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December 2017

Gordon & Rees New Jersey Team Obtains Dismissal of Franchise Claims in International Arbitration

Gordon & Rees New Jersey attorneys Peter G. Siachos and Matthew P. Gallo obtained complete dismissal of a multi-count arbitration filed against their client, a worldwide franchisor of fitness centers before a three-member arbitration panel of the International Arbitration Tribunal of the American Arbitration Association. The claimant, a former master franchisee of the client for the entire country of Vietnam, alleged that the client improperly terminated it as master franchisee, and brought claims for breach of contract, breach of fiduciary duty, promissory estoppel, and negligence.

The claimants’ rights to develop, own, and operate fitness facilities in Vietnam were terminated on September 24, 2010, and she waited until March 2, 2016 to file her demand for arbitration.  Gordon & Rees's attorneys successfully argued that Texas law applied, which provides for a four-year statute of limitations. The attorneys then requested permission from the arbitration panel to file a dispositive motion to dismiss the plaintiff’s arbitration demand as time-barred. The arbitration panel begrudgingly granted such permission, noting that dispositive motions are very rarely granted in arbitration.  Though Gordon & Rees’s dispositive motion was forthcoming, the arbitration panel set an aggressive discovery schedule, including depositions in Vietnam and Hong Kong. 

Though the claimants waited nearly six years after termination to serve their Notice of Arbitration, they argued that the Texas “Continuing Tort Doctrine" applied and the panel should consider the date of the last tortious act as the date when the statue began to run.  According to the plaintiff, the client’s last alleged tortious act occurred on March 3, 2012 (less than four years before the March 2, 2016 arbitration demand) when the franchisor sent an e-mail to the claimants reiterating that they were no longer the master franchisee in Vietnam. Additionally, the plaintiff argued that subsequent acts committed by the franchisor, including canceling the plaintiff’s license to operate fitness facilities with the Vietnamese government in 2013, also tolled the statute of limitations.  

After extensive briefing and a three-hour hearing, the panel issued a lengthy decision dismissing the plaintiff’s claims as time-barred.  The panel further rejected the applicability of the continuing tort doctrine and instead, concluded that the Notice of Termination dated September 24, 2010 controlled for purpose of calculating the statute of limitations. The panel concluded that the Notice of Termination operated to nullify any alleged “continuing torts” because the claimant acknowledged receipt of the termination in 2010, whether it was wrongful or not.  

Matthew P. Gallo
Peter G. Siachos