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WASHINGTON — Last week the International Franchise Association filed a friend of the court brief with the U.S. Supreme Court in support of Coffee Beanery’s petition on the issue of “manifest disregard of the law” in arbitration rulings. The IFA urges the Supreme Court to take the case so it can resolve the conflict among the Circuit courts that “adversely affects every company that favors arbitration and does business nationwide.” The IFA’s brief explains:
“The current state of the law creates tremendous uncertainty about the finality and cost-effectiveness of arbitration – uncertainty that is especially problematic for national franchise systems that rely on arbitration. Franchisors select arbitration as an expeditious, efficient and cost-effective means of resolving disputes, but they currently do not receive those benefits uniformly across the country. These inappropriate variations in the law governing enforcement of arbitration awards significantly undermine the Federal Arbitration Act’s purpose of establishing a national policy favoring arbitration of claims that parties contract to settle in that manner.”
The IFA has stated that it filed the brief to protect the tenets of arbitration as an efficient and cost-effective method of resolving disputes. According to the association a recent study comparing data from major franchisors from 1999-2007, found the proportion of franchise agreements with an arbitration clause to range between 43 and 45 percent. David French, IFA vice president of government relations, stated, “In order to defend against claims of manifest disregard in post-arbitration motions, arbitrators may become more like judges, permitting expansive discovery and issuing lengthy decisions at every turn.”
In addition, without clarity, French predicted that court dockets will become more crowded as motions to vacate follow almost every arbitration and courts are asked to comb through days of evidence and legal argument to evaluate allegations of manifest disregard.
“A national uniform policy is essential to maintaining the purpose of the arbitration process,” French said. “We are hopeful that the Supreme Court will agree so that those companies that choose to use arbitration can do so with confidence.”
AAFD Responds to IFA Amicus
Robert Purvin, chairman of the American Franchisee and Dealers Association, said his group did not have plans to file an amicus on behalf of the Coffee Beanery franchisees. “We don’t have a Coffee Beanery chapter, and there hasn’t been any request made to us regarding this case. Since we are driven by the crises of our member groups, or by requests made of us, there are many cases that deserve our attention that never even make it under our radar.”
Purvin also reminded that the efficacy of arbitration is under great scrutiny. He said, “Even among IFA members the wall of sanctity is beginning to crumble. The AAFD supports the proposed Arbitration Fairness Bill now in Congress. The IFA opposes it. However, many franchisor lawyers have come to see arbitration as too costly as compared to its benefits of keeping franchisee claims apart, limiting relief, and limiting due process protections under constitutional law.”
Franchisees Say IFA Amicus No Surprise
Coffee Beanery franchisees Deborah Williams and Richard Welshans said IFA filing an amicus brief came as no surprise. “There has been much speculation that the IFA is funding the legal fee's for Coffee Beanery, so they may have a financial stake in the Supreme Court outcome.” A statement released this morning by Williams explained,
“This brief brings to light not what is good about arbitration, but what is wrong with arbitration. I summarize this brief as the IFA making their case, that is acceptable to “manifestly disregard the law” in order to sell franchises. They make the argument for us, as far as the need to pass the Arbitration Fairness Act.
The American Arbitration Association and Coffee Beanery appointed the arbitrator four months before they told us what was going on. The arbitrator lied about her relationship with The Coffee Beanery's accountant. They share the same accountant. The arbitrator awarded that contrary to the Maryland Securities Commissioners findings, The Coffee Beanery disclosed all that was legally required ( See: Federal, State Law Enforcers Complete Bogus Business). The FTC and the State of Maryland determined that the sale of the flawed “cafe concept,” was a bogus business scam.
We are now homeless, unemployed and bankrupt, all due to the fraudulent sale of this bogus concept. In arbitration, all law and rules, are up for grabs. It is the repeat business the arbitrators depend upon, that cause this kind of Injustice.
There is no oversight and review is impossible. The IFA has made our case. Arbitration is a third party contract, between big business and the arbitration companies. They are employed under these contracts to protect their boss. There is no other explanation for this outrageous “manifest disregard of the law” in our case.
While it was not the intention of the IFA to support the passing of the Arbitration Fairness Act, they made a good argument for just that. An international organization has just publicly come forth and supported back alley justice, veiled in secrecy away from the eyes of the public in order to conduct business on an international level.
I'm pleased that they have proven the need for choice in how to handle pre-dispute clauses in any contract. The American public needs to know that our laws are useless if they are not enforced. It's amazing how many think that they are protected by law. They better read everything they have ever signed and look for the arbitration clause.”
|Final Coffee Beanery Amicus.pdf||45.99 KB|