Summary
enforcing an arbitration agreement even when in-factum fraud appeared to taint another part of the contract at issue.
Summary of this case from Eidson v. Albertville Auto Acquisitions, Inc.Opinion
Nos. 00-D-361-S, 00-D-521-S
November 30, 2000
MEMORANDUM OPINION AND ORDER
Before the court is Defendants Snap-on Tools Company and Snap-on Credit LLC's (collectively "Snap-on" or "Defendants") Petition To Compel Arbitration, filed April 24, 2000, in Civil Action No. 00-D-521-S. Also before the court is Defendants' Motion To Stay These Proceedings Pending Arbitration ("Mot."), together with a Memorandum In Support ("Defs.' Br."), both filed April 24, 2000, in Civil Action 00-D-361-S.
On May 16, 2000. plaintiff Christopher Goulart ("Plaintiff") filed a Brief In Opposition To Motion To Stay. The court construes Plaintiff's Brief as a Response ("Resp."). Defendants filed a Reply on May 18, 2000. After careful consideration of the arguments of the Parties, the relevant law and the record as a whole, the court finds that Defendants' Petition To Compel Arbitration is due to be granted and that Defendants' Motion To Stay These Proceedings Pending Arbitration also is due to be granted.
I. FACTS
The issue before the court is whether the Federal Arbitration Act, 9 U.S.C. § 901, et seq., warrants compelled arbitration and a stay of this action. In October 1994, Plaintiff began negotiations with Snap-on about purchasing a franchise for the distribution of Snap-on tools and equipment. (Compl. ¶ 10-11; Defs.' Br., Ex. B at 1.) The negotiations were consummated on or about November 9, 1994, when Plaintiff and Snap-on entered into a Snap-on Tools Dealer Franchise Agreement ("Franchise Agreement"). (Defs.' Br., Ex. B.)
Defendants' Exhibit B is the Franchise Agreement.
The Franchise Agreement contains an arbitration provision that states, in relevant part, as follows:
[A]ny controversy or dispute arising out of, or relating to the Dealership or this Agreement including, but not limited to, any claim by Dealer, or any person in privity with or claiming through, on behalf of or in the right of Dealer, concerning the entry into, performance under nonrenewal, or termination of this Agreement; and claim against a past or present employee, officer, director or agent of Snap-on; any claim or breach of this Agreement; and any claims arising under state or federal laws, shall be submitted to final and binding arbitration as the sole and exclusive remedy for any such controversy or dispute.
. . .
The right and duty of the parties to this Agreement to resolve any dispute by arbitration shall be governed exclusively by the Federal Arbitration Act, as amended, and arbitration shall take place according to the commercial arbitration rules of the American Arbitration Association in effect as of the date the demand for arbitration is filed.
. . .
Each party further agrees that, unless such a limitation is prohibited by applicable law, the other party shall not be liable for punitive or exemplary damages and the arbitrators shall have no authority to award the same.
(Defs.' Br., Ex. B, at 18, ¶ 25.)
Further, Snap-on agreed to finance certain costs associated with Plaintiff's dealership and to provide working capital for the dealership. The amount and terms of the financing agreement are contained in a Loan And Security Agreement ("Security Agreement"). (Defs.' Br., Ex. C.) This Agreement also contains an arbitration provision, which is substantially similar to the one in the Franchise Agreement. The arbitration provision in the Security Agreement reads as follows:
Defendants' Exhibit C is the Security Agreement.
a. Arbitration. Except as otherwise provided below, any controversy or dispute arising out of or relating to the Borrower's Dealership or this Agreement, the Note and any other document or agreement delivered in connection with the Loan, including but not limited to any claim by Dealer, or any person in privity with or claiming through, on behalf of or in the right of Dealer concerning the entry into, performance under, or termination of this Agreement; any claim against a past or present employee, officer, director or agent of Lender; any claim of breach of this Agreement; and any claims arising under state or federal laws, shall be submitted to final and binding arbitration as the sole and exclusive remedy for any such controversy or dispute.
. . .
The right and duty of the parties to this Agreement to resolve any dispute by arbitration shall be governed exclusively by the Federal Arbitration Act, as amended, and arbitration shall take place according to the commercial arbitration rules of the American Arbitration Association in effect as of the date the demand for arbitration is filed. . . .
(Defs.' Br., Ex. C, at 5.)
Plaintiff admits that he signed a Security Agreement on November 9, 1994. (Compl. ¶ 25.) However, Plaintiff contends that, after he signed the Security Agreement, Snap-on changed the signing date from November 9, 1994, to December 6, 1994, and altered two terms in the agreement. (Compl. ¶ 5, 13-14, 27, 29; Resp. at 4; Pl.'s Aff. at 1-2.) First, Plaintiff asserts that Snap-on increased the amount owing under the loan from $81,525.00 to $84,105.00. (Resp. at 4; Compl. ¶ 5, 27; Pl.'s Aff. at 2.) Second, Plaintiff states that the inventory used to secure the loan, which was listed in the Security Agreement he signed included only "used and discontinued tools." (Compl. ¶ 26-28.) However, in the altered Security Agreement, the inventory described new tools, which plaintiff never received. (Id. ¶ 28, 37; Pl.'s Aff. at 2.) According to Plaintiff, "[t]he material alterations of the agreement subjected the plaintiff to terms and conditions he did not agree to, altered the very essence of the agreement between the parties and constituted the foundation of predatory trade practices employed by the defendants toward the plaintiff." (Compl. ¶ 15.)
As a result, Plaintiff filed this action against Defendants on March 24, 2000. Plaintiff's Complaint alleges five counts. In Count 1, Plaintiff asks the court to enter a declaratory judgment voiding the arbitration clauses in the Franchise Agreement and the Security Agreement. (Id. ¶ 18-24.) In Counts 2-5, Plaintiff alleges state law claims for forgery (Count 2), fraudulent misrepresentation (Counts 3 and 4), and interference with contractual relations (Count 5). (Id. ¶ 25-52.) Plaintiff's forgery count (Count 2) pertains to the alterations of the Security Agreement allegedly made by Defendants after Plaintiff executed the Security Agreement on November 9, 1994. (Id. ¶ 25-32.) Counts 3 and 4 involve Defendants' alleged fraudulent misrepresentations about the value and description of the inventory and about training programs Defendants promised to provide Plaintiff but which Plaintiff never received. (Id. ¶ 33-42.) The basis of Plaintiff's claim in Count 5 is that, after Plaintiff entered into contracts with customers, Snap-on would contact those customers and "persuade [ ] [them] not to honor" the contracts. (Id. ¶ 47-49.) As relief for the claims set forth in Counts 2-5, Plaintiff asks for compensatory and punitive damages. (Id. at 8, 10, 11, 13.) Plaintiff also demands a trial by jury. (Id. at 13.)
In response to Plaintiff's Complaint, Snap-on filed a separate action (i.e., Civil A. No. 00-D-521-S) on April 24, 2000. In that action, Snap-on brings a Petition pursuant to 9 U.S.C. § 4, seeking an order compelling arbitration, citing the arbitration clauses in the Franchise Agreement and Security Agreement. Additionally, Snap-on, by Motion filed April 24, 2000 in Civil A. No. 00-D-361-S, asks the court for an Order pursuant to 9 U.S.C. § 3, staying all proceedings pending arbitration. In an Order entered on May 12, 2000, and pursuant to Rule 42 (a) of the Federal Rules of Civil Procedure, the court consolidated Civil Actions Nos. 00-D-361-S and 00-D-521-S.
II. DISCUSSION A. The Federal Arbitration Act
The FAA establishes "`a federal policy favoring arbitration,'"Shearson/American Express. Inc. v. McMahon, 482 U.S. 220. 226 (1987) (quoting Moses H. Cone Mem'l Hosp. v. Mercury Constr. Core., 460 U.S. 1, 24 (1983)), and mandates that courts "rigorously enforce agreements to arbitrate." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985). Congress enacted the FAA to overcome state courts' "ancient hostility" to arbitration and refusal to enforce arbitration agreements.Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 270 (1995)
Section 2 of the FAA declares that written agreements to arbitrate are enforceable when contained in a contract involving interstate commerce. 9 U.S.C. § 2. Pursuant to 9 U.S.C. § 4, "[a] party aggrieved by the alleged failure, neglect, or refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court which, save for such agreement, would have jurisdiction . . . in a civil action . . . for an order directing that such arbitration proceed in the manner provided for in such agreement." Id. § 4. If a court determines that arbitration is appropriate, then the court shall "stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement [.]" Id. § 3.
B. Analysis
The Parties do not dispute that the Franchise Agreement and the Security Agreement constitute transactions involving commerce within the meaning of 9 U.S.C. § 2. (Resp. at 2.) Plaintiff, however, raises three primary grounds in support of his assertion that he has no obligation to arbitrate the claims raised in his Complaint. First, plaintiff asserts that the FAA does not apply to him because he fits within the "employee" exception contained in 9 U.S.C. § 1. (Resp. at 2-3.) Second, Plaintiff contends that his claims are outside the scope of the arbitration clause contained in the Franchise Agreement. (Id. at 3-4.) Third, Plaintiff argues that the arbitration clauses in both the Franchise Agreement and the Security Agreement are "invalid." (Id. at 4-7.) The court will address each argument in turn.
1. 9 U.S.C. § 1
Plaintiff contends that the FAA'S enforcement provisions are not applicable to him because he falls within the FAA's "employee" exemption. (Resp. at 2-3); see 9 U.S.C. § 1. In response, Defendants make two arguments. First, they contend that Plaintiff is an independent contractor, not an employee of Snap-on. (Reply at 2-4.) Second, even assuming arguendo that Plaintiff is an employee, Defendants contend that he does not satisfy the definition of a § 1 "employee." (Id.) For the reasons to follow, the court agrees with Defendants' second contention. Specifically, the court finds that it need not reach the issue of whether plaintiff was an "employee" of Snap-on or an independent contractor. Even assuming without deciding that Plaintiff was a Snap-on employee, an assumption-which appears somewhat dubious, the court finds that Plaintiff does not fit within the narrow § 1 exception.
The court notes that the Franchise Agreement describes Plaintiff's relationship with Snap-on as that of an independent contractor. (Defs.' Br., Ex. B, ¶ 14.) Further, in his Complaint, Plaintiff states that, pursuant to the Franchise Agreement, Plaintiff "was to be an independent contractor with Snap-on." (Compl. ¶ 25.)
Section 1 of the FAA provides, in pertinent part, that "nothing herein [in the FAA] shall apply to contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." 9 U.S.C. § 1. In Paladino v. Avnet Computer Tech., Inc., the Eleventh Circuit joined the majority of the circuits which have held that courts must narrowly construe § 1 of the FAA to exclude "only employees actually engaged in transportation of goods in commerce." 134 F.3d 1054, 1060-61 (11th Cir. 1998). This means that an individual claiming the exclusion must actually transport goods "in the same way" that seaman and railroad workers move goods. Asplundh Tree Expert Co. v. Bates, 71 F.3d 592, 601 (6th Cir. 1995). As explained in Bates, "[t]he meaning of the phrase `workers engaged in foreign or interstate commerce' is illustrated by the context in which it is used, particularly the two specific examples given, seamen and railroad employees, those being two classes of employees engaged in the movement of goods in commerce." Id. (quoting 9 U.S.C. § 1). For example, in Wright v. Circuit City Stores, Inc., the plaintiffs worked for Circuit City in the positions of sales counselor and cashier. 82 F. Supp.2d 1279, 1280 (N.D. Ala. 2000). The court rejected the plaintiffs' argument that ordering and receiving merchandise from out-of-state stores placed them within § 1's "employee" definition. Id. at 1283. The Wright court stated that "neither Plaintiff falls within the exclusion because neither was directly involved in the actual transportation of goods in interstate commerce."Id.
Here, there are neither allegations in Plaintiff's Complaint, evidence, nor contentions in his Response suggesting that owning a Snap-on franchise required Plaintiff himself to physically transport tools and equipment across state lines. Likewise, there is no such job description in the Franchise Agreement or any indication that direct movement by Plaintiff of Snap-on goods is a condition or even a component of owning a Snap-on franchise. Because Plaintiff is not involved in the direct transportation of goods in interstate commerce, the court finds that Plaintiff is not excluded from the provisions of the FAA under the § 1 "employee" exemption.
2. The Scope of the Arbitration Clause in the Franchise Agreement
Plaintiff argues that the scope of the arbitration clause in the Franchise Agreement is limited solely to disputes "concerning the entry into, performance under [non]renewal, or termination of" the Agreement. (Resp. at 3, quoting Franchise Agreement.) Plaintiff describes his claims in the Complaint as "relat[ing] to wrongful activities occurring after [he] entered into agreements signed November 9, 1994." (Id. at 4.) According to Plaintiff, his claims do not "`concern'" or "relate in any way to performance under the contract." (Id.) Thus, Plaintiff avers that he "never agreed to arbitrate the activities referred to in the [C]omplaint." (Id.)
The court disagrees with Plaintiff. Plaintiff's reading of the arbitration provision in the Franchise Agreement ignores key words. The arbitration provision provides that " [a]ny dispute arising out of or relating to the Dealership or this Agreement" must be arbitrated, " including but not limited to, any claim by Dealer . . . concerning the entry into, performance under nonrenewal, or termination of, this Agreement[.]" (Defs.' Br., Ex. B at 18, ¶ 25.) The bolded language makes clear that "entry into, performance under nonrenewal, or termination of, this Agreement" are provided as examples of arbitrable claims, and do not limit the scope of the agreement. Accordingly, the court rejects Plaintiff's argument as frivolous.
Further, the court concludes that all Plaintiff's claims in his Complaint are covered under the arbitration clause in the Franchise Agreement and, thus, are within the scope of the arbitration agreement. The court's findings in this regard are set forth in the next section.
3. The Validity of the Arbitration Clauses in the Franchise Agreement and the Security Agreement
Plaintiff asserts that the court should invalidate the arbitration clauses in both the Franchise Agreement and the Security Agreement. The court will separately address Plaintiff's arguments, first, as they pertain to the Security Agreement and, second, as they relate to the Franchise Agreement.(a) Security Agreement
Plaintiff contends that Defendants changed material terms in the Security Agreement after he signed it on November 9, 1994. (Resp. at 4; Compl. ¶ 5, 13-14, 26-29, 37.) Based on these alterations, Plaintiff argues that the whole Agreement is void, and, therefore, the arbitration clause therein cannot be enforced. (Resp. at 4-5.) Plaintiff avers that, because there is not a valid Security Agreement, the arbitration clause therein cannot be enforced. (Id.) Based on these allegations and his reliance on Cancanon v. Smith Barney, Harris Upham Co., 805 F.2d 998, 1000-01 (11th Cir. 1986), discussed below, the court finds that Plaintiff is attempting to allege a fraud in the factum claim. In countering Plaintiff's assertions, Defendants argue that Plaintiff's claims are in the nature of fraud in the inducement of the Security Agreement as a whole and do not go to the making of the agreement to arbitrate. Further, Defendants assert that any question regarding the fraudulent inducement of the Security Agreement is a question for the arbitrator, not the trial court, relying primarily on Prima Paint Corp. v. Flood Conklin Mfg. Co., 388 U.S. 395 (1967). (Reply at 7.)
In determining whether the court or the arbitrator should decide the threshold issue of whether a party agreed to arbitrate disputes, the Eleventh Circuit distinguishes between claims of fraud in the factum and fraud in the inducement of the contract as a whole. When a plaintiff asserts that he or she was fraudulently induced to sign a contract, which contains among its terms an arbitration clause, the plaintiff seeking to avoid arbitration must put forth allegations "that the arbitration clause itself, standing apart from the whole agreement, was induced by fraud."Coleman v. Prudential Bache Sec., Inc., 802 F.2d 1350, 1352 (11th Cir. 1986) (citing Prima Paint Corp., 388 U.S. at 403-04). Thus, underColeman and Prima Paint Core., general claims for fraud in the inducement of an agreement, as compared to specific claims of fraud in the inducement of the arbitration clause, must be resolved by the arbitrator, not the district court. Defendants assert that Plaintiff's allegations constitute the former type of fraud in the inducement.
In Prima Paint Corp., the Supreme Court of the United States held that, "if the claim is fraud in the inducement of the arbitration clause itself — an issue which goes to the `making' of the agreement to arbitrate — the federal court may proceed to adjudicate it. But the statutory language does not permit the federal court to consider claims of fraud in the inducement of the contract generally." 388 U.S. at 403-04 (internal footnote omitted).
On the other hand, when a plaintiff substantiates a claim of fraud in the factum, the court, not the arbitrator, must decide the threshold issue of whether an agreement to arbitrate exists. In Cancanon, the Eleventh Circuit distinguished fraud in the inducement from fraud in factum, holding that "where the allegation is one of fraud in factum, i.e., ineffective assent to the contract, the issue is not subject to resolution pursuant to an arbitration clause contained in the contract." 805 F.2d at 1000; see also Harold Allen's Mobile Home Factory Outlet v. Early, 2000 WL 869579, *8 n. 6 (Ala. 2000) (distinguishing between fraud in the factum and fraud in the inducement). In Cancanon, the plaintiffs, who could not speak English, alleged that the defendant falsely told them that the signed documents at issue, all of which were in English, merely opened money market accounts when, in fact, the documents opened accounts that were designed to allow the trading of securities. Id. at 999. 1001. The plaintiffs, however, asserted "that they never intended to enter into a securities account agreement and were duped by" one of the defendant's employees. Id. at 1000-01. The Eleventh Circuit concluded that these allegations effectively alleged and substantiated a fraud in the factum claim. Thus, the Eleventh Circuit held that the district court, not the arbitrator, must decide after trial whether "the plaintiffs gave effective assent to" the agreement at issue. Id. at 1001; see also Oakwood Mobile Homes, Inc. v. Berger, 2000 WL 73596 (Ala. 2000) ("Fraud in the factum constitutes ineffective assent to the contract.") (citingCancanon, 805 F.2d at 998).
Plaintiff's allegation that Defendants altered material terms of the Security Agreement after Plaintiff signed it appears to constitute a fraud in the factum claim, not a fraud in the inducement claim. "[C]oncealment of critical portions of documents [is a] species of fraud in the factum." Life Ins. Co. of Georgia v. Smith, 719 So.2d 797, 809 (Ala. 1998). It seems to the court that changing terms in a contract after its execution is one method by which a party can conceal facts. Here, Plaintiff, in essence, is asserting that he could not have understood the basic nature of the Security Agreement because Defendants concealed from him material terms by altering the Security Agreement after he had signed it. Because Plaintiff was never presented with the altered terms, it would have been impossible for him to know of these terms and to agree to these terms.
However, the court need not decide whether Plaintiff's fraud allegation constitutes fraud in the factum or fraud in the inducement. Even if the arbitration provision in the Security Agreement is unenforceable, the court finds that the court the arbitration provision in the Franchise Agreement is comprehensive enough to include all of Plaintiff's disputes. Courts have characterized similar arbitration provisions "as extremely broad and capable of an expansive reach." Keifer Specialty Floring, Inc. v. Tarkett. Inc., 174 F.3d 907, 909 (7th Cir. 1999); see also Oldroyd v. Elmira Savings Bank, FSB, 134 F.3d 72, 76 (2d Cir. 1998) (holding that an arbitration clause providing that "[a]ny dispute, controversy or claim arising under or in connection with [Oldroyd's employment agreement]" constitutes "the prototypical broad arbitration provision."). Such broad arbitration clauses create a presumption of arbitrability. See Keifer Specialty Floring, Inc., 174 F.3d at 909. The court finds for the following reasons that there is nothing in the record to rebut the presumption of arbitrability.
There is no dispute that Plaintiff entered into a Franchise Agreement with Snap-on and that the Franchise Agreement contained an arbitration clause. It is by no means a stretch to conclude that Plaintiff's claims in Counts 2 and 3 concerning Snap-on's alleged fraudulent representations regarding inventory and training and Plaintiffs' claim in Count 5 that Snap-on tortiously interfered with contracts between Plaintiff and his customers "arise from or relates to" Plaintiff's Snap-on Dealership and the Franchise Agreement between Plaintiff and Snap-on. Moreover, under the broad arbitration clause, the court finds that even Plaintiff's claim in Count 2 regarding the alleged alteration of the terms in the Security Agreement is covered under the arbitration clause in the Franchise Agreement. The Franchise Agreement's arbitration clause covers not only disputes relating to the Franchise Agreement, but also "any controversy or dispute arising out of, or relating to the Dealership." (Defs.' Br., Ex. B at 18, ¶ 25.) An integral component of Plaintiff's acquisition of the Snap-on dealership was the financing Plaintiff received from Snap-on to purchase the franchise. (Compl. ¶ 10-12.) Had Snap-On not loaned Plaintiff the money Plaintiff would not have obtained the franchise. Plaintiff states that the loan from Snap-on "fund[ed]" the Franchise Agreement and that, in exchange for Snap-on funding the Franchise Agreement, Plaintiff agreed to buy the franchise. (Id. ¶ 11, 12.) Based on these facts, the court finds that the loan which provided the basis for the Security Agreement was integrally related to not only the Franchise Agreement, but also the Dealership as a whole. As such the court finds that all of Plaintiff's disputes are within the scope of the arbitration clause in the Franchise Agreement.
Further, the court finds that a narrower reading of the scope of the arbitration provision in the Franchise Agreement would run afoul of the intent of the FAA and the manner in which courts should interpret arbitration agreements. There is a strong federal policy favoring arbitration as an alternative means of dispute resolution. "The strong federal policy favoring the enforceability of arbitration contracts is designed to place arbitration agreements on the same footing as any other contract." Koullas v. Ramsey, 683 So.2d 415, 416-17 (Ala. 1996) (citingAllied-Bruce Terminix Cos., 513 U.S. at 265). "[A]ny doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration. . . ." Moses H. Cone Mem'l Hosp., 460 U.S. at 24-25. Under this presumption of arbitrability, the court should not deny arbitration unless "it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute." AT T Tech., Inc. v. Communications Workers of Am., Inc., 475 U.S. 643, 650 (1986). For all of the foregoing reasons, the court cannot say with positive assurance that Plaintiff's claims are not covered under the arbitration clause in the Franchise Agreement.
(b) Franchise Agreement
Plaintiff, however, argues that the arbitration clause in the Franchise Agreement is unenforceable for two reasons. First, Plaintiff asserts that the Franchise Agreement "lacks consideration." (Resp. at 6) Plaintiff contends that the terms of the Security Agreement constituted the "necessary consideration" for the Franchise Agreement. (Id.) According to Plaintiff, the Security Agreement is invalid in its entirety, and, therefore, there exists no consideration for the Franchise Agreement. In response, Defendants argue that the "mutual promise" between Plaintiff and Defendants "to be bound by arbitration is sufficient consideration for arbitration." (Defs.' Br. at 8.) The court agrees with Defendants for the following reasons.
In determining whether an agreement to arbitrate exists, the court looks to state contract law, "with due regard for the federal policy favoring arbitration." Roberson v. The Money Tree of Alabama, 954 F. Supp. 1519, 1528 (M.D. Ala. 1997) (citing Volt Info. Sciences v. Board of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 475-76 (1989), and Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52 (1995)). Thus, the court turns to Alabama contract law. "It is a basic principle of Alabama contract law that in order for a promise to be enforceable against the promisor, the promisee must have given some consideration for the promise." Wright, 82 F. Supp.2d at 1283 (citingConsolidated Portrait Frame Co. v. Barnett, 51 So. 936 (1910)). "So long as there is a valuable consideration moving from one side to the other, or there are binding promises on the part of each party to the other, there is adequate consideration for a valid contract." Marcrum v. Embry, 282 So.2d 49 (1973).
For example, in Wright, cited by Defendants (Defs.' Br. at 8), the court found that adequate consideration existed for the arbitration provision because both the employer and the employee agreed to bound by the arbitration process. 82 F. Supp.2d at 1284. The agreement to be bound, in and of itself, was sufficient consideration even though the employer was not obligated to submit its disputes to arbitration: The employer's "promise to be bound by the arbitration process and results of employee disputes that are initiated by employees is sufficient consideration. . . ." Id. Other courts have reached the same conclusion as did the Eleventh Circuit in Wright. See Michalski v. Circuit City Stores. Inc., 177 F.3d 634, 636-37 (7th Cir. 1999) (recognizing that a "promise [by the employer] to be bound by the arbitration process itself serves as mutual consideration here"); see also Johnson v. Circuit City, 148 F.3d 373, 378 (4th Cir. 1998) (holding that the employer's promise to be bound by the arbitration process and the results of the arbitrator concerning the employee's disputes was adequate consideration and rejecting the notion that the employer must also agree to submit its claims against the employee to arbitration); see also Quin v. EMC Corp., 109 F. Supp.2d 681, 685 (S.D. Tex. 2000) ("find[ing] that by acceding to binding arbitration . . ., Defendant has satisfied the consideration requirement.").
Here, the court finds that the agreement to arbitrate does not fail for lack of consideration because bilateral binding promises exist between Plaintiff and Defendants. Namely, the arbitration clause itself contains its own consideration, that is, the mutual agreements of the Parties to arbitrate and to be bound by the arbitration process. As in the foregoing cases, both Plaintiff and Snap-on agree to be bound by the arbitration provision. (See Defs.' Br., Ex. B, Franchise Agreement, stating that arbitration is "binding" as to "any controversy or dispute arising out of, or relating to the Dealership or this Agreement[.]"). Not only are both Parties bound by the process, but also both Snap-on and Plaintiff must submit all claims to arbitration. In other words, there is no language in the arbitration provision, as in Wright, requiring only Plaintiff to submit claims to arbitration. Thus, additional consideration exists in this case that was not present in Wright. Accordingly, for the foregoing reasons, the court finds that adequate consideration exists for the arbitration agreement.
Second, Plaintiff asserts that Defendants "fraudulently induced" him to enter into the Franchise Agreement. (Resp. at 6.) Plaintiff frames his argument as follows:
The [Franchise] Agreement was induced by fraud because Snap-on Tools never intended to retake possession of [P]laintiff's old inventory and replace it with new inventory. The new inventory was to provide sufficient security for an increase line of credit by Snap-on Credit. Also the Initial License Fee of Three Thousand Dollars ($3,000) was never paid as required under the [Franchise] Agreement. . . . The initial license fee was to be included in the amount financed in [the] . . . Security Agreement. Since the . . . Security Agreement is invalid because its terms were changed from the one signed on November 9, 1994, and the [Security] Agreement by Snap-on Credit was procured by forgery, the Dealership Franchise Agreement is invalid and hence, unenforceable. Fraudulently induced [Franchise] Agreement with no consideration plus an altered and forged signature [Security] Agreement equals no arbitration.
(Id.)
The court rejects Plaintiff's argument. As discussed in the preceding section, the court has jurisdiction only over claims which raise issues as to the making of the arbitration agreement itself. See 9 U.S.C. § 4. To reiterate, when, as here, a plaintiff asserts that he or she was fraudulently induced to sign a contract, which contains an arbitration clause, the plaintiff seeking to avoid arbitration must put forth allegations "that the arbitration clause itself, standing apart from the whole agreement, was induced by fraud." Coleman, 802 F.2d at 1352.
Here, the court finds that there are no allegations to support a claim that the fraudulent inducement related directly to the arbitration clause, as opposed to the Franchise Agreement as a whole. The arbitration provision in the Franchise Agreement was included as one of its many provisions. The Parties did not separately execute the arbitration provision. Plaintiff does not assert in his Complaint any claim of fraudulent inducement of the arbitration provision contained in the Franchise Agreement. Instead, Plaintiff's claim relates to the false representations concerning Plaintiff's inventory and initial licensing fee, which allegedly induced Plaintiff to sign the Franchise Agreement. In the absence of specific allegations by Plaintiff that the inducement relates to the arbitration provision itself, the court finds that Plaintiff has failed to raise "an issue which goes to the `making' of the agreement to arbitrate." Prima Paint Corp., 388 U.S. at 403-404. Accordingly, the court finds that Plaintiff's fraudulent inducement issue is for the arbitrator to decide, not the court. See id. at 403-04.
III. ORDER
Accordingly, it is CONSIDERED and ORDERED that Defendants' Petition To Compel Arbitration and Defendants' Motion To Stay These Proceedings Pending Arbitration be and the same are hereby GRANTED. Plaintiff is ORDERED to submit his claims to arbitration in the manner provided for in the arbitration clause in the Franchise Agreement.
It is further CONSIDERED and ORDERED that this action be and the same is hereby STAYED pending arbitration. See FAA, 9 U.S.C. § 3, 4. Within three months and six months of today's date, the Parties are ORDERED to report jointly to the court as to the status of arbitration, if this matter has not been disposed of by then.
It is further CONSIDERED and ORDERED: (1) that the Clerk of the Court REMOVE this action from the court's active docket and PLACE said action on the court's administrative docket, with leave for either party to move to reinstate the same on the active docket at the conclusion of arbitration proceedings; (2) that such reinstatement will cause the filing date of the action to relate back to the original filing date of this action; and (3) that any motion for reinstatement shall be filed no later than the time prescribed by the FAA, 9 U.S.C. § 12.