Binder v. Medicine Shoppe International, Inc.
(E.D.Mich. July 20, 2010)
In a dispute between a franchisor and the franchisee, the franchisee sought to arbitrate. The relevant agreement between the parties was entered into in Michigan and provided that the parties would arbitrate any disputes in Missouri. In a separate document, Michigan's law prohibiting out of state arbitrations was set forth.
The franchisee sought to arbitrate in Missouri. The individual shareholders of the franchisor, participated as representatives of the franchisor, but not insisted they did not appear in their personal capacities. Ultimately, the franchisor and the shareholders filed a suit in Michiganstate court. The franchisee removed the suit to federal court, and sought to compel arbitration. The franchisors opposed the petition to compel arbitration on the basis thatMichigan law prohibited arbitration; and that they reasonably relied on the document provided by the franchisee setting forth the Michiganlaw. The franchisee argued that at worst, the franchisors were aware they would have to arbitrate, but believed that it would be in Michigan.
Holding that the arbitration agreement was enforceable because the Michiganstatute was trumped by the FAA and Supremacy Clause, the court also held that the franchisors reasonably relied on the document setting forth the Michiganstatute. At the same time, noting that the franchisors were savvy businesspeople, the court held that the franchisors should have anticipated that they would be called upon to arbitrate, but in Michigan.
The court also found that the individual officers and shareholders were bound by the arbitration agreement because they personally assumed the liabilities of the company and derived significant personal benefit from the arbitration agreement.
For a copy of the decision click here
Sarah Delaney and Sharon Angelino
https://www.goldbergsegalla.com/attorneys/Delaney.html
https://www.goldbergsegalla.com/attorneys/Angelino.html
Case provided courtesy of Lexis