The Franchise Memorandum

In an unusual twist, an Idaho federal court granted a former franchisee's motion to dismiss, or alternatively, a motion to stay the action pending arbitration, because the franchisor's claims were subject to the franchise agreement's arbitration clause. Arctic Circle Rests. v. Bell, 2015 U.S. Dist. LEXIS 24342 (D. Idaho Feb. 26, 2015). Arctic Circle, a franchisor, filed an action to enforce certain provisions of the franchise agreement, as well as claims under trademark and unfair competition law, after Bell continued to use trademarks owned by Arctic Circle and refused to deidentify his business activities or to return Arctic Circle's property while operating a similar business five miles away.

The franchise agreement required resolution through arbitration of any dispute or breach. Another provision allowed either party to seek preliminary or equitable relief from a court. Although Arctic Circle originally sought a preliminary injunction and/or a temporary restraining order against Bell, the motion had been mooted by Bell's remedial actions. In granting Bell's motion, the court held that all of Arctic Circle's remaining causes of action arose in some way out of the franchise agreement, and that none of the claims could be pursued separately, outside of the valid arbitration clause.