme Court says, if the contract clause such, it is an arbitrator’s place to determine if a dispute is required to resolved by arbitrated.

When the parties’ contract delegates the arbitrability question to an arbitrator, the courts must respect the parties’ decision as embodied in the contract.

HENRY SCHEIN, INC., ET AL. v. ARCHER & WHITE SALES, INC. CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT No. 17–1272. Argued October 29, 2018—Decided January 8, 2019.

Here are a few quick statements regarding arbitration in general and franchising. 

  • Yes, arbitration offers a quicker resolution than litigation. On average, US District Court cases take more than twelve months longer to get to trial than cases adjudicated by arbitration (24.2 months vs. 11.6 months)[i].
  • Your right to challenge an arbitration decision is considerably more limited than in litigation. 
  • Arbitration decisions, unlike litigation, are not public; however, both must be disclosed in the Franchise Disclosure Document congruently.

[i] A New AAA Study Confirms That Arbitration Is Faster To Resolution Than Court – And The Difference Can Be Assessed Monetarily. Posted by John P. Ahlers  https://www.acslawyers.com/a-new-aaa-study-confirms-that-arbitration-is-faster-to-resolution-than-court-and-the-difference-can-bassessed-monetarily/

[i] HENRY SCHEIN, INC., ET AL. v. ARCHER & WHITE SALES, INC. CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT No. 17–1272. Argued October 29, 2018—Decided January 8, 2019

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