Craig Tractenberg of Fox Rothschild. Courtesy photo Nonsignatory Held to Arbitration Pact in Dispute With Popular Water Ice Franchise
The court found there was no evidence that Rita's used litigation before seeking arbitration so as to cause a waiver. The mere fact that Rita's waited until there was a dispute to arbitrate did not constitute a waiver.
June 14, 2024 at 11:17 AM
5 minute read
Food and BeverageThe district court referred to it as "gamesmanship." That characterization may be an understatement given the position of the franchisee's counsel in Ice Rak v. Rita's Franchise, No. 8:23-cv-2659 (M.D. Fla., Mar. 14, 2024). Ultimately, the case was stayed pending arbitration over termination of the franchise, even though Ice Rak was not a signatory to the franchise agreement.
Rita's Franchise Co. LLC had terminated the frozen dessert franchise operated by Ice Rak's managers individually in Lakeland, Florida. The principals had operated the Rita's business since 2021, having signed in their personal names but decided to operate the business and sign the lease under their subsequently established limited liability company, Ice Rak LLC. Rita's had requested that the managers transfer the franchise agreement signed by the managers to Ice Rak, LLC as the franchise agreement allows such transfers for convenience to a business entity. The managers never transferred the franchise agreement. They did, however, sign a collateral assignment of the lease in the name of Ice Rak LLC also signed by the landlord acknowledging that upon termination of the lease, Rita's would have step-in rights. The collateral assignment contained an acknowledgement by Ice Rak LLC that it was a franchisee of Rita's.
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