The Franchise Memorandum

The United States District Court for the Northern District of California denied a former franchisee’s motion for vacatur of an arbitration award and affirmed the arbitration award in favor of franchisor Jiffy Lube International, Inc. on the grounds that the franchisee failed to show the arbitrator’s manifest disregard for the law. Stevens v. Jiffy Lube Int’l, Inc., 2017 WL 512888 (N.D. Cal. Feb. 8, 2017). After Randy and Elissa Stevens failed to successfully negotiate a new lease with their existing landlord, Jiffy Lube terminated their franchise agreement for loss of right to possession of the franchised business premises. Stevens claimed in arbitration that Jiffy Lube violated a provision of the California Business & Professions Code for terminating the franchise without giving Stevens an opportunity to cure. The arbitrator determined that Stevens’ claim was time-barred by the franchise agreement’s two-year limitation period.

Stevens argued in a motion to the court that the arbitrator manifestly disregarded the law because the legal doctrines of equitable tolling and relation back salvaged their claim. Citing existing precedent that the manifest disregard standard may only be met where the arbitrator ignores a governing legal principle after it has been brought to the arbitrator’s attention, the court rejected Stevens’ argument. The court noted that Stevens failed to show any evidence that the arbitrator knew or was aware of the law on equitable tolling and relation back and that Stevens did not appear to have raised those issues for the arbitrator’s consideration.