Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—M.D. La.: Arbitration ordered in electrical contracting breach of franchise agreement action, (Jan 12, 2016)

By Greg Hammond, J.D.

A facility solutions company could enforce an arbitration provision in a franchise agreement with an electrical and instrumentation contractor, the federal district court in Baton Rouge has decided. In granting the facility solutions company’s motion to compel arbitration, the court determined that the arbitration provision was not uncommonly broad, its reach was easy to discern, and the electrical contractor’s breach of contract claims fell squarely and comfortably within the arbitration provision’s plain ambit (Vector Electric & Controls, Inc. v. ABM Industries Inc., January 11, 2016, deGravelles, J.).

Vector Electric & Controls, Inc., an electrical and instrumentation contractor, entered into a franchise agreement and two renewal contracts with TEGG Inc., an international group of electrical contractors. Facility solutions company ABM Industries Inc., however, purchased TEGG’s assets in 2012. Vector subsequently sued ABM indirectly for breach of the franchise agreement and violation of the Louisiana Unfair Trade Practices Act, alleging that Vector relied on misrepresentations or suppressions of truth made by ABM and TEGG with the intention of inducing Vector to enter into a contractual relationship with and pay fees to ABM. ABM moved to compel arbitration.

Arbitration enforceable. The court agreed that there was no other option than to order arbitration because: (1) the arbitration provision—which covered “any dispute arising out of or relating to this Agreement, or a claimed breach thereof, that remains unresolved after discussions and mediation”—was not uncommonly broad and its reach was easy to discern; and (2) the alleged breaches of three contracts, each of which included an identically worded arbitration provision, and TEGG’s purported improprieties in inducing Vector to consent to the contracts, fell squarely and comfortably within the arbitration provision’s plain ambit.

ABM’s standing. Second, the court rejected Vector’s arguments that ABM lacks standing because it was not a party to any of the agreements to which the arbitration provision was included. In particular, the court determined that Vector portrayed ABM as an effective signatory in prior filings. Further, Pennsylvania law—which is controlling according to the terms of the franchise agreement—allowed non-signatories to be bound to an arbitration agreement. Consequently, because ABM, as an apparent agent and successor of TEGG, could enforce the arbitration provision under Pennsylvania law, Vector’s standing argument was unsupportable, the court concluded.

In addition to granting ABM’s motion to compel, the court stayed the action pending the results of the arbitration.

The case is No. 3:15-00252-JWD-RLB.

Attorneys: David L. Bateman (Bateman Law Firm) for Vector Electric & Controls, Inc. Steven W. Copley (Gordon, Arata, McCollam, Duplantis & Eagan, LLC) and Benjamin B. Reed (Plave Koch PLC) for ABM Industries Inc.

Companies: Vector Electric & Controls, Inc.; ABM Industries Inc.; TEGG Inc.

Cases: FranchisingDistribution LouisianaNews