The Honor able Thoma s B. Russell, Un i t ed S tates District Judge f or the Western D istrict * of Ke ntucky , sitti ng by

desig nation. NO T R EC OM M EN DE D F OR F UL L- TEX T P UB LIC AT ION F ile Nam e: 08a0696n.06 F iled: Novem ber 14, 2008 No. 07-1830 UN ITED STA TES C OU RT OF AP P EA LS F OR THE SI XT H C IR CU IT
CO F F EE BEA NE RY , LT D. , ET AL . , Petitioners-Appellee

s , v. WW , L. L.C .; DE BOR AH WI LLIA M S; and RICHARD WELSHANS , Re sp on de nts -A

pp e lla nts . ) ) ) ) ) ) ) ) ) ) ON AP P E AL F ROM THE UN I TE D ST AT ES D I STR I CT CO UR T F OR

TH E E AST ERN DI STRI CT OF MI CHI GAN AM EN DE D O P IN ION

BEFORE: COLE an d CLAY, Circuit Judges; RUSSELL , District Judge
. * COLE, Circuit Judge. Respondent-Appe llant WW, L .L .C. and its tw o p ri nc ipa l ow ne rs , Richard Welshans and D ebora h Wil liams (collectively , “WW”), appea l the di strict court’s de nial of the ir mot ion to v a c a te an a

rb itr a tio n a

ward. At iss ue is w he the r t

he Ar bit ra tor sh ow e d a

manif e st dis re g ard of the law w he n s he iss ued her awa rd . B e c a us e we c on c lud e that th e fa ilure to d isc los e a prior f elony conviction for g rand la rce ny violates the Mar

y land Fr anch i se Reg istration and Disclosure L aw ( “F ranc hise Act” ), M d
. Bu s. Reg . Code Ann. § 14-216( 8)(i), a nd beca use the Arbit rator show ed a ma

nifest disreg ard of

the law in conc luding other wise, we RE VE RSE the judgme nt of the district court a nd VA CA TE the Arbitrator’s aw ard.No. 07-1830

Cof fe e Be an e ry

, Lt d. v . W W , LLC

- 2 -

I. BACKG ROUND Petitioner-Appellee , The Coffee Be aner y L td., is a

Michig an cor

poration with its principal place of business in F lushing, Michig an. I ts pr imary business is to sell and operate Coffee Be aner y fra nchises ac ross the United States. The rema ining Petitioners-A ppellees, Joanne Shaw, Juli us Shaw, Kevin Shaw, K

urt S h aw , Ke n Cox en, Walter Pilon, and Owe n Stearn, a re of fice rs of the
c omp any (c ol lec tiv e ly , “ the Cof

fe e B e ane ry” ). WW, L .L .C. is a Mary land c or po ra tio n w ithits principal plac e of business in Anna polis, Mary land. T h i s d i s p u t e a

r i s e s o u t o f a f

a i l e d b u s i n e s s a g r e e m e n t t o l i c e n s e a C o f f e e B e an e r y C a f e . In Spring of 2003, Richard Welshans and D ebora h Wil liams, husband and wife , beg an rese arc hing the idea of opening a small coff

ee shop that would sell coffe e and othe r bever ag es. The two a rra ng ed
a mee ting with Ke vin Shaw, the Coffe e B eaner y ’s Vi ce Pre sident of Real Estate , to discuss the details of a pur chase and a pote ntial location for a store. I n J une 2003, Richar d and De b o ra h att ended a Coffee Be aner

y “discove ry

day ” at the headqua rters in F lushing, Michig an to investig ate the pur chase of a f ranc hise. During this trip, Coffee Be aner

y repr esentatives took the two on a tour of the company -owne d Coffee Be aner y Cafe, wher e they

met some employ ees a

nd sampled food a

nd bever ag es. That s am e d ay , R ichar d and Debor ah ag ree d to lice nse a Cafe Store in Annapolis, Mary land, and sig ned a f

ranc hise ag ree ment to p ur c ha se and

op e rate a sto re . With th e c on se nt of the Cof fe e B e ane ry , th e ri g hts , ti tle and int e re st in and obligations under this ag ree ment wer e later assig ned to WW , L .L .C.No. 07-1830

Cof fe e Be an e ry

, Lt d. v . W W , LLC

- 3 - Th e pa rt ie s h a ve dif

fe re nt v e rs ion s o f w hat ha pp e ne d d ur ingthi s m eetin g . A c c or din g to Richard a nd Debor ah, they

had orig inally

intended to purc hase a

traditional Coffee Be aner y store, but severa l repre sentatives of the Coffee Be aner y , including Shaw, encour ag ed them to purc hase a Cafe Store, sug g esting that the Cafe Stores wer e potentially more lucrative, in pa rt, b ec au s e they
wer e not “se asonal.” I n a private mee t i n g af t er the tour, Shaw a sked them, “Can you g et by on $1 25 ,0 00 ? ,” and

pr e se nte d a

pr o f or ma f i n a n c ia l w or k s he e t c on ta ini nginf

or ma tio n a bo ut i np ut c os ts fo r o pe ratio ns and

pr oje c te d in c ome . B a se d o n w hat Ric ha rd and De bo ra h a sse rt to be f

a lse
re pr e se ntatio ns , th e y

a g re e d to purc ha se and

op e ra te a Ca fe Sto re , wh ic h re qu ir e d an in iti a l f ra nc his e fee of $25,000. The Coffe e B eane ry , unsurprising ly , believes that it provided adequate, prope r and tim e ly dis c los ur e , s uf

fi c ie nt t ra ini ng , c omp re he ns ive a ssi sta nc e , a nd ma de no fa lse re pr e se ntatio ns . Af te r i ts o pe nin g in 2 00 3, WW’s Ca fe Sto re imm e diate ly e nc ounte re d nume ro us dif fi c ult ie s. Spurn e d b y s ig n if ic an t l o s s e s , in

Ja n u ar y 2 0 0 5 , WW s e n t t

h e A me r ic anA r

b it r a ti o nA s s o c iation (“A AA”) and the Coff

ee B eane ry

a De mand for Me diation and Arbitr ation. The nature of the dispute, acc ording to the demand, include d fra ud, neg lige nt misreprese n tation, fraudule nt mis re pr e se ntatio n, fr a

ud ule nt n on -d isc l o s u

r e , b r e a c h o f c o nt r a c t , b r e a c h o f t

he c ov e na nt o f g oo d f

a ith and fa ir dea ling, violations of the Ma ryland Fr anchise Reg istration and Disclosure L aw, Michig an Fr anchise I nvestment L aw, a nd the Michig an Consumer Protec tion Act. Th e arb itr a tio n p ro c e ss h it a sn a g wh e n co un se l for WW se nt a n e ma il t o A AAre tr a c tin g its
ear lier dema

nd for arbitration, be cause “the a rbitration clause in the fra nchise a g ree ment is lim ited to c on tr ov e rs ie s b e tw e e n [the Cof fe e B e ane ry ] an d St or e Ow ne r. ” “ Th e le g a l a c tio n th a t my c lie nts
are considering ,” the e mail expl ained, doe s not “fall within the scope of the ar bitration ag ree ment,”No. 07-1830

Cof fe e Be an e ry

, Lt d. v . W W , LLC

- 4 - and the re fo re “ any

arb itr a tio n r e qu ir e me nt w ou ld a lso be of no fo rc e and

e ff e c t. ” Based on tho se
rea sons, on Dece mber 15, 2005, W W abandoned a rbitration altog ether

and filed suit in the United States District Court for the District of Ma ryland, alleg ing violations of the Ma ryland Fr anchise Act and see king r elief unde r other state-lawclaims for de trimental relianc e, intentional misrepre sentation, and ne g lige nt misreprese ntation. I ndepende ntly , on J anuar y 19, 2006, t h e S ec urities Commi ssioner of Ma ryland (“Commissioner”) issued a n administrative “Or der to Show Cause” ag ainst the Coffee Be aner y and Kevin Shaw, a lleg ing violations of the disc losure a n d a nti-fra ud provisions of the Fr anchise Act, Md. Bus. Reg . Code Ann. § 14-210 et seq . T he su bs ta nc e of the Com mis sio ne r’ s c la ims wa s n e a rl y identical to WW ’s alleg ations—namely , that the Coffee Be aner y made materia l misreprese ntations in c on ne c tio n w iththe of fe r a nd sa le of Ca fe Sto re fr anc his e s, that Sh aw i na pp ro pr ia te ly

tol d prospec tive buy ers that they could expect a spe cific inc ome level f rom the oper ation of a Caf e Store, and that the Coff

ee B eane ry

failed to timely provide prospec tive fra nchisee s a copy of the off ering prospec tus and a propose d fra nchise a g ree ment. On J anuar

y 30, 2006, eleve n day s after the Commiss ioner issued h er Or d er , the Coffe e Be aner y responde d in kind by

filing a petition to compel arbitration in the Un i t ed States District Court for the Eastern District of Mi chig an. The Coffee Be aner y alleg ed that, under

the ar bitration
c la us e of the fr anc his e a g re e me nt, any c la im or c on tr ov e rs y ari sin g ou t of or re la te d to the fr anc his e ag ree ment should be settled by arbitration.No. 07-1830

Cof fe e Be an e ry

, Lt d. v . W W , LLC

On Mar ch 23 , 20 06 , th e Mary land dis tr ic t c ourt

iss ue d a n o rd e r s tay ingthe c a se in 1 defe renc e to the state a dminist rative pr ocee dings a nd t he Ea stern District of Michig an, and administratively

closed the c ase. - 5 - Th e dis tr ic t c ourt g ra

nte d the Cof

fe e B e ane ry ’s pe tit ion to c omp e l arb itr a tio n and re fu se d to stay the ca se. Cof

fe e Be an e ry

v . W W L.L. C. , N o. 06 -1 04 08 , 2 00 6 WL 20 33 92 9 ( E. D. Mic h. July 1 18, 2006) (“ Coffee Beane ry I ”). B ut before arbitration could proce ed, on September 12, 2006, the Commi ssioner rea ched a Consent Order with the Coffee Be aner

y and Shaw, unde r which the Coffee Be an e r y an d Sh aw a c kn o w le d g e d th a t th e y h a d v io late d th e M ar y la n d F r an c h is e A c t b y

making
ma te ri a l mi sr e pr e se ntatio ns of fa c t or omi ssi on s o f m a te r i a l f

a c t t o p r o s p e c t i v e M a

r y l a nd fr anc his e e s, and by failing to give prospec tive fra nchisee s a copy

of the off eringprospec tus. This Order r equire d the following : (1) that the Coff ee B eane ry

and Shaw c ease selli n g franchises in violation of Maryland Fr anchise L aw; and ( 2) that WW be entitled to a r escission offe r t hat would be kept open for thirty day s from t he date of not ice. Under the explicit t erms of the Orde r, howe ver, the Coffee Be aner y reta ined the rig ht to “deny any statement of fac t or conclusion of law of the Consent Orde r in any proce eding , litigation, or arbitration ag ainst them in which the Commi ssioner is not a par ty .” WW ne ve r a c c e pte d th e re sc iss ion of fe r. I ns te a d, in Janu ary

20 07 , it su bmi tte d it s c la ims to arbitration in Ann Arbor, Michig an. Arbitrator J oAnne Ba rron presided over a

n eleve n-day

hear ing that i n cl u d ed testimony

from WW, ot her Caf

e Store owne rs, and r epre sentatives fr om the Coffee Be aner y . On Marc h 28, 2007, the Arbitrator issued an awa rd finding in f

avor of the Coffe e B eane ry
on a ll c la ims
.No. 07-1830

Cof fe e Be an e ry

, Lt d. v . W W , LLC

- 6 - On April 18, 2007, WW filed a motion to vacate the ar bitration awa

rd in the Easte rn District of Michi gan . The district cour t issued an orde r and opinion deny ing the motion to vacate a nd confirmingthe awa

rd. Cof fe e Be an e ry

v . W W L.L. C. , 501 F. S u p p . 2d 955 (E.D. Mich. 2007) (“ Coffee Beane ry II

”). The court found: that WW failed to e stablish “evident par tiality ” on the pa

rt of arb itr a tor

a s a g ro un d to va c a te th e awa rd ; th a t th e pa

rt ie s w e re no t r e qu ir e d to e ng a g e in mediation prior to proc eedingto arbitration; that WW failed to e stablish f raud or perjury ; and that the Arbitrator did not manifestly disreg ard either fac ts or laws when she ig nored the finding s made by the Commiss ioner. Id. On J une 4, 2007, WW soug ht r econside ration of the district court’s opinion and or der, w hich the district court de nied. Cof fe e Be an e ry

v . W W L.L. C. , No. 06-10408, 2007 W L 2 335135 (E.D. Mich. Aug . 16, 2007) (“ Coffee Beane ry II I ”). WW ti mely

appea led. II. AN AL YSI S When review ing a

district court’s de cision t o confirm a n arbitration awar d, we r eview questions of law de novo and re view finding s of fac t f or clea r er ror. Merrill Lynch, Pierc e, Fe nner & Smith, Inc. v . Jaros , 7 0 F. 3 d 4 1 8 , 4 2 0 ( 6 t h C i r. 1 9 9 5 ) ( ci t i n g First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 947-48 (1995))
.

“ Th e F e de ra l A rb itr a tio n A c t ( ‘F AA ’) e xpre sse s a pr e su mpt ion

that arb itr a tio n a

wa rd s w ill be conf irmed.” Nationw ide Mut. Ins. Co. v. Hom e Ins. Co. , 429 F. 3 d 6 4 0 , 6 4 3 (6th Cir. 2005). “‘When c ourts are called on to r eview a n arbitrator’s dec ision, the review is very narr ow; [i t is] one of th e n ar rowe st standards of judicia l reviewin all of Americ an jurisprude nce.’ ” Id. (quoting Lat tim e r- Ste v e ns Co. v . U nit e d S te e lwo rk e rs , 913 F.2d 1166, 1169 (6th Cir. 1990)). Sec tion 10 ofNo. 07-1830

Cof fe e Be an e ry

, Lt d. v . W W , LLC

- 7 - the FA A sets forth the statutory g rounds to vaca

te an a rbitration awa

rd; namely : (1) where the awa rd was proc ured by corr

uption, fra

ud, or undue me ans; (2) w here an ar bitrator evide nced pa

rtiality or
corr uption; (3) wher e the a

rbitrator s were g uilty

of misconduct; and ( 4) whe re the arbitrators exceede d their powe r. 9 U.S.C. § 10(a)( 1)-( 4). Th is C ourt ’s a

bil ity to v a c a te an a

rb itr a tio n a

wa rd is al mos t e xclu siv e ly

lim ite d to the se g rounds, althoug h it may also vaca te an awa rd found to be in manife st disreg ard of the law. W

ilko v. Sw an , 3 4 6 U
. S
. 4 2 7 , 4 3 6 ( 1 9 5 3 ) ( o v e r r u l e d o no t h e r g r o u n d s b y Rodriguez de Quijas v. Shearson/Am. Expre

ss, Inc. , 490 U.S. 477 (1989)). In W ilko , the Sup re me Court im pl ici tly
rec og nized judicial revi ew based on “ manifest disreg ard” of the lawwhen it stated that “ the int e rp re ta tio ns of the law b y the arb itr a tor s in contrast to manifest disregard are not subject, in the fede ral c ourts, to judicial revie w for err or i n interpre tation.” 346 U.S. at 436 (e mphasis added) . To constitute a manifest disreg ard f or the law , “[a] mere er

ror in interpr etation or a

pplication of the law is insufficient. Rather, the decision must fly in the fac e of c lear ly

established leg al pre cede nt.” Jaros , 70 F.3d at 421. Thus, an ar bitrator ac ts with manifest disreg ard if “ (1) the a pplicable leg al pr inc ipl e is c le arl y

de fi ne d a nd no t su bje c t to re a so na

ble de bate ; and

(2 ) t he arb itr a to rs refu sed to heed that leg al principle.” Id. I n Hall Stre et Assocs., L.L.C

. v. Mattel , Inc. , 128 S.Ct . 1396 (2008), the Supre me Court signific antly reduc ed the ability of fede ral c ourts to vacate ar bitration awa

rds for r easons other

than those specif

ied in 9 U. S
. C
. § 1 0 , b ut it did not fore close fe dera l courts’ re view for an ar bitrator’s manifest disreg ard of

the law. The Court held that the FA A does not al low pr iv atepa rti es to supplement by

contra ct the F AA’s statutory g rounds for va catur

of an a rbitration awa

rd. Id. at 1400.No. 07-1830

Cof fe e Be an e ry

, Lt d. v . W W , LLC

- 8 - M o re o v er , t h e C o u rt re

j ec t edre ad i n g W

ilko to allow any

“g ener al re view for

an a rbitrator’ s leg al
err ors.” Id. a t 1 4 0 4
. H o w e v e r , w it h r e s p ect to the j u dicially -invoked, na rrow e x ception for

an
arb itr a tor ’s manif

e st d isr e g ard

of the law, the Court a c kn ow le dg e d tha t “ [m]ay be the te rm

‘m a nif e st disreg ard’ [i n W

ilko ] was meant to name a new g round for

rev i ew , ” t h o ug h it also sugg ested that
narr ower interpre tations of W

ilko wer e equa lly

plausible. Id. a t 14 04 . T he Court did no t c ome to
a conc lusion reg ardingthe pre cise mea ning of W ilko , h old ingon ly

that W ilko c ou ld not

be re a d to allow par ties to ex pand the sc ope of judicia l reviewby their own a g ree ment. Id. I t is worth noting that since W ilko , ever y fede ral appellate court has allowed for the va catur of an awa rd based on a

n arbitrator’s manife st disreg ard of the law. See J

aros, 70 F .3 d at 42 1; see also McCarthy v. Citigroup Global Mkts., Inc. , 46 3 F .3 d 87 , 91 (1 st Cir . 2 00 6) ; Hoeft v. M VL Group, Inc. , 3 43 F .3 d 5 7, 64 (2 d Ci r. 20 03 ); Dl uh os v . S tra sb e rg , 321 F .3 d 3 65 , 3 70 (3 rd Cir . 2 00 3) ; Three S Delaware Inc . v. DataQuick Info. Sys., Inc

. , 492 F .3 d 520 , 5 27 (4 th C ir . 2 00 7) ; Prestige Ford v. Ford Dealer Computer Se rvs., Inc

. , 324 F .3 d 391 , 3 95 -9 6 ( 5th Cir . 2 00 3) ; Halim v. Gre at Gatsby’s Auction Gallery, I

nc., 51 6 F. 3d 55 7, 56 3 ( 7th Cir . 2 00 8) ; Ma nio n v . Nag in, 39 2 F. 3d 29 4, 29 8 ( 8th Cir. 2004); Colli ns v. D. R

. Ho rton, Inc. , 5 05 F .3 d 8 74 , 8 79 (9 th C ir . 2 00 7) ; Dominion Video Sa te lli te , I nc . v . Ec ho sta r S

ate lli te L.L. C. , 430 F .3 d 126 9, 12 75 (1 0th Cir . 2 00 5) ; Scott v. Prudential Sec., I nc. , 141 F.3d 1007, 1017 (11th Cir. 1998). I n light of the Supreme Court’s he sitation to reject the “ manif

e st d isregard ” do c tr ine in a ll c ir c ums tanc e s, we be lie ve it w ou ld b e imp ru de nt t o c e a se
e mpl oyingsu c h a

un ive rs a lly

re c og nize d p ri nc ipl e . A c c or dingl y , th is C ourt wi ll f oll owits we llestablished pre cede nt here and continue to e mploy the “manif

est disreg ard” standard.No. 07-1830

Cof fe e Be an e ry

, Lt d. v . W W , LLC

- 9 - WW raises f

our arg uments in support of vac ating the Arbitrator’s aw ard. F irst, the Arbitrator
ov e rr e a c he d h e r a

uth or ity whe n sh e rul e d o n th e F ra nc his e Ac t c la ims . Se c on d, the fr anc his e ag ree ment was unc onscionable. Thir d, the Arbitrator had a conflict of inter est that rose to the le vel
o f b ia s . F o u rth , th e A r

b it r a to r ma n if e s tl y d is r e g a r d e d th e la w . Wi th r e g ar d to th is la s t c la im , WW contends that the Arbitrator ignor ed undisputed evidenc e that it was misled about cer tain promotions and contracts, that S haw made false r epre sentations about potential ea rning s, and that Shaw fa iled to disclose his prior felony conviction for g rand la

rce ny . We beg in and end with the very last argument, beca use we find it dispositive to the instant
case . Be cause Shaw fa iled to disclose his prior felony conviction for g rand larce ny in violation of the Fr anchise Act, Md. B us. Reg . Code Ann. § 14-216( 8)(i), w e conc lude that the Ar bitrator’s a

war d shows a manife st disreg ard of the law. First, the fac t that WW did not r aise this c laim be fore the district court until its mot ion for
rec onsideration does not de feat the claim on appe al. Although g ener ally this Court will not conside r
an ar g ument on appea l that was ra ised for the first time be low in a motion for rec onsideration, see Am. Meat Inst. v. Pridgeon , 724 F.2d 45, 47 (6th Cir. 1984), “[t] his waiver r ule is one of pr

udence

. . . and [is] not jurisdictional,” Of fic ial Com m. of U

ns e c ur e d Cr e ditor

s o f Co lor Tile , I nc . v . Co op e rs & Ly bran d, LLP , 322 F.3d 147, 159 (2d. Cir. 2003) (citation and quotation ma rks omitted). We have g ener ally considere d the following fac tors in determining whether we should exercise our discre tion to hear a pre viously

waived a rg ument: (1) whe ther the que st i o n is one of law or one that re quires some fac tual development; (2) whether the prope r re solution of the issue is c lear bey ond doubt; (3) whether the failure t o take up the issue w ill result in a miscarria g e of justice; a nd (4) the pa

rties’ rig htNo. 07-1830

Cof fe e Be an e ry

, Lt d. v . W W , LLC

- 10 - to have their issues considere d by both a district judg e and a n appellate court. Scottsdale Ins. Co.

v . F low e rs , 513 F.3d 546, 552-53 (6th Cir. 2 0 0 8 ) ( ci t i n g Friendly Farms v . Reliance Ins. Co. , 79 F .3 d 5 41 , 5 45 (6 th C ir . 1 99 6) ). B e c a us e it i s a pure qu e sti on

of law w he the r S ha

w’ s f a ilure to dis c los e his pr ior

g ra nd larc e ny c on vic tio n v iol ate d the F ra nc his e Ac t, an d be c a

us e the re are no fa c ts in d isp ute re g ard ingthi s is su e , w e be lie ve it ap pr op ri a te to co ns ide r thi s ar g ume nt ra ise d for the fi rs t time in W W’s moti on for r econside ration. Se e als o Mar re ro Pi c ha rd

o v . A sh c ro

ft , 374 F.3d 46, 54 (2d Cir. 2004). This is e specia lly true be cause the Coffe e B eane ry , the par ty supposedly

benef itting from the wa iver rule , failed to e ven mention the waiver issue on appea l. Fl owe rs , 513 F.3d at 553 (explaining that one of the important re asons for the wa iver rule is to ensure fa irness to the nonmoving litiga

nt). Se e als o Lexicon, Inc. v. Safeco Ins. Co. of Am., Inc. , 43 6 F .3 d 6 62 , 6 70 n. 6 ( 6th Cir. 2006) (finding that issue raised for the f irst time in defenda

nt’s response to plaintiff’s re ply brief for summary

judgme nt was not waive d partly beca use both parties f

ully briefe d the issue on appe al). The Ar bitrator found that t h e Coffee Be aner y “wa s not require d to disclose to [ WW ] t hat Kevin Shaw ha s a fe lony conviction for g rand l ar ce n y as it is not the ty

pe of f elony conviction subject to disclosure.” We disag ree . Under the Franc hise Act, an offe ring prospec tus must include “whe ther a

ny person identifie d in the prospec tus has been c onvicted of a felony . . . if the fe lony

or civil action involved fraud, embezz lement, fraudulent conversion, or misappropriation of proper ty .” Md. Bus. Reg . Code Ann. § 14-216( 8)(i). The lang uag e of this pr o v i s i o n could not be any more
c le ar: a ll p e rs on s identif

ie d in the of fe ri ngpr os pe c tus mus t di sc los e any pr ior fe lony so lon g a s it involves some “misappropr iation of property ,” which by definition would include a c onviction for g rand la rce ny , reg ardle ss of the conduc t givingrise to the convic tion. See, e .g. , Benton v. Mary land ,No. 07-1830

Cof fe e Be an e ry

, Lt d. v . W W , LLC

- 11 - 3 9 5 U. S
. 7 8 4 , 8 0 3 (1 9 6 9 ) ( ci t i n g Fl e tc he r v . S tate , 189 A. 2d 64 1 (19 63 )) (“ L arc e ny in M ary land is a common-la

w cr ime, consisting of

the taking and car

rying awa y of the persona l property

of anothe r wi th i nte nt t o de pr ive the ow ne r o f t he pr op e rt

y pe rm ane ntl y .” ); Way

ne R. L a F a ve , 3 Sub st. Cr im. L . § 19.2 (2007) ( “L arc eny at common law may be defined as the (1) trespassor y (2) taking a

nd (3)
car rying a way of the (4) persona l property (5) of another (6) with intent to steal it.”). Th e re su lt i s th a t th e Cof

fe e B e ane ry and Sha

w may be c ivi lly lia

ble to WW. Th e F ra

nc his e Ac t st a te s, in n o unc e rt a in te rm s, that“ [a] pe rs on wh o sel ls or g ra nts a fr anc his e is c ivi lly

lia ble to the pe rs on

wh o b uy s o r i s g ra

nte d a fr anc his e if

the pe rs on

. . . b y me ans of
. . . any omi ssi on to s ta te a mater ial fac t nece ssary

in order to make the statements made , in light of the circ umstances unde r which they

are made, not misleading , if the per son who buy s or is g rante d a fra nchise doe s not know of the . . . omission.” Md. Bus. Reg
. Code Ann. § 14-227(a)(1) (ii). Thus, the Ar bitrator’s c ontrary interpre tation— that Shaw was not re quired to disclose this felony in the offe ring prospec tus—“fl[ies] in the fac e of c lear ly established leg al pre cede nt.” Jaros , 70 F.3d at 421. Moreove r, this is not the ty pe of case in w hich the g overning law has not bee n broug ht to the attention of the Ar

bitrator. S

e e id. I n s t ea d , t he re cord indicates that counsel f or both parties g ener ally ag ree d on the applicable law during arbitration (and still do on appeal). Indeed, the Coffee Be aner y conce des that it failed to disclose Shaw’s prior felony conviction, and argues onl y that it was not the ty pe of c onviction subject to disclosure under the Fr anchise Act. T r u e , w e c a n n o t s ay t h a t t h e A r

b i t r a t o r ’ s c o n c l u s i o nt h a t“ t h e n o n - d i s c l o s u r e [ o f t h e f e l o n y] did not cause da

mag e to Claimants” constitutes a re fusal to hee d a cle arly d ef ined leg al principle. B ut w e int e rp re t th is f

ind inga s r e la tin g to c omp e ns a tor y dama g e s a llo we d fo r un de r the F ra nc his eNo. 07-1830

Cof fe e Be an e ry

, Lt d. v . W W , LLC

- 12 - Act, see Md. Bus. Reg . Code Ann. § 14-227( b) (“ The pe rson who buy s or is g rante d a fr anchise may sue under this section to recove r dama g es sustained by the g rant of the fra

nchise.” ), and not re lating to the questi on of whether W W is entitled to a re scission of the fra nchise a g ree ment, see id. § 14- 227(c) (“Acourt may

order the per son who sells or g rants a f ranc hise to: (1) re scind the fr anchise ; and (2) make r estitution t o the per son who buy s or is g rante d a fr anchise .”). B eca use the Ar

bitrator
e x p r e s s l y c h o s e n o t t o f

o l l o w c l e ar l y e s t a

b l i s h e d l aw r e g ar d i n g t h e d i s c l o s u r e o f S h aw ’ s p r i o r

f e l o n y, we be lieve the issue of

whether WW is entitled to a resc ission is more a ppropriate ly

addre ssed when WW pursues its civil remedie s available under the Fr anchise Act in a c ourt of law. Finally , the purpose of

this provision o f t he F ranc hise Act is to allow par ties to make informed de cisions reg ard i n g wh ether to enter into a f ranc hise ag ree ment and with whom they choose to do business. Be cause WW was de prived of a mandatory , statutorily

require d notice, prior into entering into the franc hise ag ree ment, and did not have an opportuni ty to avoid being subjected to the conseque nces of

having enter ed int o the contract (including the requireme nt to arbitrate suc h claims), WW s hould not be bound by the ar bitration provisi ons of the ag ree ment which it was fra udulently induced into sig ning in violation of the F ranc hise Act. V. CO NC LU SION For those rea sons, we RE VE RSE the jud gm en t o f the district cour t and VA CA TE the A r b it r a to r ’ s aw ar d
. B e c a

u s e th e Co f

f e e B e an e r y f a il e d to d is c lo s e Sh aw ’ s f

e lo n y c o n v ic ti o n , WW need not r esort to arbitration to vindicate its statutory rig hts but may

instead see k appropr iate re lief in a cour t of law.No. 07-1830

Cof fe e Be an e ry

, Lt d. v . W W , LLC

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