Proactive Arbitration Helping A Franchisor Terminate A Franchisee

Mustard Franchise Corporation v. YEK, Inc.

By Mulcahy LLP on January 08, 2013

In Mustard Franchise Corporation v. YEK, Inc. (AAA, Orange County, March 2008), Mustard Franchise Corporation retained Mulcahy LLP for assistance in terminating a franchisee’s agreement for its violation of the terms of its franchise agreement. Mulcahy LLP filed a demand for arbitration before the AAA seeking a declaration from the arbitrator that the franchisee violated its agreement with Mustard and that the subsequent termination was valid.

In response, the franchisee filed counterclaims alleging fraud and violations of the franchise agreement by Mustard. Following a nine-day trial, the arbitrator ruled: (1) that Mustard was entitled to terminate the franchise agreement; and, (2) that the franchisee’s claims were without merit. In accordance with the post-termination obligations of the parties, Mustard was entitled to purchase the franchisee’s business and take immediate possession of the restaurant pending finalization of the purchase. The franchisee refused to comply either with its post-termination obligations or the arbitrator’s award. Mulcahy LLP thereafter filed an action in the Orange County Superior Court seeking confirmation of the arbitrator’s award and a TRO and preliminary injunction. The Court granted Mustard’s requests, entered injunctions against the franchisee, and ordered the franchisee to turn over possession of the restaurant. When the franchisor still refused to turn over possession, Mulcahy LLP obtained a writ of execution, and secured Mustard’s possession of the restaurant.

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