Franchisees seeking to recover on claims of fraud often seek to circumvent the arbitration clause contained in the franchise agreement. The arbitration clause is drafted to prevent trial by jury, runaway juries and limited discovery that might delay or expand the scope of the dispute. One method of avoiding the arbitration clause is bringing suit against the individuals rather than against their employer or principal. Courts will often look beyond the four corners of the pleading in order to consider a petition to enforce the arbitration clause, but the court needs the full view of the dispute to decide whether the matter should be arbitrated.
In Doctor’s Associates v. Burr (D. Conn., Dec. 28, 2016), the Subway franchisor petitioned to compel arbitration of claims asserted in California state court by Brian Burr and Bryn Burr, unsuccessful franchisee applicants for a casino location. The Burrs claimed that the development agents eventually awarded the franchise interfered with their appointment as a franchisee. The underlying story is not an uncommon fact pattern.
