Spinks v. Krystal Co.

Spinks Investments, Inc. (Spinks) and Spinks’s owner (plaintiff) entered into two franchise agreements with Krystal Company (Krystal) (defendant) under which Spinks was to operate two Krystal restaurants in two different cities. The two franchise agreements were entered into on May 11, 2004, and June 22, 2004. The franchise agreements contained an arbitration clause that provided that all disputes between the parties, except if a party was seeking injunctive relief, must be resolved in arbitration. On the same day each agreement was entered into, the parties executed a guarantee agreement as to each franchise agreement. The guarantee agreements provided that each guarantor agreed to be personally bound by “each and every provision in the Franchise Agreement” and that the guarantee agreements would be governed by Tennessee law. Neither guarantee agreement contained an arbitration clause nor specifically incorporated the arbitration provision contained in the franchise agreement. However, the guarantee agreements were attached to the franchise agreement and made exhibits thereto. Less than three years after signing the franchise agreement, Spinks closed both restaurants. Krystal served Spinks notices of breach of the franchise agreement and its intention to seek remedy for the breach in arbitration. Upon receiving the notices, Spinks’s owner filed suit in the Court of Common Pleas of Greenville both in his personal capacity and as a corporation seeking a declaration that the two guarantee agreements were unenforceable and that even if they were enforceable, both he as an individual and Spinks as a company were not subject to arbitration with Krystal.