Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—S.D. Fla.: Franchisee’s alleged violation of post-termination agreement not subject to arbitration, (Feb 19, 2016)

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

The federal district court in Fort Lauderdale declined to compel arbitration of a franchisor’s claims arising out of an alleged violation of the post-termination agreement and the franchise agreement’s restrictive covenants. It determined that the franchisor’s claims were clearly excluded from arbitration by the franchise agreement (Jewelry Repair Enterprises, Inc. v. Son Le Enterprises, Inc., February 18, 2016, Bloom, B.).

As a consequence of Son Le Enterprises, Inc.’s and Son Le’s alleged violation of the post-termination agreement and restrictive covenants in the franchise agreement, Jewelry Repair Enterprises, Inc. (JRE) filed an action for trademark infringement, trademark dilution, and unfair competition. JRE’s complaint also included state law claims for misappropriation of trade secrets, breach of contract, unjust enrichment, and injunctive relief. In response, the defendants filed a motion to stay and compel arbitration.

In the franchise agreement, binding arbitration was required of any controversy or claim arising out of or relating to the franchise agreement, with certain exceptions. The limited exceptions identified in the franchise agreement were claims relating to: (1) confidential information; (2) obligations of the franchisee upon termination or expiration of the franchise agreement; (3) matters relating to actions which may impair the goodwill associated with the marks; and (4) requests for restraining orders, injunctions, or other procedures.

The defendants acknowledged that the provision excluded from arbitration JRE’s claims relating to confidential information, trademark infringement, and restrictive covenants.

After determining that any matter listed in the provision was explicitly excluded from arbitration, the court considered whether JRE’s claims were included in the exceptions. It found that JRE’s claims fit into the categories identified in the provision or, at an absolute minimum, were claims relating to “confidential information or marks”. It further noted that JRE’s action: (1) arose out of the defendants’ alleged violation of the franchise agreement’s post-termination obligations and restrictive covenants; and (2) included claims for monetary and equitable relief relating to the defendants’ alleged misappropriate of its trade secrets.

The case is No. 9:15-cv-81622.

Attorneys: Andrea Shwayri (Greenberg Traurig LLP) for Jewelry Repair Enterprises, Inc. Robert David Eckard (The Law Office of Robert Eckard, Associates, P.A.) for Son Le Enterprises, Inc.

Companies: Jewelry Repair Enterprises, Inc.; Son Le Enterprises, Inc.

Cases: FranchisingDistribution FloridaNews