Commercial Banking, Collections, and Bankruptcy

Dist. Ct. did not err in denying defendant-franchisor’s motion to stay several related lawsuits pending arbitration in actions seeking declaration that plaintiffs-franchisees were not required under terms of franchise agreements to participate in defendant’s corporate pricing and promotions of menu items offered in their franchise restaurants, where defendant argued that plaintiffs’ disputes were covered by arbitration policy that was adopted for all franchisees after plaintiffs had filed instant lawsuits. While each franchisee’s agreement contained right of defendant to institute non-binding arbitration, arbitration clause in said agreements was illusory because defendant was free to exercise arbitration clause at its whim. Ct also found that arbitration clause in each agreement was too vague and indefinite to be enforceable, where defendant could decide at its sole discretion issues regarding whether and how claims against it would be arbitrated.

Magistrate Judge did not err in granting defendant’s motion for summary judgment in plaintiff’s action alleging that defendant breached contract by misrepresenting status of three out of 19 properties identified as collateral for loan portfolio purchased by plaintiff. Terms of contract limited plaintiff’s remedy of any breach to “repurchase price,” and plaintiff could not seek any damages under instant record, where plaintiff had already sold other collateral properties and obtained proceeds that exceeded price plaintiff had paid for entire loan portfolio. Ct. rejected plaintiff’s claim that remedies’ limitation clause contained in contract failed of its essential essence because it failed to provide plaintiff with any remedy for defendant’s misrepresentation.

Dist. Ct. did not err in dismissing five of seven counts that plaintiff-Trustee for bankrupt holding company filed against defendants-three directors of banks controlled by holding company, alleging that defendants violated certain fiduciary duties by failing to implement financial controls that would have protected holding company from defendants’ financial errors in their roles as directors of said banks. Under 12 USC section 1821(d)(2)(A)(i), said action in these counts belonged to FDIC, which was in process of collecting banks’ assets and paying their debts, since FDIC, as opposed to Trustee, owned any legal claim that depended on actions taken by defendants in their roles as banks’ directors. However, Dist. Ct. erred in dismissing remaining two counts, since those counts pertained to defendants’ conduct directed at holding company, and thus Trustee could properly pursue said claims on behalf of holding company.