Reinsurance Focus

In an action by a pharmacy franchisor to stay franchisees’ collective arbitration claims filed with the American Arbitration Association and to compel individual arbitrations, the Eastern District of Missouri granted the franchisees’ motion to dismiss based on lack of subject matter jurisdiction, relying heavily on both contract interpretation and the Federal Arbitration Act, which states that agreements to arbitrate “shall be valid, irrevocable, and enforceable save upon such grounds as exist at law or in equity for the revocation of any contract.” Although the arbitration clauses provided that “arbitration shall be conducted on an individual, not a class-wide, basis,” they also expressly incorporated the AAA’s rules, and AAA Rule 7(a) grants arbitrators, not courts, the authority to determine their own jurisdiction.

Without reaching the question of whether collective arbitrability is a gateway issue for the court or a question of procedure to be determined by an arbitrator, the court held that the parties had “clearly and unmistakably agreed to submit all questions of arbitrability to an arbitrator” pursuant to AAA Rule 7(a). In so holding, the court directed its attention to a handful of exceptions to the applicability of the AAA’s rules found in the franchise agreements, emphasizing that no such exception regarding the resolution of arbitrability had been included. Therefore, the court found the AAA’s arbitrability provision controlling. Medicine Shoppe Int’l, Inc. v. Edlucy, Inc., Case No. 12-161 (USDC E.D. Mo. May 14, 2012).

This post written by Rollie Goss.

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