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Copi-Rite, Inc. v. Sharp Electronics Corporation

A-5171-96T3 (N.J. Super. App. Div. 1998) (Unpublished)

FRANCHISES; ARBITRATION—The Franchise Practices Act does not preclude the use of arbitration even if the selected forum is a convenient, but out of state venue.

A photocopy machine dealer sued its manufacturer-supplier alleging violations of the Franchise Practices Act, breach of contract in violation of the New Jersey Antitrust Act, tortious interference with contractual relations or prospective economic advantage, and conspiracy to violate the New Jersey Antitrust Act (the last two allegations were also made against another dealer). The manufacturer moved to dismiss the complaint and compel arbitration under the mandatory arbitration provision of its contract with the dealer. The lower court determined that all claims except those sounding in tort and antitrust should be arbitrated. Following its success in the arbitration, the manufacturer successfully moved in the lower court to confirm the arbitration award. At oral argument on the motion for the confirmation, the dealer confirmed, as it had earlier represented in its motion brief, that it had withdrawn the antitrust and tort claims, with prejudice, against the manufacturer and the other dealer in order to obtain a final decision with respect to the motion.

The dealer appealed from the lower court’s order confirming the arbitration award. In its appeal, it argued that the arbitration clause in the agreement was presumptively invalid and that it should have been permitted to reinstate the tort and antitrust claims that were waived in order to render final and appealable the lower court’s order. Although the dealer argued that agreements under the Franchise Practice Act must be litigated in the courts and should not be subject to arbitration in an out-of-state forum, the Appellate Division did not agree. The Court did not believe that an arbitration clause calling for arbitration in New York City imposed an oppressive burden on the franchisee, nor that there were significant issues of expense or inconvenience or problems of unfamiliarity with applicable New Jersey law. Furthermore, in the Court’s view, the choice of arbitration for dispute resolution did not force a franchisee to forego all protections of the New Jersey courts. In addition, even though the contract’s arbitration clause suggested application of New York law, here, where the arbitrator actually applied New Jersey law to determine whether the provisions of the Franchise Practices Act would pertain, there was no offence to New Jersey law. Further, the Court noted that while an arbitration clause sets forth the manner in which relief may be sought and granted, it does not relieve a party from its potential exposure under the Franchise Practices Act in the chosen arbitration setting. Consequently, neither court precedent nor the Franchise Practices Act renders such arbitration clauses unenforceable.

With respect to the dealer’s argument that it should be allowed to “revive” the dismissed tort and antitrust claims, the Court held that such arguments “will not be tolerated.” To allow so, would be to permit an evasion of the rule against interlocutory appeals and, in any event, an order entered on consent is not appealable.


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