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The Franchise Memorandum

Illinois Federal Court Refuses to Vacate Arbitration Award
Posted in Arbitration

In Jimmy John’s Franchise, LLC v. Kelsey, 2008 WL 1722188 (C.D. Ill. Apr. 10, 2008), Jimmy John’s sought to vacate an arbitration award on the ground that the arbitrator had exceeded his authority under the Federal Arbitration Act and had disregarded the law in awarding damages to the franchisee’s guarantor. More specifically, Jimmy John’s argued that the arbitrator either did not read the agreement in dispute between the parties or disregarded the agreement entirely and implemented his notion of what was fair and reasonable.

In denying Jimmy John’s motion, an Illinois federal district court held that its review of an arbitration award is limited under Section 10 of the FAA. In so holding, the court noted that, under applicable law, it could not “vacate an arbitrator’s award [merely] where the contract interpretation is ‘incorrect or even wacky’ but rather [it could only do so] where ‘the arbitrators had failed to interpret the contract at all.’” In this case, even though the arbitrator made no specific findings of fact and conclusions of law as part of his arbitration award, the court inferred that the arbitrator had “interpreted” the contract between the parties and, therefore, did not exceed his authority.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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