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Amend Your Arbitration Clause to Comply with New Rules

By Craig R. Tractenberg
August 02, 2014

Franchising companies often select arbitration to resolve issues with their franchisees and critical vendors. An arbitral forum allows the parties to discuss and resolve marketing initiatives outside of the prying eyes of the media and competitors. Landlords may want to include arbitration to settle disputes as well. Although some companies welcome the limitations on appeals of arbitration awards as an advantage in reaching finality of business disputes, others find it a reason to avoid arbitration, because the costs of a bad outcome can be high.

For example, just recently, a JAMS arbitrator entered an arbitration award against the Starbucks chain in the amount of $2.8 billion in favor of Kraft Foods for terminating a marketing deal. There, the single arbitrator selected by the parties, Edward Bobrick, a retired magistrate judge for the U.S. District Court for the Northern District of Illinois, awarded $2.23 billion in damages and $527 million in legal fees and pre-award interest over Starbucks' termination of the deal in 2010.

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