The Franchise Memorandum

In Zammer v. Herman Miller, Inc., 2011 U.S. Dist. LEXIS 119900 (E.D. Penn. Oct. 18, 2011), Zammer entered into an agreement with his employer, Herman Miller, under which he could purchase his dealership provided he met certain performance goals. Herman Miller terminated Zammer’s contract on the grounds that he had failed to meet those goals. Despite the presence of a mandatory arbitration clause in the contract, Zammer brought suit against Herman Miller. Herman Miller successfully moved to compel arbitration. The arbitrator found in favor of Herman Miller on all but one of Zammer’s claims, and denied him damages on the single claim on which he prevailed. When Herman Miller moved to confirm the arbitrator’s award, Zammer moved to vacate it.

The court rejected Zammer’s challenge to the arbitration award, finding that Zammer had done no more than argue that the award was legally incorrect. The court noted that the Third Circuit had previously recognized that an arbitration award could be vacated if it was in “manifest disregard of the law.” The court found, however, that the Third Circuit’s ruling had been called into question by subsequent precedent from the United States Supreme Court, which limited the bases for vacating an arbitration award to the four grounds identified in the Federal Arbitration Act. The court determined that it was not required to decide whether the “manifest disregard” standard still applied because Zammer had failed to show that the arbitrator acted improperly, even if that remained the applicable legal standard. The court found that Zammer had not identified any willful disregard of controlling legal authority, but instead sought to relitigate the underlying case through its motion to vacate. The court made clear that it was not authorized under the FAA to substitute its own judgment for that of the arbitrator. Finding that Zammer had already presented his arguments to the arbitrator, the court confirmed the arbitrator’s award.