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MOSCA v. DOCTORS ASSOCS.

October 25, 1993

JOSEPH B. MOSCA, JR., JOSEPHINE MOSCA, JOSEPH B. MOSCA, SR., and SIS N SON, Plaintiffs,
v.
DOCTORS ASSOCIATES, INC. d/b/a SUBWAY, LOUISE SCOTTI, RALPH PISSELLI, and LEONARD AXELROD, Defendants.



The opinion of the court was delivered by: STERLING JOHNSON, JR.

 JOHNSON, District Judge:

 INTRODUCTION

 Plaintiffs Joseph B. Mosca, Jr., Josephine Mosca, Joseph B. Mosca, Sr., and Sis N Son (collectively the "Moscas") commenced this action against Defendants Doctors Associates, Inc. ("DAI"), d/b/a Subway, Louise Scotti ("Scotti"), Ralph Pisselli ("Pisselli"), and Leonard Axelrod ("Axelrod") alleging violations of the New York General Business Law, the Connecticut Franchise Act, and the common and statutory law of the State of Connecticut, including common law fraud, unjust enrichment, and fraudulent business practices by Defendant. Defendants now move to dismiss the action in favor of arbitration or, in the alternative, stay the action pending arbitration pursuant to an arbitration clause in agreements signed by DAI and Plaintiffs. For the reasons stated below, Defendants motion to dismiss is granted.

 FACTUAL BACKGROUND

 In October 1987, Joseph Mosca, Jr. and Josephine Mosca entered into two contracts to purchase Subway sandwich shop franchises. Defendant Scotti was the Developing Agent for their area who would approve a location, supervise the franchise, and be paid a portion of the initial franchise fee and royalties. After several locations were rejected by Scotti, Plaintiffs were informed by Pisselli, a sales representative of DAI, of a suitable location in New Brunswick and on February 6, 1989, Plaintiffs Joseph B. Mosca, Jr. and Josephine Mosca entered into a contract to purchase and operate a Subway franchise in New Brunswick, New Jersey.

 Plaintiffs were soon successful and were interested in opening a second franchise. David Scotti, the new Developing Agent, informed Plaintiffs that an abandoned location in Elizabeth was available which the Plaintiffs decided to purchase. A second Subway franchise agreement was entered into on August 4, 1989 by the Moscas. The Elizabeth store failed to be profitable causing the Moscas to fall behind in their royalty payments on both locations.

 DAI expressed concern about the missed payments and Defendant Axelrod suggested that the Moscas sell the Elizabeth location. On August 7, 1990 the sale of the Elizabeth store was completed and the franchise agreement was terminated with the proceeds put toward the debt of both locations. Soon thereafter, Plaintiffs were evicted from the New Brunswick location.

 DISCUSSION

 Defendants, relying on the Federal Arbitration Act (the "FAA"), 9 U.S.C. § 1 et seq., contend that an arbitration clause in the contracts with Plaintiffs requires dismissal of the action or an order staying the action pending arbitration. Plaintiffs respond that Defendants Scotti, Pisselli, and Axelrod are not bound by the agreement and that the allegations under the Organized Crime Control Act of 1970, 18 U.S.C. §§ 1961-1968 and the Connecticut Franchise Act cannot be settled by an arbitrator.

 The FAA establishes a "federal policy favoring arbitration," Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24, 74 L. Ed. 2d 765, 103 S. Ct. 927 (1983), which requires that courts "rigorously enforce agreements to arbitrate." Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221, 84 L. Ed. 2d 158, 105 S. Ct. 1238 (1985); see also Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 226, 96 L. Ed. 2d 185, 107 S. Ct. 2332 (1987); McDonnell Douglas Fin. Corp. v. Pennsylvania Power & Light Co., 858 F.2d 825, 830 (2d Cir. 1988); Heat & Frost Insulators v. Insulation Quality Ent., 675 F. Supp. 1398, 1405 (E.D.N.Y. 1988). Yet the provisions of the FAA do not apply to any and all contracts; a court must determine whether the FAA applies to the dispute, whether an agreement to arbitrate exists, and whether a specific claim was contemplated by the parties to be within the scope of the agreement. Wilson v. Subway Sandwiches Shops, Inc., 823 F. Supp. 194, 198 (S.D.N.Y. 1993); Scher v. Bear Stearns & Co., Inc., 723 F. Supp. 211, 214 (S.D.N.Y. 1989).

 The FAA only governs those contracts which are defined in 9 U.S.C. §§ 1 and 2, Bernhardt v. Polygraphic Co. of America, 350 U.S. 198, 100 L. Ed. 199, 76 S. Ct. 273 (1956); Varley v. Tarrytown Associates, Inc., 477 F.2d 208, 209 (2d Cir. 1973), such as "contract[s] evidencing a transaction involving commerce." 9 U.S.C. § 2. Here, the contract between Defendants and Plaintiffs created an ongoing commercial relationship involving parties from different states, a national advertising campaign and other marketing efforts, and training of Plaintiffs by Defendants; therefore the contract is governed by the FAA's provisions. See Franchise Agreements, appended to Notice of Motion as Exhibits 1 & 2.

 To determine the existence of an arbitration agreement, the Court employs ordinary contract principles and "as with any other contract, the parties' intentions control, but those intentions are generously construed as to issues of arbitrability." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 626, 87 L. Ed. 2d 444, 105 S. Ct. 3346 (1985). In the instant case, ...


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