The Franchise Memorandum

The United States Court of Appeals for the Third Circuit recently weighed in on an issue that often arises in the franchise and distribution context — class arbitrability. In Chesapeake Appalachia, LLC v. Scout Petroleum, LLC, 809 F.3d 746 (3d Cir. Jan. 5, 2016), the court concluded that, while no magic language is required to overcome the presumption in favor of judicial control over this issue, the adoption by the parties of the rules of the American Arbitration Association (which provide for arbitrators to decide the issue) does not "clearly and unmistakably" delegate the question of class arbitrability to the arbitrator. Rather, unlike other circuits, which have found the adoption of the AAA rules to constitute sufficient evidence that the parties agreed to arbitrate arbitrability, the Third Circuit now requires a clearer manifestation of the parties' intent to allow an arbitrator to decide the issue of class arbitrability.