18‐1865‐cv
Doctor’s Associates, Inc. v. Alemayehu




                                  UNITED STATES COURT OF APPEALS
                                       FOR THE SECOND CIRCUIT



                                             August Term, 2018

                          Argued: May 23, 2019        Decided: August 14, 2019

                                           Docket No. 18‐1865‐cv



                                         DOCTOR’S ASSOCIATES, INC.,

                                                              Plaintiff‐Appellant,

                                                  — v. —

                                            GIRUM ALEMAYEHU,

                                                              Defendant‐Appellee.




B e f o r e:

                           LIVINGSTON, LYNCH, and SULLIVAN, Circuit Judges.




     Plaintiff‐Appellant Doctor’s Associates, Inc. (“DAI”), is the parent
company of the Subway chain of restaurants. Defendant‐Appellee Girum
Alemayehu (“Alemayehu”) sought DAI’s approval to purchase an existing
Subway franchise in Aurora, Colorado, and, when DAI denied his application,
Alemayehu sued, claiming that DAI discriminated against him on the basis of
race. DAI then filed this lawsuit in the United States District Court for the District
of Connecticut, seeking to compel Alemayehu to arbitrate. The United States
District Court for the District of Connecticut (Hall, J.) denied DAI’s motion to
compel, holding that the Franchise Application, which DAI argues contains a
binding arbitration clause, was not supported by consideration.
       As a threshold matter, we agree with the district court that whether or not
an agreement is supported by adequate consideration is a question about contract
formation for the court, not the arbitrator, to decide. We conclude, however, that
the promise to arbitrate in the Franchise Application was supported by adequate
consideration. We therefore VACATE the judgment of the district court and
REMAND for further proceedings consistent with this opinion.




                   JEFFREY R. BABBIN, Wiggin and Dana LLP, New Haven, CT
                         (David R. Roth, Wiggin and Dana LLP, New Haven, CT,
                         on the brief), for Plaintiff‐Appellant.

                   JEFFREY COHEN, Cohen, LLC, Denver, CO (Anthony Garcia,
                         Cohen, LLC, Denver, CO, on the brief), for Defendant‐
                         Appellee.




GERARD E. LYNCH, Circuit Judge:

      Plaintiff‐Appellant Doctor’s Associates, Inc. (“DAI”), is the parent

company of the Subway brand of restaurant franchises. Beginning in 2016,

Defendant‐Appellee Girum Alemayehu sought to purchase an existing Subway

franchise in Colorado. As part of the application process, Alemayehu checked a


                                          2
box on an online form, agreeing to submit any claims arising from the application

process to arbitration. When DAI denied Alemayehu’s application, however, he

filed a lawsuit in the United States District Court for the District of Colorado,

claiming that DAI and its agents had discriminated against him on the basis of

race. DAI responded by bringing this action in the United States District Court

for the District of Connecticut, seeking to compel the arbitration of Alemayehu’s

claims.

      The United States District Court for the District of Connecticut (Janet A.

Hall, J.) denied the motion, finding that the putative arbitration agreement lacked

consideration, and DAI appealed. For the reasons that follow, we VACATE the

judgment of the district court and REMAND for further proceedings consistent

with this opinion.




                                          3
                                BACKGROUND1

      In 2016, Alemayehu, a Colorado businessman, sought to purchase an

existing Subway franchise in Aurora, Colorado, from Gary Newcomb. After a

few months of negotiation, Alemayehu and Newcomb, who owned multiple

Subway franchises in the Denver area, reached a tentative agreement that

Alemayehu and his wife would purchase the Aurora franchise for $120,000.

      However, individuals seeking to start a new Subway franchise, or to

purchase an existing franchise as a new owner, must first obtain DAI’s approval.

The application process begins with an online application. The application, on

which potential franchisees must provide the restaurant chain with personal as

well as financial information, is available on Subway’s website.

      Alemayehu filled out this initial application on February 15, 2017, on

behalf of himself and his wife. The two‐page application required Alemayehu to



1
 Our discussion of the facts is drawn primarily from Alemayehu’s complaint in
the Colorado action and the factual information submitted by the parties in
connection with the motion to compel arbitration. In reviewing a motion to
compel arbitration, we “consider all relevant, admissible evidence submitted by
the parties and contained in pleadings, depositions, answers to interrogatories,
and admissions on file, together with affidavits.” Nicosia v. Amazon.com, Inc., 834
F.3d 220, 229 (2d Cir. 2016) (internal citations, quotations marks and alterations
omitted).

                                         4
provide his demographic and personal information, as well as information about

his educational background and past or current business experience.

      In addition to demanding such information, the Franchise Application

required the applicant to make various promises. Applicants were required to

authorize DAI to complete a background check, and to agree to keep private any

confidential information they receive from DAI. The Franchise Application also

contained the following arbitration provision:
            I agree that I will settle any and all previously
            unasserted claims, disputes or controversies arising out
            of or relating to my application or candidacy for the
            grant of a SUBWAY franchise from Franchisor,
            pursuant to the laws of Connecticut, USA, and by
            binding arbitration only. I agree that the arbitration will
            be administered by either the American Arbitration
            Association or its successor (“AAA”) or the American
            Dispute Resolution Center or its successor (“ADRC”) at
            the discretion of the party first filing a demand for
            arbitration. I understand that AAA will administer the
            arbitration in accordance with its administrative rules
            (including, as applicable, the Commercial Rules of the
            AAA and the Expedited Procedures of such rules), and
            ADRC will administer the arbitration in accordance
            with its administrative rules (including, as applicable,
            the Rules of Commercial Arbitration or under the Rules
            for Expedited Commercial Arbitration). If both AAA
            and ADRC are no longer in business, then I understand
            that the parties will mutually agree upon an alternative
            administrative arbitration agency. If the parties cannot
            mutually agree, then the parties agree to take the matter

                                         5
             to a court of competent jurisdiction to select the agency.
             I agree that arbitration will be held in Bridgeport,
             Connecticut, USA, conducted in English and decided by
             a single arbitrator.
J. App’x at 14. Applicants were required to check a box immediately below this

text, certifying that they “ha[d] read the above disclaimer.” Id. It was not possible

to submit the Franchise Application without checking the box and typing a name

into a signature box below it.

      As Alemayehu later stated in his Colorado complaint, “Subway began

taking actions in consideration of their applications” shortly after he submitted

the application form. J. App’x at 24. DAI required Alemayehu and his wife to

take the Wonderlic Personnel Test at the office of Clear Stone Development, Inc.

(“Clear Stone”);2 the couple completed the test on February 22, 2017. Several

weeks later Alemayehu was informed that he had passed the test, but that his

wife had not. Alemayehu was then interviewed at the Clear Stone office. During

this initial interview, Alemayehu alleges, Connie Gemignani, Director of

Operations for Clear Stone, told him not to sign a contract with Newcomb. She

then instructed Alemayehu to attend a training seminar.


2
 Clear Stone is a Colorado corporation and serves as Subway’s franchise
development agency for Denver and parts of southern Colorado.

                                          6
      Alemayehu had a final interview with Clear Stone on May 24, 2017, during

which Gemignani allegedly told Alemayehu that he was “not fit” to run a

Subway franchise. J. App’x at 27. According to Alemayehu, Gemignani did not

tell him what specifically made him unqualified. She later told Newcomb,

however, that she “did not want to talk to [Alemayehu] because [Clear Stone

was] worried he would be playing the race card with them,” and that she

therefore would not reconsider Alemayehu’s application. J. App’x at 117–18.

      Alemayehu filed suit in the United States District Court for the District of

Colorado on January 26, 2018. In his complaint, Alemayehu claimed that DAI

was responsible for the actions of Clear Stone and its employees, and that DAI

engaged in its own wrongful conduct. He claimed that, in denying his

application, DAI, Gemignani, and Clear Stone had discriminated against him on

the basis of his race in violation of 42 U.S.C. § 1981. He also asserted several state

law claims, including tortious interference with prospective business advantage,

extreme and outrageous conduct, deceit based on fraud, violations of the

Colorado Consumer Protection Act, breach of the implied covenant of good faith

and fair dealing, and civil conspiracy.

      In response to the Colorado lawsuit, DAI brought the instant action to


                                          7
compel arbitration in the United States District Court for the District of

Connecticut.3 DAI relied on the arbitration provision of the Franchise

Application, alleging that the provision required Alemayehu to arbitrate “any

disputes or controversies arising out of or relating to the application or candidacy

for the grant of a Subway franchise from the Franchisor.” J. App’x at 9. DAI also

claimed that the arbitration provision required that any arbitration “must be in

accordance with the Commercial Rules of either the American Arbitration

Association . . . or the American Dispute Resolution Center” and that arbitration

“is to take place in Bridgeport, Connecticut.” J. App’x at 8. DAI therefore

requested that the district court in Connecticut enter “an order pursuant to 9

U.S.C. § 4 directing Alemayehu to arbitrate with DAI [the] claims against both

DAI and its agents” underlying Alemayehu’s Colorado action.4 J. App’x at 10.


3
 DAI asserted that venue was proper because, among other reasons, Alemayehu
“agreed to arbitrate in Connecticut.” J. App’x at 8. Alemayehu does not raise any
objection to venue.
4
 Following the filing of the Connecticut action, the district court in Colorado
stayed the proceedings there pending resolution of the motion to compel
arbitration. See Order, Alemayehu v. Gemignani, 18‐cv‐212‐CMA (D. Colo. March
23, 2018), ECF No. 16. After the district court in Connecticut denied the motion,
Alemayehu sought to vacate the stay. But the Colorado district court denied his
request pending this Court’s resolution of this appeal. The United States Court of
Appeals for the Tenth Circuit dismissed Alemayehu’s appeal of that order for

                                          8
      Alemayehu opposed DAI’s application on various grounds. Rather than

addressing the merits of Alemayehu’s arguments, however, the district court

instead raised sua sponte the question of consideration. It concluded that the court

“ha[d] insufficient information to determine whether the Franchise Application

submitted by [Alemayehu] constitutes a contract, either in whole or with respect

to the arbitration agreement, specifically whether there is consideration.” J. App’x

at 148. It then requested supplemental briefing from the parties.

      Following that briefing, the court denied DAI’s motion to compel. See

Doctorʹs Assocs., Inc. v. Alemayehu, 321 F. Supp. 3d 305 (D. Conn. 2018) (“DAI”).

Rejecting DAI’s arguments to the contrary, the district court concluded that the

Franchise Application “contains only unilateral promises made by the applicant,

Alemayehu” and failed to require anything of DAI. Id. at 309. As a result, the

court concluded that there was no consideration and therefore “the parties did

not agree to arbitrate.” Id. at 313.

      The district court entered judgment in favor of Alemayehu, and DAI

timely appealed.




lack of appellate jurisdiction. See Alemayehu v. Gemignani, 769 F. Appʹx 555, 562
(10th Cir. 2019). The Colorado proceedings accordingly remain stayed.

                                         9
                                    DISCUSSION

      Under the Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., parties may

contract to arbitrate their disputes, and such agreements are “valid, irrevocable,

and enforceable, save upon such grounds as exist at law or in equity for the

revocation of any contract.” Id. § 2. The FAA “embodies a national policy

favoring arbitration” founded upon “a desire to preserve the parties’ ability to

agree to arbitrate, rather than litigate, [their] disputes.” Schnabel v. Trilegiant

Corp., 697 F.3d 110, 118 (2d Cir. 2012) (internal citations, quotation marks, and

alterations omitted). The Act was intended to “place[] arbitration agreements

upon the same footing as other contracts.” Id. (internal quotation marks omitted).

Arbitration remains, however, a creature of contract: “The threshold question

facing any court considering a motion to compel arbitration is . . . whether the

parties have indeed agreed to arbitrate.” Id.

      DAI argues that Alemayehu promised to arbitrate his claims when, upon

submitting his application, he checked a box adopting an agreement to “settle

any and all previously unasserted claims, disputes or controversies arising out of

or relating to my application or candidacy . . . by binding arbitration only.” J.

App’x at 14. On appeal, DAI raises two primary arguments challenging the


                                           10
district court’s denial of its motion to compel arbitration. First, it argues that the

question whether the promise to arbitrate was supported by adequate

consideration should have been decided by the arbitrator, not by the district

court. Second, should we conclude that the consideration question is for the

courts to decide, DAI argues that the agreement to arbitrate is supported by

adequate consideration and, therefore, that the parties have a binding contract

that requires Alemayehu to submit his claims to arbitration.

      We review the district court’s denial of a motion to compel arbitration de

novo. Meyer v. Uber Techs., Inc. 868 F.3d 66, 72 (2d Cir. 2017).

I.    Who Decides the Question of Consideration?

      Before reviewing the district court’s determination that there was not

sufficient consideration, we must address a threshold issue that we have not

previously resolved: must the question whether an arbitration clause is

supported by adequate consideration be decided by a court at the outset, or may

it be referred to an arbitrator?

      Under the FAA, threshold questions of arbitrability presumptively should

be resolved by the court and not referred to the arbitrator. See, e.g., First Options of




                                           11
Chicago, Inc. v. Kaplan, 514 U.S. 938, 944–45 (1995).5 While the presumption may

be overcome where the parties “clearly and unmistakably” agree to arbitrate

threshold questions such as whether the arbitration clause applies to a particular

dispute, or whether it is enforceable, parties may not delegate to the arbitrator the

fundamental question of whether they formed the agreement to arbitrate in the

first place. Granite Rock Co. v. International Brotherhood of Teamsters, 561 U.S. 287,

299‐301 (2010) (internal quotation marks omitted).

      In Granite Rock, the Supreme Court clarified that its “precedents hold that

courts should order arbitration of a dispute only where the court is satisfied that



5
  “When deciding whether the parties agreed to arbitrate a certain matter
(including arbitrability), courts generally . . . should apply ordinary state‐law
principles that govern the formation of contracts.” Id. at 944. The Franchise
Application stated that disputes would be decided “pursuant to the laws of
Connecticut, USA.” J. App’x at 14. The district court, however, declined to
enforce the choice‐of‐law provision, concluding that Colorado law applied. DAI,
321 F. Supp. 3d at 308 & n.1. While DAI asserts that Connecticut law should
control, it also acknowledges that, like the district court, it “is unaware of any
substantive difference” between the law of Connecticut and Colorado relevant to
this appeal. Appellant’s Br. at 32‐33 n.9. Because the parties do not identify a
meaningful relevant difference between Connecticut and Colorado law, we need
not resolve the choice‐of‐law issue here. See, e.g., Schnabel, 697 F.3d at 119 (“But as
the district court recognized, neither that court nor this one need resolve this
typically thorny choice‐of‐law question, because both Connecticut and California
apply substantially similar rules for determining whether the parties have
mutually assented to a contract term.”).

                                           12
neither the formation of the parties’ arbitration agreement nor (absent a valid

provision specifically committing such disputes to an arbitrator) its enforceability

or applicability to the dispute is in issue.” Id. at 299 (emphasis in original). The

Court in Granite Rock thus expressly distinguished threshold questions

concerning contract formation from questions concerning enforceability and

scope, noting that the parties may agree to arbitrate the latter in a parenthetical

conspicuously not applicable to the former. See id. See also Edwards v. Doordash,

Inc., 888 F.3d 738, 744 (5th Cir. 2018) (“[W]e first look to see if an agreement to

arbitrate was formed, then determine if it contains a delegation clause. . . .

Arguments that an agreement to arbitrate was never formed . . . are to be heard

by the court even where a delegation clause exists.”).6


6
  DAI argues that the parties delegated threshold issues by incorporating the
rules of the American Arbitration Association (“AAA”) and the American
Dispute Resolution Center (“ADRC”), both of which empower arbitrators to
decide questions of arbitrability, including questions of the arbitrator’s own
jurisdiction and the existence of a contract. It relies on Contec Corp. v. Remote
Solution, Co. Ltd., 398 F.3d 205, 208 (2d Cir. 2005), in which this Court held that
the parties’ incorporation of the AAA rules amounted to “clear and unmistakable
evidence” of the parties’ intent to delegate threshold issues.
       But even assuming that DAI is correct that the Franchise Application’s
invocation of the two sets of rules required arbitration of threshold questions, the
Court still “must resolve the disagreement” over “the formation of the parties’
arbitration agreement” before referring the dispute to arbitration. Granite Rock,
561 U.S. at 299–300.

                                          13
       This distinction accords with basic principles of contract law. An

agreement that has not been properly formed is not merely an unenforceable

contract; it is not a contract at all. And if it is not a contract, it cannot serve as the

basis for compelling arbitration. Arbitration is, first and foremost, “strictly a

matter of consent.” Granite Rock, 561 U.S. at 298 n.6. To take the question of

contract formation away from the courts would essentially force parties into

arbitration when the parties dispute whether they ever consented to arbitrate

anything in the first place.

       Accordingly, the question before us is what type of issue, exactly, is

consideration. Is it a question of contract formation, such that a court must decide

the issue in order to ensure that the parties actually consented to arbitrate at all?

Or is it an issue related to the enforceability or scope of the arbitration clause and

therefore one that the parties may choose to delegate?

       Basic tenets of contract law yield a simple answer. As one treatise notes,

“[a]t common law the formation of an informal contract requires that legally

sufficient consideration be given for the promise or promises contained within

the contract.” 3 Williston on Contracts § 7:1 (4th ed.). The requirement that a

contract be supported by consideration has continued, with slight modification,


                                            14
into the present, where it remains an essential element of contract formation:

“Where no consideration exists, and is required, the lack of consideration results

in no contract being formed in the absence of a substitute for consideration” such

as estoppel. Id. at § 7:11; see also 17A Am. Jur. 2d Contracts § 18 (noting several

formulations of the essential elements of contracts, each including consideration).

      Both Connecticut and Colorado law treat consideration as a necessary

element of contract formation, following the standard formulation of contract

formation. See, e.g., Summerhill, LLC v. City of Meriden, 131 A.3d 1225, 1229 (Conn.

App. Ct. 2016) (affirming trial court’s conclusion that there was insufficient

evidence to submit the question of a contract’s existence to the jury where the

alleged contract “did not set forth any consideration to support the formation of a

contract”); Harley v. Indian Spring Land Co., 3 A.3d. 992, 1013 (Conn. App. Ct.

2010) (“[T]he elements of a breach of contract include the formation of an

agreement[,] which, in turn, requires the presence of adequate consideration . . .

.” (citation omitted)); Pierce v. St. Vrain Valley Sch. Dist. RE‐1J, 981 P.2d 600, 603

(Colo. 1999) (explaining that “consideration” and “mutual assent” are “the basic

elements of contract formation”); Legro v. Robinson, 328 P.3d 238, 246 (Colo. App.

2012) (“A contract is formed when one party makes an offer and the other accepts


                                           15
it, and the agreement is supported by consideration.”) (quoting Sumerel v.

Goodyear Tire & Rubber Co., 232 P.3d 128, 133 (Colo. App. 2009)). Because

consideration is fundamental to contract formation, it is an issue reserved for the

courts under Granite Rock.7

      We conclude that whether a purported promise to arbitrate was supported

by consideration must be resolved by the court. We therefore turn to the question

of the consideration supporting the Franchise Application at issue here.

II.   Was the Agreement Supported by Consideration?

      The district court held that the “alleged contract” was not supported by

consideration because it “contains only unilateral promises made by the

applicant, Alemayehu.” DAI, 321 F. Supp. 3d at 309. Rejecting DAI’s arguments

to the contrary, it concluded that, while a promise to consider an application

might be sufficient consideration for promises made in submitting that


7
  DAI’s arguments about the scope of the arbitration provision (and the AAA and
ARDC rules) are beside the point. Once formed, of course, a broad agreement to
arbitrate might require the arbitrator to determine the scope of the arbitration
provision at issue. See, e.g., Bell v. Cendant Corp., 293 F.3d 563, 568 (2d Cir. 2002).
The question here is not whether the language of the provision can be read as
broad enough to encompass issues of formation, but rather whether the clause
itself exists as a binding agreement in the first place. If there is no consideration
for the promise to arbitrate, then there is essentially no contractual language to
interpret.

                                           16
application, “DAI did not make a legally enforceable promise to consider

Alemayehu’s Franchise Application” because there was “no language in the

Franchise Application binding DAI to consider franchise applications, to provide

applicants with additional information, or to respond to everyone who applies.”

Id. at 310.

       That conclusion was in error. A fundamental tenet of the law of

consideration is that “[c]onsideration may consist of a performance or of a return

promise,” Restatement (Second) of Contracts § 71, cmt. d (emphasis added), and

that, except in certain circumstances not relevant here, “any performance which

is bargained for is consideration,” id. § 72. See also Mandell v. Gavin, 816 A.2d 619,

625 (Conn. 2003) (adopting Restatement (Second) definition of consideration);

PayoutOne v. Coral Mortg. Bankers, 602 F. Supp. 2d 1219, 1224 (D. Colo. 2009)

(noting that, under Colorado law, “sufficient consideration . . . [requires] an

exchange of one party’s promise or performance for the other party’s promise or

performance.”) (emphasis added); 17A Am. Jur. 2d Contracts § 101 (“There is

consideration for a contract if the promisee, being induced by the agreement,

does anything legal that he or she is not bound to do, or refrains from doing

anything that he or she has a right to do.”).


                                          17
      Here, Alemayehu received a bargained‐for performance in exchange for

his agreement to arbitrate. Alemayehu wished to purchase the Aurora Subway

franchise from Newcomb, but Newcomb was contractually forbidden from

transferring the franchise without DAI’s approval. DAI was under no obligation

to entertain an application from any would‐be franchisee who did not agree to

DAI’s preconditions. Accordingly, DAI solicited franchise applications from

applicants willing to provide various items of personal information as well as to

make various promises — including, inter alia, to maintain confidentiality and to

arbitrate all disputes arising out of the application process.8 By completing and

submitting his application, Alemayehu offered that information and those

promises in exchange for DAI’s subsequent review of the application. DAI then

accepted that offer by giving the performance that Alemayehu had sought: it

reviewed Alemayehu’s application and actually considered him for the franchise.

DAI thereby provided Alemayehu with a benefit in exchange for Alemayehu’s



8
  Such preconditions for entering even preliminary negotiations for a business
transaction are not uncommon. Parties often require suitors for a business
opportunity to agree to provide financial or other information, or to enter a non‐
disclosure agreement or, as here, an arbitration agreement, before undertaking
even to consider a proposed transaction. See, e.g., Media Rights Technologies, Inc. v.
Microsoft Corp., 922 F.3d 1014, 1018 & n.4 (9th Cir. 2019).

                                          18
earlier application promises, concluding a contract between the parties and

binding Alemayehu to comply with those promises.

      The district court correctly observed that, since DAI did not promise to

consider properly submitted applications, an individual’s franchise application

could “simply languish[], unread, in an electronic inbox” and that no express

promise “preclude[d] DAI from unilaterally deciding not to review any

applications submitted.” DAI, 321 F. Supp. 3d at 310. Here, however, DAI did

review Alemayehu’s application. In doing so, DAI both accepted Alemayehu’s

offer to arbitrate all claims arising out of such review and simultaneously

provided the very consideration (a review of the application) that Alemayehu

sought by applying in the first place.

      Alemayehu also challenges this conclusion on grounds slightly different

from those stated by the district court. He argues that “[i]n order to accept the

offer [by rendering performance], the offeree must give . . . that for which the

offeror bargains. If it is in any material respect different, there is no contract.”

Appellee’s Brief at 32 (internal quotation marks and citation omitted). He argues

that DAI never specified what performance it would provide to ensure

consideration, and that therefore mutual assent was necessarily lacking.


                                           19
      But, again, DAI rendered the exact performance that Alemayehu sought. It

did not (as Alemayehu suggests in a hypothetical) “send[] Alemayehu a $50 gift

card to Starbucks a few weeks after the Application was submitted instead of

considering the Application.” Id. at 33. DAI’s website solicited applications, but

conditioned the filing of an application on Alemayehu’s agreement to arbitrate

disputes. Alemayehu began his application by navigating to the portion of

Subway’s website labeled “Apply to Own.” J. App’x at 46. The application stated

it was to be “used for purchasing a new franchise, an additional franchise, or the

purchase and transfer of an existing store,” but that applying alone would “not

obligate the applicant to purchase or the franchisor to sell a franchise or

location.” J. App’x at 13. The application was thus explicitly an application to be

considered to own a franchise. As he proceeded through the form, Alemayehu

consented to release his information for a background search and an investigative

consumer report, the exact steps later taken by DAI when it referred him to the

Wonderlic test, training, and interviews. The performance that DAI would

provide in exchange for Alemayehu’s completion of the online application was

clear from the moment that Alemayehu sat down at his computer. Indeed,

Alemayehu himself alleged in his complaint in the District of Colorado that DAI


                                         20
had “tak[en] actions in consideration of [Alemayehu and his wife’s]

applications.” J. App’x at 24.

      Given the specific steps taken by DAI in this case, then, we conclude that

there was sufficient consideration to support the agreement to arbitrate.9 Nothing

in this opinion, of course, expresses any view on whether DAI considered

Alemayehu’s application fairly, or whether, as Alemayehu alleges, it violated

federal or state law by denying his application because of his race. Holding that

DAI’s consideration of his application is sufficient consideration to support a

promise by Alemayehu to arbitrate his claims in no way suggests that DAI can

contract out of its legal obligation to consider an applicant (who agrees to DAI’s

demand for an arbitration agreement) in a non‐discriminatory manner. The issue

before us is only who will be responsible for determining Alemayehu’s claim of

discrimination: a court or an arbitrator.

      Accordingly, we vacate the district court’s judgment, which was



9
 DAI also raises two other arguments regarding consideration. First, it argues
that the arbitration provision itself is mutual and would require DAI to arbitrate
claims, even though its language purports only to bind Alemayehu. Second, it
argues that having an opportunity to be considered, by itself and without
performance on the part of DAI, would be a sufficient benefit to Alemayehu to
constitute consideration. We need not address either argument.

                                            21
predicated on the absence of consideration. In opposing the motion to compel

before the district court, however, Alemayehu “raised a number of arguments”

other than consideration. See DAI, 321 F. Supp. 3d at 313 (noting issues). In light

of its conclusion that the Franchise Application did not constitute a binding

contract, the district court did not reach those issues. Id. We therefore remand to

the district court to consider Alemayehu’s other arguments in the first instance,

and for any other necessary proceedings.

                                     CONCLUSION

      For the reasons stated above, we VACATE the judgment of the district

court and REMAND for further proceedings consistent with this opinion.




                                         22
