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A federal district court in New York denied a motion to enjoin arbitration in Washington because the validity of the forum selection clause was an issue for the arbitrator.
In Gill v. World Inspection Network International, Inc., No. 06-CV-3187, 2006 WL 2166821 (E.D.N.Y. July 31, 2006), World Inspection Network (“WIN”) initiated arbitration, alleging that Gill, its former franchisee, violated a non-compete provision in the parties’ franchise agreement. The agreement provided for arbitration in the state of Washington.
Gill, a New York resident, sued to enjoin arbitration in Washington, arguing that the forum selection clause was unconscionable and that arbitration should take place in New York.
Citing Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79 (2002), the Court held that the validity of the forum selection clause was not a “question of arbitrability” but rather a procedural question for the arbitrator to decide. In support of its holding, the Court cited two federal court decisions holding that the arbitrator must decide the validity of a forum selection clause.
As the Court observed, even if the validity of a forum selection clause were normally an issue for the court, the parties’ agreement “clearly and unmistakably provided otherwise” by specifying that “any claim that this Agreement, or any part thereof, is invalid, illegal or otherwise voidable or void, shall be submitted to the arbitrator.”
Despite the arbitrator’s province over the issue, the Court “out of an abundance of caution” explained why Gill would be unlikely to prevail on his argument that the forum selection clause was unconscionable. Specifically, the Court observed that forum selection clauses are not per se unconscionable. Moreover, the Court distinguished the cases cited by Gill on the ground that those cases involved “contracts for consumer goods and services” as opposed to a franchise agreement where more is at stake.
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