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December 2017

Gordon & Rees Multi-Office Team Prevails in Arbitration for National Franchisor Client

Partner Lisa K. Garner, with invaluable assistance from associate Crystal Yu and paralegal Katherine Wong, recently prevailed in an arbitration for a national franchisor who was being sued by a current franchisee. The franchisee claimed that the franchisor anticipatorily breached the franchise agreement, violated the duty of good faith and fair dealing, and violated Arizona’s Deceptive Practices Act by a statement that the franchise agreement was only for a certain period of time. The franchisee claimed that the position of the franchisor impacted the length of time any buyer of the franchise business would have on the franchise should the franchise be sold. The franchisee elected rescission, which would mean that the franchisee could operate the business without having to abide by the non-compete provisions in the franchise agreement.  Such a result would have been untenable for the firm's client.  This case was watched very carefully by the firm's client because there was a potential for similar claims by other franchisees.

After a two-day arbitration and further post-arbitration briefing, the decision in favor of Gordon & Rees's client on all three claims was made by the arbitrator. The arbitrator noted that the alleged statement was of no effect, since the franchisee had no present plans to sell its franchise and since the franchisor had not, in fact, refused to perform as stated in the franchise agreement. The arbitrator also agreed with Garner’s argument concerning the Deceptive Practices Act. The arbitrator also determined that the firm's client was the prevailing party and is entitled to attorney fees and costs. 

Because of the potential for additional litigation from other franchisees if the result had been against the franchisor, the client was, needless to say, overjoyed with the result. In addition, both its general counsel and its CEO wrote Garner expressing their delight with the way the case was handled by the team which includes partners Calvin Davis and Ted Armbrister, and the entire Arizona office.

Lisa K. Garner
Crystal W. Yu