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Arbitrate, Mediate, Litigate, We All Fall Down

The rules on arbitration in agreements are getting tighter, as the franchisees of Mail Boxes, Etc. just found out.  MBE's franchise agreements with various groups of franchisees had three types of alternative dispute resolution provisions in them:  arbitration with the American Arbitration Association, arbitration with the Judicial Arbitration and Mediation Service and just plain, old everyday vanilla mediation.  When MBE tried to change the format of its stores to The UPS Store, the franchisees objected and sued.

In response, MBE invoked the three types of ADR provisions and sought to respond to each store individually in arbitration/mediation, not litigation.  The franchisees responded with a consolidation motion, which the trial court denied, but instead granted MBE's motion to compel arbitration under the three separate provisions.  They appealed.

Now the appellate court has ordered the trial court to consolidate the arbitrations and resolve the differences between the AAA and JAMS arbitration provisions so they all can proceed together as one happy family.  Alright, not so happy a family.  But proceed to arbitration they will, not to litigation in court.  There's another fix ordered, too. 

The JAMS provision prohibits classwide arbitration.  That issued turned out to be a simple one for the appellate court since the California Supreme Court recently ruled that such bans are unconscionable.  The franchisees will all end up participating in one arbitration, but apparently the ones who agreed to mediation will be mediating.

What's the lesson here?  If you're a franchisor, look at your agreements and make sure they comply with these rulings.  If you're a franchisee or a potential franchisee, read the franchise agreement before you sign it and understand what you're getting into.  You could end up somewhere other than where you want to be. 

Now about shipping that package...

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Printer friendly page Permalink Email to a friend Posted by J. Craig Williams on Friday, October 14, 2005 at 12:12 Comments Closed (0) |
 
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