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Arctic Circle Restaurants, Inc. v. Bell

United States District Court, D. Idaho

February 26, 2015

ARCTIC CIRCLE RESTAURANTS, INC., a Delaware corporation, Plaintiff,
v.
DAVID LYNN BELL. Defendants.

MEMORANDUM DECISION AND ORDER RE: DEFENDANT'S MOTION TO DISMISS, OR ALTERNATIVELY, TO STAY THE ACTION PENDING ARBITRATION (Docket No. 18)

RONALD E. BUSH, Magistrate Judge.

Now before the Court is Defendant's Motion to Dismiss, or Alternatively, to Stay the Action Pending Arbitration (Docket No. 18). Having carefully considered the record, participated in oral argument, and otherwise being fully advised, the Court enters the following Memorandum Decision and Order:

I. BACKGROUND

This is an action for enforcement of certain provisions of a franchise agreement, trademark infringement, unfair competition, and trademark dilution under the Trademark Act of 1946, as amended, 15 U.S.C. § 1051, et seq. (the "Lanham Act"), and for common law trademark infringement, unfair competition, and unjust enrichment under the laws of the State of Idaho. See Compl., ¶ 3 (Docket No. 1) (asserting claims specifically for (1) Breach of Franchise Agreement (First Claim for Relief, (2) Breach of Promissory Note (Second Claim for Relief), (3) Federal Trademark Infringement (Third Claim for Relief), (4) Federal Unfair Competition/Infringement (Fourth Claim for Relief), (5) Federal Trademark Dilution (Fifth Claim for Relief), (6) State Law Unfair Competition (Sixth Claim for Relief), and Unjust Enrichment (Seventh Claim for Relief)). For the purposes of the pending Motion, the details informing Plaintiff's claims against Defendant are not important; rather, the issue is whether this action should be dismissed/stayed in favor of arbitration pursuant to the applicable "Arctic Circle Restaurants Unit Franchise Agreement" (the "Franchise Agreement").

Relevant here, the Franchise Agreement reads:

31. Dispute Resolution.
A. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Utah, which laws shall prevail in the event of any conflict of law.
B. Arbitration. Except as provided in Section 31.C, the parties agree that any dispute or disagreement arising hereunder or with respect to any breach of the terms hereof shall be resolved through arbitration under the rules of the American Arbitration Association ("AAA") as the sole and exclusive method of resolving the dispute. The arbitration proceedings shall be conducted in Salt Lake City, Utah by one arbitrator selected from a panel of neutral arbitrators maintained by AAA chosen by the striking method, and in accordance with the then-current commercial arbitration rules of AAA for commercial arbitrations. All procedural matters relating to the arbitration shall be governed by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq. ).
The arbitrator shall have the right to award or include in his award any relief which he deems proper in the circumstances, including without limitation, money damages (with interest on unpaid amounts from the date due), specific performance, injunctive relief and legal fees and costs in accordance with Section 21.F. The arbitrator, however, shall have no authority to amend or modify the terms of this Agreement. The award and decision of the arbitrator shall be conclusive and binding upon all parties thereto and judgment upon the award may be entered in any court of competent jurisdiction. The parties consent to the exercise of personal jurisdiction over them by such courts and to the propriety of venue of such courts for the purpose of carrying out this provision and they waive any right to contest the validity or enforceability of such award. This provision shall continue in full force and effect subsequent to, and notwithstanding, expiration or termination of this Agreement.
C. Litigation. Nothing in Section 31.B. shall be construed to prevent either party from seeking and obtaining preliminary equitable relief from a court. Any such action shall be brought in the state or federal courts for Salt Lake County, Utah. The parties consent to the exercise of personal jurisdiction over them by such courts and to the propriety of venue of such courts.

Franchise Agreement, p. 29, attached as Ex. A to Compl. (Docket No. 1, Att. 1) (emphasis added).

From this, Defendant argues that Plaintiff's claims should be dismissed here and resolved through arbitration "because they all arise under or relate to the obligations set forth in the Franchise Agreement." Def.'s Mem. in Supp. of Mot. to Dismiss, p. 5 (Docket No. 18, Att. 1) ("In fact, each and every claim in Plaintiff's Complaint is grounded in the Defendant's rights and limitations under the Franchise Agreement."). Plaintiff disagrees, arguing in response that (1) the Franchise Agreement explicitly contemplates suits requesting preliminary equitable relief, and (2) the majority of claims asserted in the Complaint do not arise from the Franchise Agreement. See Pl.'s Reply Mem. in Supp. of Mot. for Prelim. Inj., pp. 2-4 (Docket No. 19).[1]

II. DISCUSSION

The Federal Arbitration Act ("FAA") provides that a party may seek an order from a federal district court to compel arbitration where another party fails, neglects, or refuses to arbitrate. See 9 U.S.C. § 4. The FAA "leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985) (emphasis in original). "The court's role under the Act is therefore limited to determining (1) whether a valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the dispute at issue." Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000). Here, there is no dispute that the Franchise Agreement incorporates therein a valid agreement to arbitrate under ...


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