July 30, 2025|Franchise Frontlines
July 30, 2025 | United States District Court for the District of Maryland | Unpublished Opinion
Executive Summary
In an unpublished opinion, Judge Richard D. Bennett of the District of Maryland granted in part and denied in part a motion to compel arbitration brought by Spiffy Franchising, LLC. Plaintiffs MJ Enterprise Holdings, Inc. and its CEO, Ross Markajani, alleged fraudulent inducement, violations of the Maryland Franchise Law, breach of contract, and related claims. They argued that the arbitration clause in the Franchise Agreement was procedurally and substantively unconscionable. Defendants countered that the franchisee had ample time to review the contract, was invited to propose changes, and never sought modifications. The court held that plaintiffs failed to show procedural unconscionability, noting they allegedly had more than twenty days to review the agreement and an explicit invitation to submit comments. Because both Maryland and North Carolina law require proof of both procedural and substantive unconscionability, the court enforced the arbitration clause as to all claims except the Maryland Franchise Law claim, which the Maryland addendum expressly preserved for litigation.
Relevant Background
In early 2022, MJ Enterprise Holdings allegedly pursued a franchise opportunity with Spiffy, an app-based car service provider. On February 17, 2022, Spiffy allegedly sent plaintiffs a Franchise Agreement, which included a broad arbitration clause requiring disputes to be resolved under the Federal Arbitration Act in Durham, North Carolina. Plaintiffs allege they attended a Franchise Discovery Day in early March and executed the Franchise Agreement on March 9, 2022, along with a Personal Guaranty signed by Mr. Markajani.
The Franchise Agreement included a Maryland addendum acknowledging state regulations that prohibit waiver of a franchisee’s right to file suit under Maryland’s Franchise Law. The addendum stated: “Franchisee may bring claims under the Maryland Franchise Registration and Disclosure Act in Maryland,” creating a carve-out for Maryland statutory claims.
After plaintiffs allegedly ceased operations in 2023, they filed a nine-count complaint alleging fraud, statutory violations, breach of contract, and RICO claims. Spiffy moved to compel arbitration under the agreement. Plaintiffs opposed, asserting that the arbitration clause was unconscionable and that defendants had waived arbitration by failing to respond promptly to their arbitration demand.
Decision
Judge Bennett began with contract formation. Plaintiffs alleged that the Maryland addendum destroyed mutual assent to arbitration, but the court disagreed. Relying on Chorley Enterprises, Inc. v. Dickey’s Barbecue Restaurants, Inc., the Fourth Circuit explained that “common law claims do not implicate the Maryland [Addendum] in the first instance,” and when read together “the Arbitration [Clause] and Maryland [Addendum] demonstrate that the parties agreed to arbitrate all disputes except for the narrow carve-out for Maryland Franchise Law claims.” 807 F.3d 553, 565–66 (4th Cir. 2015). As in Chorley, the court held that the parties reasonably expected to arbitrate all claims other than those under the Maryland Franchise Law.
The plaintiffs also alleged that the arbitration clause was procedurally unconscionable because it was presented on a take-it-or-leave-it basis. They claimed they lacked any meaningful opportunity to negotiate and that the agreement was a contract of adhesion. The court found no evidence to support these assertions. Spiffy allegedly provided the Franchise Agreement on February 17, 2022, and plaintiffs did not sign until March 9, 2022—giving them at least twenty days for review. That alleged timeline contrasted with cases where courts found procedural unconscionability because parties were pressured to sign in minutes. See Mansfield v. Vanderbilt Mortg. & Fin., Inc., 29 F. Supp. 3d 645, 653–54 (E.D.N.C. 2014).
Further, the transmittal email allegedly stated: “please take your time reviewing in detail” and invited plaintiffs to “note any questions you’d like to discuss on our next call.” Plaintiffs allegedly did not request changes, raise objections, or otherwise indicate a lack of choice. As Judge Bennett noted, Maryland law presumes “that a person knows the contents of a document that he executes and understands at least the literal meaning of its terms.” Walther v. Sovereign Bank, 872 A.2d 735, 745 (Md. 2005). North Carolina precedent likewise holds that “[w]here a party has a reasonable opportunity to read a contract and fails to do so, he is bound by its terms.” Raper v. Oliver House, LLC, 637 S.E.2d 551, 555 (N.C. Ct. App. 2006).
The court also referenced Siert v. Spiffy Franchising, LLC, where another franchisee alleged that Spiffy’s agreement was unconscionable. The Northern District of California rejected that claim, noting Spiffy “promptly responded to Plaintiffs’ redlines and incorporated most of their proposed changes.” 758 F. Supp. 3d 1142, 1151 (N.D. Cal. 2024). That history undermined the allegation that Spiffy’s contracts were categorically adhesive.
Judge Bennett concluded that plaintiffs made “no showing at all of procedural unconscionability” and therefore failed to meet their burden. Because both Maryland and North Carolina require a showing of both procedural and substantive unconscionability, the court declined to reach substantive unconscionability. As he emphasized, “even the most substantively unconscionable contract will not be deemed unconscionable absent some showing of procedural unconscionability.” Rose v. New Day Fin., LLC, 816 F. Supp. 2d 245, 256 (D. Md. 2011).
The court compelled arbitration of all claims except the Maryland Franchise Law claim, which the addendum preserved for Maryland courts. Exercising its discretion under Chorley and Smith v. Spizzirri, 601 U.S. 472, 478 (2024), the court stayed the entire action to avoid “confusion and inconsistent results.” Trouard v. Dickey’s Barbecue Rests., Inc., 2016 WL 687487, at *3 (D. Md. Feb. 19, 2016).
Looking Forward
For franchisors, this case illustrates that procedural unconscionability challenges may be defeated when the record shows franchisees had meaningful time to review agreements. Courts may view statutory disclosure waiting periods, coupled with documented opportunities to ask questions, as sufficient to ensure enforceability.
The opinion also demonstrates the importance of contemporaneous documentation. Emails encouraging franchisees to review the agreement carefully or to raise comments can later serve as powerful evidence against claims of procedural unfairness.
Finally, the decision highlights the interplay between federal arbitration law and state franchise statutes. By using a Maryland addendum that preserved statutory claims while still channeling other disputes into arbitration, the franchisor maintained compliance without undermining the agreement’s enforceability.
Thomas O’Connell is a Shareholder at Buchalter APC and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
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