Casa del Caffe Vergnano S.p.A. v. ItalFlavors, LLC

Arbitration clause in franchise contract was unenforceable because the parties had simultaneously signed a second agreement stating the franchise contract was merely a sham.  Rabellino wanted to move from Argentina to the United States and open a coffee shop in San Diego using ItalFlavors coffee and merchandise.  On Sept. 23, 2010, Rabellino’s corporation, Casa del Caffe, signed two contracts with ItalFlavors.  The first was an Italian franchise agreement which contained an arbitration clause.  The second was a hold-harmless agreement which said the franchise agreement has no validity or effect between the parties.  After moving to the United States, signing other contracts with ItalFlavors and failing at the coffee shop business, Rabellino sued, claiming ItalFlavors didn’t provide the agreed support for the venture.  The majority holds that the dispute need not be arbitrated since the only arbitration clause was in the franchise agreement which the parties had agreed, the same day, was of no validity and effect between them—a sham to help Rabellino obtain a US visa. The dissent says the arbitrator should decide whether and when the franchise agreement, which was signed first, was invalidated.

Ninth Circuit Court of Appeals (Korman, J., sitting by designation; Callahan, J., dissenting); March 15, 2016; 2016 WL 1016779

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