The Franchise Memorandum

In November 2017, the Seventh Circuit affirmed the confirmation of an approximately $9 million arbitration award for Hyatt against one of its former franchisees. In doing so, the Seventh Circuit instructed the parties to agree to the attorneys’ fees and costs owed to Hyatt under the attorneys’ fee provision in the parties’ franchise agreement. But the court also noted that it had the authority to award Hyatt fees and costs as a sanction for the franchisee’s refusal to comply with the arbitrator’s decision. After the franchisee did not agree to pay Hyatt’s attorneys’ fees and costs as instructed, Hyatt applied to the Seventh Circuit for relief. As a sanction for what it deemed “unnecessary and pointless litigation,” the Seventh Circuit awarded Hyatt attorneys’ fees and costs in the amounts claimed by Hyatt for seeking to confirm and enforce the arbitrator’s award and to obtain its attorneys’ fees and costs. Hyatt Franchising, LLC v. Shen Zhen New World I, LLC, 2018 WL 386194 (7th Cir. Jan. 12, 2018). The Seventh Circuit further ordered the franchisees’ counsel to show cause as to why they should not be held jointly and severally responsible for Hyatt’s attorneys’ fees under 28 U.S.C. § 1927, which empowers courts to find counsel liable for attorneys’ fees and costs resulting from the unreasonable and vexatious multiplying of proceedings.