The Franchise Memorandum

In U-Save Auto Rental of America, Inc. v. Furlo, 2009 WL 901922 (S.D. Miss. Mar. 31, 2009), a Mississippi federal district court denied a franchisee’s motion to set aside the judgment and dismiss franchisor U-Save’s suit to confirm the arbitration award based upon lack of subject matter jurisdiction. In reaching its decision, and finding that it had jurisdiction over U-Save’s suit to confirm the award, the court held that the amount in controversy in U-Save’s suit should be determined based on the amount the franchisee demanded in the underlying complaint rather than the amount of the arbitration award. Noting a split of authority among the circuits, the court followed the “demand” approach whereby, for the purpose of determining whether the amount in controversy met the $75,000 jurisdictional threshold for federal court, the potential arbitration award was the amount that the franchisee had demanded in the underlying complaint, not the arbitration award itself. Because the franchisee sought $250,000 in its complaint, the threshold was met. The court also found that federal policy favoring arbitration would be contradicted if a party chose to arbitrate instead of litigate but then could not enforce the subsequent arbitration award.