The Franchise Memorandum

In Doctor’s Associates Inc. v. White, 2014 U.S. Dist. LEXIS 11433 (D.N.J. Jan. 30, 2014), the federal court in New Jersey granted partial reconsideration of an order refusing to confirm an arbitration award. Doctor’s Associates, Inc. (“DAI”) had initiated arbitration against franchisee White for breach of his Subway franchise agreement. After DAI won the arbitration, it filed a lawsuit in federal court to confirm the award against both White and Coach Investments & Developers. Although Coach was not party to the arbitration, DAI argued that Coach was the alter ego of the franchisee.

After originally refusing to extend the award to Coach, the court concluded on reconsideration that confirmation was required to prevent injustice. The court reasoned that White’s refusal to appear in the case suggested that it was hoping to avoid having to pay a judgment by hiding behind Coach—a company owned and created by White solely to administer his obligations under the franchise agreement. The evidence suggested that White was insolvent and living off the income from Coach.