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Court Watch

By Genevieve Beck and Jon Swierzewski
November 01, 2005

Arbitration Clause in Franchise Agreement Is Enforceable By Nonsignatories

The Eighth Circuit Court of Appeals has ruled that nonsignatories to a franchise agreement were entitled to enforce the agreement's arbitration clause. In CD Partners, LLC v. Grizzle, ___ F.3d ___, 2005 WL 2319132 (8th Cir. Sept. 23, 2005), the court considered whether a franchisor's three principals could compel arbitration of a tort lawsuit brought against them in their individual capacities by the franchisee. The franchisee's lawsuit alleged claims of negligence, negligent misrepresentation, and fraudulent misrepresentation against the three principals. The district court denied the principals' motion to compel arbitration under the arbitration clauses in the franchise agreements on the grounds that the three principals were not signatories to the franchise agreements between the franchisor and franchisee and the tort lawsuit was not covered by the agreements' arbitration clauses.

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