A Futile Attempt at Ignoring Mediation Obligations

By:  Donald L. Swanson

There’s a lawsuit now in progress in a Florida Federal Court over a local pub.

The Pub Dispute

Plaintiff claims to be “a franchisor” of “establishments” that sell “imported and domestic beers” and other products used in “a distinctive pub environment.”

Plaintiff also claims to have “methods and procedures—a system—” that ensures the “successful operation” of its pub establishments. The system includes a “large statement bar” that’s “prominently covered” in a “dark walnut stained pine” and a “granite bar top finish” with, (i) “back lighted and transparent reach-in coolers” that “uniquely feature a vast selection of bottled beers,” (ii) a “proprietary Infusion Tower, which infuses beer with fruit, herbs, coffee” and other flavors, and (iii) etc.

Defendant is, of course, a pub-owning franchisee.

Their relationship turns bitter. Plaintiff even goes so far as to hire a private investigator who “specializes in fact-finding related to fraud” and who produces a bunch of photos of the Defendant’s “CraftHouse” establishment.

The parties part ways, and Defendant begins to “de-brand.”

Litigation Begins

Plaintiff is unsatisfied with Defendant’s de-branding efforts and brings the lawsuit, asking for a “preliminary injunction” to prevent Defendant from using or infringing on Plaintiff’s “marks, logo,” trade name, or confidential information and from causing “confusion or misunderstanding” as to the terminated franchise relationship.

Plaintiff has a problem in the lawsuit, arising from the following mediation clause in the parties’ franchise agreement:

Either party may obtain “preliminary injunctive relief from a court,” but the moving party must, also, “immediately and contemporaneously” submit the dispute to “non-binding mediation.”

Plaintiff files the lawsuit, along with a “Motion for Preliminary Injunction,” but does not pursue mediation. Defendant opposes the Motion on a variety of grounds, including this:

The Motion violates the franchise agreement, “which require the parties to submit disputes to mediation.”

The Court, addressing the mediation issue, rules:

–“the hearing on Plaintiff’s Motion for Preliminary Injunction” will be rescheduled, if necessary, “after the Parties have completed” their contractual obligation to mediate;

–mediation “may conserve both judicial and the Parties’ resources” by resolving the dispute; and

–once mediation is concluded, the Court will “decide the appropriate course of action” to be taken.

Appeal

But Plaintiff is really, really opposed to mediating.  Instead of complying with the Court’s ruling, Plaintiff appeals to the Eleventh Circuit Court of Appeals, raising technical and grammatical issues on the meaning of mediation requirements in the franchise agreement.

Four months later, on October 16, 2017, the Eleventh Circuit affirms the District Court’s ruling, rejecting all of the Plaintiff’s arguments.

So . . . the parties are now back at square one.

Mediation Provisions in Contracts

Including mediation provisions in commercial contracts is, apparently, becoming common. The Alternative Dispute Resolution Committee of the New York City Bar Association, for example, has published a “Compilation of Sample Mediation Clauses” dated June 8, 2016.

Conclusion

Who knows what Plaintiff’s strategies might have been for adamantly opposing the mediation process created in its own franchise agreement. Compliance, in retrospect, would have saved time and money for everyone involved.

There is, undoubtedly, a rational explanation—would love to know what it might be.

**  If you find this article of value, please feel free to share.  If you’d like to discuss, let me know.

[Footnote: The case discussed above is World of Beer Franchising, Inc. v. MWB Development I, LLC, Case No. 17-cv-01171, in the United States District Court for the Middle District of Florida. All information and quotations above are from filings in this case.]