A district court in Pennsylvania confirmed a final arbitration award in favor of a franchisor, denying the franchisees’ motion to vacate the award.
An association of franchisees sued franchisor Choice Hotels International, Inc. for fraud and breach of contract, among other claims, alleging that Choice Hotels required them to pay inflated prices to third-party vendors, abide by a variety of unconscionable franchise terms and practices, racially discriminated against specific franchisees, and obstructed franchisees from leaving the system by imposing onerous liquidated damages provisions.
Choice Hotels moved to compel arbitration based on the parties’ agreement to arbitrate, which the court granted. The court stayed the district court proceeding pending arbitration. After receiving an arbitral award of $645,770.43, Choice Hotels sought to have the award confirmed in federal court. The franchisees filed a cross-motion to vacate the award.
Courts must presume that an arbitral award is enforceable under the Federal Arbitration Act. This means that, absent proof of egregious events in the arbitration, such as partiality or corruption among the arbitrators, arbitrator misconduct that prejudices any party, and arbitrators exceeding their powers, arbitration awards are generally upheld.
The franchisees claimed the arbitrator (a) engaged in misconduct by refusing to hear additional evidence, (b) was not impartial because he had a history of serving as an arbitrator for Choice Hotels, and (c) exceeded his powers by issuing an award later than anticipated. The court was unpersuaded by each of these arguments. The court noted that the franchisees had an equal opportunity to present their case, consented to the arbitrator after learning he had previously served as arbitrator for Choice Hotels in multiple arbitration proceedings, and the parties’ arbitration agreement was silent on a deadline for issuing an award.
Although the franchisees argued that the arbitrator refused to permit the franchisees’ presentation of additional evidence, the court noted that an arbitrator is only required to provide the parties with an adequate opportunity to present their case. An arbitrator is not required to permit parties to present any and all evidence they wish. The franchisees were also permitted to question the arbitrator regarding his prior relationship with Choice Hotels, and did so.
The court noted that the franchisees submitted a series of questions that the arbitrator responded to, and the franchisees ultimately did not object to the arbitrator. Finally, the court stated that an arbitrator exceeds his powers only if he acts outside the scope of his contractually delegated authority. Here, nothing in the parties’ contract imposed a deadline for issuing an award or any consequences for not adhering to an award deadline.
A common strategy for franchisees ordered into arbitration involves preparing to vacate the award if there are grounds to support that outcome at or before the evidentiary hearing. Franchisees should consult with franchise counsel to analyze possible avenues to challenge an arbitration award.
Choice Hotels Int’l, Inc. v. Jai Sai Baba, LLC, 2025 U.S.Dist.LEXIS 178479 (E.D. Pa. Sept. 11, 2025).
