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Posts tagged "arbitration"

Do I have to go to arbitration in my franchisor's home state, across the country?

Will an arbitration case be in the home state of the franchisor instead of California?  Not always. Many state's laws trump what's in the franchise agreement. Depending on the state the franchisee is located, that state law may overrule arbitration required locations outside the franchisee's state, regardless of the franchise agreement says. It is imperative that you have an experienced franchise arbitration attorney review both your franchise agreement and your states franchise laws once you are notified of a new arbitration against you. If the franchisor has to come across the country because of your state's laws, they may not want to do that, particularly if they have to drag 3 corporate witness and stay for 2 nights. If your state favors local arbitration and you have defenses and claims perhaps YOU as the franchisee may want to initiate an arbitration rather than having to react to a franchisor's demand for arbitration in an inconvenient location. If your state law is not in your favor, there are still potential solutions that may allow you to stay put such as determining if the franchisor potentially violated registration or disclosure laws Franchise law is highly regulatory and attention to detail is necessary. Sometimes those details are missed. This gives you the franchisee alternative arguments, for example where the franchisor has not given you a proper Franchise Disclosure Document with some state required extra language, or contains the required audited financial statements, or other current information which may contain errors. You may have more alternatives that you think on your side. Call me today for a review of your situation.

What is arbitration anyway?

Arbitration is an expedited and less expensive process for a dispute to get resolved. Mandatory arbitration is used in many industries and becoming the norm for franchise agreements. Franchisors utilize arbitration as a quick and easy way to perhaps collect its past due royalties. A franchisee may also seek to use arbitration to resolve a dispute with a franchisor. Many times the franchise relationship does continue even though there is an arbitration preceding in process. Depending on the arbitration tribunal indicated in the arbitrate clause, your dispute will be heard before an experienced attorney or a judge or retired judge. There may be more than 1 arbitrator required by your agreement. In general, the matter will be scheduled for hearing in about 4-6 months after the initial case is filed, much quicker than traditional litigation. In addition arbitration is much more informal, no courtroom, no jury no bailiff, no court reporter, just a conference room everyone sits around. Both sides call their witnesses and present their exhibits, and there is cross examination. However the atmosphere is less formal, the rules of evidence are less formal, and generally witnesses can say what they want, without objection. The arbitrator hears the evidence and testimony and makes a ruling, generally within 14-30 days after the end of the hearing, and the ruling is binding, unless there was some kind of provable arbitration misconduct or bias. Arbitration is an efficient method of resolving disputes. And the disputes many times resolve themselves before the hearing. If you are contemplating arbitration or have been given a demand for arbitration call me today to discuss your situation and strategy.

I want to sue my franchisor, and don't want to go to arbitration.

Can you sue your franchisor without having to go to arbitration first?  Many franchise agreements do have mandatory arbitration clauses, however state law will dictate which state governs, and which laws are not subject to arbitration. Additionally the franchise agreement itself will have exceptions for the issues that may be arbitrated. Although you may believe your rights best lay with litigation, it is always prudent to have an experienced franchise attorney first look at both your agreement, the state's laws where both the franchisor and the franchisee are located, as well as the registration documents for both states compared to what you received. This will give the full picture of the available remedies based on potential state law violations, which happen more often that not, and will determine potential remedies and options that you may not know even exist. Franchise law is highly regulated and if your Franchise Disclosure Document was deficient in any manner (and many are) then you have more options. Have a franchise expert review your situation before deciding on a course of action.

My Franchisor is Suing Me (or arbitrating) for Money I Know I Own But I Just Don't Have, What is My Option?

When a Franchisor sues or arbitrates merely for collections, there is a 100% chance they will be open to payment plans in Settlement that will work for you. As a franchisee, Ignoring the situation only makes you appear uncooperative. Paying a little even though it seems useless generally shows you are trying and Franchisors will shift focus to others who are paying nothing hence "uncooperative." Negotiating a settlement that you can not possibly fulfill is not recommended either. As a former in house franchise counsel, I can tell you that once you have a heart to heart conversation with one of the Franchise officers or a high profile rep explaining the specific operations issues, generally the Franchisor will be more attuned to offering specific operational recommendations, which you must be open to receiving and following through, in order for the Franchisor to hold off on legal action. Again it is all about the appearance of cooperation. The franchisor will figure out you don't have the money and will work with you to improve your business so you do have the money. The goal of you both is to stay in business and make money. If you close the Franchisor knows it will have no chance of getting paid. But a Franchisee who will not return Franchisors calls only hastens the day where they will be put out of business by the Franchisor. There are many ways to structure a payment plan that can work for both sides. We just need to be create. An experienced franchise attorney can assist in the process, if kept to a friendly level.

When Should I Go to Arbitration with My Franchisee...with My Franchisor?

In most franchise agreements there is a provision for dispute resolution requiring mandatory arbitration. Arbitration is usually quicker, cheaper and less complicated than litigation. Either a franchisor or a franchisee may initiate an arbitration proceeding. The result is binding and may/will be entered as a judgment by the prevailing party against the party who loses. Counterclaims are allowed and should be brought in arbitration if they exist. In California, the Franchise arbitration law requires arbitration to take place in California if the franchisee is located in California, regardless of what the Franchise Agreement says, and even if the out of state Franchisor attempts to start an arbitration elsewhere. Conversely a California Franchisor may be forced to arbitrate our of state if the franchise law of the state where the franchisee is located also provides a similar law (and there are several). Arbitration can be an effective way to get to a settlement when there have been poor communication attempts at negotiation of a dispute. Even after an arbitration is filed both parties are free to negotiate and settle a matter even in the middle of the arbitration hearing. Even after the hearing is over before the award is handed down. Settlement is always encouraged. Sometimes it takes a more serious knock at the door before both parties can see and understand the other party's point of view. Whether you believe you have been seriously wronged by the other party or you just want to get their focused attention on your issues, I am committed to a fair playing field for all. If you are my client I will simultaneously pursue your position while at the same time offer realistic, pragmatic, and economic solutions.

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