Suburban Leisure Ctr., Inc. v. Amf Bowling Prods. - 468 F.3d 523 (8th Cir. 2006)

Rule:

Because the parol evidence rule does not exclude parol proof of a prior or contemporaneous oral agreement that is independent of, collateral to and not inconsistent with the written contract, and which would not ordinarily be expected to be embodied in the writing, a merger clause gives rise to no more than a presumption that all the parties' prior agreements merged into the written agreement. The Virginia Supreme Court refers to this exception to the parol evidence rule as the "collateral contract doctrine."

Facts:

Under the oral agreement, the appellee franchisee had the right to use the appellant franchisor’s marks to sell the franchisor's tables. A subsequent written e-commerce dealer agreement had a merger clause and addressed the franchisor's sale of products from its website. The franchisor sent a letter requiring the franchisee to cease promoting the tables. The franchisee filed a damages action for the cancellation of the oral agreement. The franchisor filed a motion to dismiss or, in the alternative, to compel arbitration and stay proceedings, pursuant to 9 U.S.C.S. § 3 of the Federal Arbitration Act (FAA), 9 U.S.C.S. § 1 et seq. The district court denied the franchisor’s motion. The franchisor sought review of the decision. 

Issue:

Did the district court err in denying the franchisor's motion to dismiss or compel arbitration and stay proceedings? 

Answer:

No.

Conclusion:

The court affirmed the denial of the franchisor's motion to dismiss or compel arbitration and stay proceedings. The e-commerce agreement did not address the franchisee's ability to promote or sell the franchisor's products, which was the subject of the oral agreement; thus, the facts did not implicate the parol evidence rule because the oral agreement did not seek to contradict or supplement the subsequent agreement. The court held that the e-commerce agreement, which did not cover the contractual relationship addressed by the oral agreement, did not extinguish the oral agreement because it constituted an independent agreement under Virginia's collateral contract doctrine; thus, arbitration language in the e-commerce agreement was not attributed to the oral agreement.