Please ensure Javascript is enabled for purposes of website accessibility

Contract — Franchisor Can Compel Arbitration

Deborah Elkins//August 13, 2015

Contract — Franchisor Can Compel Arbitration

Deborah Elkins//August 13, 2015

Chorley Enterprises Inc. v. Dickey’s Barbecue Restaurants Inc. (Lawyers Weekly No. 15-01-0795, 39 pp.) (Floyd, J.) No. 14-1799, Aug. 5, 2015; USDC at Baltimore, Greenbelt, Md. (Grimm, J.) 4th Cir.

Holding: Two owners of Dickey’s barbecue restaurant franchises may try in court their claims that Dickey’s violated Maryland franchise law by misrepresenting start-up and other costs, but the parties’ franchise agreements allow Dickey’s to compel arbitration of their claims that the franchisees breached the agreement by running their franchises poorly; the 4th Circuit reverses the district court decision requiring trial of all claims in the matter.

We first determine that we have jurisdiction over the franchisor’s appeal, even though the order denying the motion to compel arbitration was not final. The district court expressly “denied” the motions to compel “without prejudice.” As we have previously held, and we reiterate again today, that is all that is necessary to grant us appellate jurisdiction in this case.

This dispute is governed by the parties’ franchise agreements. On one hand, the agreements require arbitration of all claims “arising out of or relating to” the agreements. On the other hand, the agreements state that the agreements “shall not require” the franchisees to waive their “right to file a lawsuit alleging a cause of action arising under Maryland Franchise Law in any court of competent jurisdiction in the State of Maryland.”

The district court held that these provisions create an ambiguity that only a jury can resolve. In doing so, the district court appeared to conclude that the agreements set up an either/or scenario: either all the parties’ claims must go forward in arbitration, or they must all proceed in federal court.

As a matter of law, the clear and unambiguous language of these provisions requires that the common law claims asserted by Dickey’s must proceed in arbitration, while the franchisees’ Maryland Franchise Law claims must proceed in the Maryland district court.

We recognize that requiring the parties to litigate in two different forums may be inefficient and could lead to conflicting results. But this outcome is mandated by the Federal Arbitration Act, which requires piecemeal litigation where, as here, the agreements call for arbitration of some claims, but not others.

We reverse with instructions to compel arbitration of the common law claims only. We leave it to the district court’s discretion whether to stay the franchisees’ Maryland Franchise Law claims pending conclusion of the arbitration.

Vacated and remanded.

Top Legal News

See All Top Legal News


See All Commentary