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First Circuit concludes that arbitrators should decide whether the parties to various arbitration agreements had “agreed to authorize” an associational dispute through arbitration

July 16, 2012 2:55 PM | Posted by Jaret J. Fuente | Print this page

In Fantastic Sams Franchise Corp. v. FSRO Assoc. Ltd., --- F.3d ----, No. 11-2300, 2012 WL 2402560 (1st Cir. June 27, 2012), the First Circuit affirmed an order of the United States District Court for the District of Massachusetts denying a franchisor’s petition, pursuant to Section 4 of the FAA, to stay an associational arbitration and compel individual arbitrations. The Court reasoned that the parties’ various arbitration agreements included the following “sweeping language” (or similar terms):

“[A]ny controversy or claim arising out of or relating in any way to this Agreement or with regard to its formation, interpretation or breach shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association”

and that the agreements were subsequently “conscious[ly] change[d]” to include the following language (or similar terms) on arbitration:

“[A]ny arbitration between FSFC and [the regional licensee] shall be of [regional licensee’s] individual claim only” and “[n]o arbitration shall be conducted on a class-wide basis.”

The First Circuit concluded that the question of whether the parties had “agreed to authorize” an associational dispute through arbitration was for the arbitrators to decide.

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