Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Conn. App.: Arbitration award against Subway franchisee confirmed, (Nov 17, 2015)

By Michael Menzhuber, J.D., LL.M.

Although a trial court properly confirmed an arbitration award against a Subway franchisee, it failed to effectuate the award with a calculation of damages, according to the appellate court in Hartford, Connecticut. Consequently, the appellate court remanded the case for a hearing on the franchisor’s request for damages (Windham v. Doctor’s Associates, Inc., November 17, 2015, Alvord, B.).

Background. Troy Windham entered into a franchise agreement with the Subway franchisor to operate a Subway sandwich store. After Windham breached that agreement, the franchisor initiated arbitration, pursuant to the franchise agreement, to terminate Windham’s franchise. The arbitrator entered an interim order reflecting that Windham had admitted to the breach but that the franchisor would reinstate the franchise agreement if Windham cured his store’s defects and complied with the franchise agreement during a six-month review period. The order also stated that, if the franchise agreement was breached, the franchisor was entitled to an expedited arbitration hearing to obtain a final award.

A few months later, the franchisor claimed that Windham violated the terms of the interim arbitration order. The arbitrator ordered the termination of the Windham’s franchise and stated the Windham would have to pay $250 per day for each day, after the date of this award, for his continued use of the franchisor’s trademarks and trade names. Windom filed an application in Superior Court to vacate the arbitration award and continued to operate his store while he sought judicial review.

The Superior Court denied Windham’s application to vacate and confirmed the arbitration award. The franchisor then filed a motion for a post-confirmation hearing and order in damages. The franchisor requested $115,425 in damages, along with $250 per day for each day Windham continued to operate the story in violation of the interim arbitration order. The Superior Court restated its decision denying the application to vacate the arbitration award and granting the franchisor’s application to confirm. However, the Superior Court’s decision made no findings of fact and did not reduce the per diem penalty to a monetary damages sum.

Windham appealed, claiming that: (1) the Superior Court erred by confirming the arbitration award because no valid application to confirm was pending before the court; and (2) its judgment to enforce the award was erroneous to the extent that it purported to impose the $250 per day penalty.

Confirmation of arbitration award. Windham argued that the Superior Court improperly confirmed the arbitration award because Subway had not submitted a proper application to confirm the award. According to Windham, the franchisor (1) did not file a distinct application to confirm in Connecticut; and (2) did not pay a filing fee when it filed its objection and application to confirm. However, the appellate court disagreed that this procedural variance was fatal to Subway’s confirmation request.

The appellate court found that the franchisor clearly moved to confirm the arbitration award, and that Windham had sufficient notice of the request, on the grounds that the franchisor’s objection to Windham’s application to vacate also served as the franchisor’s application to confirm. The application to confirm was filed within one year of the arbitration award, as required by Connecticut General Statute § 52-417. The court also noted that: (1) the franchise agreement, information about the arbitrator, and the award itself were before the court; and (2) when a parties’ dispute concerns one arbitration award, reviewing an application to vacate and application to confirm simultaneously, in furtherance of judicial economy, is a reasonable way to dispose of the case with the least possible delay.

Judgment to enforce award. Windham argued that the Superior Court’s judgement to enforce the award was erroneous to the extent that it purported to impose a $250 per day penalty for any period of time prior to the entry of final judgment. The appellate court, however, did not reach Windham’s claim because it determined that the Superior Court committed error by failing to effectuate the terms of the judgment upon the award.

The court noted that, after receiving judicial confirmation of the arbitrator’s award, Subway moved to have the award reduced to a monetary sum and suggested a specific award amount. However, the Superior Court, in entering its purported judgement regarding damages, merely restated selected terms of the arbitration award and failed to effectuate the award with a calculation of damages, despite a properly pleaded request to do so. Consequently, the appellate court remanded the case to the Superior Court for further proceedings.

The case is No. AC 36414.

Attorneys: Jonathan M. Starble (Starble & Harris LLC) for Troy W. Windham. Frank J. Mottola, III (Law Office of Frank Joseph Mottola, III) for Doctor’s Associates, Inc.

Companies: Doctor’s Associates, Inc.

Cases: FranchisingDistribution ConnecticutNews