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In the Matter of the Arbitration v. Navindra Gharbaran

March 30, 2011

IN THE MATTER OF THE ARBITRATION
DOCTOR'S ASSOCIATES INC., PETITIONER,
v.
NAVINDRA GHARBARAN, RESPONDENT.



The opinion of the court was delivered by: Denise Cote, District Judge:

between

OPINION & ORDER

Petitioner Doctor's Associates Inc. ("DAI") has filed this petition for confirmation of an arbitration award. Respondent Navindra Gharbaran ("Gharbaran") has not opposed the petition or otherwise appeared in this action. The petition is denied for lack of subject matter jurisdiction.

BACKGROUND

DAI is the national franchisor of Subway sandwich restaurants. In August 2009, DAI entered a franchise agreement ("Agreement") with Gharbaran, authorizing her to operate a Subway franchise in Ridgewood, New York. The Agreement requires Gharbaran to operate her franchise in accordance with the Subway Operations Manual ("Operations Manual"). The Agreement also contains an arbitration clause which states: "Any dispute, controversy or claim arising out of or relating to this Agreement or the breach thereof shall be settled by arbitration." The Agreement also provides that any judgment rendered in an arbitration that arises from a dispute relating to the Agreement "may be entered in any court having jurisdiction thereof."

To monitor compliance with the Operations Manual, DAI inspects franchises monthly. During inspections, DAI's field consultants complete Restaurant Evaluation and Compliance Review reports in which they document areas of noncompliance. Copies of the reports are sent to franchisees, along with recommendations for achieving full compliance.

On November 7, 2009, field consultants performed an inspection of Gharbaran's Subway franchise and found it did not comply with the standards in the Operations Manual. On November 9, DAI sent Gharbaran a letter of noncompliance, citing specific violations and advising Gharbaran to correct them immediately.

On January 18, 2010, field consultants performed another inspection of Gharbaran's Subway franchise and again discovered multiple areas of noncompliance. On January 20, DAI sent Gharbaran a letter citing specific violations and threatening to terminate the Agreement if Gharbaran failed to correct them within sixty days. Gharbaran failed to bring her franchise into full compliance within the sixty-day period, and additional violations of the Agreement were cited in reports dated February 22, March 29, and April 30.

On April 20, 2010, DAI filed a Demand for Arbitration with the American Dispute Resolution Center ("ADR"), stating a claim for breach of the Agreement. Gharbaran was served with copies of DAI's demand, but did not answer or otherwise respond. Gharbaran also did not challenge or otherwise respond to the appointment of an arbitrator. During the arbitration proceedings, DAI submitted a written affidavit with documentary evidence and a legal brief. Gharbaran did not submit any documents.

The arbitrator issued a written award ("Award") on June 29, 2010. In part, the Award: (1) terminates the Agreement; (2) enjoins Gharbaran from continuing to operate her restaurant as a Subway franchise; (3) requires Gharbaran to pay DAI $250.00 per day for each day her restaurant, after the issuance of the Award, continues to operate as a Subway franchise; (4) requires Gharbaran to pay DAI $15,000.00 for each sandwich business she operates within three miles of a Subway restaurant, plus 8% of the gross sales of such businesses; (5) requires Gharbaran to reimburse DAI $779.82 for fees and expenses of ADR; and (6) requires Gharbaran to reimburse DAI $800.00 for compensation of the arbitrator. Copies of the Award were sent to both parties on June 30. As of February 17, 2011, the date of an affidavit submitted by DAI, Gharbaran had failed to abide by the terms of the Award and continued to operate a restaurant using DAI's trade names, trademarks, service marks and other indicia.

On September 22, 2010, DAI filed this petition to confirm the arbitration awards. Gharbaran did not file any opposition. On February 4, 2011, this Court requested supplemental briefing from the parties on the issue of subject matter jurisdiction. DAI submitted supplemental materials on February 18. Gharbaran did not respond, and has not appeared in this action.

DISCUSSION

"[T]he Federal Arbitration Act . . . does not independently confer subject matter jurisdiction on the federal courts." Durant, Nichols, Houston, Hodgson & Cortese-Costa P.C. v. Dupont, 565 F.3d 56, 63 (2d Cir. 2009). "Thus, there must be an independent basis of jurisdiction before a district court may entertain petitions under the Act." Id. (citation omitted).

One basis for subject matter jurisdiction is diversity, where the parties are citizens of different states and the amount in controversy exceeds $75,000. 28 U.S.C. § 1441. "A party invoking the jurisdiction of the federal court has the burden of proving that it appears to a reasonable probability that the claim is in excess of the statutory jurisdictional amount." Scherer v. Equitable Life Assurance Soc'y of the United States, 347 F.3d 394, 397 (2d Cir. 2003) (citation omitted). To overcome such a showing, ...


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