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Doctor's Associates Inc. v. Nijjar

United States District Court, D. Connecticut

April 13, 2017

DOCTOR'S ASSOCIATES INC., Plaintiff,
v.
KAMALJIT NIJJAR, Defendant.

          RULING ON PETITION TO COMPEL ARBITRATION (DOC., 1)

          JANET C. HALL UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         The plaintiff, Doctor's Associates, Inc. (“DAI” or “Subway”), the franchiser of Subway sandwich shops in the United States, filed a Petition to Compel Arbitration (Doc. No. 1) against the defendant, Kamaljit Nijjar, (“Ms. Nijjar”). Ms. Nijjar had assumed the obligations and liabilities for two Subway Franchise Agreements. See Assumption of Agreement No. 24099 (on page 17 of Doc. No. 1-1); Assumption of Agreement No. 12414 (on page 17 of Doc. No. 1-2). The Franchise Agreements each include an arbitration provision. See Franchise Agreement No. 24099 (in pages 2-16 of Doc. No. 1-1) at 11-12 ¶ 10; Franchise Agreement No. 12414 (in pages 2-16 of Doc. No. 1-2) at 11-12 ¶ 10. DAI now seeks to compel arbitration in connection with a lawsuit that Ms. Nijjar filed against DAI in Virginia state court, and that has since been removed to a court in the Easter District of Virginia (“the Virginia Lawsuit”). See Pet. ¶¶ 13, 18; Original Virginia Compl. (Doc. No. 1-4); Virginia Am. Compl. (E.D. Va. Case No. 16-cv-1457, Doc. No. 7). DAI seeks an order “directing Ms. Nijjar to arbitrate her claims in the manner provided by the Franchise Agreements.” Pet. ¶ 18. For the reasons stated below, DAI's Petition to Compel Arbitration is denied.

         II. BACKGROUND

         The Franchise Agreements were formed in 2007, between Rambir Nijjar (“Mr. Nijjar”) and DAI. See Franchise Agreement No. 24099 at 2; Franchise Agreement No. 12414 at 2. Each Franchise Agreement contains an arbitration provision, stating that “[a]ny dispute, controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration.” Franchise Agreement No. 24099 at 11 ¶ 10(a); Franchise Agreement No. 12414 at 11 ¶ 10(a).

         Mr. Nijjar is currently Ms. Nijjar's ex-husband. See Divorce Order (Doc. No. 14-1) at 1. The couples' divorce became final on August 14, 2015. See Divorce Order at 1 (discussing final divorce decree). Mr. Nijjar transferred the Franchise Agreements to Ms. Nijjar on August 20, 2015, in connection with this divorce. See Pet. ¶¶ 6-7; Response (Doc. No. 14) ¶ 2; Divorce Order at 1 (quoting settlement agreement, incorporated into couples' divorce decree, in which Ms. Nijjar released Mr. Nijjar from certain claims, in exchange for him transferring the franchises to her).

         A dispute arose between DAI and Ms. Nijjar regarding the operation of the restaurants involved in the Franchise Agreements. In June 2016, the parties signed, and an arbitrator approved, a Stipulated Arbitration Award (Doc. No. 1-3), in connection with that dispute.

         The Stipulated Arbitration Award states, inter alia, that (1) Ms. Nijjar “will transfer the Restaurants in accordance with the standard transfer procedures, as required by subparagraph 9(a) of the Franchise Agreement[s] and Chapter 21 [(excerpted in Doc. No. 14-2)] of the SUBWAY® Operations Manual, ” (2) “[t]he transfer must be at arms-length to a buyer approved by [DAI], ” and (3) “a closing must take place within one hundred and fifty (150) days.” Stipulated Arbitration Award ¶ 5(a)(ii). The Stipulated Arbitration Award provides that, if Ms. Nijjar “fails to transfer the Restaurants by the date set forth above, the Franchise Agreements will be terminated on the one hundred and fifty first (151st) day from execution of [the] Award.” Id. ¶ 8. The Stipulated Arbitration Award states that the Award “does not affect any continuing obligations of the parties under [the] Franchise Agreements between them.” Id. ¶ 12. The Stipulated Arbitration Award states that the Award “can be confirmed in any court having jurisdiction.” Id. ¶ 17.

Subparagraph 9(a) of the Franchise Agreements, which is referenced in the Stipulated Arbitration Award, contains the following language:

You may transfer the Restaurant and this Agreement . . . provided[, inter alia]: (i) you first offer, in writing, to sell the Restaurant to us on the same terms and conditions offered by a bona fide third party purchaser, we fail to accept the offer . . ., and we approve your contract with the purchaser; (ii) each purchaser has a satisfactory credit rating, and is of good moral character; [and] (iii) each purchaser received a passing score on our standardized test.

Franchise Agreement No. 24099 at 10 ¶ 9(a); Franchise Agreement No. 12414 at 10 ¶ 9(a).

         Chapter 21 of the SUBWAY® Operations Manual, also referenced in the Stipulated Arbitration Award, states, inter alia, that “DAI considers any change in the ownership interest of a franchise due to a divorce decree (or, a court approved settlement or Separation Agreement) to be a transfer in accordance with paragraph 9(a) of your Franchise Agreement.” Chapter 21.

         On September 26, 2016, a Virginia state court ordered Ms. Nijjar to “transfer back to” Mr. Nijjar “all of her right, title and ownership interest in the [ ] Subway franchised stores.” Divorce Order at 1. Ms. Nijjar then attempted to transfer the franchises back to Mr. Nijjar. See Response ¶ 10; Reply (Doc. No. 16) at 6. However, DAI refused to allow Ms. Nijjar to transfer the franchises back to Mr. Nijjar. See Response ¶ 10; Reply at 6.

         On October 28, 2016, Ms. Nijjar filed a lawsuit against DAI in Virginia state court. See Original Virginia Compl. Ms. Nijjar alleged that, by preventing her from transferring the franchises back to Mr. Nijjar, DAI acted in bad faith, made it impossible for Ms. Nijjar to find a buyer within the 150-day window set out by the Stipulated Arbitration Award, prevented her from complying with the Divorce Order, and violated both the Stipulated Arbitration Award and the Franchise Agreements. See Original Virginia Compl. ΒΆΒΆ 23- 27. Despite mentioning the Franchise Agreements, the Original Virginia Complaint contained only a single cause of action: a breach of contract claim for violation of ...


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