U.S. Supreme Court Backs Franchisor's Right to Enforce Arbitration Clauses
This U.S. Supreme Court breathes new life into a 1967 decision known as Prima Paint Corp. v. Flood & Conklin, 388 U.S. 395 (1967) which held that arbitration clauses in franchise agreements are enforceable even where other provisions of the contract are unenforceable. For example, even in situations where the Franchisee claimed that he had been fraudulently induced into signing a Franchise Agreement, the fraud claim would be determined by the arbitrator, and the matter would not be decided by a Court. Various cases subsequent to the Prima Paint decision, notably cases from the 9th Circuit (California), along with numerous state court decisions have “muddied the waters” on this issue. The recent Buckeye decision, however, clearly reaffirms the U.S. Supreme Court’s holding that claims such as unconscionability and fraudulent inducement would have to be resolved by an arbitrator, and that those claims would not provide a mechanism for avoiding arbitration.
