Casa Del Caffee Vergnano v. ItalFlavors

Parties are only required to submit to arbitration in disputes where the parties consented to arbitration; further, the requisite consent to constitute a binding agreement is governed by contract law principles, specifically determining the parties’ mutual assent under an objective standard regarding the exchange of a legally enforceable bargain with consideration.

Cesar and Hector Rabellino, Argentinian nationals, planned to open an Italian-style coffee shop in the United States. The Rabellinos met with Tommaso Lambert, a representative of Caffee Vergnano – Italian corporation that the Rabellinos wished to open a franchise of in America. On September 23, 2010, the parties signed the Commercial Contract – the first contract, which included the compulsory arbitration provision at issue. Subsequently, the next day, the parties signed a second contract that included language negating the validity of the Commercial Contract. Lambert asserts that the purpose of the second contract was merely to protect Caffe Vergnano from liability in the event Hector Rabellino used the contract contrary to United States immigration laws. The panel heard this case pursuant to Chapter 2 of the Federal Arbitration Act. The district court held that the arbitration provision in the Commercial Contract survived the parties’ September 24, 2010 agreement; thus the dispute was arbitable. On appeal, the Ninth Circuit determined the issue of whether parties to a contract, in which no evidence supported that the contract was a binding agreement, may enforce a compulsory arbitration provision against themselves. Parties are only required to submit to arbitration in any disputes where those parties have consented to arbitration. The requisite consent to constitute a binding agreement between the parties is governed by contract law principles, particularly in the Restatement (Second) of Contracts. A contract is formed when the parties manifest a mutual assent to the exchange and consideration of a legally enforceable bargain. Moreover mutual consent by the parties is determined under an objective standard by examining the parties’ expressive conduct. The panel held that the parties in the present case did not intend to be bound by the Commercial Contract; therefore, the district court erred in compelling the parties to submit to arbitration. REVERSED.