Swensen's Ice Cream Company Swensen's, Inc. v. Corsair Corporation Donald Frank Diane Frank

942 F.2d 1307
CourtCourt of Appeals for the Eighth Circuit
DecidedOctober 8, 1991
Docket90-2481WM
StatusPublished
Cited by16 cases

This text of 942 F.2d 1307 (Swensen's Ice Cream Company Swensen's, Inc. v. Corsair Corporation Donald Frank Diane Frank) is published on Counsel Stack Legal Research, covering Court of Appeals for the Eighth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Swensen's Ice Cream Company Swensen's, Inc. v. Corsair Corporation Donald Frank Diane Frank, 942 F.2d 1307 (8th Cir. 1991).

Opinions

ARNOLD, Circuit Judge.

In this case we must determine whether federal court is a proper forum to resolve differences between Swensen’s Ice Cream Company of Andover, Massachusetts, and the operators of three Swensen’s Ice Cream Shops in Springfield, Missouri. Swensen’s claims that this lawsuit should be halted in favor of binding arbitration. We disagree, and affirm the judgment of the District Court.1

The case turns upon the scope of arbitration clauses contained in three franchise agreements between Swensen’s, Donald and Diane Frank, and Corsair Corporation. At issue also is a distribution agreement between the parties, permitting Donald Frank and Corsair Corporation to distribute ice cream manufactured at Frank’s shops to restaurants and other franchisees in an eight-state area, and to supermarkets within 50 miles of Springfield, Missouri. The distribution agreement itself contains no language requiring arbitration. Swen-sen’s contends, however, that the distribution agreement was contingent upon the existence of the franchise relationship, and, therefore, that any dispute concerning the distribution agreement is also subject to the arbitration clauses contained in the franchise agreements.

This case began after a sour turn in the parties’ business relationship in early 1990. Swensen’s sued first, asking the District Court to prohibit the defendants from operating their ice-cream shops independently, under a name other than Swensen’s, as they had begun to do in March 1990. The defendants counterclaimed, alleging numerous violations of the franchise and distribution agreements, as well as other claims. In response to the counterclaim, Swensen’s withdrew its request for an injunction, and filed instead a motion to compel arbitration of all of the issues raised in the counterclaim. The District Court held that some, but not all, of the Franks’ grievances against Swensen’s were subject to arbitration. The Court refused to stay proceedings on the remaining claims pending the outcome of arbitration.

The relevant contractual provisions are found in documents spanning a period of nine years. In 1979 Donald Frank entered into two separate franchise agreements [1309]*1309with Swensen’s. These agreements gave Donald Frank the right to operate two retail Swensen’s Ice Cream Shops, along with the right to manufacture ice cream for retail sale at those two franchise locations. The same arbitration clause appears in both of the 1979 franchise agreements:

(a) Arbitration. In the event of any dispute between Franchisor and Franchisee with respect to the interpretation, performance or alleged breach of this Agreement, such dispute shall be submitted to and resolved by arbitration in accordance with the rules of the American Arbitration Association....

Joint Appendix 41, 69.

In 1985, the parties executed a third franchise agreement, for an ice-cream shop at Battlefield Mall in Springfield. Under the terms of this agreement, the defendants were not permitted to manufacture ice cream at this location. This franchise agreement contains an arbitration clause broader in scope than the previous two:

(a) Arbitration. Except as provided in subparagraph (b) of this Section and in Section 17, disputes arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association....

Joint Appendix 104.

In 1987, the parties executed what they refer to as a “wholesale/distribution” agreement. This agreement is in the form of a letter from Swensen’s to Donald Frank. The letter memorialized the terms of a regional ice-cream distribution arrangement which Mr. Frank had recently undertaken with the consent of Swensen’s. As noted previously, this agreement does not contain any arbitration clause. It does, however, specify that “[t]he above rights are granted to you subject to your continuing to be in good standing with your various franchise agreements and other arrangements with Swensen’s.” Joint Appendix 344.

The District Court determined that the plain language of the good-standing clause was not sufficient to subject claims based upon the distribution agreement to the arbitration clauses of the three franchise agreements. Nor was any of the arbitration clauses meant to govern all future business transactions between the parties: “By their terms, the three franchise agreements govern only the relationship of the parties with respect to each franchise location.” No. 90-3153-CV-S-2, Order at 11 (W.D.Mo. August 3, 1990). Of the nine counts in defendants’ counterclaim, the District Court referred to arbitration only Count I and portions of Counts VIII and IX. Count I alleges Swensen’s breach of the three franchise agreements. Count VIII alleges, among other things, fraud and misrepresentation concerning the provision of recipes to defendants as promised in the franchise agreements. Count IX alleges that Swensen’s violated its fiduciary duty to defendants under the franchise agreements and the distributorship agreement. The Court referred to arbitration only those parts of Counts VIII and IX relating to the franchise agreements.

The District Court held that Counts VI and VII, alleging federal and state antitrust violations, could not be the subject of an arbitration agreement as a matter of law. The Court then determined that the remaining counts, those counts related only to the distribution agreement, were beyond the reach of even the broadest arbitration clause, that contained in the Battlefield Mall franchise agreement. Count II alleges that plaintiffs broke the distributorship agreement. Count III alleges tortious interference with defendants’ contracts and business expectancies with other Swensen’s franchisees. Count IV alleges tortious interference with defendants’ contracts and business expectancies with their own suppliers. Count V alleges a theory of prima facie tort. The remaining part of Count VIII alleges that Swensen’s misrepresented to defendants and the general public the ingredients in its “All Natural” and “Lite” ice creams. The remaining part of Count IX alleges Swensen’s violated its fiduciary duty to defendants under the distribution agreement.

[1310]*1310We affirm the District Court’s actions in all respects. Those counts of defendants’ counterclaim which concern only the distribution agreement should remain for disposition in the District Court. This is because, as the District Court held, each arbitration clause is specific to a franchise location. The three franchise agreements govern the relationship of the parties as to each store. Even the third arbitration clause, with the most expansive language of the three, requires arbitration only of disputes “relating to” the Battlefield Mall franchise. None of the defendants’ counterclaims remaining in the District Court “relates to” the operation of the Battlefield Mall location because, under the terms of that franchise agreement, defendants are not allowed to manufacture ice cream at this store. Defendants could not use their third store to manufacture any of the ice cream distributed to other businesses. Although we cannot tell from the record before us, there might be some relationship between the distribution agreement and store number three if that store were supplied by one of defendants’ other stores.

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Cite This Page — Counsel Stack

Bluebook (online)
942 F.2d 1307, Counsel Stack Legal Research, https://law.counselstack.com/opinion/swensens-ice-cream-company-swensens-inc-v-corsair-corporation-donald-ca8-1991.