"Does and "Will" are not equal, or Arbitration clauses are tricky things: Federal court in Connecticut rules against franchisor, allows Colorado lawsuit to proceed in court

Blog Post

In what appears at first blush to be a ruling contravening the general law mandating arbitration in Doctors Associates, Inc.  v. Alemayehu, the Honorable Janet Hall of The United States District Court, District of Connecticut, after detailed analysis found a long-used franchise application lacked mutuality and therefore could not be enforced by the prospective franchisor.

Alemayehu, a Colorado resident,  completed a franchise application for a store to be located in Colorado. The application was signed by Alemayehu and mandated that he arbitrate any disputes in the franchisor’s “home” state of Connecticut. The franchisor neither [counter]signed the application nor even agreed to review it.

When Alemayehu heard nothing about his application, he brought a lawsuit in Colorado alleging discrimination.  The franchisor moved the suit to Connecticut and then sought to compel arbitration there.

In a detailed analysis of the facts and law, Judge Hall ruled while Alemayehu made enforceable promises and agreements to the franchisor, the franchisor promised nothing in return. In part the ruling was based upon the franchisor’s assertion that while it does review applications, it will  not review and consider all applications.  The Court found the lack of an obligation to actually review  and consider the franchise application meant the franchisor gave nothing to Alemayehu in exchange for his promise to arbitrate.  As such the Court refused to compel arbitration.

While the Alemayehu case once again demonstrates the importance of careful drafting, it also demonstrates that in litigation there are no sure outcomes.

Related Services

Jump to Page

McDonald Hopkins uses cookies on our website to enhance user experience and analyze website traffic. Third parties may also use cookies in connection with our website for social media, advertising and analytics and other purposes. By continuing to browse our website, you agree to our use of cookies as detailed in our updated Privacy Policy and our Terms of Use.