Lawyers, other representatives, expert(s), tribunal’s secretary

    Final Award

    We, THE UNDERSIGNED PANEL OF ARBITRATORS, having been duly appointed in accordance with the provisions associated with resolution of disputes in the Franchise Renewal Agreements and Distribution Agreements ("Franchise Documents") entered into by Claimant General Nutrition Corporation ("GNC") and Respondent Vitasalud, S.A. ("Vitasalud") (the titles and dates of the Franchise Documents are set forth in paragraphs 3-7 of the Demand for Arbitration, which are incorporated here by reference); having been duly sworn; and having conducted an evidentiary hearing on December 18, 2015, in accordance with the Commercial Arbitration Rules of the American Arbitration Association ("AAA"), do hereby issue this Award.
    At the evidentiary hearing, Claimant was represented by attorneys James Hankle of Sherrard, German & Kelly, P.C., and Gary Kelly of GNC. Respondent, after receiving notice of the hearing,1 did not appear. This Panel finds that service was perfected upon Vitasalud and that, accordingly, the Panel was obligated to proceed to undertake the evidentiary hearing in accordance with the dispute resolution clauses of the Franchise Documents.
    Claim. In its Demand for Arbitration, GNC sought $185,543.94 (all dollar amounts are U.S.), plus interest, attorneys’ fees, and reimbursement for AAA administrative costs. GNC also sought injunctive relief prohibiting actions by Vitasalud that would interfere with its successor replacement as GNC's franchisee in the Dominican Republic.
    Hearing. The December 18, 2015 hearing began at approximately 9:00 am and lasted until approximately 3:00pm. GNC called five witnesses and introduced 32 exhibits.
    Findings of Fact. Based on the evidence, the Panel finds as follows:
    Vitasalud had been GNC’s Franchisee for the Dominican Republic for a number of years when, in 2011, Vitasalud took issue with GNC’s interpretation of the tax withholding provisions of the parties’ Franchise Documents. See Exhibits 6-12, 15. Rather than raise this dispute through the dispute resolution process required under the Franchise Documents, i.e. by arbitration in Pittsburgh, PA (see Exhibits 1-6), Vitasalud began a pattern of non-compliance with its contractual obligations to GNC. Those breaches on the part of Vitasalud included:

    • Operating certain stores for which Vitasalud had failed to sign and return franchise agreements.

    • Operating certain stores for which the existing franchise term had expired without having executed renewal agreements permitting the continued operations of such stores.

    • Relocating stores without signing and returning relocation addenda.

    • Operating unapproved stores.

    Carrying hundreds of products that had not been approved or had been expressly disapproved by GNC.

    Using GNC proprietary marks on unapproved promotional materials.

    See Exhibits 17 and 18.

    On April 4, 2013, GNC sent Vitasalud a default notice letter (Exhibit 18) delineating the above areas of non-compliance, and giving Vitasalud 30 days to cure them. Thereafter, on May 20, 2013, GNC sent Vitasalud a termination letter for failure to correct the areas of non-compliance (Exhibit 20). On June 7, 2013, Vitasalud sent GNC a letter (Exhibit 26) explaining that it had corrected the deficiencies, assuring that it would comply with its obligations going forward, and asking to be reinstated.
    On June 17, 2013, GNC sent Vitasalud a letter (Exhibit 27) conditionally agreeing to reinstate Vitasalud if it agreed to the letter’s six terms and conditions within ten days. Those terms and conditions were limited to express acknowledgements of Vitasalud s responsibilities to comply with its contractual obligations, did not add additional requirements beyond those set forth in the Franchise Documents applicable to Vitasalud at the time, and were not unique to Vitasalud. At Vitasalud’s request, the deadline for its acceptance of the conditional reinstatement was extended until July 8, 2013 (Exhibit 28). Vitasalud never signed the conditional reinstatement letter. Accordingly, GNC sent a final termination letter on August 30, 2013 (Exhibit 30).
    At the time of Vitasalud’s termination, it owed GNC $185,543.94 (see Exhibit 31, p. 3). The Franchise Documents provide for interest on late payment amounts "calculated on a daily basis, at a rate of one and one-half percent (1½%) per month" (see, e.g., Exhibit 1 Section 4.E.).
    The Franchise Documents (Exhibits 1-6) also provide:

    In any litigation or arbitration between Franchisor and Franchisee relating to the Franchised Business or to this Agreement, the prevailing party shall be entitled to recover its reasonable costs and expenses, including attorneys’, arbitrators’, and related fees and court costs, from the prevailing party.

    Award. Vitasalud is contractually obligated to pay GNC $185,543.94, plus simple interest calculated on a daily basis, at a rate of one and one-half percent (1½%) per month. As of February 29, 2016, interest would amount to $101,623.62, and that interest will continue to accrue after that date at the same rate (1½% per month) until the award is paid. In addition, Vitasalud is further contractually obligated to pay GNC’s attorneys’ fees in the amount of $31,108.99.2 This award of attorneys’ fees and costs shall accrue interest at the rate of 1½% per month until paid in full, as well, should Vitasalud not pay same on or before February 29, 2016.
    GNC has also incurred legal fees and costs in connection with two legal actions commenced by Vitasalud in the Dominican Republic. The Panel concludes that the fee-shifting provision in the Franchise Documents is broad enough to include recovery by GNC of the attorneys’ fees it incurred in connection with the legal proceedings in the Dominican Republic because those legal proceedings are "related to the Franchised Business or the parties’ Agreements." However, at the time of the hearing, it was not established that the legal proceedings in the Dominican Republic had finally concluded and, as a result, the "prevailing party" cannot yet be conclusively determined. In one of those cases, GNC had prevailed at the trial and initial appellate levels, but it was uncertain whether Vitasalud still had the right to initiate an appeal and, if so, whether it would file an appeal subsequent to the hearing. In the other Dominican Republic case, a ruling had not yet been issued. Accordingly, the Panel cannot conclude that this issue is ripe for disposition at this time. Once the Dominican cases (including appeal rights) have finally concluded, the Panel opines that the prevailing party shall be entitled to recover its reasonable costs and expenses in connection with the Dominican Republic litigation mentioned above.
    GNC also requested that the award include injunctive relief associated with GNC’s claim that Vitasalud’s threatened conduct vis-à-vis its successor, replacement franchisee. The Panel was not presented with sufficient evidence to reach a conclusion that the standards for injunctive relief have been met. The evidence of possible interference was limited to a second-hand report of an alleged comment by Vitasalud’s President over a lunch with a principal of the replacement franchisee. Accordingly, this claim is denied without prejudice, and no relief is granted.
    For the reasons stated above, we award as follows:

    1. By on or before February 29, 2016, Vitasalud S.A. shall pay to General Nutrition Corporation the sum of $318,276.55 (THREE HUNDRED AND EIGHTEEN THOUSAND TWO HUNDRED AND SEVENTY SIX AND 55/100 UNITED STATES DOLLARS) for damages, attorneys’ fees and costs as a result of its contractual breaches.

    2. The administrative fees of the International Centre for Dispute Resolution (ICDR) totaling $7,500.00 and the compensation of the Arbitrators totaling $13,252.04shall be borne by Vitasalud S.A.. Therefore, Vitasalud S.A. shall reimburse General Nutrition Corporation the sum of $20,752.04 representing that portion of said fees and expenses previously incurred by GNC.

    3. This Award is in full settlement of all claims submitted to this Panel. All claims not expressly granted herein are hereby denied.

    This Final Award may be executed in any number of counterparts, each of which shall be deemed an original, and all of which shall constitute together one and the same instrument.

    IT IS SO ORDERED this 29th day of January, 2016.

    We hereby certify that, for the purposes of Article I of the New York Convention of 1958, on the Recognition and Enforcement of Foreign Arbitral Awards, this Final Award was made in Pittsburgh, Pennsylvania, USA.
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