Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Inc. v. Alemayehu

United States Court of Appeals, Second Circuit

August 14, 2019

Doctor's Associates, Inc., Plaintiff-Appellant,
v.
Girum Alemayehu, Defendant-Appellee.

          Argued: May 23, 2019

         Plaintiff-Appellant Doctor's Associates, Inc. ("DAI"), is the parent company of the Subway chain of restaurants. Defendant-Appellee Girum Alemayehu ("Alemayehu") sought DAI's approval to purchase an existing Subway franchise in Aurora, Colorado, and, when DAI denied his application, Alemayehu sued, claiming that DAI discriminated against him on the basis of race. DAI then filed this lawsuit in the United States District Court for the District of Connecticut, seeking to compel Alemayehu to arbitrate. The United States District Court for the District of Connecticut (Hall, J.) denied DAI's motion to compel, holding that the Franchise Application, which DAI argues contains a binding arbitration clause, was not supported by consideration.

         As a threshold matter, we agree with the district court that whether or not an agreement is supported by adequate consideration is a question about contract formation for the court, not the arbitrator, to decide. We conclude, however, that the promise to arbitrate in the Franchise Application was supported by adequate consideration. We therefore VACATE the judgment of the district court and REMAND for further proceedings consistent with this opinion.

          Jeffrey R. Babbin, Wiggin and Dana LLP, New Haven, CT (David R. Roth, Wiggin and Dana LLP, New Haven, CT, on the brief), for Plaintiff-Appellant.

          Jeffrey Cohen, Cohen, LLC, Denver, CO (Anthony Garcia, Cohen, LLC, Denver, CO, on the brief), for Defendant- Appellee.

          Before: Livingston, Lynch, and Sullivan, Circuit Judges.

          Gerard E. Lynch, Circuit Judge.

         Plaintiff-Appellant Doctor's Associates, Inc. ("DAI"), is the parent company of the Subway brand of restaurant franchises. Beginning in 2016, Defendant-Appellee Girum Alemayehu sought to purchase an existing Subway franchise in Colorado. As part of the application process, Alemayehu checked a box on an online form, agreeing to submit any claims arising from the application process to arbitration. When DAI denied Alemayehu's application, however, he filed a lawsuit in the United States District Court for the District of Colorado, claiming that DAI and its agents had discriminated against him on the basis of race. DAI responded by bringing this action in the United States District Court for the District of Connecticut, seeking to compel the arbitration of Alemayehu's claims.

         The United States District Court for the District of Connecticut (Janet A. Hall, J.) denied the motion, finding that the putative arbitration agreement lacked consideration, and DAI appealed. For the reasons that follow, we VACATE the judgment of the district court and REMAND for further proceedings consistent with this opinion.

         BACKGROUND[1]

         In 2016, Alemayehu, a Colorado businessman, sought to purchase an existing Subway franchise in Aurora, Colorado, from Gary Newcomb. After a few months of negotiation, Alemayehu and Newcomb, who owned multiple Subway franchises in the Denver area, reached a tentative agreement that Alemayehu and his wife would purchase the Aurora franchise for $120, 000.

         However, individuals seeking to start a new Subway franchise, or to purchase an existing franchise as a new owner, must first obtain DAI's approval. The application process begins with an online application. The application, on which potential franchisees must provide the restaurant chain with personal as well as financial information, is available on Subway's website.

         Alemayehu filled out this initial application on February 15, 2017, on behalf of himself and his wife. The two-page application required Alemayehu to provide his demographic and personal information, as well as information about his educational background and past or current business experience.

         In addition to demanding such information, the Franchise Application required the applicant to make various promises. Applicants were required to authorize DAI to complete a background check, and to agree to keep private any confidential information they receive from DAI. The Franchise Application also contained the following arbitration provision:

I agree that I will settle any and all previously unasserted claims, disputes or controversies arising out of or relating to my application or candidacy for the grant of a SUBWAY franchise from Franchisor, pursuant to the laws of Connecticut, USA, and by binding arbitration only. I agree that the arbitration will be administered by either the American Arbitration Association or its successor ("AAA") or the American Dispute Resolution Center or its successor ("ADRC") at the discretion of the party first filing a demand for arbitration. I understand that AAA will administer the arbitration in accordance with its administrative rules (including, as applicable, the Commercial Rules of the AAA and the Expedited Procedures of such rules), and ADRC will administer the arbitration in accordance with its administrative rules (including, as applicable, the Rules of Commercial Arbitration or under the Rules for Expedited Commercial Arbitration). If both AAA and ADRC are no longer in business, then I understand that the parties will mutually agree upon an alternative administrative arbitration agency. If the parties cannot mutually agree, then the parties agree to take the matter to a court of competent jurisdiction to select the agency. I agree that arbitration will be held in Bridgeport, Connecticut, USA, conducted in English and decided by a single arbitrator.

J. App'x at 14. Applicants were required to check a box immediately below this text, certifying that they "ha[d] read the above disclaimer." Id. It was not possible to submit the Franchise Application without checking the box and typing a name into a signature box below it.

         As Alemayehu later stated in his Colorado complaint, "Subway began taking actions in consideration of their applications" shortly after he submitted the application form. J. App'x at 24. DAI required Alemayehu and his wife to take the Wonderlic Personnel Test at the office of Clear Stone Development, Inc. ("Clear Stone");[2] the couple completed the test on February 22, 2017. Several weeks later Alemayehu was informed that he had passed the test, but that his wife had not. Alemayehu was then interviewed at the Clear Stone office. During this initial interview, Alemayehu alleges, Connie Gemignani, ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.