The Franchise Memorandum

In Medicine Shoppe International, Inc. v. Turner Investments, Inc., 2009 WL 1295978 (E.D. Mo. May 7,  2009), the district court confirmed a $475,000 arbitration award in favor of the franchisor, Medicine Shoppe International (MSI). The American Arbitration Association had ruled that MSI was entitled to its past-due license fees, attorneys’ fees and costs, and future licensing fees due to the franchisee’s decision to close the franchise 13 years into the 20-year franchise term. 

Turner Investments moved to vacate the award, arguing that the arbitrator disregarded the law by failing to consider MSI’s alleged breach of the franchise agreement and lack of sufficient evidence of lost profits. In rejecting these arguments, the court found that Turner’s points actually were assertions of alleged factual errors. Regardless, the court held that neither a disregard of the law nor a disagreement about factual findings is grounds to vacate an arbitration award. Furthermore, without alleging any corruption or bias specific to its arbitration or arbitrators, Turner also argued that the “arbitration process is fundamentally unfair to franchisee respondents.” The court rejected this contention out of hand because Turner failed to submit any evidence that the award was procured by corruption, fraud, or undue means.