United States District Court, D. Utah
CAMPBELL INVESTMENTS, LLC; KEVIN CAMPBELL; and KODY CAMPBELL, Plaintiffs,
DICKEY'S BARBECUE RESTAURANTS, INC., Defendant.
MEMORANDUM DECISION AND ORDER
Benson United States District Judge
the court is Defendant's Motion to Compel Arbitration and
Stay Proceedings. (Dkt. No. 18.) The court held a hearing on
the motion on February 14, 2018. At the hearing, Plaintiffs
were represented by Greggory Savage and Richard Madsen.
Defendants were represented by Aaron Van Nostrand and Monica
Call. At the conclusion of the hearing, the court took the
motion under advisement. Now being fully informed, the court
issues this Memorandum Decision and Order.
spring of 2014, Plaintiffs began to explore the possibility
of acquiring a Dickey's Barbecue Pit Franchise. (Compl.
at ¶ 5.) In April 2014, Plaintiffs communicated with
Ryan Reeves, Director of Franchise Sales for Defendant, and
obtained a franchise application. (Id. at
¶¶ 6-7.) Plaintiffs also spoke with John Thomas, an
owner of Dickey's Franchises and development agent for
Defendant, about acquiring an existing franchise in South
Jordan and/ or Ogden, Utah. (Id. at ¶ 7.) In
July 2014, Plaintiffs submitted their completed franchise
application to Defendant. (Id.at ¶ 8.) After
Plaintiffs obtained disclosures and approval to become
franchisees, Plaintiffs signed two separate documents on
August 25, 2014: (1) a Franchise Agreement and (2) a
Development Agreement. (Id. at ¶ 10.)
Franchise Agreement signed by Plaintiffs listed the
“Assigned Area” as “Ogden, Utah” and
specifically provided that the agreement applied only to that
area, absent prior written consent from Defendant. (Dkt. No.
23-5 at 2.) This Ogden Franchise Agreement included an
agreement of the parties to submit to binding arbitration
“all disputes, controversies, claims, causes of action
and/or alleged breaches or failures to perform arising out of
or relating to this Agreement (and attachments) or the
relationship created by this Agreement” if those
disputes had not already been successfully resolved in
non-binding mediation. (Id. at 46.)
August, 2014, Mr. Thomas provided Plaintiffs with financial
information related to the operation of Defendant's South
Jordan, Utah and Ogden, Utah franchises. (Compl. at ¶
12.) On September 8, 2014, Plaintiffs entered into an Asset
Purchase Agreement with the franchisees of the South Jordan
franchise to purchase the assets of that franchise.
(Id. at ¶ 17.) In the Asset Purchase Agreement,
Plaintiffs agreed that they would “be solely
responsible for obtaining franchise approval from
Dickey's Barbecue Pit franchise and for meeting all
continuing obligations of the same.” (Dkt. No. 18-2.)
to the Asset Purchase Agreement, the previous owners of the
South Jordan franchise had operated pursuant to a Franchise
Agreement (“South Jordan Franchise Agreement”),
dated September 9, 2011. (Dkt. No. 18-1.) In that Agreement,
the previous owners of the South Jordan location agreed to
submit “all disputes, controversies, claims, causes of
action and/or alleged breaches or failures to perform”
related to the agreement to binding arbitration.
(Id. at 44.)
began operating the South Jordan franchise in September 2014.
(Compl. at ¶18.) The South Jordan location operated as a
Dickey's franchise, and Plaintiffs paid royalty fees to
Defendant. (Id. at ¶ 13.) Plaintiffs closed the
location on November 18, 2016, because it failed to
successfully operate at a profit. (Id. at ¶
now claim that Defendants violated the Utah Business
Opportunity Disclosure Act, misrepresented material facts to
them regarding the South Jordan location, and breached an
agreement between the parties. (See id.) Defendants
move to compel arbitration, pursuant to the arbitration
provision in the South Jordan Franchise Agreement. (Dkt. No.
18.) Plaintiffs argue that no agreement to arbitrate applies
to their claims.
court must initially evaluate whether an individual is bound
by a contractual duty to arbitrate before compelling
arbitration.” ARW Expl. Corp. v. Aguirre, 45
F.3d 1455, 1460 (10th Cir. 1995). “[A]rbitration is a
matter of contract and a party cannot be required to submit
to arbitration any dispute which he has not agreed to
submit.” AT & T Technologies, Inc. v.
Communications Workers of Am., 475 U.S. 643, 648 (1986)
(quoting Steelworkers v. Warrior & Gulf Nav.
Co., 363 U.S. 574, 582 (1960)). Arbitration agreements
are subject to “the well- accepted rule that
ambiguities in contracts are construed against the
drafter.” Dumais v. Am. Golf Corp., 299 F.3d
1216, 1219 (10th Cir. 2002). And although there is a
“strong federal policy favoring arbitration, ”
McWilliams v. Logicon, Inc., 143 F.3d 573, 576 (10th
Cir.1998), “this presumption disappears when the
parties dispute the existence of a valid arbitration
agreement.” Dumais, 299 F.3d at 1220 (citing
First Options of Chicago, Inc. v. Kaplan, 514 U.S.
938, 944-45 (1995); Riley Mfg. Co., Inc. v. Anchor Glass
Container Corp., 157 F.3d 775, 779 (10th Cir.1998)).
the court has been presented with two possibly applicable
agreements to arbitrate. First, Defendants have argued that
the South Jordan Agreement requires arbitration of
Plaintiff's claims. The South Jordan Agreement was signed
by the previous owners of the South Jordan Dickey's
location. (Dkt. No. 18-1.) In the Asset Purchase Agreement
Plaintiffs entered into with the previous owners, Plaintiffs
agreed that they were responsible for “obtaining
franchise approval from Dickey's Barbecue Pit franchise
and for meeting all continuing obligations of the
same.” Nowhere in the Asset Purchase Agreement or any
of the documents submitted to the court do the Plaintiffs
agree to assume the agreements and obligations contained in
the South Jordan Agreement. Thus, the court has no basis to
find that the South Jordan Agreement applies to compel
arbitration here, where the court has not been presented with
evidence that Plaintiffs agreed to the terms of the South
Jordan Agreement or its arbitration provision.
parties have also presented the Ogden Agreement as a possible
source of a requirement to arbitrate. The Ogden Agreement
expressly applies only to an Ogden, Utah franchise location
that apparently never came to fruition. The Ogden Agreement
does not reference a South Jordan location. In fact, the
Agreement is specifically limited to the “Assigned
Area”, which is “Ogden, Utah.” (Dkt. No.
23-5.) Plaintiffs' claims all arise out of the operation
of a South Jordan franchise. Accordingly, the Ogden Agreement
is inapplicable to Plaintiffs' claims.
points out that Plaintiffs paid royalties consistent with a
franchise agreement for the years it operated as a
Dickey's franchise, and that Plaintiffs used Dickey's
logo, name, and marketing materials in connection with the
operation of the South Jordan franchise. Plaintiffs also
admit in their Complaint that they “entered into a
Franchise Agreement and a Development Agreement with
Dickey's on August 25, 2014.” (Compl. at ¶
10.) Although the existence of some type of franchise