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UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

W. ALVIN JACKSON, RITA F. JACKSON,

ANGELA O’MARA, BRIAN DAVIS, KELLI

DAVIS, DAVID PATTERSON, TANJA

DEHOFF, JAMIE HARNETT, JIM

SCHAEFER, LAURA SCHAEFER, CARISSA

ROMAN, DANIEL ROMAN, JANET

ROLLINS and COLETTE GIVINS,

Plaintiffs,

v.

MIKE BUTLER, KATHY BUTLER, DANIEL

FRAGEN and PRS FRANCHISE SYSTEMS,

LLC,

Defendants.

___________________________________ /

Case Number: 09-10779

JUDGE PAUL D. BORMAN

UNITED STATES DISTRICT COURT 

OPINION AND ORDER GRANTING DEFENDANTS’ MOTION TO DISMISS

Before the Court is Defendants Mike Butler, Kathy Butler, Daniel Fragen and PRS Franchise

Systems’ (“Defendants”) Motion to Dismiss/for Summary Judgment, filed April 15, 2009. (Doc.

No. 4). The motion has been fully briefed and this Court heard oral argument on July 2, 2009. For

the reasons discussed below, the Court GRANTS Defendants’ motion to dismiss.

I. BACKGROUND

Plaintiffs W. Alvin Jackson, Rita F. Jackson, Angela O’Mara, Brian Davis, Kelli Davis,

David Patterson, Tanja DeHoff, Jamie Harnett, Jim Schaefer, Laura Schaefer, Carissa Roman,

Daniel Roman, Janet Rollins and Colette Givins all purchased franchises from Defendant PRS

Franchise Systems. (Compl. ¶ 24). Alvin and Rita Jackson are Georgia residents, but were residents

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of Michigan when they bought their franchise. (Id. at ¶¶ 1-2). Angela O’Mara is a resident of

California. (Id. at ¶ 3). Brian and Kelli Davis are residents of Texas. (Id. at ¶¶ 4-5). David

Patterson, Tanja DeHoff, and Jamie Harnett are residents of Hawaii. (Id. at 6-8). Jim and Laura

Schaefer are residents of South Carolina. (Id. at ¶¶ 9-10). Carissa and Daniel Roman and Janet

Rollins are residents of North Carolina. (Id. at ¶¶ 11-13). Colette Givens is a resident of Illinois.

(Id. at ¶ 14). Plaintiffs aver that the “original injury” occurred in Oakland County, Michigan. (Id.

at ¶ 19).

Individual defendants Mike and Kathy Butler and Daniel Fragen are residents of North

Carolina. (Id. at ¶¶ 16-18). Defendant PRS Franchise Systems, LLC (“PRS”) is a North Carolina

limited liability company. (Id. at ¶ 19).

Between 2006 and 2008, Mike and Kathy Butler and Daniel Fragen (“individual

defendants”), promoters for PRS, recruited Plaintiffs to be franchisees. (Id. at ¶ 24). The individual

defendants promoted PRS as an “opportunity to own their own marketing business called the

PRstore in which franchisees would be awarded PRstore franchisees [sic] in consideration for a

franchise fee.” (Id. at ¶ 25). Plaintiffs accuse the individual defendants of providing false and

misleading financial information, falsely promising that PRS would institute a national advertising

campaign to promote the PRstore brand and that PRS would assist Plaintiffs in successfully

operating their franchises. (Id. at ¶¶ 25-30). Plaintiffs allege that the Defendants engaged in

racketeering, fraud, and violations of the Michigan Franchise Investment law in Michigan. (Id. at

¶¶ 33-34, 41, 53, 60).

Defendants filed the instant motion to dismiss, or in the alternative, for summary judgment

on April 15, 2009. (Doc. No. 4). Defendants move to dismiss Plaintiffs’ complaint on two separate

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grounds: 1) venue is improper; and 2) the parties are bound by a mandatory arbitration provision.

(Defs.’ Mot. 4). 

II. ANALYSIS

A. The Arbitration Provision

This Court finds that the arbitration provision issue to be dispositive.

Defendants argue that Plaintiffs’ complaint should be dismissed because the franchise

agreement contains a mandatory arbitration clause, which applies to Plaintiffs, PRS and the

individual Defendants. (Defs.’ Br. 10). Plaintiffs respond that Defendants have misconstrued the

arbitration provision and, “the arbitration clause states only cases between Franchisor and its

Affiliates, including the Affiliates’ respective shareholders, officers, directors, agents, and/or

employees and cases between the Franchisor and the Franchisee and the Franchisee’s owners,

guarantors, affiliates, and/or employees, are to go to arbitration.” (Pls.’ Br. 10).

“Federal law favors arbitration.” Landis v. Pinnacle Eye Care, LLC, 537 F.3d 559, 561 (6th

Cir. 2008) (citing Federal Arbitration Act, 9 U.S.C. § 1 et seq. (“FAA”). Under the FAA, 9 U.S.C.

§ 2, a written agreement to arbitrate a dispute arising out of a contract involving transactions in

interstate commerce “shall be valid, irrevocable, and enforceable, save upon such grounds as exist

at law or in equity for the revocation of any contract.” Courts must examine the arbitration clause

language in light of the strong federal policy in favor of arbitration. Stout v. J.D. Byrider, 228 F.3d

709, 714 (6th Cir. 2000). Thus, “any ambiguities in the contract or doubts as to the parties’

intentions should be resolved in favor of arbitration.” Id.

When considering a motion to stay proceedings and compel arbitration under the

Act, a court has four tasks: first, it must determine whether the parties agreed to

arbitrate; second, it must determine the scope of that agreement; third, if federal

statutory claims are asserted, it must consider whether Congress intended those

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claims to be nonarbitrable; and fourth, if the court concludes that some, but not all,

of the claims in the action are subject to arbitration, it must determine whether to stay

the remainder of the proceedings pending arbitration. 

Stout, 228 F.3d at 714.

In this case, Plaintiffs only dispute the first “task” assigned to the Court: whether the parties

agreed to arbitrate. Plaintiffs argue they only agreed to arbitrate cases between the Franchisor and

the Franchisee, and the individual Defendants are not included in the arbitration agreement.

Plaintiffs have misinterpreted the language of the arbitration clause. The arbitration clause reads,

in relevant part: 

22.8 ARBITRATION

Franchisor and Franchisee agree that, except for controversies, disputes, or

claims related to or based on improper use of the Marks or Confidential Information,

all controversies, disputes, or claims between Franchisor and its Affiliates, and

their respective shareholders, officers, directors, agents, and/or employees, and

Franchisee (and/or its owners, guarantors, affiliates, and/or employees) arising

out of or related to:

(1) this Agreement or any other agreement between Franchisor and Franchisee;

(2) Franchisor’s relationship with Franchisee;

(3) the validity of this Agreement or any other agreement between Franchisor and

Franchisee; or

(4) any standard, specification, or operating procedure for PRstore business;

must be submitted to binding arbitration, on demand of either party, to the American

Arbitration Association (“AAA”).

(Defs.’ Br. Ex. B, Franchise Agreement) (emphasis added).

Plaintiffs would have this Court read the arbitration clause as only governing disputes

between the Franchisor and its Affiliates and the Franchisor and Franchisee. Such a reading is

contrary to the basic rules of grammar. The arbitration clause binds the Franchisor, its Affiliates,

and the Franchisor’s and its Affiliates’ shareholders, officers, directors, agents, and/or employees

to arbitrate disputes with Franchisees. The clause “their respective shareholders, officers, directors,

agents, and/or employees” modifies both Franchisor and Affiliates, not only Affiliates as Plaintiffs

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argue. Moreover, an ambiguity must be resolved in favor of arbitration. Stout, 228 F.3d at 714.

Accordingly, the Court finds that the arbitration provision encompasses the dispute in the instant

case because the dispute involves Franchisees, the Franchisor, and the Franchisors’ employees.

Thus, this matter must be arbitrated according to the arbitration clause.

Plaintiffs also contend that this Court should not enforce the arbitration clause because

Plaintiffs were fraudulently induced into entering into the arbitration agreement. (Pls.’ Br. 12).

However, in order to void an arbitration clause, Plaintiffs’ complaint must contain a “‘well-founded

claim of fraud in the inducement of the arbitration clause itself, standing apart from the whole

agreement, that would provide grounds for the revocation of the agreement to arbitrate.’” Fazio v.

Lehman Bros., Inc., 340 F.3d 386, 394 (2003) (quoting Arnold v. Arnold Corp.-Printed

Communications for Bus., 920 F.2d 1269, 1278 (6th Cir.1990)). Plaintiffs’ complaint does not

allege a claim of fraud in the inducement of the arbitration clause itself. The arbitration clause is

valid and enforceable.

B. Improper Venue

This Court has concluded that this matter must be litigated in arbitration. Therefore, the

Court need not address the venue issue.

III. CONCLUSION

For the reasons stated above, the Court GRANTS Defendants’ motion to dismiss (Doc. No.

4).

SO ORDERED.

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s/Paul D. Borman 

PAUL D. BORMAN

UNITED STATES DISTRICT JUDGE

Dated: July 27, 2009

CERTIFICATE OF SERVICE

Copies of this Order were served on the attorneys of record by electronic means or U.S. Mail on July

27, 2009.

s/Denise Goodine 

Case Manager

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