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Torres v. CleanNet U.S.A., Inc.

United States District Court, E.D. Pennsylvania

February 5, 2015

EDDY TORRES, Plaintiff,
v.
CLEANNET U.S.A., INC., et al., Defendants

Page 370

For EDDY TORRES, Plaintiff: CHARLES J. KOCHER, LEAD ATTORNEY, SALTZ MONGELUZZI BARRETT & BENDESKY PC, PHILADELPHIA, PA; PATRICK HOWARD, LEAD ATTORNEY, SALTZ MONGELUZZI BARRETT & BENDESKY, PHILADELPHIA, PA; PETER D. WINEBRAKE, LEAD ATTORNEY, WINEBRAKE & SANTILLO, LLC, Dresher, PA; SIMON BAHNE PARIS, LEAD ATTORNEY, PRO HAC VICE, SALTZ MONGELUZZI BARRETT & BENDESKY, P.C., ONE LIBERTY PLACE, PHILADELPHIA, PA; DAVID GARCIA-VILLARREAL, GARCIA & ASSOCIATES LLC, PHILADELPHIA, PA; R. ANDREW SANTILLO, WINEBRAKE & SANTILLO, LLC, DRESHER, PA.

For CLEANNET U.S.A., INC., Defendant: MARTHA J. KEON, WILLIAM J. SIMMONS, LEAD ATTORNEYS, LITTLER MENDELSON, P.C., PHILADELPHIA, PA.

For MKH SERVICES, INC., doing business as CLEANNET OF PHILADELPHIA, Defendant: DAVID KRAUT, HAROLD M. GOLDNER, KRAUT HARRIS, P.C., BLUE BELL, PA.

For CLEANNET SYSTEMS OF PENNSYLVANIA, INC., Defendant: MARTHA J. KEON, LEAD ATTORNEY, LITTLER MENDELSON, P.C., PHILADELPHIA, PA.

Page 371

MEMORANDUM

ANITA B. BRODY, J.

Plaintiff Eddy Torres brings this class action against Defendants CleanNet U.S.A., Inc. (" CleanNet" ), MKH Services, Inc. (" MKH" ), and CleanNet Systems of Pennsylvania, Inc. (" CleanNet PA" ) pursuant to PA R. Civ. P. § § 1701-16 on behalf of the following putative class: " All persons who performed cleaning services for Defendants in Pennsylvania at any time from April 11, 2011 to the present." Compl. ¶ 70. Torres originally filed this case in the Philadelphia Court of Common Pleas. Defendants removed this diversity class action from state court to district court pursuant to the Class Action Fairness Act of 2005 (" CAFA" ). I determined that the action stays in federal court. See ECF Nos. 37, 38. Defendants now move to stay proceedings pending arbitration.[1]

Page 372

For the reasons set forth below, I will grant Defendants' motions to stay in favor of arbitration.

I. BACKGROUND[2]

Defendant CleanNet is a commercial cleaning company that operates in Pennsylvania and other locations throughout the United States. CleanNet operates in Pennsylvania through two subfranchisors (" Area Operators" ), Defendants MKH and CleanNet PA. On March 9, 2012, Torres entered into a Franchise Agreement with MKH to become a CleanNet franchisee and to perform cleaning services for CleanNet. In the Franchise Agreement, MKH agreed to provide Torres $7,000 in gross monthly billings, if Torres paid an Initial Franchise Fee of $24,500. The Franchise Agreement also contained Section XXII on dispute resolution.

Under Section XXII, the parties " expressly agree[d] first to resolve disputes by direct negotiation with each other." MKH's Mot. Ex. A at 39.[3] If those negotiations failed, the parties agreed that " [b]efore and as a necessary condition precedent to, filing a demand for arbitration in accordance with this Agreement, Franchisee and Franchisor shall attempt to settle the dispute through mediation administered by the American Arbitration Association (" AAA" )." Id. If mediation failed, the parties then agreed to adhere to the following arbitration provision:

Arbitration. All disputes, controversies, and claims of any kind arising between parties, including but not limited to claims arising out of relating to this Agreement, the rights and obligations of the parties, the sale of the franchise, or other claims or causes of action relating

Page 373

to the performance of either party that are unable to be settled through mediation shall be settled by arbitration administered AAA at its office closest in proximity to the Franchisor's office, in accordance with the Federal Arbitration Act and the Commercial Rules of the AAA, unless the parties otherwise agree in accordance with . . . this Agreement.
* * * *
The filing fee for the proceeding shall be borne by the initiating party. The arbitrator's compensation and any administrative costs shall be borne by both parties.
* * * *
The parties expressly agree that an arbitrator shall have the power to enter an award, including injunctive relief, protecting each parties rights to the same extent a court could do so, and such relief shall be enforceable by a court having jurisdiction under . . . this Agreement.
* * * *
No arbitration or action under this Agreement shall include, by consolidation, joinder, or any other manner, any claims by any person or entity in privity with or claiming through or on behalf of Franchisee. Franchisee shall not seek to arbitrate or litigate as a representative of, or on behalf of, any person or entity, any dispute, controversy, and claim of any kind arising out of or relating to this Agreement, the rights and obligations of the parties, the sale of the franchise, or other claims or causes of action relating to the performance of either party to this Agreement.

Id. at 39-40. Section XXII also included the following waiver of punitive damages provision:

Waiver of Punitive Damages. FRANCHISEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT OR CLAIM FOR ANY PUNITIVE, EXEMPLARY, CONSEQUENTIAL, OR SPECULATIVE DAMAGES INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS, AND AGREES THAT IN THE[] EVENT OF A DISPUTE, FRANCHISEE SHALL BE LIMITED TO THE ACTUAL DAMAGES SUSTAINED EXCEPT AS OTHERWISE PROVIDED HEREIN.

Id. at 41. Additionally, Section XXII contained the following saving clause:

Saving Clause. If any provisions of this Section XXII would violate applicable state or federal laws, then the parties agree that such provision shall be excluded from the terms of this Agreement, or shall be modified to the ...

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