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Arbitration Provisions Continue to Make Waves

Franchisors are well aware of the U.S. Supreme Court's opinion earlier this year in AT&T Mobility LLC v. Concepcion, No. 09-893 (U.S. Apr. 27, 2011), addressing whether class-arbitration waivers in standard form contracts are enforceable in actions brought by consumers. The Court held that class-arbitration waivers are enforceable based on federal law that protects agreements to arbitrate and cannot be found unconscionable under state law (California's in this case). The decision has been recognized as strengthening the hand of any business that designates arbitration for dispute resolution. (See FBLA, June 2011, for further discussion.)

In a recent presentation, Nixon Peabody LLP attorneys Gregg Rubenstein and Diana Vilmenay discussed arbitration-related litigation in light of AT&T Mobility LLC v. Concepcion and Stolt-Nielsen S.A. v. AnimalFeeds International Corp., decided by the Supreme Court in April 2010. “The Court in AT&T Mobility said it would enforce an arbitration agreement according to its terms. It said that's the purpose of the FAA,” said Rubenstein, explaining how it could come into effect in a franchise context. “If a franchisor enters into an agreement to arbitrate with a franchisee, and if that provision says that they agree to arbitrate any and all claims and agree that these must be done on an individualized basis, then federal courts will enforce it.”

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