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In ordering arbitration of a franchisee's counterclaims, a federal court in Virginia rejected the franchisee's argument that the unilateral nature of the arbitration agreements rendered them unconscionable.
In JTH Tax, Inc. v. Lee, No. 2:06cv486, 2007 WL 1795751 (E.D. Va. June 19, 2007), JTH Tax (JTH) and Lee entered into five separate franchise agreements, each containing an arbitration clause that applied only to Lee's claims. When JTH sued for trademark infringement and breach of contract, Lee filed several counterclaims. In response, JTH filed a motion to compel arbitration of the counterclaims.
In opposing arbitration, Lee argued that the arbitration agreements were unconscionable and therefore unenforceable. As support for his unconscionability argument, Lee noted that the arbitration agreements applied only to his claims.
The Court relied on Johnson v. Circuit City Stores, 148 F .3d 373 (4th Cir.1998) in rejecting Lee's argument that the unilateral nature of the arbitration agreements rendered them unconscionable. Similarly, the Court rejected Lee's argument that the unilateral nature of the arbitration agreements ran afoul of Illinois franchise law.
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