Planet Beach Franchising Corp. v. Zaroff

969 F. Supp. 2d 658, 2013 WL 4547058, 2013 U.S. Dist. LEXIS 121908
CourtDistrict Court, E.D. Louisiana
DecidedAugust 27, 2013
DocketCivil Action No. 13-438
StatusPublished

This text of 969 F. Supp. 2d 658 (Planet Beach Franchising Corp. v. Zaroff) is published on Counsel Stack Legal Research, covering District Court, E.D. Louisiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Planet Beach Franchising Corp. v. Zaroff, 969 F. Supp. 2d 658, 2013 WL 4547058, 2013 U.S. Dist. LEXIS 121908 (E.D. La. 2013).

Opinion

ORDER AND REASONS

CARL J. BARBIER, District Judge.

Before the Court is a 12(b)(6) Motion to Dismiss, or, in the Alternative, to Compel Arbitration on a Consolidated Basis (Rec. Doc. 7), filed by Defendants, David Zaroff, Tom Hymanson, and AJJN Group, LLC (collectively “AJJN Group”). Plaintiff, Planet Beach Franchising Corporation (“Planet Beach”), has filed an opposition (Rec. Doc. 16), to which the AJJN Group has replied (Rec. Doc. 18). On June 19, 2013, the Court heard oral argument on the AJJN Group’s motion and took the matter under advisement. Having considered the motion, the memoranda, the record, the applicable law, and the oral arguments of counsel, the Court finds that the AJJN Group’s motion should be GRANTED for reasons set forth more fully below.

PROCEDURAL HISTORY AND BACKGROUND FACTS

Plaintiff, Planet Beach, is a closely-held Louisiana corporation based in Jefferson Parish which has developed a business format for the operation of franchised spas. (Rec. Doc. 16, p. 2) Defendants, David Zaroff (“Zaroff’) and Tom Tymanson (“Hymanson”), are the sole members of AJJN Group, LLC, a limited liability company organized under Minnesota law. (Rec. Doc. 7-2, p. 2) AJJN Group LLC is a Planet Beach franchisee that owns and [659]*659operates four Planet Beach salons in the Twin Cities metro area in Minnesota. (Rec. Doc. 7-1, p. 1) Between June or July of 2006, and January of 2008, the AJJN Group entered into four franchise agreements with Planet Beach, pursuant to which it took over the operation of four Planet Beach locations.1 (Rec. Doc. 7-1, pp. 5-7) Each of the four franchise agreements contain arbitration provisions. The three franchise agreements for the AJJN Group’s St. Paul, Downtown Minneapolis, and Uptown Minneapolis locations include an identical arbitration provision that provides in pertinent part:

26.4 Arbitration. All disputes and claims relating to this Agreement or any other agreement entered into between the parties, the rights and obligations of the parties, or any other claims or causes of action relating to the making, interpretation, or performance of either party under this Agreement, shall be settled by arbitration in Jefferson, Parish, Louisiana in accordance with the Federal Arbitration Act and the Commercial Arbitration Rules of the American Arbitration Association (“AAA”)____
The following shall supplement and, in the event of conflict, shall govern any arbitration: If the claim is for less than $35,000 than the matter shall be heard before a single arbitrator. If the claim, or a counterclaim, is for $35,000 or more, the matter shall be heard before a panel of three (3) arbitrators and each party shall appoint its oum arbitrator, and the appointed arbitrators shall appoint a “neutral” arbitrator from the AAA’s list of arbitrators. Arbitrability mil be decided by the arbitrator. Neither party shall pursue class claims and/or consolidate the arbitration with any other proceeding to which the franchisor is a party ....

(Rec. Docs. 7-2, 7-3, 7-4, ¶ 26.4) (emphasis added).

However, the arbitration provision in the AJJN Group’s franchise agreement for the Maple Grove, Minnesota location is slightly different, in terms of the procedure for selecting arbitrator(s), and provides in pertinent part:

26.4 Arbitration. All disputes and claims relating to this Agreement or any other agreement entered into between the parties, the rights and obligations of the parties, or any other claims or causes of action relating tot he making, interpretation, or performance of either party under this Agreement, shall be settled by arbitration in Jefferson, Parish Louisiana in accordance with the Federal Arbitration Act and the Commercial Arbitration Rules of the American Arbitration Association (“AAA”)....
The following shall supplement and, in the event of a conflict, shall govern any arbitration: If the claim is for less than $35,000 than the matter shall be heard before a single arbitrator. If the claim, or a counterclaim, is for $35,000 or more, the matter may be heard before a [660]*660panel of three (S) arbitrators if both parties agree and each party shall appoint its own arbitrator, and the appointed arbitrators shall appoint a “neutral” arbitrator from the AAA’s list of arbitrators. If the parties do not agree the matter shall be heard before a single arbitrator. Arbitrability will be decided by the arbitrator. Neither party shall pursue class claims and!or consolidate the arbitration with any other proceeding to which the franchisor is a party ....

(Rec. Doc. 7-5, ¶ 26.4) (emphasis added).

On October 31, 2012, the AJJN Group filed a Demand for Arbitration with the American Arbitration Association asserting a $2,746,679.00 claim against Planet Beach for: (1) alleged violations of the Minnesota Franchise Act, (2) fraud, (3) negligent misrepresentation, (4) breach of contract, and (5) breach of the implied covenant of good faith and fair dealing. (AJJN Group Demand for Arbitration, Rec. Doc. 7-6, p. 2; Rec. Doc. 7-1, p. 8) Generally, the AJJN Group asserts that Planet Beach made a host of material misrepresentations and omissions in its sales materials, and elsewhere, between approximately 2005 and 2008, in an effort to induce the AJJN Group to enter, into the four franchise agreements. (Rec. Doc. 7-6, p. 19) The American Arbitration Association (“AAA”) began administering the proceedings. (Rec. Doc. 7-1, p. 8) However, on November 9, 2012, Planet Beach submitted a letter to the AAA objecting to the proceedings based on its allegations that: (1) the AJJN Group failed to meet the threshold filing requirements under the AAA’s Commercial Arbitration Rules, made applicable through the parties’ franchise agreements, and (2) “there was no basis for the administrative consolidation of the AJJN Group’s claims arising under multiple arbitration clauses contained in separate and independent contracts.” (Rec. .Doc. 1, p. 7, ¶ 32) On-January 28, 2013, over Planet Beach’s objections, the AAA sated that it would begin the process of appointing a threshold arbitrator to decide whether “the various arbitration demands could be consolidated in a single proceeding.” (Rec. Doc. 1, p. 7, ¶ 33) At present, no threshold arbitrator has been appointed, and the parties agreed to temporarily suspend the arbitration proceedings, including the appointment of a threshold arbitrator, to allow Planet Beach to file its Petition to Compel Arbitration in this Court.

On March 7, 2013, Planet Beach filed a “Petition to Compel Arbitration in Accordance with Agreements,” in which it asserts that the AJJN Group “have sought arbitration on a consolidated basis of disputes arising under four separate and individual Single Unit Franchise Agreements.” (Rec. Doc. 1, p. 1, ¶ 2) Planet Beach further asserts that “‘[njothing in the four separate and individual Single Unit Franchise Agreements permits an arbitrator or panel of arbitrators appointed under one Single Unit Franchise Agreement to resolve disputes arising under any other Single Unit Franchise Agreement.” (Rec. Doc. 1, p.

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Bluebook (online)
969 F. Supp. 2d 658, 2013 WL 4547058, 2013 U.S. Dist. LEXIS 121908, Counsel Stack Legal Research, https://law.counselstack.com/opinion/planet-beach-franchising-corp-v-zaroff-laed-2013.