Bottle Poetry, LLC v. Doyle Rest. Grp. Franchise Co.

• Decision Date: 15 January 2014
• Docket Number: No. 2013–CA–0406.,2013–CA–0406.
• Citation: 133 So.3d 60
• Parties: BOTTLE POETRY, LLC, Uncorked, LLC d/b/a The Wine Loft Uncorked II, LLC d/b/a The Wine Loft, DP Ventures, and the Wine Loft Pittsburgh, Inc. v. DOYLE RESTAURANT GROUP FRANCHISE COMPANY, LLC.
• Court: Court of Appeal of Louisiana — District of US

133 So.3d 60

BOTTLE POETRY, LLC, Uncorked, LLC d/b/a The Wine Loft Uncorked II, LLC d/b/a The Wine Loft, DP Ventures, and the Wine Loft Pittsburgh, Inc.

v.DOYLE RESTAURANT GROUP FRANCHISE COMPANY, LLC.

No. 2013–CA–0406.

Court of Appeal of Louisiana, Fourth Circuit.

Jan. 15, 2014.

Michael A. Patterson, S. Brooke Barnett–Bernal, Latoya D. Jordan, Long Law Firm, Baton Rouge, Louisiana, for Plaintiffs/Appellees.

Roderick Christopher Patrick, Patrick & Associates, New Orleans, Louisiana, for Defendant/Appellant.

(Court composed of Chief Judge JAMES F. McKAY III, Judge DENNIS R. BAGNERIS, SR., Judge MADELEINE M. LANDRIEU).

JAMES F. McKAY III, Chief Judge.

Defendant, Doyle Restaurant Group Franchise Company, LLC (“DRG”), appeals the trial court's September 6, 2012 judgments: 1) confirming an arbitration award rendered in favor of plaintiffs, Bottled Poetry, LLC, Uncorked, LLC d/b/a The Wine Loft, Uncorked II, LLC d/b/a The Wine Loft, DP Ventures, and the Wine Loft Pittsburgh, Inc. (collectively “franchisees”); and 2) denying DRG's exception of lack of procedural capacity. For the reasons set forth below, we affirm.

DRG is the national franchisor of Wine Loft. Each of the five franchisees involved in this action entered into franchise agreements with DRG to operate Wine Loft franchises in various states. None of the businesses are located in Louisiana, and none of the franchisees are licensed to do business in the state.

The franchise agreements, which were drafted by DRG, required the franchisees to pay a percentage of their gross sales as advertising fees to DRG. The franchise agreements also contain a choice of forum clause for the state of Louisiana and an arbitration clause, requiring that the arbitrator be appointed in New Orleans, Louisiana. The terms of the franchise agreements are not disputed.

A dispute arose between the franchisees and DRG regarding DRG's use of the advertising fees. The parties submitted to arbitration in New Orleans, Louisiana. An arbitration award was rendered in favor of the franchisees. The terms of the award are not at issue here.

On February 2, 2012, the franchisees filed a petition to confirm the arbitration award in the Civil District Court for the Parish of Orleans. DRG neither admitted nor denied the allegations of the petition. Rather, DRG filed exceptions of prematurity/lack of procedural capacity and insufficiency of service of process.¹

The matter was brought before the trial court on August 10, 2012. After considering the testimony of Jason Doyle (“Mr. Doyle”), managing member of DRG, the arguments of counsel, and the record, the trial court confirmed the arbitration award and denied DRG's exception of lack of procedural capacity. The arbitration award and the franchise agreements were attached to the petition, but were not introduced into evidence. DRG's timely appeal followed. The franchisees answered the appeal seeking an increase in attorneys' fees.

On appeal, DRG asserts that the trial court erred in: 1) failing to sustain DRG's exception of lack of procedural capacity; and 2) confirming the arbitration award when the franchisees failed to present any evidence or testimony and failed to introduce any exhibits into evidence. For the reasons that follow, we find no merit in these assignments of error.

Arbitration is favored in Louisiana, and arbitration awards are presumed to be valid. Dicorte v. Landrieu, 2008–0249, p. 3 (La.App. 4 Cir. 09/10/08), 993 So.2d 799, 801. Unless grounds for vacating, modifying or correcting the award are established, the award must be confirmed, and the burden of proof is on the party attacking the award. Montelepre v. Waring Architects, 2000–0671, p. 4 (La.App. 4 Cir. 5/16/01), 787 So.2d 1127, 1130.

La. R.S. 9:4209 requires that a district court confirm the arbitration award upon application by any party unless grounds pursuant to La. R.S. 9:4210 or 9:4211 exist.²Kleinschmidt v. Lanza, 2010–0540, p. 5 (La.App. 4 Cir. 9/15/10), 45 So.3d 1165, 1168. In addition to the grounds enumerated in La. R.S. 9:4210 and 4211, a litigant may attack an arbitration award on the basis of a “manifest disregard of the law,” a judicially created ground for vacating an arbitration award. Welch v. A.G. Edwards & Sons, Inc., 95–2085, 2086, p. 5 (La.App. 4 Cir. 5/15/96), 677 So.2d 520, 524. A manifest disregard of the law refers to error which is obvious and capable of being readily and instantly perceived by an average person qualified to serve as an arbitrator. Id.

Exception of Lack of Procedural Capacity

In the present case, DRG did not file a motion to vacate or modify the arbitration award based on either the statutory or jurisprudential grounds stated hereinabove. Rather, DRG asserted an exception of prematurity/lack of procedural capacity, arguing: 1) pursuant to La. R.S. 12:314(A), the franchisees, as foreign corporations, are not permitted to bring a judicial demand in Louisiana because they are not licensed to do business in the state; and 2) because the franchisees are not licensed to do business in the state, they are required by La. R.S. 12:82(G) to show proof of their corporate authority to file an action here. DRG submits that no such proof was provided.

La. R.S. 12:314(A) provides:

No foreign corporation transacting business in this state shall be permitted to present any judicial demand before any court of this state unless it has been authorized to transact such business, if required by, and as provided in, this Chapter. The burden of proof shall rest upon the corporation to establish that it has been so authorized, and the only legal evidence thereof shall be the certificate of the secretary of state or a duly authenticated copy thereof. (Emphasis added).

The franchisees argue that La. R.S. 12:314(A) does not apply to them because they were not “transacting business” in Louisiana within the meaning of the statute. They contend that La. R.S. 12:314(A) does not apply, as in the present case, where a foreign corporation not licensed to do business in this state is not in fact conducting business here. We agree. It is well settled that La. R.S. 12:314(A) (formerly La. R.S. 12:212) does not apply to a foreign corporation unless it is actually doing business in Louisiana. Kirkeby–Natus Corporation v. Campbell, 210 So.2d 103, 105 (La.App. 4 Cir.1968). The question of whether or not the corporation is doing business in this state is one mixed with both law and fact, the determination of which rests upon all of the individual facts connected with its operations. Id. The burden of proving that the corporation is doing business in the state is imposed entirely upon the individual urging such a defense. Id. See also Aspen Industries, Inc. v. Williams, 378 So.2d 527 (La.App. 4 Cir.1979); Charles Pfizer & Co., Inc. v. Tyndall, 287 So.2d 552 (La.App. 3 Cir.1973).

To demonstrate that the franchisees were transacting business in Louisiana, DRG presented the testimony of Mr. Doyle, who was asked to describe the contacts that the franchisees have had with this state. He noted the following: 1) the franchise agreements were negotiated in Louisiana; 2) franchisee training was conducted in Louisiana; 3) the franchisees sent weekly documents to Louisiana reporting on their gross revenues; and 4) the franchisees came to Louisiana for meetings. Mr. Doyle acknowledged that all of these contacts were mandated by the franchise agreements.

Based on the record, we find that DRG did not meet its burden of showing that the franchisees were doing business in Louisiana. Other than the contacts Mr. Doyle described, which were undisputedly mandated by the franchise agreements, DRG presented no evidence that the franchisees were actually doing business here. Thus, the franchisees were not prohibited from filing suit in Louisiana pursuant to La. R.S. 12:314(A).

DRG's exception of lack of procedural capacity further asserts that pursuant to La. R.S. 12:82(G), the franchisees are prohibited from filing suit in Louisiana without demonstrating their authority to file suit. Again, we find no merit in this contention.

La. R.S. 12:82(G) provides in pertinent part:

Except as otherwise provided in the articles or by-laws, or by resolution of the board of directors, the president, vice-president or manager of any corporation or any foreign corporation doing business in this state, shall have power in the name and behalf of the corporation to authorize the institution, prosecution or defense of any suit and other legal proceedings, and no exception of want of authority shall lie on the part of any other party.

La. R.S. 12:82(G) is a declaration that no exception of want of authority shall lie on the part of a defendant when the president, vice-president or manager of a foreign corporation doing business in the state authorizes the institution of a suit. See Eastlake Trading Co., Inc. v. Iberia Trading Co., Inc., 398 So.2d 1146, 1149 (La.App. 4 Cir.1980). It does not apply in the present case where the franchisees were not shown to be conducting business in Louisiana.

DRG also argues on appeal that the trial court failed to consider the exception of lack of procedural capacity and failed to make a factual determination on the issue. To the contrary, the record reflects that the trial court considered DRG's argument presented on the exception of lack of procedural capacity and considered the testimony of Mr. Doyle to determine that DRG failed to set forth sufficient grounds to vacate the arbitration award. On the record, the trial court stated:

The Court's only recourse when there is a Petition to Confirm the Arbitration is whether that [sic] was something that was so egregious that warrants overturning the arbitrator's award. The Exception of Lack of Procedural Capacity that you raised, I do not find rises to that level. Since there is only a motion before the Court to confirm the arbitrator award, I do not find there is anything so egregious that would warrant that it be...