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Extremely Clean Cleaning Services, LLC v. Caat, Inc.

United States District Court, S.D. Indiana, Indianapolis Division

February 25, 2019

EXTREMELY CLEAN CLEANING SERVICES, LLC, ALISIA BURKS, Plaintiffs,
v.
CAAT, INC. an Ohio Corporation, ANAGO CLEANING SYSTEMS, INC. a Florida Corporation, ANAGO FRANCHISING, INC. a Florida Corporation, ALBERTSON FAMILY JANITORIAL HOLDINGS, INC. an Ohio Corporation, CURT ALBERTSON an individual, COREY ALBERTSON an individual, TERESA ALBERTSON an individual, DAVID R. POVLITZ, Defendants.

          ORDER ON PENDING MOTIONS SETTING TRIAL (DKTS. 13, 23, 25, 29)

          SARAH EVANS BARKER, JUDGE

         Now before the Court are two motions filed by Defendants seeking to stay these proceedings pending arbitration. Dkts. 13, 29.[1] See 9 U.S.C. § 3. There is no motion for an order compelling Plaintiffs to arbitrate in the first instance, see 9 U.S.C. § 4, but “[a] defendant who wants arbitration is often content with a stay, since that will stymie the plaintiff's effort to obtain relief unless he agrees to arbitrate.” Cabinetree of Wis., Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388, 389 (7th Cir. 1995). The parties' dispute at this juncture obviously turns on the necessity of arbitration itself rather than merely the propriety of a stay. We therefore construe the motions to stay as motions to compel and to stay. Hill v. Lynch Chevrolet, Inc., 349 F.Supp.2d 1118, 1118-19 (N.D.Ill. 2004).

         As explained below, Defendants' motions to stay are granted in part. We defer decision on the remaining issues until the trier of fact determines whether the parties have agreed to arbitration.

         Background

         Plaintiffs are Alisia Burks (“Burks”) and her limited liability company, Extremely Clean Cleaning Services, LLC (“Extremely Clean”). Defendants are franchisors and subfranchisors of a cleaning business. We assume the parties' familiarity with the facts, such as they are reflected in the complaint, its various attachments, and Burks's affidavit, but we restate the most relevant assertions here in the light most favorable to Plaintiffs.

         Extremely Clean, through Burks, proposed to purchase a cleaning franchise from Defendants. On October 15, 2015, Burks informed Defendants' agent in Indianapolis, Brian Burton (“Burton”), that Burks's mother, Kearl Ash (“Ash”), was being dispatched to Defendants' Indianapolis office on Extremely Clean's behalf to pay the required franchise fee. Ash's signature had previously appeared on a prior contract between Extremely Clean and Defendants and some related documents, but Ash was not a member, manager, or employee of Extremely Clean and had no authorization to act on its behalf.

         Burks avers that she made clear to Burton that she was not yet prepared to execute the offered contract to purchase the franchise (“the Franchise Agreement”). Burks sought additional time to review the contract's terms with Burton “to make sure [she] fully understood what [she] was signing.” Burks Aff. ¶ 21. Burton agreed that Ash could deposit the franchise fee and Burks could review the Franchise Agreement with him and execute it later in the week. Burton represented he would schedule a time for him and Burks to meet.

         In depositing the franchise fee, however, Ash also signed the Franchise Agreement, purportedly on behalf of Extremely Clean but for reasons that have not been explained. There is no record of how or why Ash came to do so, nor why Burton permitted or induced her to sign, particularly since to do so was against Burks's contrary instructions to Burton. At that time, Ash was allegedly contemplating purchasing her own franchise from Defendants, which may have generated confusion on one or both sides, but we speculate as to that.

         As soon as Ash informed Burks that she had signed the Franchise Agreement, Burks called Burton to inform him that Ash had no authority to execute the Franchise Agreement on Extremely Clean's behalf. Burton thus invited Burks to come to his office the next day to review the terms of the Franchise Agreement and “redo the paperwork.” Id. ¶ 17. Burks agreed and went to Burton's office the following day, but Burton failed to appear as scheduled. Reached by telephone, Burton promised to deliver a new contract to Burks at a later time. Neither Burton or any other of Defendants' agents ever did so.

         Eventually, Burks let the matter drop. For the next two years, Burks cleaned properties as Defendants' franchisee, sometimes working sixty hours per week and often, unusually, in competition with other of Defendants' franchisees. Over the course of that period, Burks signed a series of “account assumption agreements, ” whereunder Extremely Clean agreed to assume client accounts from Defendants “subject to the terms of the Franchise Agreement[.]” E.g., Dkt. 1 Ex. C, at 1. Again unusually, payment for the franchisees' services were remitted directly by the clients to Defendants, who then paid their franchisees. Burks was sometimes paid late, sometimes not at all, and often less than Burks believed she was owed.

         In March 2018, Defendants abandoned their Indianapolis business without notice to their franchisees, including Burks. This lawsuit followed. The Franchise Agreement contains an arbitration clause, Dkt. 1 Ex. B, at 63-64, which Defendants now seek to enforce against Plaintiffs. The issue now before the Court is whether the Franchise Agreement has been agreed to by the parties sufficiently to render it enforceable.

         Analysis

         The Federal Arbitration Act (FAA) provides,

If any suit . . . be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had . . . .

9 U.S.C. § 3. The FAA provides further,

A party aggrieved by the alleged . . . refusal of another to arbitrate under a written agreement for arbitration may petition any United States district court [with jurisdiction] . . . for an order directing that such arbitration proceed . . . . The court shall hear the parties, and upon being satisfied that the making of the agreement for arbitration . . . is not in issue, the court shall make an order directing the parties to proceed to arbitration . . . . If the making of the arbitration agreement . . . be in issue, the court shall proceed summarily to ...

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