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Hyle v. Doctor’s Associates Inc.

Issue Discussed: Functus Officio

Submitted by Linsey M. Routledge, Troy Shuman

Date Promulgated: December 16, 1999

 

Hyle v. Doctor’s Associates Inc., (198 F.3d 368)

Case Number: 99-7400

Court: United States Court of Appeals for the Second Circuit

William H. Hyle (“Hyle”), Michael Gruelich (“Gruelich”), and two others entered into a franchise agreement with Doctor’s Associates, Inc. (DAI) to operate a Subway restaurant. DAI, pursuant to the franchise agreement, filed for an arbitration under the American Arbitration Association’s rules. DAI accused Hyle and his partners of breaching the franchise agreement by using Subway trademarks while operating “Your Way Café,” a Baltimore sandwich shop.  DAI sought a termination of the franchise agreement, damages and injunctive relief.

Hyle was the only respondent to appear at the hearing. In its opening, DAI stated that it sought termination of the franchise agreement as to all Defendants but damages and injunctive relief as to Hyle only because, according to the DAI, only Hyle was involved in operating “Your Way Café”. Ultimately, the Arbitrator entered an award in favor of DAI, but awarded injunctive relief and damages only against Gruelich.

Following the Award, DAI’s counsel sought “clarification” regarding whether the Arbitrator intended to enter an award against only Gruelich. The Arbitrator responded that he intended to enter an award terminating the franchise agreement as to all respondents and injunctive relief/damages against Hyle only.  He issued a Corrected Award to reflect this amendment.  After the issuance of the Corrected Award, Hyle sought confirmation of the Original Award (pursuant to 9 U.S.C. § 9) and requested that the Court vacate the Corrected Award (pursuant to 9 U.S.C. § 10). The trial court denied both motions and remanded the matter to the Arbitrator for clarification. Hyle appealed to the U.S. Court of Appeals for the Second Circuit.

The Second Circuit noted that under the functus officio doctrine, an arbitrator’s authority terminates upon the issuance of a final award; an exception to this doctrine exists for correction of clerical errors or errors on the face of the award; 9 U.S.C. §11(a) limits the District Court’s authority to correct material mistakes; and a District Court can remand an ambiguous award for clarification.

Based on these principles, the Court found that DAI’s stated intention to limit its request for injunctive relief and damages as to Hyle, when read in conjunction with the final award, created an ambiguity.  The Court remanded the matter to the arbitrator for clarification.

 

 

[1] Linsey M. Routledge is Senior Counsel and Troy Shuman is an Associate at Clyde & Co US LLP.