Athlete’s Foot Wins $2 Million Arbitration

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Breach of Contract

Franchisee Blair Taylor has won roughly $2 million in an arbitration against The Athlete’s Foot, the largest arbitration award in the athletic footwear company’s franchising history. Mr. Taylor and his company, C.O.I. Corp., were formerly the largest African-American franchisees in The Athlete’s Foot system, with an agreement to develop 82 stores throughout California.

C.O.I., entered into an area developer agreement with The Athlete’s Foot in 1997. Under the agreement, Mr. Taylor received exclusive franchise development rights for the state of California. However, according to Mr. Taylor, his attempts at development were stymied by the company’s refusal to ship inventory and train personnel, among other hindering tactics, leading him to file an action with the American Arbitration Association in 1999. Another African-American franchisee also testified to similar problems.

Mr. Taylor’s action, which included numerous violations of the charges of breach of contract, fraud and California Franchise Investment Law and the California Unfair Trade Practices Act, was heard in Pittsburgh, location of The Athlete’s Foot’s law Firm, Buchanan & Ingersoll. Along with an award of almost $1.6 million on the breach-of-contract claim, Mr. Taylor received interest dating to 1997, resulting in a total award of about $2 million.

Mr. Taylor additionally has a separate, far larger lawsuit against The Athlete’s Foot pending in federal court in the Northern District of Georgia, seeking damages of around $15 million. This action deals with the operating agreements for Mr. Taylor’s five franchise stores. The allegations in this suit include fraud, negligent misrepresentation, quantum meruit and violations of the California Unfair Trade Practices Act. Although the case will be heard in Georgia, the court has ruled that the entire matter will be subject to California law.

Mr. Taylor’s lawyer, Birmingham, Mich.-based Norman Yatooma, also handled the case of La-Van Hawkins, at one time the largest African-American Burger King franchisee, who settled his $1.9 million case against the hamburger giant for an undisclosed amount last year. According to Mr. Yatooma, the Athlete’s Foot case is a “significant victory, not only for Blair [Taylor], but for all franchisees that have been victims of a franchisor’s mis-handling of its gross imbalance of power.” Mr. Yatooma’s co-counsel, Peter Lagarias, is a member of this newsletter’s board of editors. Taylor v. Athlete’s Foot Marketing Associates Inc., American Arbitration Association, Case No. 55-114-00144-00-DST (March 14).

Based in Atlanta, The Athlete’s Foot has more than 700 stores worldwide.

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