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Frye v. Wild Bird Centers of America, Inc.

United States District Court, D. Maryland

February 4, 2010

STEPHEN FRYE, JULIE A. GRAF and NDEGE NDOGO, INC., Petitioners,
v.
WILD BIRD CENTERS OF AMERICA, INC., Respondent.

          MEMORANDUM OPINION

          THEODORE D. CHUANG, Judge

         Petitioners Stephen Frye, Julie A. Graf, and Ndege Ndogo, Inc., former franchisees of Respondent Wild Bird Centers of America, Inc. ("WBCA"), have filed a Petition to Vacate Arbitration Award seeking to overturn an arbitration award entered in favor of WBCA. The award at issue was based on WBCA's efforts to enforce a two-year non-competition provision included in the parties' franchise agreement. Following an evidentiary hearing, the arbitrator ordered Petitioners to cease violating the non-competition provision for two years beginning on the date Petitioners began to comply with the provision. Petitioners now request that the Court vacate the award because the arbitrator "displayed a manifest disregard of the law" and the award "failed to draw its essence" from the parties' agreement. Pet. Mem. at 1, ECF No. 1-2. In response, WBCA has filed a Petition to Confirm Arbitration Award. For the reasons set forth below, the Petition to Vacate Arbitration Award is DENIED, and the Petition to Confirm Arbitration Award is GRANTED IN PART and DENIED IN PART.

         BACKGROUND

         In February 2005, Petitioners, all of whom are citizens of Colorado, entered into a franchise agreement with WBCA, a citizen of Maryland, to operate a Wild Bird Center store ("the Store") in Boulder, Colorado (the "Franchise Agreement"). The Franchise Agreement authorized Petitioners to operate a retail business selling "wild bird seed and other products of interest to wild bird enthusiasts, including bird feeders, bird-watching optical equipment, books and other items." Franchise Agreement at 1, Pet. Ex. 1, ECF No. 1-4. The Franchise Agreement granted Petitioners a license to operate its store according to the "Wild Bird Center System, " a standard set of retail practices including trade names and trademarks associated with WBCA, such as the name "Wild Bird Center, " as well as "marketing and product presentation techniques, distribution of the 'Wild Bird News, ' our newsletter, and Wild Bird Center promotional postcards, methods of inventory and operation control, bookkeeping and accounting, and manuals covering business practices and policies." Id. Petitioners were permitted to operate their Wild Bird Center franchise within a defined geographic area, and WBCA agreed that it would not operate any stores or grant any other franchises within that territory during the term of the Franchise Agreement. The Franchise Agreement was to remain in effect for a ten-year period, from January 1, 2005 to December 31, 2014, and stated that upon its expiration, Petitioners would be permitted one additional renewal period of 10 years, provided that certain requirements were met.

         The Franchise Agreement imposed certain "Restrictions" on Petitioners. Id. ¶ 14. In particular, Paragraph 14(B) ("the Non-Competition Provision") provided that:

For a period of 24 months after termination of this Agreement for any reason, you will not engage in or acquire any financial or beneficial interest... in, or become a landlord of any retail business which is similar to the Store, within the Licensed Territory or within the licensed territory of any other Wild Bird Center franchisee.

         Arbitration on October 25, 2016 in conjunction with its Opposition to the Petition to Vacate. During a case management conference on November 10, 2016, the parties agreed that no discovery is required, and that the Petitions are ripe for resolution.

         DISCUSSION

         Petitioners assert that the arbitrator should not have enforced the Non-Competition Provision because, in their view, that provision applied only upon "termination" of the Franchise Agreement, rather than upon expiration. They further argue that, even if the Non-Competition Provision did apply, it was improper for the arbitrator to order that its requirements would extend for two years from the date of first compliance, rather than from the original expiration date of the Franchise Agreement. Because, in its view, the arbitrator's award drew from the essence of the agreement and did not disregard the law, WBCA requests that the Court confirm the arbitration award

         I. Legal Standards

         The Federal Arbitration Act ("FAA") provides in part that:

If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to 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. 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.

9.U.S.C.. § 9 (2012). The FAA further provides that a petition to vacate an arbitration award may be brought in "the United States court in and for the district wherein the award was made." Id. § 10. Here, the Franchise Agreement contains an arbitration clause which states that, subject to certain exceptions not applicable here, "any controversy or claim arising out of or relating to this Agreement; . . will be submitted for arbitration ... on demand of either of us" and that the "arbitration proceedings will be conducted in Montgomery County, Maryland." Franchise Agreement ¶ 31(A). The arbitration clause further provides that the "award and decision of the arbitrator will be conclusive and binding upon you and us and judgment upon the award may be entered in any court of competent jurisdiction." Id. ¶ 31(B). Because the award was rendered in Maryland and the petitions were filed within one year, the Court is satisfied that the requirements of the FA A'are met, such that it may review the arbitration award.

         Judicial review of an arbitration award is "severely circumscribed, " and, in fact, is "among the narrowest known at law because to allow full scrutiny of such awards would frustrate the purpose of having arbitration at all-the quick resolution of disputes and the avoidance of the expense and delay associated with litigation." Apex Plumbing Supply, Inc. v. U.S. Supply Co.,142 F.3d 188, 193 (4th Cir. 1998) (footnote omitted). "An arbitrator's award is entitled to a special degree of deference on judicial review." Upshur Coals Corp. v. United Mine Workers of Am., Dist. 31,933 F.2d 225, 228 (4th Cir. 1991). Thus, where there is a valid contract between the parties providing for arbitration, and the arbitration resolves a dispute within the scope of the arbitration clause, federal courts may vacate the arbitration award only upon a showing of one of the grounds set forth in the FAA, or if the arbitrator acted in manifest disregard of the law. See Apex Plumbing Supply, Inc., 142 F.3d at 193. Section 10 of the FAA enumerates the permissible grounds for vacating an arbitration award: (1) "the award was procured by corruption, fraud, or undue means"; (2) "there was evident partiality or corruption" on the part of the arbitrator; (3) the arbitrator was "guilty of misconduct" by which "the rights of any party have been prejudiced"; or (4) the ...


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