Senior Servs. of Palm Beach LLC v. ABCSP Inc., Civ. No. 12-80226 (S.D. Fla. June 7, 2012)
This case involves a Franchise Agreement and Modification Agreement entered into by Defendant ABCSP, Inc. (“ABCSP”), a corporation that franchises businesses to provide non-medical in-home care, nursing care, and assisted living services, and Plaintiff Senior Services of Palm Beach LLC (“Senior Services”), who was granted the right to operate franchises in Florida. The franchise agreement between the parties contained an arbitration clause.
Senior Services filed a lawsuit seeking declaratory judgment that the arbitration clause was unconscionable and alleging other unfair trade practices and contract-related claims. Before the court in the instant opinion was ABCSP’s motion to dismiss the action and arbitrate its claims based on the arbitration clause in the agreements.
The court stated that the dispute was governed by the Federal Arbitration Act, which provides that an agreement in writing to submit to arbitration is valid unless grounds exist at law or in equity for revocation of the contract. First, the court held that the issue of unconscionability was for the arbitrator, not the court. Second, the court stated that, even if the issue were properly before the court, the court would not find the clause to be unconscionable.
When deciding whether the parties agreed to arbitrate certain questions, the court stated that it was to apply ordinary state-law principles governing the formation of contracts. The court noted that arbitration is a matter of contract, and parties can agree to the question of arbitrability. In this instance, the parties explicitly incorporated rules that empowered an arbitrator to decide issues of arbitrability, which evidences the parties’ intent to delegate these issues to an arbitrator. Specifically, the parties’ arbitration clause states that the arbitration shall be conducted by the American Arbitration Association (“AAA”), in accordance with their rules. The AAA rules provide that the arbitrator has power to rule on his or her own jurisdiction, including objections as to the existence, scope, or validity of the arbitration agreement. Thus, the court found that it must defer to the arbitrator on the issue of unconscionability of the arbitration clause.
Though the court found that the question of unconscionability was not properly before the court, the court examined the issue of unconscionability and found that the arbitration clause was neither procedurally nor substantively unconscionable. The court found that the clause was not procedurally unconscionable because (1) the contract was not an adhesion contract because Vivian Torres, one of Plaintiff’s owners, could have negotiated changes to the arbitration clause, (2) Ms. Torres was represented by legal counsel, and (3) Ms. Torres was a sophisticated and educated businesswoman with relevant experience. The court found that the clause was not substantively unconscionable because (1) Plaintiff failed to demonstrate that the arbitration clause was unfairly one-sided, (2) there was no evidence that Plaintiff was surprised to learn that arbitration would take place in California, and (3) Ms. Torres had the option to negotiate the forum selection clause but chose not to.