Friday, December 27, 2013

We Care Hair Development, Inc. v. Engen case brief

We Care Hair Development, Inc. v. Engen case brief summary
180 F.3d 838 (1999)

Appellant franchisees sought review of a judgment and orders from the United States District Court for the Northern District of Illinois, which held for appellee franchisor under the Federal Arbitration Act, 9 U.S.C.S. § 4, compelled appellants to arbitrate their state law claims against appellee, and stayed state court proceedings pursuant to the Anti-Injunction Act, 28 U.S.C.S. § 2283.

Appellant franchisees filed a class action lawsuit in state court, which alleged fraud and other causes of action against appellee franchisor.


  • Holding that the district court had subject matter jurisdiction, and that the arbitration agreement between the parties was enforceable, the court affirmed. 
  • The court held that appellee was entitled to compel arbitration under the Federal Arbitration Act, 9 U.S.C.S. § 4, because the parties to the petition to compel were diverse, and because although appellants' state law action pleaded damages per franchisee below the federal amount in controversy requirement of 28 U.S.C.S. §1332, the arbitrator possibly could award greater damages, and the solvency of appellee to satisfy the judgment was not relevant to the amount in controversy. 
  • The court held that the state court's decision that the arbitration agreement was invalid was not res judicata, because it was not embodied in a final judgment. 
  • The court held that the agreement was not unconscionable, because eviction for a breach of lease was not an impermissible penalty, and appellants were businessmen who voluntarily concluded agreements with fair notice of the eviction provision.

The court affirmed the judgment for appellee franchisor in its suit to compel arbitration. The district court had jurisdiction where appellee and appellant franchisees were of diverse citizenship and it was not legally certain that the amount in controversy did not exceed the jurisdictional minimum, and the arbitration agreement was valid and enforceable.

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