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Paul Green School of Rock Music Franchising LLC v. Smith

February 17, 2009

PAUL GREEN SCHOOL OF ROCK MUSIC FRANCHISING, LLC, PLAINTIFF,
v.
JIM SMITH, DEFENDANT.



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

MEMORANDUM AND ORDER

Before this Court is Plaintiff Paul Green School of Rock Music Franchising LLC's ("PGSORM") Motion to Confirm Arbitration Award (Doc. No. 4) and Plaintiff Jim Smith's ("Smith") Opposition to Plaintiff's Motion to Confirm Arbitration Award (Doc. No. 9). For the reasons set forth in the Memorandum, we will GRANT Plaintiff's Motion to Confirm the Arbitration Award.

Background

Paul Green School of Rock Music Franchising LLC awarded a franchise agreement for the operation of a PGSORM branded business to Jim Smith, franchisee, in 2006. This Agreement contained an arbitration provision in Section 25.3 providing for arbitration before the American Arbitration Association. A dispute arose between PGSORM and Smith soon after Smith began operation of a School of Rock Music in Agoura Hills, CA. PGSORM submitted an demand for arbitration with the American Arbitration Association ("AAA") in Philadelphia, PA, on April 1, 2008; Smith filed an objection with the AAA to the arbitration being held in Pennsylvania. In its claim, PGSORM sought an injunction, an award of money damages, attorney's fees and costs. Subsequently Smith answered PGSORM's claims and filed a counterclaim pursuant to the California Franchise Investment Law with the AAA. Smith also filed a lawsuit in the United States District Court of the Central District of California to compel arbitration of the dispute in California. The California court denied the motion, finding the forum selection and choice of law provisions of the franchise Agreement enforceable, but stated that its holding was contingent on the fact that Smith's California Franchise Investment Law ("CFIL") claims would be heard in Pennsylvania.*fn1

Arbitration therefore proceeded with the AAA in Pennsylvania. Jerry Schuchman, Esq., was designated arbitrator by the parties and the arbitration hearing occurred on August 19, 20 and 21, as well as on October 13 and 14, 2008. Arbitrator Schuchman entered an award in favor of PGSORM on November 18, 2008, in full resolution of all claims and counterclaims submitted. The Award: (1) enjoined defendant from violating his restrictive covenants against competition for a period of two years; (2) awarded to PGSORM damages in amount of $401,743.00; (3) awarded to PGSORM arbitration administrative fees, compensation and expenses of the arbitrator totaling $12,450.00. Following this Award, PGSORM filed the instant Motion to Confirm the Arbitration Award and Smith responded in opposition.

Standard

Arbitration, of course, is a matter of contract and a party cannot be required to submit to arbitration any dispute which he has not agreed to so submit. AT &T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648-649, 106 S.Ct. 1415, 1419, 89 L.Ed.2d 648 (1986). In this case, the evidence is clear that the Agreement's signatories agreed to submit their claims to binding arbitration before the American Arbitration Association.

The relevant section, 9 U.S.C. §9, of the Federal Arbitration Act (FAA) provides:

If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made, any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified or corrected as prescribed in sections 10 and 11 of this title [9 U.S.C. §§ 10, 11]. If no court is specified in the agreement of the parties, then such application may be made to the United States court in and for the district within which such award was made.

In this case, arbitration took place in Philadelphia and the plaintiff has applied to the proper district court for confirmation of the award. Under the §10(a) of the FAA,

(a) In any of the following cases the United States court in and for the district wherein the award was made may make an order vacating the award upon the application of any party to the arbitration--

(1) Where the award was procured by corruption, fraud or undue means.

(2) Where there was evident partiality or corruption in the arbitrators, or either of them.

(3) Where 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 ...


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