# KHORCHID v. 7-ELEVEN, INC.

> District Court, D. New Jersey · August 14, 2019

URL: https://www.frixlaw.com/law-library/cases/10266531

## Case

- **Court:** District Court, D. New Jersey
- **Decided:** August 14, 2019
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10266531

## How later opinions describe it (automated extraction)

- finding waiver where a party had assented to ten pretrial conferences and engaged in extensive discovery

## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY

BASSEL KHORCHID, HONORABLE RENÉE MARIE BUMB

Plaintiff,
Civil Action No.
v. 18-8525 (RMB/JS)

7-ELEVEN, INC.,
OPINION
Defendant.

APPEARANCES:

Ahmed M. Soliman, Esq.
SOLIMAN & ASSOCIATES, P.C.
923 Haddonfield Road, Suite 300
Cherry Hill, NJ 08002
Attorney for Plaintiff

Dennis R Callahan, Esq.
Amy L. Hansell, Esq.
WARD GREENBERG HELLER & REIDY, LLP
1853 Market Street, Suite 650
Philadelphia, PA 19103
Attorneys for Defendant

SIMANDLE, District Judge:
I. INTRODUCTION
This case arises over alleged violations of a franchise
agreement entered into by Plaintiff Bassel Khorchid (hereinafter,
“Plaintiff”) and 7-Eleven, Inc. (hereinafter, “Defendant”) in
October 2017. (See Amended Complaint, hereinafter, “Am. Compl.”
[Docket Item 12].) Plaintiff alleges that Defendant repeatedly
violated the franchise agreement (id.), and due to the alleged
violations, Plaintiff surrendered his store in August of 2017.
(Id. at ¶ 37.) Plaintiff’s Amended Complaint re-pleads claims that
Defendant (1) breached the franchise agreement, (id. at ¶¶ 39-44);
(2) breached the covenant of good faith and fair dealing under New
Jersey law (id. at ¶¶ 45-55); and (3) violated New Jersey’s

Franchisee Protection Act (hereinafter, “NJFPA”), N.J. Stat. Ann.
§§ 56:10-1, et seq. (2013), by attempting to constructively
terminate Plaintiff’s franchise. (Id. at ¶¶ 56-59.) Plaintiff’s
Amended Complaint also asserts additional claims of (4) unjust
enrichment (id. at ¶¶ 60-62); and (5) unconscionability. (Id. at
¶¶ 63-66.)
Pending before the Court are Defendant’s motion to dismiss
the Amended Complaint, alleging that Plaintiff fails to state a
claim under any count pursuant to Federal Rule of Civil Procedure
12(b)(6), (see Def.’s Mot. to Dismiss [Docket Item 13]), and
Defendant’s motion to stay arbitrable claims, arguing that aspects
of Plaintiff’s Amended Complaint concerning vendor negotiating

practices must be stayed pending mandatory arbitration, as
required by the Franchise Agreement.1 (See Def.’s Mot. to Stay
[Docket Item 14].) Subsequently, Defendant submitted to the Court

1 In the original Complaint, Plaintiff variously referred to a
“Franchise Agreement” and to multiple “Franchise Agreements.”
Following the filing of the Amended Complaint, the Court finds
that the parties are now referring to the Agreement signed October
27, 2016 and included in the Am. Compl. at Docket Item 12-1.
an Opinion from the Eastern District of Pennsylvania regarding a
similar franchise agreement dispute between 7-Eleven and a
franchisee. (See Notice [Docket Item 21]; Takiedine v. 7-Eleven,
Inc., No. 17-4518, 2019 WL 934994 (E.D. Pa. Feb. 25, 2019).) For
the reasons stated herein, the Court will grant in part and deny

in part Defendant’s motion to dismiss and will grant Defendant’s
motion to stay arbitrable claims.
II. BACKGROUND
A. Facts
The Court previously presented the facts of this case in
Khorchid v. 7-Eleven, Inc., No. 18-8525, 2018 WL 5149643 (D.N.J.
Oct. 22, 2018), and they are incorporated herein.
B. Procedural History
On April 28, 2018, Plaintiff filed the initial Complaint in
this case. (See Complaint [Docket Item 1].) Defendant previously
moved to dismiss Plaintiff’s initial Complaint pursuant to Fed. R.
Civ. P. 12(b)(6). (See Def.’s Mot. to Dismiss [Docket Item 4].) On
October 22, 2018, the Court granted Defendant’s prior motion to

dismiss without prejudice and granted Plaintiff leave to file an
amended complaint. Khorchid, 2018 WL 5149643, at *12.2

2 Plaintiff timely filed his Amended Complaint. (See Am. Compl.
[Docket Item 12].) Thereafter, Defendant filed the present motion
to dismiss, (see Def.’s Mot. to Dismiss [Docket Item 13]), and a
motion to stay pending arbitration. (See Mot. to Stay [Docket Item
14].) Plaintiff subsequently filed briefs in opposition to each
motion, (see Pl.’s Opp’n to Stay [Docket Items 15]; Pl.’s Opp’n to
III. STANDARD OF REVIEW
Pursuant to Fed. R. Civ. P. 8(a), a complaint need only
contain “a short and plain statement of the claim showing that the
pleader is entitled to relief.” Specific facts are not required,
and “the statement need only ‘give the defendant fair notice of
what the . . . claim is and the grounds upon which it rests.’”

Erickson v. Pardus, 551 U.S. 89, 93 (2007) (citations omitted).
While a complaint is not required to contain detailed factual
allegations, the plaintiff must provide the “grounds” of his
“entitle[ment] to relief,” which requires more than mere labels
and conclusions. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007). “Thus, the mere metaphysical possibility that some
plaintiff could prove some set of facts in support of the pleaded
claims is insufficient; the complainant must give the court reason
to believe that this plaintiff has a reasonable likelihood of
mustering factual support for these claims.” Ridge at Red Hawk,
LLC v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007) (emphasis
omitted).

A motion to dismiss under Fed. R. Civ. P. 12(b)(6) may be
granted only if, accepting all well-pleaded allegations in the

Dismiss [Docket Item 16]), and Defendant filed a reply brief with
respect to each motion. (See Def.’s Reply to Dismiss [Docket Item
17]; Def’s. Reply to Stay [Docket Item 18].) Defendant’s motions
have been fully briefed and will be decided without oral argument
pursuant to Fed. R. Civ. P. 78(b).
complaint as true and viewing them in the light most favorable to
the plaintiff, while disregarding unsupported conclusory
statements, a court concludes that plaintiff has failed to set
forth fair notice of what the claim is and the grounds upon which
it rests. Id. A complaint will survive a motion to dismiss if it

contains sufficient factual matter to “state a claim to relief
that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662,
663 (2009). Although a court must accept as true all factual
allegations in a complaint, that tenet is “inapplicable to legal
conclusions,” and “[a] pleading that offers labels and conclusions
or a formulaic recitation of the elements of a cause of action
will not do.” Id. at 678.
In the Third Circuit, to determine arbitrability of an issue,
courts apply a two-tier standard of review. See Guidotti v. Legal
Helpers Debt Resolution, LLC, 716 F.3d 764 (3d Cir. 2013). Where
it is apparent on the face of the complaint, or in documents relied
upon in the complaint, that the claims at issue in the case are

subject to arbitration, the case is considered under a motion to
dismiss standard, Fed R. Civ. P. 12(b)(6). Id. at 774-76. However,
where the complaint does not establish on its face that the parties
have agreed to arbitrate, or where the party opposing arbitration
has come forward with reliable evidence that it did not intend to
be bound by an arbitration agreement, then the parties are entitled
to limited discovery on the question of arbitrability before a
renewed motion to compel and/or stay arbitration is decided on a
summary judgment standard. Fed. R. Civ. P. 56. Id.
IV. DISCUSSION
A. Count I: Breach of Contract Claim3
In Count I of the Amended Complaint, Plaintiff re-pleads his
breach of contract claim. (Am. Compl. [Docket Item 12], ¶¶ 39-44.)

A plaintiff bringing a cause of action for breach of contract must
establish: (1) the existence of a valid contract with plaintiff
and defendant; (2) a breach of the contract by defendant; (3)
performance by the plaintiff of his or her obligations under the
contract; and (4) resulting damages. Oswell v. Morgan Stanley Dean
Witter & Co., No. 06-5814, 2007 WL 1756027, at *5 (D.N.J. June 18,
2007). A plaintiff cannot meet the burden of establishing these
elements by merely making conclusory allegations. See In re Nice
Sys., Ltd. Sec. Litig., 135 F.Supp.2d 551, 565 (D.N.J. 2001).
Although Plaintiff argues that “unequal bargaining power
between Plaintiff and Defendant allowed Defendant to dictate the
terms and conditions,” (Am. Compl. [Docket Item 12], ¶ 16), and he

had to “sign the Franchise Agreements as written, or forgo
continuing as a franchisee of [Defendant],” Plaintiff does not

3 The Court finds that Count I’s breach of contract claims,
particularly with respect to vendor selection practices, are very
similar to the issues covered in Paragraphs 15(j) and 15(k) of the
Franchise Agreement and may be appropriately addressed in
arbitration.
allege that no valid contract existed. (Id. at ¶ 10.) Thus, as
Plaintiff does not allege that he did not enter into a valid
contract, the Court will assume that Plaintiff agrees that the
first element is met for purposes of this motion.
Defendant argues that Plaintiff fails to state a claim for

breach of contract because he does not identify which franchise
agreement, and which provisions of that franchise agreement,
Defendant allegedly breached. (Def.’s Br. to Dismiss [Docket Item
13-2], ¶ 3-4.) Additionally, Defendant contends that Plaintiff
failed to allege damages caused by any purported breach. (Id. at
8.)
However, as Plaintiff indicated in his opposition brief,
Exhibit A of the Amended Complaint contains only the second
franchise agreement signed in October 2016. (See Am. Compl. [Docket
Item 12]; Pl.’s Opp’n to Dismiss [Docket Item 16].) Although
Plaintiff does not cite to specific section numbers of the
Franchise Agreement, he does provide summaries of specific

sections that are sufficient for Defendant and the Court to
determine the contractual provisions that are supposedly at issue.
(Am. Compl. [Docket Item 12], ¶¶ 41a-d.) Count I of Plaintiff’s
Amended Complaint, its breach of contract claim, includes two
separate claims of breach. Additionally, the “background” section
of the Amended Complaint contains breach of contract claims that
the Court will discuss in this section.
1. Failure to Provide Necessary Maintenance
Plaintiff alleges that “Plaintiff’s store sustained
substantial damage as a result of Hurricane Sandy, however
Defendant failed and/or refused to repair the store as requested,
and as required by the Franchise Agreements, which expressly states

[sic] that Defendant will make necessary repairs.” (Am. Compl.
[Docket Item 12], ¶ 43.) Defendant argues that Plaintiff’s
allegation contradicts the actual terms of the franchise agreement
which states that “[e]xcept to the extent [Defendant] may expressly
assume any of the following responsibilities in writing,
[Plaintiff] agree[s] to be responsible for all maintenance,
repairs, replacements, janitorial services and expenses relating
to the Store.” (Franchise Agreement [Docket Item 12-1], ¶ 20(a).)
However, as Plaintiff indicated, Section 20 also states that
“[w]hen [Defendant] considers it necessary,” Defendant would
repair the interior and exterior of the store, replace equipment,
replace glass windows and doors, repair flooring, and maintain

structural soundness of the store. (Id. at ¶ 20(d).) Defendant
argues that Plaintiff failed to allege that Defendant considered
the repairs in question “necessary.” (Def.’s Br. to Dismiss [Docket
Item 17], 5.) Defendant also indicates that Hurricane Sandy struck
on October 29, 2012. (Id.) The parties entered into the second
franchise agreement four years later in October 2016, which states
that Plaintiff agrees to take the store “in ‘as-is’ condition.”
(Franchise Agreement [Docket Item 12-1], ¶ 8(c).)
The Court must consider all factual allegations Plaintiff
asserts as true and determine if Plaintiff pled sufficient facts
to set forth a cause of action that put Defendant on fair notice

of the grounds for Plaintiff’s claim. Twombly, 550 U.S. at 555;
Iqbal, 556 U.S. at 679. Although Plaintiff did not specifically
allege that Defendant considered the repairs “necessary,”
Plaintiff did assert that he requested the repairs and Defendant
either failed and/or refused to make them. (Am. Compl. [Docket
Item 12], ¶ 43.) The plaintiff in Takiedine v. 7-Eleven, Inc.,
made a similar claim and the Eastern District of Pennsylvania
ruled:
7-Eleven was certainly on notice of the nature
of the claim, and whether 7-Eleven considered
these repairs necessary and whether its
failure to provide the maintenance requested
breached the contract can be determined at a
later stage in the proceeding with the benefit
of a factual record.

Takiedine, 2019 WL 934994, at *5. Drawing all reasonable inferences
from the pleaded factual allegations in favor of the nonmoving
party, here Plaintiff, the Court agrees with the Eastern District
of Pennsylvania and will deny Defendant’s motion to dismiss,
insofar as it seeks to dismiss this breach of contract claim
pending the opportunity to develop the issue through discovery.
2. Failure to Treat as Independent Contractor
Plaintiff’s Amended Complaint references Section 2 of the
Franchise Agreement, (Am. Compl. [Docket Item 12], ¶ 41(b)), which
states that Plaintiff agrees: “(a) to hold [itself] out to the
public as an independent contractor; (b) to control the manner and

means of the operation of the Store; and (c) to exercise complete
control over and responsibility for all labor relations and the
conduct of [its] agents and employees, including the day-to-day
operations of the Store and all agents or Store employees.”
(Franchise Agreement [Docket Item 12-1], ¶ 2.) Plaintiff alleges
that Defendant breached its franchise agreement and failed to treat
Plaintiff as an independent contractor by ordering merchandise
that Plaintiff did not authorize and forcing Plaintiff to write
off the unsold merchandise at a loss. (Am. Compl. [Docket Item
12], ¶¶ 22 & 44.) Additionally, Plaintiff argues that if he did
not buy products from Defendant’s specified vendors, Defendant
would increase its split of profits even though “Plaintiff was

supposed to be an independent contractor who was responsible for
running the store.” (Id. at ¶ 20.)
Defendant argues that Section 2 only bestows obligations upon
Plaintiff and does not require Defendant to treat Plaintiff as an
independent contractor. (Def.’s Br. to Dismiss [Docket Item 13-
2], 7.) Therefore, Defendant contends, Plaintiff may not state a
claim for breach of contract based on a provision that only
specifies Plaintiff’s obligations. (Id.)
Additionally, Defendant argues that Plaintiff’s breach of
contract claim fails because Section 15(b) of the Franchise
Agreement states that Plaintiff must “at all times . . . carry at

the Store all Categories of Inventory that [Defendant]
specif[ies]” and must “comply with all of [Defendant’s] standards
and specifications for all Inventory.” (Id.; Franchise Agreement
[Docket Item 12-1], ¶ 15(b).) However, as Plaintiff asserts,
Section 15(b) also states that Plaintiff may delete any products
from being offered at its store, upon written permission from the
Defendant, “which will not be unreasonably withheld.” (Franchise
Agreement [Docket Item 12-1], ¶ 15(b) (emphasis added).)
With evidence, Defendant may prove that Section 2 does not
bestow any contractual obligations upon Defendant. However,
Plaintiff may also prove that Defendant unreasonably withheld
permission to delete certain products in violation of Section

15(b). At this stage in the proceeding, without the benefit of a
factual record, the Court is not prepared to interpret these
provisions or dismiss this claim. Therefore, Defendant’s motion to
dismiss, insofar as it seeks to dismiss this breach of contract
claim, will also be denied without prejudice.
B. Count II: Breach of Covenant of Good Faith and Fair Dealing4
“A covenant of good faith and fair dealing is implied in
every contract in New Jersey,” including franchise
agreements. Sons of Thunder, Inc. v. Borden, Inc., 148 N.J. 396,
421 (1997) (citations omitted). To support a claim of the breach

of the covenant of good faith and fair dealing, the plaintiff “must
provide evidence sufficient to support a conclusion that the party
alleged to have acted in bad faith has engaged in some conduct
that denied the benefit of the bargain originally intended by the
parties.” Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping
Ctr. Assocs., 182 N.J. 210, 225 (2005) (quoting 23 Williston on
Contracts § 63:22, at 513-14 (Lord ed. 2002)). In addition,
“[p]roof of ‘bad motive or intention’ is vital to an action for
breach of the covenant.” Id. (quoting Wilson v. Amerada Hess Corp.,
168 N.J. 236, 249 (2001)).
Plaintiff argues that Defendant breached the covenant of good
faith and fair dealing by constructively terminating Plaintiff.

(Am. Compl. [Docket Item 12], ¶ 55.) Plaintiff argues Defendant
created an “Operation Philadelphia” scheme to drive out
franchisees in Philadelphia and South Jersey and take back their

4 The Court finds that Count II’s claims, particularly with the
respect to the “Operation Philadelphia” scheme insofar as it
concerns disputes about proprietary 7-Eleven products, are very
similar to the issues covered in Paragraphs 15(j) and 15(k) of the
Franchise Agreement and may be appropriately addressed in
arbitration.
stores. (Id. at ¶¶ 26 & 54). Plaintiff asserts Defendant carried
out this scheme by launching the “7-Select” proprietary product
line that forced Plaintiff to write off products at a loss and
diminished Plaintiff’s profits. (Id. at ¶ 46.) To illustrate the
effects of the alleged scheme, Plaintiff indicates that in 2011

Plaintiff’s store generated total sales of $1,239,030 and
Plaintiff’s net income was $36,050, which represented 2.91% of
total sales. (Id. at ¶ 47.) However, in 2016 the same store
generated $1,265,306 in total sales but Plaintiff only received
$2,790 in net income, which represents only 0.02% of total sales.
(Id.) Lastly, Plaintiff asserts Defendant “failed to change its
stores, products, and marketing despite the ever-changing market.”
(Id. at ¶ 47.)
Defendant argues that Plaintiff’s claim rests on conclusory
assertions rather than factual allegations. (Def.’s Br. to Dismiss
[Docket Item 13-2], 9.) Additionally, Defendant asserts that the
implied covenant of good faith and fair dealing cannot override a

contract’s express terms and the franchise agreement here
specifies that Defendant may change the amount of proprietary
products Plaintiff had to offer. (Id.)
Accepting Plaintiff’s well-pleaded allegations as true,
Plaintiff successfully satisfied the improper motive element by
alleging Defendant created a “scheme” to drive out and
constructively terminate franchisees. This “scheme” could have
deprived Plaintiff from the benefit of the bargain originally
intended by the parties. At this stage of the proceeding, without
the benefit of a factual record, the Court will deny Defendant’s
motion to dismiss, insofar as it seeks to dismiss Plaintiff’s
breach of covenant of good faith and fair dealing claims.
C. Count III: Violation of New Jersey’s Franchisee Protection
Act – N.J. Stat. Ann. §§ 56:10-1, et seq.

Plaintiff claims, and Defendant does not dispute, that the
NJFPA applies to its franchisee-franchisor relationship with
Defendant. (See Am. Compl. [Docket Item 12], ¶ 15; Def.’s Br. to
Dismiss [Docket Item 13-2].) The N.J. Stat. Ann. §§ 56:10-4 states
that to state a claim under the NJFPA, Plaintiff must allege (1)
a place of business within New Jersey, (2) gross sales stemming
from the Agency Agreement that exceeded $35,000 in the 12 months
preceding initiation of the lawsuit, and (3) that more than 20% of
Plaintiff’s gross sales came from the franchise relationship.
Failure to satisfy any of these requirements necessitates
dismissal of an NJFPA claim. Instructional Sys., Inc. v. Comput.
Curriculum Corp., 614 A.2d 124, 133 (N.J. 1992). Plaintiff
qualifies under the statute because when Plaintiff initiated the
lawsuit, gross sales between Plaintiff and Defendant exceeded
$35,000, and over 20% of said sales derived from Plaintiff’s
franchise. (Am. Compl. [Docket Item 12], ¶ 11.)
However, despite the opportunity to amend its complaint,
Plaintiff failed to correct the deficiencies this Court addressed
in Khorchid, 2018 WL 5149643, at *11. “Each count of a properly
pled complaint must contain: (a) its own cause of action against
a clearly identified defendant(s), and (b) those particular

factual allegations that would allow the court to draw a reasonable
inference that the defendant is liable for that cause of action.”
Lee-Peckham v. Runa, LLC, No. 14-6635, 2015 WL 150120, at *3
(D.N.J. Jan 12, 2015); see Iqbal, 556 U.S. at 678.
Plaintiff again failed to identify any section of the NJFPA
that Defendant purportedly violated in its Amended Complaint.5
Plaintiff’s vague claim that Defendant violated the entire statute
fails to satisfy the pleading requirements of Fed. R. Civ. P. 8
and fails to give Defendant fair notice of what the claim is and
the grounds upon which it rests. See Erickson, 551 U.S. at 93.
Although Plaintiff’s brief in opposition to Defendant’s
motion to dismiss refers to specific provisions of the NJFPA, the

Amended Complaint failed to do so. (Compare Pl.’s Opp’n to Dismiss
[Docket Item 16] with Am. Compl. [Docket Item 12].) The Amended
Complaint only sets forth conclusory allegations rather than
factual allegations that would “allow the Court to draw a
reasonable inference that the defendant is liable.” Twombly, 550

5 The Amended Complaint solely cites to “N.J.S.A. 56:10-1, et seq.”
(Am. Compl. [Docket Item 12], ¶¶ 56-59.)
U.S. at 556. “When legal conclusions are not supported by factual
allegations, a court may properly dismiss the complaint pursuant
to Rule 12(b)(6).” Averhart v. CWA Local 1033, No. 10-6163, 2015
WL 9581753, at *3 (D.N.J. Dec. 30, 2015) (citing Iqbal, 556 U.S.
at 679). Therefore, Defendant’s motion to dismiss Plaintiff’s

NJFPA claim shall be granted.
D. Count IV: Unjust Enrichment
Plaintiff alleges that, although he regularly paid increasing
maintenance charges to Defendant, he has not received the benefits
of these payments because Defendant failed and/or refused to
address Plaintiff’s maintenance requests. (Am. Compl. [Docket Item
12], ¶¶ 61-62.) Defendant argues that the Court should dismiss
this claim because (1) the Court did not authorize Plaintiff to
assert new claims in its Amended Complaint, and (2) the subject
matter of Plaintiff’s claim is governed by the Franchise Agreement.
The Court dismissed Plaintiff’s original Complaint and
granted Plaintiff leave to re-plead “an Amended Complaint curing

the deficiencies noted in the Opinion.” (Order [Docket Item 11].)
The Court did not prohibit Plaintiff from asserting new claims
that would aid in curing the specified deficiencies. Therefore,
the Court will address Plaintiff’s additional claims.
To state a claim for unjust enrichment, a plaintiff must
allege “(1) that the defendant has received a benefit from the
plaintiff, and (2) that the retention of the benefit by the
defendant is inequitable.” Wanaque Borough Sewerage Auth. v. Twp.
of West Milford, 144 N.J. 564, 575 (1996) (citation omitted).
Plaintiff’s allegation that he has paid maintenance charges
to Defendant and failed to receive a benefit does not constitute
a claim of unjust enrichment. (See Am. Compl. [Docket Item 12], ¶¶

61-62.) His argument is too conclusory and is insufficient under
Iqbal’s heightened pleading standard. Conclusory, generalized
allegations will not suffice, and the Court will therefore grant
Defendant’s motion to dismiss Plaintiff’s unjust enrichment claim.
E. Count V: Unconscionability
Count V of Plaintiff’s Amended Complaint asserts a claim for
unconscionability. Plaintiff alleges that “portions of the
franchise agreement [are] procedurally unconscionable because
Plaintiff lacked a meaningful choice in accepting the provisions”
and many portions “unreasonably favored Defendant by maximizing
Defendant’s profits while causing Plaintiff’s net profits to
dwindle.” (Am. Compl. [Docket Item 12], ¶ 65.) Defendant argues

that New Jersey law does not recognize a cause of action for
unconscionability. (Def.’s Br. to Dismiss [Docket Item 13-2], 14.)
As discussed above in Section D, the Court will address the
additional claims Plaintiff included in its Amended Complaint. As
a matter of law, the doctrine of unconscionability generally “acts
as a shield against enforcement of an unreasonable contract and
not a sword on a claim for affirmative relief.” Hunter v. Sterling
Bank, Inc., No. 09-0172, 2011 WL 5921388, at *8 (D.N.J. Nov. 28,
2011) (quoting Sitogum Holdings, Inc. v. Ropes, 352 N.J. Super.
555, 566 n. 14 (Super. Ct. Ch. Div. 2002). Therefore,
unconscionability cannot be brought as an affirmative claim or
cause of action. Id. (citing Lind v. New Hope Prop., LLC, No. 09-

3757, 2010 WL 1493003, at *7 (D.N.J. Apr. 13, 2010); see also
Alboyacian v. BP Prods. N. Am., No. 09-5143, 2011 WL 5873039, at
*5 (D.N.J. Nov. 22, 2011) (unconscionability is not a cause of
action that a plaintiff may bring in the affirmative). Therefore,
the Court will grant Defendant’s motion to dismiss, insofar as it
seeks dismissal of Plaintiff’s unconscionability claim.
F. Stay Pending Arbitration
In Count I of his Amended Complaint, Plaintiff claims that
Defendant has failed to “make every commercially reasonable effort
to obtain the lowest cost for products and services available from
Defendant’s Bona Fide Suppliers, and maximize profit.” (Am. Compl.
[Docket Item 12], ¶ 41(a) (emphasis in original).) He further
alleges that Defendant required him to purchase goods for sale

from Defendant’s proprietary “7-Select” product line, which,
unlike products from other vendors, cannot be returned if they do
not sell, which in turn forces Plaintiff to take the loss on the
unsold products in the form of a “write-off.” (Am. Compl. [Docket
Item 12], ¶ 17.)
In response, Defendant argues that Plaintiff’s claims
regarding the proprietary merchandise “write-offs” are vendor
negotiating practices issues and therefore fall under Paragraphs
15(j) and 15(k) of the Franchise Agreement, which require that
such disputes be submitted to arbitration. (Def.’s Reply to Stay

[Docket Item 18].) Defendant has therefore moved to stay these
claims pending arbitration. Plaintiff argues that Defendant has
waived its right to arbitrate these claims and, moreover, that
even if Defendant has not waived that right, the “write-off” claims
are not covered in the scope of the arbitration agreement. (Pl.’s
Opp’n to Stay [Docket Item 15].)
Defendant seeks to stay these arbitrable claims under the
Federal Arbitration Act (hereinafter “FAA”), which states in
relevant part:
If any suit or proceeding be brought in any of
the courts of the United States upon any issue
referable to arbitration under an agreement in
writing for such arbitration, the court in
which such suit is pending, upon being
satisfied that the issue involved in such suit
or proceeding is referable to arbitration
under such an agreement, shall on application
of one of the parties stay the trial of the
action until such arbitration has been had in
accordance with the terms of the agreement,
providing the applicant for the stay is not in
default in proceeding with such arbitration.

9 U.S.C. § 3.
Subject to a few exceptions which do not apply here, the FAA
applies to any “written provision in any . . . contract evidencing
a transaction involving commerce to settle by arbitration a
controversy arising out of such contract or transaction.” 9 U.S.C.
§ 2. The Franchise Agreement at issue in this case meets both
requirements, as it is in writing and involves interstate commerce,
so the FAA applies. Plaintiff does not dispute that the arbitration

agreement is covered under the FAA.
1. Defendant Has Not Waived its Right to Arbitrate
Plaintiff claims that Defendant has waived its right to
arbitrate. (Pl.’s Opp’n to Stay [Docket Item 15].) However, waiver
of the right to compel arbitration is “not to be lightly inferred”
because of the strong federal policy in favor of arbitrability.
Great W. Mortg. Corp. v. Peacock, 110 F.3d 222, 232 (3d Cir. 1997).
A showing of prejudice to the party resisting arbitration is the
“touchstone” for determining whether the right to arbitration has
been waived. Hoxworth v. Blinder, Robinson & Co., 980 F.2d 912,
925 (3d Cir. 1992).
In the Third Circuit, to assess prejudice and to determine

whether a party has waived its right to arbitrate arbitrable
claims, the courts consider six nonexclusive factors:
[1] the timeliness or lack thereof of a motion
to arbitrate . . . [; 2] the degree to which
the party seeking to compel arbitration has
contested the merits of its opponent's claims;
[3] whether that party has informed its
adversary of the intention to seek arbitration
even if it has not yet filed a motion to stay
the district court proceedings; [4] the
extent of its non-merits motion practice; [5]
its assent to the court's pretrial orders; and
[6] the extent to which both parties have
engaged in discovery.

Nino v. Jewelry Exch., Inc., 609 F.3d 191, 208-09 (3d Cir. 2010).
Under these factors, waiver will “normally be found only where the
demand for arbitration came long after suit commenced” because
that is when prejudice can be shown by the party that has expended
time, effort, and money prosecuting a case under the federal
discovery rules which are unavailable in the arbitral
forum. PaineWebber Inc. v. Faragalli, 61 F.3d 1063, 1068 (3d Cir.
1995); Hoxworth, 980 F.2d at 925-97. “Merely answering on the
merits, asserting a counterclaim (or cross-claim) or participating
in discovery, without more,” is generally not enough to constitute
waiver. Faragalli, 61 F.3d at 1069 (citing Hoxworth, 980 F.2d at
925). Here, Plaintiff has not shown waiver because he cannot show
that he suffered prejudice or that he has suffered due to a lengthy
course of litigation.
In their briefs, the parties use the terms “default” and
“waiver” interchangeably. (See Def.’s Br. to Stay [Docket Item 14-
1]; Pl.’s Opp’n to Stay [Docket Item 15].) Section 3 of the FAA
refers to “default,” which other courts have held is akin to
“waiver.” Maxum Fdns., Inc. v. Salus Corp., 779 F.2d 974, 981 (4th
Cir. 1985). However, neither statutory default under Section 3 nor
“waiver” may be lightly inferred given the federal policy favoring
arbitration. See Great W. Mortg. Corp, 110 F.3d at 232; In re
Mercury Constr. Corp., 656 F.2d 933, 939 (4th Cir. 1981), aff’d,
Moses H. Cone. Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1
(1983). For purposes of clarity and in line with the Third
Circuit’s preferred analysis, this Court will refer to this as
“waiver.”
i. Defendant’s motion to stay was timely

Plaintiff’s brief in opposition to Defendant’s motion to stay
does not engage in any substantive analysis of the six Hoxworth
factors; rather, he argues that discovery in a separate case in
the Eastern District of Pennsylvania means that Defendant was
sufficiently noticed of Plaintiff’s vendor negotiation practices
claim. (See Pl.’s Opp’n to Stay [Docket Item 15]; see also
Takiedine, 2019 WL 934994 (granting a motion to stay arbitrable
vendor negotiation practices claims in a 7-Eleven franchise
agreement dispute case)). At the time that Plaintiff’s brief in
opposition to Defendant’s motion to stay was filed, the parties in
Takiedine had nearly completed discovery, so Plaintiff asserts

that Defendant’s motion to stay in the present matter was not
timely because Defendant was sufficiently apprised that Plaintiff
would bring a claim on the vendor negotiation practices in this
case. (Pl.’s Opp’n to Stay [Docket Item 15], 2.) Plaintiff is in
error. Despite any similarity between the proceedings, discovery
in Takiedine — a different case with different parties, different
facts, and different procedural history — has no bearing on whether
Defendant waived its right to arbitrate arbitrable claims in this
case. See Chong v. 7-Eleven, Inc., No. 18-1542, 2019 WL 1003135,
at *9 (E.D. Pa. Feb. 28, 2019) (holding that discovery in the
Takiedine case did not prejudice the plaintiffs in Chong).
Plaintiff also claims that Defendant “sat on its rights” and

should have pursued arbitration in response to the original
Complaint. (Pl.’s Opp’n to Stay [Docket Item 15], 10). However,
this Court dismissed the original Complaint due to the vagueness
of its underlying facts and, on the breach of contract claim, for
failure to allege breach of specific provisions of an unidentified
agreement. Khorchid, 2018 WL 5149643, at *9. Although Plaintiff’s
original Complaint stated that Defendant failed to “make every
commercially reasonable effort to obtain the lowest cost for
products and services available,” his references to two different
Franchise Agreements — neither of which were made available to the
Court nor to the Defendant at the time the original Complaint was
filed, as discussed above— were unclear, and no reference was made

to the “write-offs” issue. (Compl. [Docket Item 1].) Because the
Court was unable to discern the underlying contractual basis of
Plaintiff’s claims in the original Complaint, it also follows that
Defendant was not given sufficient notice of any vendor negotiating
practices claims at that time.
Defendant filed its motion to stay fourteen days after
Plaintiff filed his Amended Complaint, which was the first time
the “write-offs” issue was raised with reference to an identified
contract. (Def.’s Br. to Stay [Docket Item 14-1]; Pl.’s Opp’n to
Stay [Docket Item 15].) In Takiedine, the defendant filed its
motion to stay one month after the plaintiff filed an amended
complaint containing a breach of contract allegation, and the

Eastern District of Pennsylvania held that this was not an undue
delay. Takiedine, 2019 WL 934994, at *7; see also Nationwide Mut.
Fire Ins. Co. v. Geo. V. Hamilton, Inc., No. 08-0646, 2010 WL
1445554, at *13-14 (W.D. Pa. Apr. 9, 2010), aff’d, 410 F. App’x
537 (holding that delay of two months does not constitute a waiver
of the right to arbitrate); Chong, 2019 WL 1003135 (holding that
three weeks’ delay after filing of an amended complaint does not
constitute waiver). Therefore, Defendant’s motion, filed fourteen
days after the Amended Complaint, was not untimely.
ii. 7-Eleven has not meaningfully contested the merits of the
vendor negotiating practices claims

The vendor negotiating practices claims were not raised until
Plaintiff filed his Amended Complaint. (Compare Compl. [Docket
Item 1] with Am. Compl. [Docket Item 12].) Subsequently,
Defendant’s only response with respect to these claims has been
their motion to stay pending arbitration. (Def.’s Br. to Stay
[Docket Item 14-1].)
iii. Defendant reserved its right to arbitrate
In its motion to dismiss Plaintiff’s original Complaint,
Defendant explicitly addressed the possibility that Plaintiff may
raise arbitrable claims:
To the extent [Plaintiff] contends a breach of
the Franchise Agreement occurred based on
[Defendant’s] vendor practices and discounts,
those claims are subject to mandatory
arbitration pursuant to Exhibit J of the
Franchise Agreement. [Defendant] does not
waive and specifically reserves its right to
arbitrate any such dispute. However, no fair
reading of the Complaint as currently
presented indicates that [Plaintiff] is
proceeding on such a theory.

(Def.’s Br. to Dismiss [Docket Item 4-1], 4 n.2.) These claims
were not raised until the Amended Complaint. (Compare Compl.
[Docket Item 1] with Am. Compl. [Docket Item 12].)
iv. Defendant has not engaged in any non-merits motion practice
Defendant has not filed any non-merits motions concerning the
vendor negotiating practices claims. These claims are not included
in the Motion to Dismiss the Amended Complaint. (Def.’s Mot. to
Dismiss [Docket Item 13].)
v. Assent to pretrial orders
Defendant has assented to all pretrial orders. However, given
that prejudice is the “touchstone” of determining waiver in the
Third Circuit, pretrial orders entered prior to the Amended
Complaint would have little if any impact because the vendor
negotiating practices claims at issue were not raised until the
Amended Complaint. Hoxworth, 980 F.2d at 925. No pretrial orders
were issued between the date of the Amended Complaint and
Defendant’s motion to stay. While long-term assent to pretrial
orders, particularly in the context of extensive discovery, may
weigh in favor of waiver, Defendant had only assented to orders

before these issues were raised. See Nino, 609 F.3d at 212 (finding
waiver where a party had assented to ten pretrial conferences and
engaged in extensive discovery). No prejudice, therefore, has
resulted to the Plaintiff with respect to the vendor negotiating
practices claims.
vi. No discovery has taken place
No discovery has taken place in this case, and discovery in
Takiedine has absolutely no bearing on whether Plaintiff has been
prejudiced in this case. Chong, 2019 WL 1003135, at *9.
On the balance of the Hoxworth factors, the Court finds that
Defendant has not waived its right to seek arbitration of
arbitrable claims under the terms of the Franchise Agreement.

2. Scope of Arbitration Clause
Neither party disputes their entry into a valid and
enforceable arbitration agreement. (Def.’s Br. to Stay [Docket
Item 14-1]; Pl.’s Opp’n to Stay [Docket Item 15].) However,
Plaintiff asserts that its claims that Defendant forced him to
take disadvantageous “write-offs” on required merchandise do not
fall within the scope of the arbitration agreement. (Pl.’s Opp’n
to Stay [Docket Item 15].)
This Court applies a two-step test in determining whether an
arbitration clause is applicable: (1) whether a valid arbitration
clause exists; and (2) whether the particular dispute falls within

the scope of the arbitration agreement. Trippe Mfg. Co. v. Niles
Audio Corp., 401 F.3d 529, 532 (3d Cir. 2005). In Trippe, the Third
Circuit stated that “when determining both the existence and the
scope of an arbitration agreement, there is a presumption in favor
of arbitrability.” Id. (citing AT&T Techs., Inc. v. Commc’ns
Workers of America, 475 U.S. 643, 650, (1986)). “A court cannot
force a litigant to submit to arbitration any dispute which he has
not agreed so to submit.” AT&T Techs., 475 U.S. at 648.
Furthermore, if the claims asserted fall outside the arbitration
agreement, they are not subject to arbitration. PaineWebber, Inc.
v. Hofmann, 984 F.2d 1372, 1377 (3d Cir. 1993).
Here, there is no dispute as to the existence of an

arbitration agreement set forth in Exhibit J of the Franchise
Agreement, as evidenced by both parties being signatories to it
and neither party raising any disputes over the existence of the
agreement. (Franchise Agreement [Docket Item 12-1]; see generally
Pl.’s Opp’n to Dismiss [Docket Item 16]). The most pressing
question in consideration of Defendant’s present motion to dismiss
is the second Trippe factor, whether the particular disputes — the
so-called “write-offs” or vendor negotiating practices claim —
fall within the scope of the arbitration agreement.
The arbitration clause contained within the Franchise
Agreement states: “ANY AND ALL CLAIMS ARISING OUT OF OR RELATING
TO OUR OBLIGATIONS UNDER PARAGRAPHS 15(j) AND (k) OR THE REVIEW

CONDUCTED UNDER THIS EXHIBIT J WILL BE BARRED UNLESS AN ACTION IS
COMMENCED UNDER THESE DISPUTE RESOLUTION PROCEDURES....”
(Franchise Agreement [Docket Item 12-1, Exhibit J], § D(1)
(emphasis in original).) Paragraph 15(j) of the Franchise
Agreement concerns vendor negotiating practices and treatments of
discounts and allowances and Paragraph 15(k) sets out procedures
for review and dispute resolution. (Id. at ¶¶ 15(j) & 15(k).)
When interpreting such language, the Third Circuit has
repeatedly given broad construction to phrases such as “arising
under” and “arising out of.” Battaglia v. McKendry, 233 F.3d 720,
727 (3d Cir. 2000). This broad construction applies because “the
federal policy in favor of arbitration is ‘particularly

applicable’ where the arbitration clause at issue is
broad.” Id. at 725. Considering the strong federal policy favoring
arbitration, provisions such as the present one must be “generously
construed” in favor of coverage. Mitsubishi Motors Corp. v. Soler
Chrysler-Plymouth, Inc., 473 U.S. 614, 625 (1985); AT&T Techs.,
475 U.S. at 650 (“Doubts should be resolved in favor of coverage”).
The main component of Plaintiff’s claim is that Defendant’s
required products cannot be returned for credit if they are unsold,
unlike other products he would purchase from other vendors, and he
is therefore forced to write off the merchandise at a loss. He
claims that this is not a vendor negotiation practices issue within

the scope of the Franchise Agreement because Defendant is the
vendor of these 7-Select products and cannot negotiate with itself.
(Pl.’s Opp’n to Stay [Docket Item 15], 13-14.) However,
manufacturers are explicitly included in Paragraph 15(j)(1) in the
definition of “Vendor.” (Franchise Agreement [Docket Item 12-1],
¶ 15(j)(1).) While it is unclear from the record who exactly
manufactures these products, Defendant’s requirement to make a
“commercially reasonable effort to obtain the lowest cost for goods
and services available from such Vendor” covers the return rights
issue when a broad construction is given to the language of the
agreement. Battaglia, 233 F.3d at 727.
Throughout his opposition brief, Plaintiff also attempts to

distinguish Defendant’s vendor negotiation practices and the
resulting write-off. (Pl.’s Opp’n to Stay [Docket Item 15].)
However, this distinction is purely semantic. He would prefer
buying from vendors who allow returns of their unsold goods, while
the manufacturers of Defendant’s “7-Select” proprietary product
line do not allow such returns of unsold goods, so he is forced to
take a less advantageous “write-off.” (Id. at 5.) This is a vendor
negotiating practices issue under Paragraph 15(j) of the Franchise
Agreement, no matter what Plaintiff calls it. He is technically
correct that these parts of the Franchise Agreement make no
explicit reference to “write-offs,” but even if this term
introduces some doubt as to the scope of the arbitration agreement,

the Supreme Court is clear that any doubts must be resolved in
favor of arbitration. Moses H. Cone, 460 U.S. at 24-25; AT&T
Techs., 475 U.S. at 648.
Given the strong federal policy towards arbitration and the
explicit inclusion of vendor and manufacturer negotiation issues
in the Franchise Agreement, the vendor negotiating practices
claims should be stayed pending arbitration.
V. ADMINISTRATIVE TERMINATION OF THE CASE
Having determined that some of Plaintiff’s claims are subject
to arbitration and some are not, the Court will exercise its
discretion and administratively terminate this action pending the
completion of arbitration. In this Court’s assessment, the
arbitration proceeding will likely encompass issues that overlap

with the remainder of the case and, as such, may facilitate the
progression of the case (or perhaps settlement) in the long run.
To ensure, however, that the case does not languish, Plaintiff
shall provide status updates to the Court every sixty days and
notify the Court when the arbitration proceeding has completed.
(The Court reserves the right to reopen this matter upon receipt
of an update.)
VI. CONCLUSION
For the foregoing reasons, Defendant’s motion to dismiss will
be granted in part and denied in part, and Defendant’s motion to
stay arbitrable claims will be granted. The remaining non-

arbitrable claims will be administratively terminated without
prejudice pending the outcome of arbitration. The accompanying
Order shall be entered.

Date: August 14, 2019
s/Renée Marie Bumb
RENÉE MARIE BUMB
U.S. District Judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10266531. Public record. Not legal advice.