In Rodriguez v Tropical Smoothie Franchise Development the Southern District of Ohio recently enforced an arbitration agreement in the franchise context. The Plaintiff sought to avoid arbitration by arguing both procedural and substantive unconscionability, and the court found that Florida law governed. Although the court rejected a series of arguments regarding procedural unconscionability, including unequal bargaining power, the court was persuaded that substantive unconscionabilityexisted. To reach this result, the court noted that the plaintiff had argued, and the Defendant did not dispute, that the arbitration would cost between $20,000-40,000 and the Plaintiff lacked such funds to cover the costs. The arbitration agreement also required that the costs be paid up front, and the court held, based on the totality of circumstance that substantive unconscionabilty was present. Notwithstanding reaching that finding, the court found that the absence of procedural unconscionability was fatal to the overall unconscionability analysis. As a result, the court granted the motion to compel arbitration.
Although this case could present some interesting issues for the Sixth Circuit on unconscionability, particularly based on the Sixth Circuit’s recent decisions on the cost of arbitration, it remains to be seen whether the court will ultimately have jurisdiction over this dispute. The Defendant evidently moved to dismiss the proceedings, and the district court granted that motion but at the same time indicated that it was staying the case. Under the Federal Arbitration Act, a decision staying a matter pending arbitration is generally not appealable, whereas an order dismissing a case pending arbitration is. It does not appear that the parties framed that issue precisely for the court, and therefore the Sixth Circuit will be left to sort through the jurisdictional issue. We will continue to keep an eye on this case and see if the court accepts jurisdiction and addresses the merits of the case.
