## Facts

- A franchisor and a franchisee entered a written franchise agreement for a bagel restaurant to be operated in Broomall, Pennsylvania.
- The agreement contained a broad arbitration clause requiring arbitration of disputes related to the agreement and franchise performance, and stating the arbitration obligation survived termination or expiration.
- The agreement also provided territorial protection limiting competition within a defined radius of the franchisee’s location.
- After the franchisor merged into an affiliate, several existing affiliate-branded stores were located within the franchisee’s protected area, prompting the franchisee to claim a violation of the territorial restriction.
- The franchisee filed a state-court action seeking a permanent injunction to stop the franchisor from associating with or operating the nearby stores.
- The franchisor filed a federal petition under the Federal Arbitration Act (FAA) to compel arbitration of the dispute; the federal court ordered the parties to arbitrate.
- The franchisor then moved for a federal preliminary injunction to stop the franchisee from continuing the state-court injunction proceeding while arbitration was pending.
- The franchisee argued the Anti-Injunction Act, 28 U.S.C. § 2283, barred the requested federal injunction.

## Issues

1. Whether a federal court that has compelled arbitration may enjoin a parallel state-court injunction action consistent with the Anti-Injunction Act, 28 U.S.C. § 2283.
2. Whether an injunction is justified as “necessary in aid of” federal jurisdiction or “to protect or effectuate” the federal court’s order compelling arbitration.

## Decision

- The court granted the franchisor’s motion for a preliminary injunction.
- The court enjoined the franchisee from prosecuting or taking further steps in the pending state-court injunction action during the arbitration.
- The court held the Anti-Injunction Act did not bar relief because the injunction fit within statutory exceptions, including being necessary in aid of jurisdiction and/or to protect or effectuate the prior order compelling arbitration.
- The court found the state action risked interfering with arbitration and undermining the federal order directing the parties to arbitrate their dispute.

## Legal Principles

- Under the Anti-Injunction Act, federal courts generally may not enjoin state proceedings unless the injunction is (1) expressly authorized by Congress, (2) necessary in aid of federal jurisdiction, or (3) necessary to protect or effectuate a federal judgment.
- A broad arbitration clause covering disputes related to the franchise relationship supports compelling arbitration of claims seeking injunctive relief concerning contractual territorial protections.
- After a federal court compels arbitration, an injunction staying parallel state litigation may be appropriate where the state proceeding would impair the arbitral forum selected by contract and ordered by the court, or produce inconsistent determinations on the same dispute.
- In evaluating a preliminary injunction in this context, a court considers likelihood of success (including the enforceability and scope of the arbitration clause), irreparable harm from loss of the arbitral forum and conflicting rulings, and the balance of hardships and public interest in enforcing arbitration agreements.

## Conclusion

The court stayed the franchisee’s state-court injunction case because it threatened to sidestep and weaken the federal order compelling arbitration, and the Anti-Injunction Act permitted an injunction to preserve the effect of that order while arbitration proceeded.


Specialty Bakeries, Inc. v. RobHal, Inc., 961 F. Supp. 822 (E.D. Pa. 1997)