SW Legal studies in Business

Arbitrator Could Award Treble Damages for Antitrust Violation
Description Appeals court held that an arbitration clause would be enforced where a franchisee sued a franchiser for antitrust violation. The arbitrator could award treble damages, as allowed by antitrust law, which would not be the punitive damages disallowed by the arbitration clause.
Topic Alternate Dispute Resolution
Key Words Punitive Damages; Treble Damages; Antitrust; Franchise Agreemente
C A S E   S U M M A R Y
Facts Investment Partners (IP) had a Glamour Shots franchise. The agreement required IP to use Candid Color Systems, part of Glamour Shots, for all photo processing. IP sued Glamour, contending the photo-processing requirement was a tying arrangement that violated the Clayton Antitrust Act. Glamour moved to compel arbitration, as the franchise agreement required arbitration. IP argued that the arbitration clause was not enforceable because it did not permit punitive damages. Damages in antitrust cases, by law, may be trebled, which would be punitive damages. The arbitration agreement cannot override federal antitrust law. The district court held that arbitration would proceed. IP appealed.
Decision

Affirmed. "Although an arbitrator cannot award punitive damages, he may award antitrust treble damages, and the arbitral forum is an adequate substitute for the judicial forum in this case." Hence, treble damages could be awarded if an illegal tying arrangement is found. Treble damages allowed by antitrust law are not the same as punitive damages, so the arbitration agreement is not in conflict with federal law.

Citation Investment Partners v. Glamour Shots Licensing, 298 F.3d 314 (5th Cir., 2002)

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