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Vyas v. Doctor's Associates, Inc.

United States District Court, D. Connecticut

March 21, 2018

UTPALA B. VYAS, Plaintiff,


          Janet C. Hall United States District Judge

         This case comes before the court pursuant to a Motion to Vacate Arbitration Award filed by the plaintiff, Utpala Vyas (“Vyas”). See Motion to Vacate (“Pl.'s Mot.”) (Doc. No. 1). The defendant, Doctor's Associates, Incorporated (“DAI”), is the franchisor of Subway sandwich shops in the United States. See Pl.'s Mot. at ¶ 2; Answer (Doc. No. 11) at ¶ 2. The plaintiff, Vyas, was a Subway franchisee, with three franchises. See Pl.'s Mot. at ¶ 1; Defendant's Memorandum of Law in Opposition to Plaintiff's Motion to Vacate (“Def.'s Mem.”) (Doc. No. 9) at 1-2. In her Motion, Vyas moves to vacate a final, ex parte arbitration award terminating her franchise agreements with DAI pursuant to the Federal Arbitration Act (“FAA”), title 9 section 10(a)(3) and (4) of the United States Code. See generally Pl.'s Mot.; Final Ex-Parte Award (Doc. No. 1-1) at 112-16. DAI opposes Vyas's Motion to Vacate and cross-moves for an order confirming the arbitration award. Motion to Confirm (“Def.'s Mot.”) (Doc. No. 10).

         For the following reasons, Vyas's Motion to Vacate (Doc. No. 1) is denied, and DAI's Motion to Confirm (Doc. No. 10) is granted.


         Vyas entered into franchise agreements with DAI for three different franchises between March 2007 and June 2015. See Pl.'s Mot. at ¶¶ 5-7; Answer at ¶¶ 5-7. It is undisputed that the arbitration clause in the third and final franchise agreement, for franchise number 36986, superseded the arbitration clauses in the first two franchise agreements, thereby becoming the relevant contractual agreement for the purposes of this case. See Superseding Franchise Agreement, Exh. 3, Def.'s Mem. (“Franchise Agreement”) (Doc. No. 9-1) at 50 ¶ 14 (“This Agreement, including the Recitals and all exhibits, contains the entire understanding of the parties and supersedes any prior written or oral understandings or agreements of the parties relating to the subject matter of this Agreement . . . .”).

         Paragraph 10 of the Franchise Agreement contains the arbitration clause, which provides that “[a]ny dispute arising out of or relating to this Agreement or the breach thereof will be settled by arbitration.” Franchise Agreement at ¶ 10(a). It further provides that such arbitration may be conducted by either the American Arbitration Association or the American Dispute Resolution Center (“ADRC”). Id. If arbitration is conducted by the ADRC, the Franchise Agreement provides that arbitration will be conducted pursuant to the ADRC's “administrative rules (including, as applicable, the Rules of Commercial Arbitration or under the Rules for Expedited Commercial Arbitration).” Id. The arbitration clause also states that “[j]udgment rendered by the arbitrator may be entered in any court having jurisdiction thereof.” Id. Finally, the Franchise Agreement's arbitration clause states that “[a]ny disputes concerning the enforceability or scope of the arbitration clause will be resolved pursuant to the [FAA].” Id. at ¶ 10(f); see also Pl.'s Mot. at ¶ 3 (FAA governs this proceeding); Answer at ¶ 3 (same).

         On or about January 9, 2017, DAI initiated an arbitration proceeding with the ADRC seeking termination of two of Vyas's three franchises. See Pl.'s Mot. at ¶ 9; Answer at ¶ 9. That demand was subsequently amended on or about February 20, 2017, to seek termination of all three franchises. See Pl.'s Mot. at ¶ 9; Answer at ¶ 9. DAI's demand alleged that the amount in controversy was less than $10, 000, which resulted in the ADRC applying its Rules of Expedited Commercial Arbitration (“Expedited Rules”) to the dispute. See Pl.'s Mot. at ¶ 9; Answer at ¶ 9. Vyas filed an Answer with Affirmative Defenses and Counterclaims on January 27, 2017, alleging up to $500, 000 in damages. See Pl.'s Mot. at ¶ 16; Exh. C., Pl.'s Mot. (Doc. No. 1-1) at 28. On February 2, 2017, the ADRC issued a statement noting that, due “to the amount of the Counterclaim, this matter will now be heard under the Regular Rules of Commercial Arbitration.” Pl.'s Mot. at ¶ 20.

         The ADRC Rules of Commercial Arbitration (“Regular Rules”) provide that the ADRC will provide a list of potential arbitrators to the parties, at which point the parties will have an opportunity to object in writing to any of the proposed arbitrators. See Regular Rule 7 (“As soon after the initiation of a case as is practicable, ADR Center shall provide the parties with a list of arbitrators from which to select an arbitrator or arbitrators, as necessary.”).[1] Upon receipt of such a list, the Regular Rules provide that the parties will have fourteen days to provide written objections to the proposed list of arbitrators and may request up to seven additional days for a total of twenty-one days in which to respond. See id. Rule 7 further provides that “[a]ny potential arbitrator to whom either or both parties object[ ] shall be stricken from the list of potential arbitrators.” Id.

         Rule E-4 of the Expedited Rules governs appointment of arbitrators in expedited arbitrations. Rule E-4 provides:

The parties will each receive an identical list of arbitrators consisting of five names from ADR Center's panel of neutrals. The parties may each have one peremptory strike. The parties may also strike off an unlimited number of names for factual, for cause reasons. However, the parties must provide a reason in writing for such strikes. The parties must return their selections to ADR Center within ten calendar days. If ADR Center is unable to appoint the arbitrator from the parties' selections, the Case Manager will appoint the arbitrator.

Expedited Rule E-4.[2] As this text reflects, under either the Expedited Rules or the Regular Rules, the ADRC provides the parties with a list of potential arbitrators, to whom the parties may object in writing. The only apparent substantive distinction between the two provisions is the deadline for responding, which is not at issue in this case.

         Rule 12 of the Regular Rules states that an arbitrator who has been chosen will not be “formally empanelled” until such prospective arbitrator discloses “any circumstances that may present an appearance of a conflict of interest or otherwise appear to affect his or her impartiality” and the parties are given the opportunity to file written objections based on such disclosures. Regular Rule 12. If an objection is received, Rule 12 grants the ADRC authority to “determine whether the arbitrator will be permitted to serve and the parties will be informed of such decision, which shall be binding.” Id. The Expedited Rules do not contain a provision akin to or inconsistent with Rule 12, which, pursuant to Expedited Rule E-8, means that Rule 12 applies with equal force to expedited and regular arbitrations. See Expedited Rule E-8 (“All other Rules set forth in the standard Rules of Commercial Arbitration, which are not inconsistent with, or otherwise covered by these Expedited Rules, shall also apply.”).

         On January 23, 2017, DAI and the ADRC received correspondence from Attorney Myles Alderman, counsel for Vyas, in which Attorney Alderman appeared on his client's behalf and objecting to procedure under the Expedited Rules on the ground that the amount in controversy exceeded $75, 000. See Exh. 10, Def.'s Mem. (Doc. No. 9-1) at 86-89. Attorney Alderman also requested that all five of the proposed arbitrators provide conflict disclosures from those on the potential arbitrator list before making written objections. Id. In that correspondence, Attorney Alderman included ten questions largely related to potential conflicts of interest. Id.

         On January 31, 2017, a representative of ADRC responded to counsel for Vyas's January 23 email. See Exh. 11, Def.'s Mem. (Doc. No. 9-1) at 90-91. She informed Attorney Alderman that the case would proceed under the Expedited Rules until he filed an answer and counterclaim, at which point the arbitrator would determine whether to continue applying the Expedited Rules. Id. She further extended the deadline for responses to the proposed arbitrators to February 2, 2017, and informed Attorney Alderman that the arbitrator would disclose “all his conflicts after he/she is selected, ” citing counsel to Rule 12. Id. Attorney Alderman replied that Vyas “would like to know which of the proposed arbitrators have a demonstrated history of regularly granting to [DAI] the relief [DAI] seeks and which proposed arbitrators have already made findings as to the credibility of [DAI]'s witnesses and findings as to the interpretation of [DAI]'s operations manual” before she responded to ADRC's list of proposed arbitrators. Exh. D, Pl.'s Mot. (Doc. No. 1-1) at 29-32.

         Vyas did not submit a response to the list of proposed arbitrators. See Exh. E, Pl.'s Mot (Doc. No. 1-1) at 33-34. Absent objections from the parties, ADRC appointed Attorney Mark R. Carta arbitrator on February 16, 2017. See Exh. 15, Def.'s Mem. (Doc. No. 9-1) at 108-09. Later that same day, Attorney Alderman sent the following response to the ADRC:

You have done it again. This is just [sic] latest, in the ADR Center's pattern of appointing arbitrators over the written objection of franchisees in DAI-commenced arbitrations. As you know, the last two times the ADR Center did this, substantial time and money was wasted before the improperly appointed arbitrators finally removed themselves.
Ms. Vyas object [sic] to the appointment of this arbitrator in writing (twice).[3]
While awaiting the arbitrator's conflict disclosure, we reserve all right [sic].

Exh. 16, Def.'s Mem. (Doc. No. 9-1) at 110-11.

         Attorney Carta subsequently issued a conflicts disclosure, which was shared with the parties on March 9, 2017. See Exh. F, Pl.'s Mot. (Doc. No. 1-1) at 35-40. On March 20, 2017, Attorney Alderman objected to the appointment of Attorney Carta as arbitrator. See Exh. G, Pl.'s Mot. (Doc. No. 1-1) at 41-45; Exh. H, Pl.'s Mot. (Doc. No. 1-1) at 46-52. On March 24, 2017, the ADRC notified the parties that the ADRC “has considered the objections and responses and has determined that Mark Carta will continue his service as the neutral in the above captioned matter.” Exh. 19, Def.'s Mem. (Doc. No. 9-1) at 123-28.

         On May 10, 2017, Attorney Carta issued a Scheduling Order, which set the evidentiary hearing for September 13 and September 14, 2017. See Exh. 25, Def.'s Mem. (Doc. No. 9-2) at 7-10. The scheduling order also set various discovery deadlines and pre-hearing briefs. Id. On July 6, 2017, Vyas requested the depositions of two fact witnesses, Rafe Hughes (“Hughes”) and Nate Bennett. See Exh. 30, Def.'s Mem. (Doc. No. 9-2) at 37-40. Both Hughes and Nate Bennett work as “Field Consultants, ” inspecting Subway franchises. See Pl.'s Mot. at ¶ 18. Hughes and Nate Bennett are employed as Field Consultants by Nick Bennett, father of Nate Bennett, who is employed as a “Development Agent” for DAI in the region where Vyas's franchises were located. See id.; Def.'s Mem. at 13-14. In response to Vyas's Motion to depose Hughes and Nate Bennett, DAI erroneously objected to the request to depose Hughes and Nick Bennett, in part on the basis that both witnesses would be called by DAI to testify at the evidentiary hearing. See Exh. 28, Def.'s Mem. (Doc. No. 9-2) at 25-31. Vyas then compounded DAI's error by further referencing Nick Bennett, rather than Nate Bennett, in her reply to DAI's objection. See id. Attorney Carta granted Vyas's Motion over DAI's objection on July 12, 2017. See id. In that decision, however, Attorney Carta stated that Vyas “shall be permitted to conduct the depositions of Mr. Hughes and Mr. Bennett.” Id. Attorney Carta's decision did not, therefore, clarify the confusion surrounding which Mr. Bennett was at issue.

         DAI contacted Vyas twice to schedule the depositions, first on July 18, 2017, and then on July 26, 2017. See Exh. 29, Def.'s Mem. (Doc. No. 9-2) at 32-36. Attorney Alderman responded to DAI's July 26 email later that same day suggesting dates for the depositions, including July 31, August 3, August 4, August 17, and August 18. Id. Then, on July 31, 2017, Vyas moved to compel DAI to produce Hughes and Nate Bennett and to modify the May 10, 2017 Scheduling Order, asserting that DAI “never provided [Vyas] with dates when the Witnesses would be available to be deposed” and “did not respond” to Vyas's correspondence suggesting dates. Exh. 30, Def.'s Mem. (Doc. No. 9-2) at 37-40. Vyas further asserted that “[i]t is no longer possible to schedule and complete the deposition of the Witnesses in time for [Vyas] to file a disclosure of witnesses by August 14, 2017, ” and that, “because the depositions cannot be started until after August 17, (at the earliest) the deposition transcripts will not be available in time for [Vyas] to prepare for the arbitration hearing without the extraordinary cost of expedited transcripts.” Id. On August 1, 2017, Attorney Carta issued a decision regarding Vyas's Motion, which stated, in pertinent part, as follows:

1. The hearing dates of September 13 and 14th will not be postponed. The hearing will be conducted in Bridgeport.
2. The depositions noticed by the Respondent will be conduct on August 17 (or if the parties can agree in the next 48 hours on the 18th).
5. The witness disclosure deadline is moved to August ...

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