Mediation Matters

By: Lane Fisher and JoyAnn Kenny, Fisher Zucker

Claims Dismissed! The US District Court for the Eastern District of Pennsylvania dismissed claims asserted in a collective lawsuit filed in federal court by a group of disgruntled franchisees and their respective owners against the franchisor of the Blingle! franchise system, its parent company, Horse Power Brands, certain affiliates, and a selection of its officers and employees because the plaintiffs ignored the mediation pre-condition to litigation contained in their franchise agreements. This notable decision highlights the significance of properly drafted mediation clauses and provides precedent supporting dismissal of lawsuits filed without first complying with this meaningful, preliminary step.

Most franchise agreements contain a mediation clause requiring the parties to mediate before a party may commence arbitration or litigation. This important step in the dispute resolution process allows both the franchisor and franchisee the opportunity to amicably resolve disputes with the assistance of an independent mediator before the complicated and expensive litigation or arbitration process takes root. Allowing an independent mediator the opportunity to disrupt each side’s echo chamber and break through impasse at the infancy stages of a dispute in an attempt to broker a resolution yields tremendous value to both parties.

At the pre-filing stage, the parties are best poised for settlement, as they are able to “cool their jets”, discuss their respective claims and defenses openly, carefully consider the ugly realities of litigation or arbitration, and explore creative settlement options before the harsh Item 3 disclosure requirements are triggered. Let’s face it, all too often the only winners in litigation and arbitration are the lawyers. Mediation is an invaluable dispute resolution mechanism with a reportedly high success rate. This federal court decision lends credence and strength to properly drafted mediation clauses, which prospective plaintiffs should be cautioned against ignoring.

Waldron et al v. SVHB Marketing LLC D/B/A Horse Power Brands et al; Case Number 2:23-cv-03485-MSG(E.D. Pa. March 20, 2024).

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