For immediate release
Contact: Alisa Harrison, 202-628-8000
WASHINGTON, June 12, 2009—The International Franchise Association today filed an amicus curiae brief with the U.S. Supreme Court in support of a Coffee Beanery Ltd., petition requesting the court to reiterate the benefits of a single, consistent national policy favoring arbitration.
“The current state of the law creates tremendous uncertainty about the finality and cost-effectiveness of arbitration – uncertainty that is especially problematic for national franchise systems that rely on arbitration,” IFA said in the brief. “Franchisors select arbitration as an expeditious, efficient and cost-effective means of resolving disputes, but they currently do not receive those benefits uniformly across the country. These inappropriate variations in the law governing enforcement of arbitration awards significantly undermine the Federal Arbitration Act’s purpose of establishing a national policy favoring arbitration of claims that parties contract to settle in that manner.”
IFA filed the brief to protect the tenets of arbitration as an efficient and cost-effective method of resolving disputes. A recent study comparing data from major franchisors from 1999-2007, found the proportion of franchise agreements with an arbitration clause to range between 43 and 45 percent.
“Arbitration works well for many franchised businesses because it provides finality and certainty in addressing disputes while also offering relative speed and efficiency,” said IFA Vice President of Government Relations David French. “The uncertain state of the law minimizes these attributes. Many circuits have different standards for post-arbitration judicial review, and it is time for the U.S. Supreme Court to step in and restore order.”
French said that allowing courts to review an arbitral award based on a flexible and “manifest disregard of the law” standard – even if only in certain circuits – threatens to undermine the core feature of final and binding arbitration.
“Without clarity, the cost for parties to arbitrate claims will increase substantially, since decisions in arbitration will face post-arbitration motions to vacate based on manifest disregard in the Circuits that have retained that standard, in any form.” French said. “In order to defend against claims of manifest disregard in post-arbitration motions, arbitrators may become more like judges, permitting expansive discovery and issuing lengthy decisions at every turn.”
In addition, without clarity, French predicted that court dockets will become more crowded as motions to vacate follow almost every arbitration and courts are asked to comb through days of evidence and legal argument to evaluate allegations of manifest disregard.
“A national uniform policy is essential to maintaining the purpose of the arbitration process,” French said. “We are hopeful that the Supreme Court will agree so that those companies that choose to use arbitration can do so with confidence.”
About The International Franchise Association
The International Franchise Association, the world’s oldest and largest organization representing franchising, is the preeminent voice and acknowledged leader for the industry worldwide. Approaching a half-century of service with a growing membership of more than 1,250 franchise systems, 10,000-plus franchisees and more than 500 firms that supply goods and services to the industry, IFA protects, enhances and promotes franchising by advancing the values of integrity, respect, trust, commitment to excellence, honesty and diversity. For more information, visit the IFA Web site at www.franchise.org.