Doctor's Associates, Inc. v. Alemayehu , 934 F.3d 245 ( 2019 )

18‐1865‐cv
Doctor’s Associates, Inc. v. Alemayehu
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
August Term, 2018
Argued: May 23, 2019 Decided: August 14, 2019
Docket No. 18‐1865‐cv
DOCTOR’S ASSOCIATES, INC.,
Plaintiff‐Appellant,
— v. —
GIRUM ALEMAYEHU,
Defendant‐Appellee.
B e f o r e:
LIVINGSTON, LYNCH, and SULLIVAN, Circuit Judges.
Plaintiff‐Appellant Doctor’s Associates, Inc. (“DAI”), is the parent
company of the Subway chain of restaurants. Defendant‐Appellee Girum
Alemayehu (“Alemayehu”) sought DAI’s approval to purchase an existing
Subway franchise in Aurora, Colorado, and, when DAI denied his application,
Alemayehu sued, claiming that DAI discriminated against him on the basis of
race. DAI then filed this lawsuit in the United States District Court for the District
of Connecticut, seeking to compel Alemayehu to arbitrate. The United States
District Court for the District of Connecticut (Hall, J.) denied DAI’s motion to
compel, holding that the Franchise Application, which DAI argues contains a
binding arbitration clause, was not supported by consideration.
As a threshold matter, we agree with the district court that whether or not
an agreement is supported by adequate consideration is a question about contract
formation for the court, not the arbitrator, to decide. We conclude, however, that
the promise to arbitrate in the Franchise Application was supported by adequate
consideration. We therefore VACATE the judgment of the district court and
REMAND for further proceedings consistent with this opinion.
JEFFREY R. BABBIN, Wiggin and Dana LLP, New Haven, CT
(David R. Roth, Wiggin and Dana LLP, New Haven, CT,
on the brief), for Plaintiff‐Appellant.
JEFFREY COHEN, Cohen, LLC, Denver, CO (Anthony Garcia,
Cohen, LLC, Denver, CO, on the brief), for Defendant‐
Appellee.
GERARD E. LYNCH, Circuit Judge:
Plaintiff‐Appellant Doctor’s Associates, Inc. (“DAI”), is the parent
company of the Subway brand of restaurant franchises. Beginning in 2016,
Defendant‐Appellee Girum Alemayehu sought to purchase an existing Subway
franchise in Colorado. As part of the application process, Alemayehu checked a
2
box on an online form, agreeing to submit any claims arising from the application
process to arbitration. When DAI denied Alemayehu’s application, however, he
filed a lawsuit in the United States District Court for the District of Colorado,
claiming that DAI and its agents had discriminated against him on the basis of
race. DAI responded by bringing this action in the United States District Court
for the District of Connecticut, seeking to compel the arbitration of Alemayehu’s
claims.
The United States District Court for the District of Connecticut (Janet A.
Hall, J.) denied the motion, finding that the putative arbitration agreement lacked
consideration, and DAI appealed. For the reasons that follow, we VACATE the
judgment of the district court and REMAND for further proceedings consistent
with this opinion.
3
BACKGROUND1
In 2016, Alemayehu, a Colorado businessman, sought to purchase an
existing Subway franchise in Aurora, Colorado, from Gary Newcomb. After a
few months of negotiation, Alemayehu and Newcomb, who owned multiple
Subway franchises in the Denver area, reached a tentative agreement that
Alemayehu and his wife would purchase the Aurora franchise for $120,000.
However, individuals seeking to start a new Subway franchise, or to
purchase an existing franchise as a new owner, must first obtain DAI’s approval.
The application process begins with an online application. The application, on
which potential franchisees must provide the restaurant chain with personal as
well as financial information, is available on Subway’s website.
Alemayehu filled out this initial application on February 15, 2017, on
behalf of himself and his wife. The two‐page application required Alemayehu to
1
Our discussion of the facts is drawn primarily from Alemayehu’s complaint in
the Colorado action and the factual information submitted by the parties in
connection with the motion to compel arbitration. In reviewing a motion to
compel arbitration, we “consider all relevant, admissible evidence submitted by
the parties and contained in pleadings, depositions, answers to interrogatories,
and admissions on file, together with affidavits.” Nicosia v. Amazon.com, Inc., 834
F.3d 220, 229 (2d Cir. 2016) (internal citations, quotations marks and alterations
omitted).
4
provide his demographic and personal information, as well as information about
his educational background and past or current business experience.
In addition to demanding such information, the Franchise Application
required the applicant to make various promises. Applicants were required to
authorize DAI to complete a background check, and to agree to keep private any
confidential information they receive from DAI. The Franchise Application also
contained the following arbitration provision:
I agree that I will settle any and all previously
unasserted claims, disputes or controversies arising out
of or relating to my application or candidacy for the
grant of a SUBWAY franchise from Franchisor,
pursuant to the laws of Connecticut, USA, and by
binding arbitration only. I agree that the arbitration will
be administered by either the American Arbitration
Association or its successor (“AAA”) or the American
Dispute Resolution Center or its successor (“ADRC”) at
the discretion of the party first filing a demand for
arbitration. I understand that AAA will administer the
arbitration in accordance with its administrative rules
(including, as applicable, the Commercial Rules of the
AAA and the Expedited Procedures of such rules), and
ADRC will administer the arbitration in accordance
with its administrative rules (including, as applicable,
the Rules of Commercial Arbitration or under the Rules
for Expedited Commercial Arbitration). If both AAA
and ADRC are no longer in business, then I understand
that the parties will mutually agree upon an alternative
administrative arbitration agency. If the parties cannot
mutually agree, then the parties agree to take the matter
5
to a court of competent jurisdiction to select the agency.
I agree that arbitration will be held in Bridgeport,
Connecticut, USA, conducted in English and decided by
a single arbitrator.
J. App’x at 14. Applicants were required to check a box immediately below this
text, certifying that they “ha[d] read the above disclaimer.” Id. It was not possible
to submit the Franchise Application without checking the box and typing a name
into a signature box below it.
As Alemayehu later stated in his Colorado complaint, “Subway began
taking actions in consideration of their applications” shortly after he submitted
the application form. J. App’x at 24. DAI required Alemayehu and his wife to
take the Wonderlic Personnel Test at the office of Clear Stone Development, Inc.
(“Clear Stone”);2 the couple completed the test on February 22, 2017. Several
weeks later Alemayehu was informed that he had passed the test, but that his
wife had not. Alemayehu was then interviewed at the Clear Stone office. During
this initial interview, Alemayehu alleges, Connie Gemignani, Director of
Operations for Clear Stone, told him not to sign a contract with Newcomb. She
then instructed Alemayehu to attend a training seminar.
2
Clear Stone is a Colorado corporation and serves as Subway’s franchise
development agency for Denver and parts of southern Colorado.
6
Alemayehu had a final interview with Clear Stone on May 24, 2017, during
which Gemignani allegedly told Alemayehu that he was “not fit” to run a
Subway franchise. J. App’x at 27. According to Alemayehu, Gemignani did not
tell him what specifically made him unqualified. She later told Newcomb,
however, that she “did not want to talk to [Alemayehu] because [Clear Stone
was] worried he would be playing the race card with them,” and that she
therefore would not reconsider Alemayehu’s application. J. App’x at 117–18.
Alemayehu filed suit in the United States District Court for the District of
Colorado on January 26, 2018. In his complaint, Alemayehu claimed that DAI
was responsible for the actions of Clear Stone and its employees, and that DAI
engaged in its own wrongful conduct. He claimed that, in denying his
application, DAI, Gemignani, and Clear Stone had discriminated against him on
the basis of his race in violation of 42 U.S.C. § 1981. He also asserted several state
law claims, including tortious interference with prospective business advantage,
extreme and outrageous conduct, deceit based on fraud, violations of the
Colorado Consumer Protection Act, breach of the implied covenant of good faith
and fair dealing, and civil conspiracy.
In response to the Colorado lawsuit, DAI brought the instant action to
7
compel arbitration in the United States District Court for the District of
Connecticut.3 DAI relied on the arbitration provision of the Franchise
Application, alleging that the provision required Alemayehu to arbitrate “any
disputes or controversies arising out of or relating to the application or candidacy
for the grant of a Subway franchise from the Franchisor.” J. App’x at 9. DAI also
claimed that the arbitration provision required that any arbitration “must be in
accordance with the Commercial Rules of either the American Arbitration
Association . . . or the American Dispute Resolution Center” and that arbitration
“is to take place in Bridgeport, Connecticut.” J. App’x at 8. DAI therefore
requested that the district court in Connecticut enter “an order pursuant to 9
U.S.C. § 4 directing Alemayehu to arbitrate with DAI [the] claims against both
DAI and its agents” underlying Alemayehu’s Colorado action.4 J. App’x at 10.
3
DAI asserted that venue was proper because, among other reasons, Alemayehu
“agreed to arbitrate in Connecticut.” J. App’x at 8. Alemayehu does not raise any
objection to venue.
4
Following the filing of the Connecticut action, the district court in Colorado
stayed the proceedings there pending resolution of the motion to compel
arbitration. See Order, Alemayehu v. Gemignani, 18‐cv‐212‐CMA (D. Colo. March
23, 2018), ECF No. 16. After the district court in Connecticut denied the motion,
Alemayehu sought to vacate the stay. But the Colorado district court denied his
request pending this Court’s resolution of this appeal. The United States Court of
Appeals for the Tenth Circuit dismissed Alemayehu’s appeal of that order for
8
Alemayehu opposed DAI’s application on various grounds. Rather than
addressing the merits of Alemayehu’s arguments, however, the district court
instead raised sua sponte the question of consideration. It concluded that the court
“ha[d] insufficient information to determine whether the Franchise Application
submitted by [Alemayehu] constitutes a contract, either in whole or with respect
to the arbitration agreement, specifically whether there is consideration.” J. App’x
at 148. It then requested supplemental briefing from the parties.
Following that briefing, the court denied DAI’s motion to compel. See
Doctorʹs Assocs., Inc. v. Alemayehu, 321 F. Supp. 3d 305 (D. Conn. 2018) (“DAI”).
Rejecting DAI’s arguments to the contrary, the district court concluded that the
Franchise Application “contains only unilateral promises made by the applicant,
Alemayehu” and failed to require anything of DAI. Id. at 309. As a result, the
court concluded that there was no consideration and therefore “the parties did
not agree to arbitrate.” Id. at 313.
The district court entered judgment in favor of Alemayehu, and DAI
timely appealed.
lack of appellate jurisdiction. See Alemayehu v. Gemignani, 769 F. Appʹx 555, 562
(10th Cir. 2019). The Colorado proceedings accordingly remain stayed.
9
DISCUSSION
Under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., parties may
contract to arbitrate their disputes, and such agreements are “valid, irrevocable,
and enforceable, save upon such grounds as exist at law or in equity for the
revocation of any contract.” Id. § 2. The FAA “embodies a national policy
favoring arbitration” founded upon “a desire to preserve the parties’ ability to
agree to arbitrate, rather than litigate, [their] disputes.” Schnabel v. Trilegiant
Corp., 697 F.3d 110, 118 (2d Cir. 2012) (internal citations, quotation marks, and
alterations omitted). The Act was intended to “place[] arbitration agreements
upon the same footing as other contracts.” Id. (internal quotation marks omitted).
Arbitration remains, however, a creature of contract: “The threshold question
facing any court considering a motion to compel arbitration is . . . whether the
parties have indeed agreed to arbitrate.” Id.
DAI argues that Alemayehu promised to arbitrate his claims when, upon
submitting his application, he checked a box adopting an agreement to “settle
any and all previously unasserted claims, disputes or controversies arising out of
or relating to my application or candidacy . . . by binding arbitration only.” J.
App’x at 14. On appeal, DAI raises two primary arguments challenging the
10
district court’s denial of its motion to compel arbitration. First, it argues that the
question whether the promise to arbitrate was supported by adequate
consideration should have been decided by the arbitrator, not by the district
court. Second, should we conclude that the consideration question is for the
courts to decide, DAI argues that the agreement to arbitrate is supported by
adequate consideration and, therefore, that the parties have a binding contract
that requires Alemayehu to submit his claims to arbitration.
We review the district court’s denial of a motion to compel arbitration de
novo. Meyer v. Uber Techs., Inc. 868 F.3d 66, 72 (2d Cir. 2017).
I. Who Decides the Question of Consideration?
Before reviewing the district court’s determination that there was not
sufficient consideration, we must address a threshold issue that we have not
previously resolved: must the question whether an arbitration clause is
supported by adequate consideration be decided by a court at the outset, or may
it be referred to an arbitrator?
Under the FAA, threshold questions of arbitrability presumptively should
be resolved by the court and not referred to the arbitrator. See, e.g., First Options of
11
Chicago, Inc. v. Kaplan, 514 U.S. 938, 944–45 (1995).5 While the presumption may
be overcome where the parties “clearly and unmistakably” agree to arbitrate
threshold questions such as whether the arbitration clause applies to a particular
dispute, or whether it is enforceable, parties may not delegate to the arbitrator the
fundamental question of whether they formed the agreement to arbitrate in the
first place. Granite Rock Co. v. International Brotherhood of Teamsters, 561 U.S. 287,
299‐301 (2010) (internal quotation marks omitted).
In Granite Rock, the Supreme Court clarified that its “precedents hold that
courts should order arbitration of a dispute only where the court is satisfied that
5
“When deciding whether the parties agreed to arbitrate a certain matter
(including arbitrability), courts generally . . . should apply ordinary state‐law
principles that govern the formation of contracts.” Id. at 944. The Franchise
Application stated that disputes would be decided “pursuant to the laws of
Connecticut, USA.” J. App’x at 14. The district court, however, declined to
enforce the choice‐of‐law provision, concluding that Colorado law applied. DAI,
321 F. Supp. 3d at 308 & n.1. While DAI asserts that Connecticut law should
control, it also acknowledges that, like the district court, it “is unaware of any
substantive difference” between the law of Connecticut and Colorado relevant to
this appeal. Appellant’s Br. at 32‐33 n.9. Because the parties do not identify a
meaningful relevant difference between Connecticut and Colorado law, we need
not resolve the choice‐of‐law issue here. See, e.g., Schnabel, 697 F.3d at 119 (“But as
the district court recognized, neither that court nor this one need resolve this
typically thorny choice‐of‐law question, because both Connecticut and California
apply substantially similar rules for determining whether the parties have
mutually assented to a contract term.”).
12
neither the formation of the parties’ arbitration agreement nor (absent a valid
provision specifically committing such disputes to an arbitrator) its enforceability
or applicability to the dispute is in issue.” Id. at 299 (emphasis in original). The
Court in Granite Rock thus expressly distinguished threshold questions
concerning contract formation from questions concerning enforceability and
scope, noting that the parties may agree to arbitrate the latter in a parenthetical
conspicuously not applicable to the former. See id. See also Edwards v. Doordash,
Inc., 888 F.3d 738, 744 (5th Cir. 2018) (“[W]e first look to see if an agreement to
arbitrate was formed, then determine if it contains a delegation clause. . . .
Arguments that an agreement to arbitrate was never formed . . . are to be heard
by the court even where a delegation clause exists.”).6
6
DAI argues that the parties delegated threshold issues by incorporating the
rules of the American Arbitration Association (“AAA”) and the American
Dispute Resolution Center (“ADRC”), both of which empower arbitrators to
decide questions of arbitrability, including questions of the arbitrator’s own
jurisdiction and the existence of a contract. It relies on Contec Corp. v. Remote
Solution, Co. Ltd., 398 F.3d 205, 208 (2d Cir. 2005), in which this Court held that
the parties’ incorporation of the AAA rules amounted to “clear and unmistakable
evidence” of the parties’ intent to delegate threshold issues.
But even assuming that DAI is correct that the Franchise Application’s
invocation of the two sets of rules required arbitration of threshold questions, the
Court still “must resolve the disagreement” over “the formation of the parties’
arbitration agreement” before referring the dispute to arbitration. Granite Rock,
561 U.S. at 299–300.
13
This distinction accords with basic principles of contract law. An
agreement that has not been properly formed is not merely an unenforceable
contract; it is not a contract at all. And if it is not a contract, it cannot serve as the
basis for compelling arbitration. Arbitration is, first and foremost, “strictly a
matter of consent.” Granite Rock, 561 U.S. at 298 n.6. To take the question of
contract formation away from the courts would essentially force parties into
arbitration when the parties dispute whether they ever consented to arbitrate
anything in the first place.
Accordingly, the question before us is what type of issue, exactly, is
consideration. Is it a question of contract formation, such that a court must decide
the issue in order to ensure that the parties actually consented to arbitrate at all?
Or is it an issue related to the enforceability or scope of the arbitration clause and
therefore one that the parties may choose to delegate?
Basic tenets of contract law yield a simple answer. As one treatise notes,
“[a]t common law the formation of an informal contract requires that legally
sufficient consideration be given for the promise or promises contained within
the contract.” 3 Williston on Contracts § 7:1 (4th ed.). The requirement that a
contract be supported by consideration has continued, with slight modification,
14
into the present, where it remains an essential element of contract formation:
“Where no consideration exists, and is required, the lack of consideration results
in no contract being formed in the absence of a substitute for consideration” such
as estoppel. Id. at § 7:11; see also 17A Am. Jur. 2d Contracts § 18 (noting several
formulations of the essential elements of contracts, each including consideration).
Both Connecticut and Colorado law treat consideration as a necessary
element of contract formation, following the standard formulation of contract
formation. See, e.g., Summerhill, LLC v. City of Meriden, 131 A.3d 1225, 1229 (Conn.
App. Ct. 2016) (affirming trial court’s conclusion that there was insufficient
evidence to submit the question of a contract’s existence to the jury where the
alleged contract “did not set forth any consideration to support the formation of a
contract”); Harley v. Indian Spring Land Co., 3 A.3d. 992, 1013 (Conn. App. Ct.
2010) (“[T]he elements of a breach of contract include the formation of an
agreement[,] which, in turn, requires the presence of adequate consideration . . .
.” (citation omitted)); Pierce v. St. Vrain Valley Sch. Dist. RE‐1J, 981 P.2d 600, 603
(Colo. 1999) (explaining that “consideration” and “mutual assent” are “the basic
elements of contract formation”); Legro v. Robinson, 328 P.3d 238, 246 (Colo. App.
2012) (“A contract is formed when one party makes an offer and the other accepts
15
it, and the agreement is supported by consideration.”) (quoting Sumerel v.
Goodyear Tire & Rubber Co., 232 P.3d 128, 133 (Colo. App. 2009)). Because
consideration is fundamental to contract formation, it is an issue reserved for the
courts under Granite Rock.7
We conclude that whether a purported promise to arbitrate was supported
by consideration must be resolved by the court. We therefore turn to the question
of the consideration supporting the Franchise Application at issue here.
II. Was the Agreement Supported by Consideration?
The district court held that the “alleged contract” was not supported by
consideration because it “contains only unilateral promises made by the
applicant, Alemayehu.” DAI, 321 F. Supp. 3d at 309. Rejecting DAI’s arguments
to the contrary, it concluded that, while a promise to consider an application
might be sufficient consideration for promises made in submitting that
7
DAI’s arguments about the scope of the arbitration provision (and the AAA and
ARDC rules) are beside the point. Once formed, of course, a broad agreement to
arbitrate might require the arbitrator to determine the scope of the arbitration
provision at issue. See, e.g., Bell v. Cendant Corp., 293 F.3d 563, 568 (2d Cir. 2002).
The question here is not whether the language of the provision can be read as
broad enough to encompass issues of formation, but rather whether the clause
itself exists as a binding agreement in the first place. If there is no consideration
for the promise to arbitrate, then there is essentially no contractual language to
interpret.
16
application, “DAI did not make a legally enforceable promise to consider
Alemayehu’s Franchise Application” because there was “no language in the
Franchise Application binding DAI to consider franchise applications, to provide
applicants with additional information, or to respond to everyone who applies.”
Id. at 310.
That conclusion was in error. A fundamental tenet of the law of
consideration is that “[c]onsideration may consist of a performance or of a return
promise,” Restatement (Second) of Contracts § 71, cmt. d (emphasis added), and
that, except in certain circumstances not relevant here, “any performance which
is bargained for is consideration,” id. § 72. See also Mandell v. Gavin, 816 A.2d 619,
625 (Conn. 2003) (adopting Restatement (Second) definition of consideration);
PayoutOne v. Coral Mortg. Bankers, 602 F. Supp. 2d 1219, 1224 (D. Colo. 2009)
(noting that, under Colorado law, “sufficient consideration . . . [requires] an
exchange of one party’s promise or performance for the other party’s promise or
performance.”) (emphasis added); 17A Am. Jur. 2d Contracts § 101 (“There is
consideration for a contract if the promisee, being induced by the agreement,
does anything legal that he or she is not bound to do, or refrains from doing
anything that he or she has a right to do.”).
17
Here, Alemayehu received a bargained‐for performance in exchange for
his agreement to arbitrate. Alemayehu wished to purchase the Aurora Subway
franchise from Newcomb, but Newcomb was contractually forbidden from
transferring the franchise without DAI’s approval. DAI was under no obligation
to entertain an application from any would‐be franchisee who did not agree to
DAI’s preconditions. Accordingly, DAI solicited franchise applications from
applicants willing to provide various items of personal information as well as to
make various promises — including, inter alia, to maintain confidentiality and to
arbitrate all disputes arising out of the application process.8 By completing and
submitting his application, Alemayehu offered that information and those
promises in exchange for DAI’s subsequent review of the application. DAI then
accepted that offer by giving the performance that Alemayehu had sought: it
reviewed Alemayehu’s application and actually considered him for the franchise.
DAI thereby provided Alemayehu with a benefit in exchange for Alemayehu’s
8
Such preconditions for entering even preliminary negotiations for a business
transaction are not uncommon. Parties often require suitors for a business
opportunity to agree to provide financial or other information, or to enter a non‐
disclosure agreement or, as here, an arbitration agreement, before undertaking
even to consider a proposed transaction. See, e.g., Media Rights Technologies, Inc. v.
Microsoft Corp., 922 F.3d 1014, 1018 & n.4 (9th Cir. 2019).
18
earlier application promises, concluding a contract between the parties and
binding Alemayehu to comply with those promises.
The district court correctly observed that, since DAI did not promise to
consider properly submitted applications, an individual’s franchise application
could “simply languish[], unread, in an electronic inbox” and that no express
promise “preclude[d] DAI from unilaterally deciding not to review any
applications submitted.” DAI, 321 F. Supp. 3d at 310. Here, however, DAI did
review Alemayehu’s application. In doing so, DAI both accepted Alemayehu’s
offer to arbitrate all claims arising out of such review and simultaneously
provided the very consideration (a review of the application) that Alemayehu
sought by applying in the first place.
Alemayehu also challenges this conclusion on grounds slightly different
from those stated by the district court. He argues that “[i]n order to accept the
offer [by rendering performance], the offeree must give . . . that for which the
offeror bargains. If it is in any material respect different, there is no contract.”
Appellee’s Brief at 32 (internal quotation marks and citation omitted). He argues
that DAI never specified what performance it would provide to ensure
consideration, and that therefore mutual assent was necessarily lacking.
19
But, again, DAI rendered the exact performance that Alemayehu sought. It
did not (as Alemayehu suggests in a hypothetical) “send[] Alemayehu a $50 gift
card to Starbucks a few weeks after the Application was submitted instead of
considering the Application.” Id. at 33. DAI’s website solicited applications, but
conditioned the filing of an application on Alemayehu’s agreement to arbitrate
disputes. Alemayehu began his application by navigating to the portion of
Subway’s website labeled “Apply to Own.” J. App’x at 46. The application stated
it was to be “used for purchasing a new franchise, an additional franchise, or the
purchase and transfer of an existing store,” but that applying alone would “not
obligate the applicant to purchase or the franchisor to sell a franchise or
location.” J. App’x at 13. The application was thus explicitly an application to be
considered to own a franchise. As he proceeded through the form, Alemayehu
consented to release his information for a background search and an investigative
consumer report, the exact steps later taken by DAI when it referred him to the
Wonderlic test, training, and interviews. The performance that DAI would
provide in exchange for Alemayehu’s completion of the online application was
clear from the moment that Alemayehu sat down at his computer. Indeed,
Alemayehu himself alleged in his complaint in the District of Colorado that DAI
20
had “tak[en] actions in consideration of [Alemayehu and his wife’s]
applications.” J. App’x at 24.
Given the specific steps taken by DAI in this case, then, we conclude that
there was sufficient consideration to support the agreement to arbitrate.9 Nothing
in this opinion, of course, expresses any view on whether DAI considered
Alemayehu’s application fairly, or whether, as Alemayehu alleges, it violated
federal or state law by denying his application because of his race. Holding that
DAI’s consideration of his application is sufficient consideration to support a
promise by Alemayehu to arbitrate his claims in no way suggests that DAI can
contract out of its legal obligation to consider an applicant (who agrees to DAI’s
demand for an arbitration agreement) in a non‐discriminatory manner. The issue
before us is only who will be responsible for determining Alemayehu’s claim of
discrimination: a court or an arbitrator.
Accordingly, we vacate the district court’s judgment, which was
9
DAI also raises two other arguments regarding consideration. First, it argues
that the arbitration provision itself is mutual and would require DAI to arbitrate
claims, even though its language purports only to bind Alemayehu. Second, it
argues that having an opportunity to be considered, by itself and without
performance on the part of DAI, would be a sufficient benefit to Alemayehu to
constitute consideration. We need not address either argument.
21
predicated on the absence of consideration. In opposing the motion to compel
before the district court, however, Alemayehu “raised a number of arguments”
other than consideration. See DAI, 321 F. Supp. 3d at 313 (noting issues). In light
of its conclusion that the Franchise Application did not constitute a binding
contract, the district court did not reach those issues. Id. We therefore remand to
the district court to consider Alemayehu’s other arguments in the first instance,
and for any other necessary proceedings.
CONCLUSION
For the reasons stated above, we VACATE the judgment of the district
court and REMAND for further proceedings consistent with this opinion.
22