Machado v. System4 LLCAnnotate this Case
A franchisee janitorial worker, on behalf of himself and other similarly situated individuals, filed a complaint against System4 LLC, a master franchisor, and NECCS, Inc., a regional subfranchisor, alleging, among other claims, breach of contract, misclassification as independent contractors in their franchise agreements, and rescission of the franchise agreements. The franchise agreements, signed only by Plaintiffs and NEECS, required the franchisees to arbitrate virtually all disputes. Defendants, citing the arbitration clause in the franchise agreement, moved to stay the court proceedings pending arbitration. The judge concluded that because System4 was not a nonsignatory to the agreements, Plaintiffs could proceed to litigate their claims against System4 in court. The Supreme Judicial Court reversed, holding that, by reason of equitable estoppel, System4 could compel Plaintiffs to arbitrate their substantive claims in accordance with the arbitration provision in Plaintiffs’ franchise agreements. Remanded.