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Stockade Franchising, LP v. Kelly Restaurant Group, LLC

United States District Court, W.D. Texas, Austin Division

October 24, 2019

STOCKADE FRANCHISING, LP, Plaintiff
v.
KELLY RESTRAURANT GROUP, LLC, KELLY INVESTMENT GROUP, LLC, MICHAEL KELLY, AND GALE PREMER, Defendants

          REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

          SUSAN HIGHTOWER UNITED STATES MAGISTRATE JUDGE

         TO: THE HONORABLE LEE YEAKEL UNITED STATES DISTRICT JUDGE

         Before this Court are Stockade's Opposed Motion for Award of Attorneys' Fees and Supporting Memorandum, filed June 6, 2019 (Dkt. No. 22); Defendant Gal Premer's Opposition to Plaintiff's Motion for Attorneys' Fees, filed June 20, 2019 (Dkt. No. 24); Kelly Defendants' Opposition to Plaintiff's Motion for Award of Attorneys' Fees, filed June 20, 2019 (Dkt. No. 25); and Stockade's Reply, filed June 27, 2019 (Dkt. No. 26).

         On October 16, 2019, the District Court referred the above motion to the undersigned Magistrate Judge for Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1)(B), Federal Rule of Civil Procedure 72, and Rule 1(d) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas.

         I. GENERAL BACKGROUND

         On June 4, 2014, Stockade Franchising, LP (“Stockade”), as franchisor, and Kelly Restaurant Group, LLC (“KRG”), as franchisee, entered into fifteen franchise agreements for certain restaurant concepts owned by Stockade. Dkt. No. 1-1 (“Franchise Agreements”). In connection with the Franchise Agreements, Kelly Investment Group, LLC (“KIG”), Michael Kelly (“Kelly”), and Gale Premer (“Premer”) executed Guaranties guaranteeing certain obligations of KRG. On February 10, 2017, Stockade terminated the Franchising Agreements with KRG for failure to pay $484, 456.00 due under the agreements.

         All of the Franchising Agreements contained a mandatory arbitration clause requiring the Parties to arbitrate all disputes arising out of the Agreements. Dkt. 1-1 at § 21.01 (“Arbitration Clause”). On May 20, 2017, pursuant to the Arbitration Clause, Stockade filed a Demand for Arbitration with the American Arbitration Association against KRG, KIG, Kelly, and Premer (“Defendants”) for breaches of the Franchising Agreements and Guaranties and related claims. Defendants filed counterclaims for breach of contract, defamation, and tortious interference.

         On July 5, 2018, the Arbitrator issued his Interim Partial Award finding that Defendants breached the Franchising Agreements and awarded Stockade $484, 456.00 for unpaid royalties and fees due under the franchise, and $137, 812.63 for damages under the Lanham Act and Texas Trademark Act. Dkt. No. 1-2 at p. 1. The Arbitrator denied Stockade's claim for future lost profits and Defendants' counterclaims. Id. at p. 1-2. The Arbitrator noted that “the issue of attorney fees and allocation of the expenses of this arbitration have been bifurcated and will be taken up in a separate hearing and included in the Final Award.” Id. at p. 2.

         On October 1, 2018, the Arbitrator issued his Final Award awarding Stockade the amounts identified in the Interim Partial Award as well as $312, 911.36 of the $549, 261.57 requested by Stockade in attorneys' fees and expenses. Dkt. No. 1-3. . The Arbitrator stated that “[t]his Award is intended to resolve all of the claims, counterclaims, and issues presented in this arbitration. All claims for relief sought by any of the parties that are not expressly awarded are hereby denied.” Id. at p. 4.

         On October 24, 2018, Stockade Franchising, LP (“Stockade”) filed this lawsuit, pursuant to 9 U.S.C. § 9, to confirm the Arbitrator's Final Award against Defendants. On May 9, 2019, the District Court entered a Final Judgment in this case stating the following:

Stockade is entitled to judgment confirming the October 1, 2018 final arbitration award entered in American Arbitration Association No. 01-17-0003-1350 (“Final Award”), and attached to this Final Judgment as Exhibit A.
Stockade is entitled to judgment against Defendants Kelly Restaurant Group, LLC; Kelly Investment Group, LLC; Michael Kelly; and Gale Premer on the terms set forth in the Final Award. The terms of the Final Award are incorporated into this Final Judgment.

Dkt. No. 20 at p. 1.

         On June 6, 2019, Stockade filed the instant Motion for Attorneys' Fees requesting $38, 820.61 in attorneys' fees and costs it has incurred in seeking confirmation of the arbitration award in this case. The ...


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