Obligation To Enforce Arbitration Under FAA Policy Trumps Motion To Prevent Enforcement Of 'Clearly Void' Non-Competition Agreement

On May 20, 2015, Judge Dudley H. Bowen of the United States District Court for the Southern District of Georgia, entered an order denying the Motion for Preliminary and Permanent Injunction filed by one of the plaintiffs (Christopher Hermann) and granting in part the motion for dismissal and to compel arbitration filed by Defendant Unishippers Global Logistics, LLC ("Unishippers"). Mr. Hermann's motion sought to prevent Unishippers from claiming that he was in violation of a covenant not to compete agreement signed with MSA which had originally made Unishippers a third party beneficiary (the "Non-competition Agreement"). Mr. Hermann asserted the Non-competition Agreement was invalid and unenforceable.

The case was initiated by one corporate (Morning Star Associates, Inc.) and three individual franchisees (collectively "MSA") against their franchisor, Unishippers, following the termination of three franchise agreements. MSA alleged several claims largely based on Unishippers termination of the franchise agreements under one provision and then pursing enforcement of inconsistent, waived provisions. Both the franchise agreements and the Non-competition Agreement contained arbitration provisions.

The Court noted that it "must 'construe arbitration clauses generously, resolving all doubts in favor or arbitration." Becker v. Davis, 491 F.3d 1292, 1305 (11th Cir. 2007). The author notes that the 11th Circuit and the State of Georgia lead the country in enforcement of arbitration provisions and hospitality to non-resident claimants and their representatives. The Atlanta International Arbitration Society.1

MSA challenged enforcement of the arbitration provisions on four grounds: (1) the FAA exempts transportation workers, (2) the Non-competition Agreement was waived or invalid, (3) Unishippers has no valid agreement to arbitration, and (4) the claims are outside the scope of the Franchise Agreements' arbitration provisions.

The FAA Exemption. The Court noted that the asserted exemption was to be "narrowly construed to apply only to 'transportation workers; and not to employment contracts in general," quoting Hill v. Rent-A-Center, Inc., 298 F.3d 1286, 1289 (11th Cir. 2005). Noting again that "the Eleventh Circuit has been exceptionally clear about one thing; '[A]ll doubts are to be resolved in favor of arbitration,'" the Court found that MSA had not proven employment status (and found as a matter of law to the contrary). Ruby-Collins, Inc. v. City...