Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

AAMCO Transmissions, Inc. v. Sally

December 17, 2008

IN THE MATTER OF THE ARBITRATION BETWEEN AAMCO TRANSMISSIONS, INC., CLAIMANT,
v.
RIZVI M. SALLY & MOHAMMED A. ASHROFF, RESPONDENTS.



The opinion of the court was delivered by: Schiller, J.

AAMCO Transmissions, Inc. (AAMCO) claims that franchisees, Rizvi M. Sally and Mohammed A. Ashroff (sometimes collectively referred to as "Franchisees") violated numerous provisions of the parties' Franchise Agreement. The Franchise Agreement contained an arbitration clause and on August 7, 2008, the parties arbitrated their dispute. The arbitrator ruled in favor of AAMCO. AAMCO then filed a petition with this Court to confirm the arbitration award. Franchisees filed a petition to vacate or modify the award, or, in the alternative, for a rehearing, to which AAMCO has responded. For the reasons below, the Court denies the petition to vacate and grants the petition to confirm.

I. BACKGROUND

On January 27, 2004, Sally and Ashroff signed a franchise agreement that allowed them to operate, for fifteen years, an AAMCO center at 1545 Pine Street in San Francisco, California. Sally is married to Ashroff's daughter. (Pet. to Vacate Arbitration Award ¶ 6.) According to affidavits accompanying the petition to vacate, Ashroff signed the Franchise Agreement to provide support for Sally and for Ashroff's daughter and to help them "make a good life." (Id. Ex. 1 [Sally Aff.] ¶ 6 & Id. Ex. 2 [Ashroff Aff.] ¶ 7.) In signing the Franchise Agreement, Sally and Ashroff committed to devote their "full time, energy and effort to the operation of [the] center, and agree[d] not to engage in any other business either at the location of [the] center or at any other location." (Pet. to Vacate Arbitration Award Ex. A [Franchise Agreement] ¶ 5.2.) After signing the Franchise Agreement, however, Ashroff left the day-to-day business operations to Sally. (Sally Aff. ¶ 6; Ashroff Aff. ¶ 7.) In fact, shortly after signing the Franchise Agreement, Ashroff stopped opening mail from AAMCO, instead giving it to Sally unopened because the business belonged to Sally. (Sally Aff. ¶ 7; Ashroff Aff. ¶ 8.)

The Franchise Agreement required Sally and Ashroff to pay AAMCO a weekly franchise fee of 7% of the preceding weeks gross receipts. (Franchise Agreement ¶ 3.1.) Franchisees also agreed to mail to AAMCO an accurate report of gross receipts and copies of the repair orders for all work completed during the preceding week. (Id. ¶ 4.1.) They also agreed to keep accurate books and records and to promptly deliver to AAMCO numerically certified work or repair orders using forms provided by AAMCO. (Id. ¶ 11.1.) Sally and Ashroff further promised to pay their proportionate share of certain national and local advertising expenses. (Id. ¶¶ 7.1-7.3.) AAMCO agreed to provide certain equipment and supplies to franchisees, subject to standard credit approval. (Id. ¶¶ 6.1, 9.2.) The agreement allowed AAMCO to charge franchisees an annual interest rate of 18% for unpaid amounts due under the agreement, in addition to costs and attorneys' fees. (Id. ¶ 14.1.) AAMCO was also entitled to the costs of investigating the reporting practices of its franchisees. (Id. ¶ 11.3.)

The Franchise Agreement contained a "Mediation and Arbitration" clause that required disputes, controversies, or claims arising out of or relating to the Franchise Agreement to be settled by binding arbitration according to the rules of the American Arbitration Association. (Id. ¶ 22.1(b).) When a provision of the agreement required notice, the notice had to be in writing and mailed via certified or registered mail, return receipt requested or overnight mail. (Id. ¶ 21.4.) Sally and Ashroff agreed to accept notice at their AAMCO franchise. (Id.)

Unfortunately, the franchises' finances began to sour as Sally had trouble meeting his financial obligations to AAMCO. But Sally hid these difficulties from Ashroff. On or about October 9, 2007, AAMCO filed a Demand for Arbitration with the American Arbitration Association. (Pet. to Confirm Arbitration Award Ex. B [Arbitration Demand & Statement of Claim].) Notice was mailed to Sally and Ashroff at their business address. (Mem. of Law in Opp'n to Pet. to Vacate Arbitration Award [Opp'n to Pet.] Ex. B [O'Connell Aff.] ¶ 2.) According to the Statement of Claim included with the Arbitration Demand, Sally and Ashroff violated a number of the Franchise Agreement's provisions. For instance, they failed to submit numerous weekly business reports and pay a number of franchise fees. (Arbitration Demand & Statement of Claim ¶¶ 17-21.) An audit conducted by AAMCO also revealed that they had intentionally misrepresented and under-reported gross receipts. (Id. ¶¶ 22-27.) Finally, Sally and Ashroff had failed to pay a large sum of money to their local advertising group. (Id. ¶¶ 28-30.) As a result of these breaches of the Franchise Agreement, AAMCO sought damages of $258,998.79, plus any other sums that may be due and owing, as well as costs. (Id. ad damnum clause.)

Sally did not tell his father-in-law that AAMCO had made an arbitration demand, or that an arbitration was scheduled, or that the arbitration occurred. (Sally Aff. ¶ 8; Ashroff Aff. ¶ 9.) Nonetheless, it is undisputed that Sally received notice of the arbitration. Additionally, an August 1, 2008 report and order from John Salla, the AAA-appointed arbitrator, notes that "respondents" made repeated requests to postpone the arbitration. (Opp'n to Pet. Ex. C [Poliner Aff.] at Ex. 1 (Report and Order).) On July 31, 2008, Sally participated in a conference call in which he requested a postponement of the arbitration to obtain an attorney. (Report and Order.) Because the arbitrator found that Sally and Ashroff had had ample time to retain counsel, he ordered that the arbitration proceed on August 7, 2008, as scheduled. (Id.) On August 5, 2008, Sally hired a law firm to represent both him and Ashroff but Sally failed to inform Ashroff of this representation. (Pet. to Vacate Arbitration Award ¶ 16; Sally Aff. ¶ 10; Ashroff Aff. ¶ 11.) The law firm hired by Sally obtained local counsel to attend the arbitration on behalf of Franchisees. (Sally Aff. ¶ 10; Pet. to Vacate Arbitration Award Ex. 4 [Schwartz Aff.] ¶ 3.) The arbitration occurred on August 7, 2008; the lawyer representing Sally and Ashroff sought a continuance because Sally was ill, but the arbitrator refused this request. (Sally Aff. ¶ 11.)

On August 13, 2008, Arbitrator Salla found in favor of AAMCO and awarded $261,840.70 plus costs. (Pet. to Confirm Arbitration Award Ex. C [Award].) On August 22, 2008, AAMCO filed a Petition to Confirm Arbitration Award in this Court. According to Franchisees, it was not until Sally was served with the petition to confirm the arbitrator's award that he made his father-in-law aware of their business' misfortunes. (Sally Aff. ¶ 12; Ashroff Aff. ¶ 12.)

II. STANDARD OF REVIEW

A district court must confirm an arbitration award unless it is vacated, modified, or corrected as prescribed by the Federal Arbitration Act (FAA). 9 U.S.C. § 9 (2008). The FAA provides that a district court may vacate an arbitration award if: (1) the award was procured by corruption, fraud, or undue means; (2) there was evident partiality or corruption in the arbitrators, or either of them; (3) the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or (4) the arbitrators exceeded their powers or so imperfectly executed them that a mutual, final and definite award upon the subject matter submitted was not made.*fn1 9 U.S.C. § 10. A district court may modify or correct an arbitration award if: (1) there was evident material miscalculation of figures or an evident material mistake in the description of any person, thing, or property referred to in the award; (2) the arbitrators have awarded upon a matter not submitted to them; or (3) the award is impefect in matter of form not affecting the merits of the controversy. 9 U.S.C. § 11.

District courts should vacate arbitration awards only in "exceedingly narrow" circumstances and must apply an "extremely deferential" standard of review. Rita's Water Ice Franchise Co. v. Simply Ices, Inc., Civ. A. No. 08-2011, 2008 U.S. Dist. LEXIS 77963, at *6 (E.D. Pa. Oct. 3, 2008) (quoting Dluhos v. Strasberg, 321 F.3d 365, 370 (3d Cir. 2003)). There is a "strong presumption" in favor of the arbitration award. U.S. Steel Mining Co., L.L.C. v. Wilson Downhole Servs., Civ. A. No. 00-1758, 2006 U.S. Dist. LEXIS 72737, at *2 (W.D. Pa. Oct. 5, 2006) (quoting Mutual Fire, Marine & Inland Reins. Co., 868 F.2d 52, 56 (3d Cir. 1989)). Mere disagreement with the arbitrator's decision or a belief that the arbitrator committed a serious error is insufficient to vacate or modify the award. United Trans. Union Local 1589 v. Suburban Transit Corp., 51 F.3d 376, 379 (3d Cir. 1995). The party seeking vacatur bears the burden of proof. See Lebeau v. Oppenheimer & Co., Civ. A. No. 05-6779, 2006 U.S. Dist. LEXIS 42613, at *5 (E.D. Pa. June 23, 2006).

III. DISCUSSION

Sally and Ashroff make two principal arguments in favor of vacating the arbitration award. First, they argue that Ashroff did not receive an opportunity to be heard because he did not receive notice of the arbitration. Given this, they contend that Arbitrator Salla's failure to ensure proper service on both Sally and Ashroff requires this Court to vacate the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.