The Franchise Memorandum

In Perry v. Ice House America, LLC, 2008 WL 4216550 (E.D. Ark. Sept. 12, 2008), the United States District Court for the Eastern District of Arkansas broadly construed an arbitration clause in a distributorship agreement in granting the defendant’s motion to stay the litigation pending a the outcome of arbitration. The plaintiffs had filed suit claiming that Ice House America, a manufacturer of ice production and delivery products, had, among other things, breached the distributorship agreement and the duty of good faith and fair dealing. Ice House America filed a petition to compel arbitration in Florida pursuant to a provision that any dispute concerning the agreement would be submitted to arbitration there. Ice House America also filed a motion to stay the litigation in the Eastern District of Arkansas. 

The plaintiffs contended that the arbitration provision was unenforceable because it was fraudulently procured. The Eastern District of Arkansas, however, rejected that argument since there was no evidence of fraud by Ice House America. The court held that the arbitration agreement broadly applied to the disagreements at issue, finding that the language of the agreement, which read “[d]isagreements between the parties regarding any of the terms of this Agreement shall be submitted to arbitration…,” meant that arbitration was required for all disputes relating to or concerning any terms of the agreement. The plaintiffs’ claims were found to be within the scope of the arbitration provision because they arose from the distributorship agreement itself. 

The plaintiffs also contended that Ice House America should be estopped because it had not filed a petition to compel arbitration in another case concerning a similar arbitration provision. The court held that the separate litigation did not mean Ice House America waived its rights to arbitration in this case.