SAN ANTONIO (Legal Newsline) – Pepperidge Farm has asked a federal court to dismiss a potentially $1 million case filed by a Bexar County, Texas distributor and to force him to arbitrate outside of court after the company decided in February to buy back the distributor's "club rights."
"This is an unusual case, as both parties agree that it belongs in arbitration," Pepperidge Farm said in its motion filed May 18 in U.S. District Court for Texas' Western District, San Antonio Division. "In fact, both parties are contemporaneously moving forward under the applicable arbitration provision - they have selected their respective arbitrators who are now jointly selecting a third.
"For reasons unknown to Pepperidge Farm, however, plaintiff filed this action in court (initially in the 150th Judicial District of Texas before Pepperidge Farm removed it to this court) and asks this court to dictate the schedule and procedure of the arbitration. But the law is clear that those decisions are for arbitrators, not the court."
The soon-to-be-former Pepperidge Farm distributor, Phillip M. Hewson, filed his case April 5 in Bexar County's 150th Judicial District Court, seeking between $200,000 and $1 million in monetary relief, after Pepperidge Farm notified him in February of its intent to buy back his territory in north central and northwest Bexar County into Comal and Kendall counties.
Pepperidge Farm notified Hewson in writing that it would purchase the "club rights" within Hewson's distributorship, with club rights meaning "Hewson's right to sell Pepperidge Farm food products to retail stores" within Hewson's territory, Hewson's 18-page complaint said.
Hewson and Pepperidge Farms attempted to negotiate but could not agree on a price and Hewson's complaint soon followed.
Hewson asked the 150th Judicial District Court to order Pepperidge Farm into arbitration and that, after arbitration, the court enter a judgment against Pepperidge Farm "on the arbitration award in the amount of fair market value of Hewson's right to service club stores, as determined by the arbitrators, plus an additional 25 percent of the fair market value," the complaint said.
Hewson also sought to recover attorneys’ fees in the case, which was filed by Paul T. Curl, Herbert S. Hill and Danielle N. Rushing of the San Antonio law firm Curl Stahl Geis.
Pepperidge Farm's counsel is T. Cullen Wallace, based in Houston, and Paul C. Evans, based in Philadelphia, from the firm Morgan, Lewis & Brockius.
The case is assigned to U.S. District Judge Orlando L. Garcia.
Hewson has "refused multiple requests" to dismiss his case, Pepperidge Farm said in its motion.
"Accordingly, and for the reasons set forth herein, Pepperidge Farm respectfully submits that this court should dismiss this action and allow the arbitrators to set the schedule and procedures of the arbitration," the motion said.
Dismissing the case is appropriate, notwithstanding Hewson's request for a court judgment confirming an arbitrators', along with fees, costs and prejudgment and post-judgment interest, according to the motion.
"Those requests are premature given that an arbitration proceeding has just begun and there is no final award to enforce, " the motion said.