ROBERT M. GIPPIN, District Judge.
The matter comes before the Court upon plaintiff's filing styled, "Plaintiff's Notice of Dismissal of Bankruptcy and Renewed Motion for Order Confirming Arbitration Award." (Doc. No. 15 ["Mot."].) The Court having previously recognized the bankruptcy court's dismissal of the action In re The Beyda Adult Day Care Center, LLC, Case No. 19-14809-BKC-RBR (Bankr. S.D. Fla.) and reopened the present case, plaintiff's renewed motion, which is unopposed, is now ripe for resolution. (See Non-document Order, Aug. 27, 2019.) For the reasons that follow, the Court grants the renewed motion and confirms the arbitration award.
On March 20, 2019, plaintiff, Sara Adult Day Services, Inc., filed the present action against defendants, The Beyda Adult Day Care Center, LLC ("Beyda"), Alan Beyda, Lewis Beyda, and Megan Beyda (collectively, "individual defendants"), seeking confirmation of an arbitration award issued by the American Arbitration Association ("AAA") in Sarah Adult Day Care Services, Inc. v. the Beyda Adult Care Center, LLC, et al., AAA No. 01-018-0001-6101. (Doc. No. 1 (Complaint ["Compl."]) at 81.
The underlying dispute between the parties involved a franchise agreement wherein plaintiff agreed to permit Beyda to operate an adult day care service under the brand and mark Sarah Adult Day Care Services. (Doc. No. 2-3 (Franchise Agreement ["Fran. Agr."]).) The franchise agreement had a non-competition/restraint of trade provision. (Id., § 10(F).) Following the termination of the franchise agreement, plaintiff initiated arbitration proceedings to enforce the terms of the non-competition/restraint of trade provision.
On February 28, 2019, the arbitrator issued a final award enjoining Beyda from operating a competing adult day care facility within a fifty (50) mile radius of plaintiff's Coral Springs, Florida facility or within a twenty (20) mile radius of plaintiff's center in Pembroke Pines, Florida. (Arb. Award at 90.)
After plaintiff filed the present action, the Court received a Suggestion of Bankruptcy, advising that a voluntary petition was filed in the Untied States Bankruptcy Court for the Southern District of Florida by Beyda. (Doc. No. 11 (Suggestion of Bankruptcy).) Upon this filing, and by the agreement of plaintiff, the Court stayed this action against all defendants, subject to reopening upon written motion of plaintiff or any interested party. (Doc. No. 12 (Order of Stay).)
On August 20, 2019, plaintiff filed the present notice and renewed motion to confirm the arbitration award. Appended to the notice and motion was an order dismissing Beyda's bankruptcy case. (Doc. No. 15-1 (Bankruptcy Order of Dismissal).) The Court reopened the case and granted defendants leave until September 9, 2019 to file a response to plaintiff's renewed motion to confirm the arbitration award. (Non-document Order, Aug. 27, 2019.) Defendants did not file a response, and the time for filing an opposition has now passed.
Pursuant to the Federal Arbitration Act, if the parties have agreed to judicial confirmation of an arbitration award, then at any time within one year after the award is made, any party to the arbitration may seek to confirm it. 9 U.S.C. § 9; Hall Street Assoc., LLC v. Mattel, Inc., 552 U.S. 576, 587 n.6, 128 S.Ct. 1396, 170 L. Ed. 2d 254 (2008). "[C]onfirmation is a summary proceeding and the court must confirm the award where the award is not vacated, modified or corrected[.]" Wachovia Sec., Inc. v. Gangale, 125 F. App'x 671, 676 (6th Cir. 2005) (emphasis in original). Accordingly, "the plain language of the Federal Arbitration Act presumes that arbitration awards will be confirmed," and courts therefore play a "limited role in confirming an arbitration award under the Federal Arbitration Act[.]" Id.; Shelby Cty. Health Care Corp. v. A.F.S.C.M.E., Local 1733, 967 F.2d 1091, 1094 (6th Cir. 1992). This limited role is appropriate since "[t]he parties have contracted for a decision by arbitrators, not the Court." Wachovia Sec., 125 F. App'x at 676-77.
"Courts thus do not sit to hear claims of factual or legal error by an arbitrator as an appellate court does in reviewing decisions of lower courts.... [A]s long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his authority, that a court is convinced he committed serious error does not suffice to overturn his decision." United Paperworkers Int'l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 38, 108 S.Ct. 364, 98 L. Ed. 2d 286 (1987). Indeed, in "[i]n an ordinary arbitration confirmation proceeding, the Court merely converts an arbitration award into a final judgment." Farmers Crop Ins. Alliance v. Laux, 422 F.Supp.2d 898, 899 (S.D. Ohio 2006).
The FAA applies to agreements included in contracts "evidencing a transaction involving commerce[.]" 9 U.S.C. § 2; see Stout v. Byrider, 50 F.Supp.2d 733, 735 (N.D. Ohio 1999). Here, the FAA applies to the parties' agreement to arbitrate controversies arising under the franchise agreement. (Fran. Agr. § 22.) Defendants agreed that the parties' arbitration agreement was binding on them, and they participated in arbitration before an AAA arbitrator, where they were represented by counsel.
Accordingly, for the foregoing reasons, plaintiff's renewed motion (Doc. No. 15) is GRANTED. The arbitration award, issued in AAA Case No. 01-18-0001-6101, is hereby CONFIRMED in all respects. Judgment is entered in accordance with the arbitration award (Doc. No. 2-2) attached hereto as Exhibit A.
I, Robert M. Gippin, the undersigned Arbitrator, my affirmation and signature appearing on Page 12 of this Award,
1) Having been designated and having proceeded in accordance with the arbitration clause contained in Paragraph 22 of the Franchise Agreement dated September 21, 2005 between Sarah Adult Day Care Services, Inc. ("Sarah") and The Beyda Adult Day Care Center, LLC ("Beyda") ("the Agreement") and the Answer filed on September 21, 2018 on behalf of Beyda, Alan Beyda, Lewis Beyda and Megan Beyda (the three individuals designated together "the Individuals," together with Beyda designated "Respondents"), by virtue of which the arbitration clause was agreed by all of the Parties to be binding upon them;
2) All of the Parties having been represented by counsel for the presentation of claims, defenses, evidence and argument, as follows: Marc P. Seidler of DLA Piper LLP for Claimant Sarah, and Joseph D. Garrity of Garrity Traina PLLC for Respondents;
3) Having given my oath to adhere to my prescribed obligations and having received and considered the proofs and allegations of the Parties in a live and teleconference hearing in Akron, Ohio and Coconut Creek, Florida, on November 27 and 28, 2018 and by the affidavits of counsel as to legal fees and expenses submitted on January 29 and 30, 2019; and
4) Having considered the post-hearing briefs of counsel for the Parties and having declared the hearing closed on January 30, 2019, hereby AWARD as follows:
I. Sarah is granted no relief on its claims against the Individuals, except as set forth in Section III below as to the costs of these proceedings, which claims are otherwise dismissed against all of the Individuals with prejudice.
II. Beyda is enjoined as follows, in accordance with the terms of Ohio Rule of Civil Procedure 65:
A) Commencing not later than ninety (90) days after the date of this Award, Beyda shall not for one (1) year operate or have any interest in any adult day care facility at or within fifty (50) miles of 754 Riverside Dr., Coral Springs, Florida 33071, or within twenty (20) miles of the Sarah Adult Day Care Center in Pembroke Pines, Florida.
B) Beyda shall immediately deliver to Sarah all Operations Manuals and other guidance documents pertaining to the operation of an adult day care center that have been received by Beyda from Sarah.
C) Beyda shall immediately cease the use of and cause the removal of all references to Sarah in connection with Beyda in any print or electronic media by which the public may reasonably be expected to seek adult day care services in Broward County, Florida, and shall immediately cease to use and shall notify the public and any applicable governmental and non-governmental entities that it has ceased to use telephone number 954-341-7788.
D) Beyda shall immediately execute and tender to the Landlord an assignment to Sarah, effective not later than ninety (90) days from the date of this Award, of all of Beyda's interest in the Demised Premises described as 754/756/758 Riverside Drive, Coral Springs, Florida, under the lease between Beyda and Plaza at Coral Springs, LLC, dated June 1, 2006. The Landlord not being a party to this arbitration, this Award imposes no obligation upon the Landlord as to the assignment or otherwise.
III. Claimant and Respondents shall equally bear their own attorney fees and litigation expenses. The administrative fees of the American Arbitration Association totaling $5,750.00 and the compensation of the arbitrator totaling $16,020.00 shall be borne equally. Therefore, Respondents shall reimburse Claimant the sum of $10,885.00 representing that portion of said fees and expenses in excess of the apportioned costs previously incurred by Claimant. Claimant is awarded that amount against Respondents, jointly and severally, with interest at the Ohio judgment rate from the date of this Award.
IV. This Final Award entirely resolves all matters submitted to the arbitration. All claims and demands not expressly determined by this Final Award are denied.
The Arbitrator determined provisionally in ruling on the Motion for Preliminary Injunction that Florida substantive law and Ohio procedural law should be applied. The contractual requirement that Ohio law be applied must be weighed against Florida's public policy interests under choice of law principles. There is no public policy interest that weighs against the application of Ohio procedural law, so that it will be applied as to all of the matters in these proceedings.
The provisional determination as to Florida substantive law will be applied to this merits Award pertaining to the non-competition clause. Ohio substantive law will be applied to the parts of this Award pertaining to the return of documents, the assignment of the lease and the cessation of trademark infringement and potential creation of marketplace confusion.
Florida has adopted comprehensive statutes concerning adult day care facilities and non-competition agreements. Because this controversy involves an adult day care facility located in Florida, regulated under Florida law, Florida has a public policy interest in the decision concerning the non-competition clause that is materially greater than does Ohio. The courts of Ohio would accordingly apply Florida substantive law to that issue. Ohayon v. Safeco Ins. Co. of Illinois, 91 Ohio St.3d 474, 2001-Ohio-100 (2001); In re All Cases Against Sager Corp., 132 Ohio St.3d 5, 2012-Ohio-1444 (2012).
FL ST § 542.335 comprehensively governs the enforcement of non-competition agreements. Certain provisions of the statute are especially pertinent to the analysis of this matter:
Adult day facilities in Florida are governed by FL ST Chapter 429, Part III, and regulations adopted pursuant to those statutes.
Ohio imposes no special requirements concerning whether a leasehold interest may be made subject to an agreement to assign. (The assignment required by this Award must of course be made in such a way as to be effective under Florida law, but that requires no consideration by the Arbitrator.) Likewise, Ohio imposes no special requirements concerning contractual requirements for the return of documentation, the cessation of the use of trademarks and the avoidance of marketplace confusion after the termination of a business relationship. All of the relief sought by Sarah that is to be decided under Ohio law is appropriate for injunction, if at all, since there could be no adequate remedy at law for any of it.
There was no evidence presented of any writings signed by any of the Individuals that could be construed to bind any of them personally. Only Alan Beyda signed any of the agreements and then only as Managing Member of Beyda. The Franchise Agreement contemplated in its Paragraph 1(C)(4) that personal guarantees would be given but there was no evidence that was done.
In light of the express prohibition of FL ST § 542.335(1)(a), enforcement of these restrictive covenants cannot be granted against any of the Individuals, regardless of any provisions of the Agreement purporting to have Beyda act on their behalf to bind them and regardless of what might otherwise be the effect of any general law concerning the scope of injunctions.
Beyda contends that the Settlement, Repurchase and Consulting Agreement and Mutual Release of September 2010 ("the Settlement") released it from the non-competition requirements of the 2005 Agreement.
Sarah established a legitimate business interest in the enforcement of the restraint against Beyda. Notwithstanding the ability of the Broward County market to absorb additional adult day care facilities, as Brian Froelich candidly acknowledged, Sarah presented persuasive evidence that continued competition by Beyda would inhibit its ability to obtain a replacement franchisee, naming at least two possibilities.
These are legitimate business interests justifying protection, as "substantial relationships with specific prospective ... customers" and "customer ... goodwill associated with ... an ongoing business or professional practice, by way of trade name, trademark, service mark, or `trade dress' ... a specific geographic location ... or a specific marketing or trade area."
Beyda does not argue for any common law legal or equitable defenses to enforcement. While the franchise relationship was long and yielded substantial royalties to Sarah, with Beyda having done nearly all of the work of developing the market for its services, none of that in and of itself is a defense to the enforcement of a non-competition agreement that is otherwise justified. Nor under either Florida or Ohio law is a non-competition agreement inherently unenforceable in the health care market.
The "effect of enforcement upon the public health, safety and welfare" must nevertheless be closely taken into account under the Florida statute, as was always required there under common law and still is in Ohio. That is particularly important in the context presented here, where a significant number of very needy elderly participants will be affected by enforcement against Beyda. The potential effect of an injunction on the participants at the Beyda Coral Springs facility is the most important and difficult consideration the Arbitrator must weigh.
Beyda established the unusually great needs of the facility's participants and the Arbitrator accords significance to the special designation license that Beyda holds. But Sarah demonstrated persuasively that there are sufficient alternative facilities to serve that population adequately, whether or not another adult day care facility is quickly established at the location of the Beyda facility, with or without a special designation license. Nor does it appear that the special designation license requirements are so rigorous as to preclude others from fulfilling them.
Thus, while the effect of this injunction can only be negative as to the public health, safety and welfare of Broward County, that does not automatically preclude enforcement of the restraint, as the case law concerning health care non-competition enforcement demonstrates. Rather, the potential extent of that negative effect must be carefully considered on the evidence presented and put in balance against the contractual interests.
The Arbitrator finds that the potential negative effect of this injunction is not so great as to overcome the standards established by the statute in favor of enforcement on the evidence presented.
The other requests for injunctive relief are discussed below. The basis for such relief derives from the Agreement or concerns the actions only of Beyda. There is no basis for injunctive relief as to those matters against any of the Individuals.
Beyda does not contest Sarah's entitlement to return of the operational guidance documentation Sarah furnished to Beyda, primarily the manuals. While Sarah broadly seeks in addition "any and all materials related to operation of the Franchised Business" and unspecified other "Confidential Information," Sarah failed to establish a sufficient basis for an order that Beyda do so. Sarah conceded that participant information cannot legally be turned over by Beyda. Beyond that, Beyda's operational records, especially financial ones, very likely must be preserved by it for tax law compliance and perhaps Florida regulatory and other purposes. Sarah demonstrated no need for any such records, in any event.
Beyda likewise did not contest Sarah's contention that all information in the public domain that would tend to link Sarah and Beyda going forward must be removed to the fullest extent possible. Indeed, Beyda expressed very credibly that it has no wish for any connection between it and Sarah to remain in the public domain. Beyda has made a significant effort to carry out the removal, including of the former phone number, but the evidence showed that some further work needs to be done because completing it had been given a lower priority.
The continuing existence of Sarah-related media that connects it to Beyda both infringes Sarah's trademarks and threatens marketplace confusion. It is appropriate to order that the removal work be completed now without further delay.
The lease assignment requirement is included in the non-competition section of the Agreement, but legally and factually it stands apart from the non-competition requirement, since it would not be inconsistent to deny Sarah non-competition relief against Beyda and still order the tender of the lease assignment. The issue is therefore appropriately analyzed as a matter of ordinary Ohio contract law, not under the Florida non-competition statutes.
No defense to the lease assignment requirement was offered by Beyda, apart from its relationship to the non-competition provision. The assignment has a rational purpose, since it may facilitate Beyda in operating a facility directly or obtaining a replacement franchisee. The requirement is unambiguous and there is no reason why it should not be enforced. That is particularly true since the Landlord will have the reserved right under the Lease to accept or reject the tendered assignment, leaving the Landlord unprejudiced by this requirement of the Award.
Both sides have requested an award of attorney fees and have submitted affidavits supporting the amounts sought. No award may be made under the Agreement, since that provision was negotiated out of the original draft, leaving the Agreement silent on the subject. As to the non-competition issues, the Florida statute permits (but does not require) an award of fees even if there is a contractual provision to the contrary. Since all of the parties have requested a fee award, AAA Commercial Rule R-47(d)(ii) would permit that to be done as to all of the issues presented in the arbitration.
The Arbitrator has accordingly considered on the merits whether any fee award should be made and has concluded there should be no such award. Neither side prevailed significantly more greatly over the other. For the same reason, all of the costs of the arbitration should be equally apportioned between the two sides.
I, Robert M. Gippin, do hereby affirm upon my oath as Arbitrator that I am the individual described in and who executed this instrument, which is my Final Award.
