Opinion
1:21-cv-07362-JSR
12-03-2021
RUSSIAN SUBWAY FRANCHISING COMPANY, LLC, a Nevada Limited Liability Company, Claimant, v. SUBWAY INTERNATIONAL, B.V., a Netherlands Limited Liability Company, Respondent.
James M. Gansinger, Esq. Eric Troff, Esq. Attorneys for Claimant Russia Subway Franchising Company, LLC
AMERICAN ARBITRATION ASSOCIATION
James M. Gansinger, Esq. Eric Troff, Esq. Attorneys for Claimant Russia Subway Franchising Company, LLC
ARBITRATION DEMAND AND CLAIM FOR: 1. DECLARATORY RELIEF; 2. BREACH OF CONTRACT-SPECIFIC PERFORMANCE; AND 3. BREACH OF CONTRACT-DAMAGES
Claimant Subway Russia Franchising Company, LLC, a Nevada limited liability company, as and for its Demand and Claim for Arbitration alleges as follows.
I.
THE PARTIES
1. Claimant Subway Russia Franchising Company, LLC (hereafter “Subway Russia”) is a Nevada limited liability company duly organized under the laws of the state of Nevada, with its principal place of business in Zephyr Cove, Nevada.
2. Respondent Subway International B.V. (hereafter “SIBV”) is a Netherlands limited liability company with its principal place of business in Amsterdam, the Netherlands. SIBV is owned and controlled, through a series of affiliates, by Doctor's Associates Inc., a Florida corporation, which is a closely held company owned by one individual and, on information and belief, a family Trust of Fredrick Deluca, deceased.
3. On October 18, 1993 Subway Russia's predecessor in interest, AmEur Holdings, Inc. (“AmEur”), a Nevada corporation, acting as general partner on behalf of EastWest Invest, LLP, a Nevada limited liability partnership, entered into a Master Franchise Agreement (hereafter the “1993 MFA”) with SIBV's predecessor, Subway Partners C.V., a Netherlands Antilles limited partnership (hereafter “Subway C.V.”), by which Subway C.V. granted AmEur the right, as a master franchisee, to enter into franchise agreements with persons or entities wishing to open and operate Subway Sandwich Shops in Russia. (A true and accurate copy of the 1993 MFA is submitted separately.)
4. AmEur subsequently assigned the 1993 MFA, with the consent of Subway C.V., to East West Investment Limited Partnership, a Nevada limited partnership (hereafter “East West.”)
5. East West then assigned the 1993 MFA, with the consent of Subway C.V., to Claimant Subway Russia, effective September 1, 1994.
6. On January 1, 2000, Subway C.V. assigned the 1993 MFA to Respondent SIBV.
II.
THE ARBITRATION CLAUSE
7. Paragraph 23 of the MFA, as modified by the First and Second Renewals (described below), provides that all claims or controversies arising out of the MFA are to be settled by binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Paragraph 23 further provides that if either party seeks an oral hearing, the hearing is to be held in New York, New York. Claimant seeks an oral hearing. (A true and accurate copy of the Arbitration Clause is being filed as part of this filing.)
III.
CHOICE OF LAW
8. Under paragraph 24 of the MFA, as modified by the First and Second Renewals, New York law is to apply.
IV.
THE HISTORY OF CLAIMANT'S DEVELOPMENT SUCCESS IN RUSSIA
9. At the time of the 1993 MFA, Subway C.V. was basically a newcomer to the international fast food market having previously focused its development in the United States and Canada. By the 1980's, many of Subway's U.S. competitors had recognized that future growth was likely to come from international opportunities. As such, these competitors began to develop their brands in foreign markets.
10. Subway did not begin aggressive development of its system internationally until the late 1980's and early 1990's at which point it began to sell master franchises for certain overseas territories.
11. Claimant Subway Russia opened its first Subway restaurant in Russia in December, 1994. Pursuant to the terms of the MFA, Claimant was required to own and operate a Subway restaurant for six months before it was permitted to begin franchising operations. That flagship restaurant, on Nevsky Prospect in St. Petersburg, quickly became the highest sales volume Subway restaurant in the world.
12. On June 4, 1995 a Russian mafia group known as the Tombovski mafia physically seized possession of the Nevsky Prospect store with armed men who physically assaulted the American head of Claimant's Russian operations and threatened to kill him and his wife if they ever set foot again in the Nevsky Prospect restaurant.
13. The mafia takeover of Subway Russia's flagship store led to an eight-year legal and political struggle to regain its possession, and to attempt to determine if the rule of law had any application in the new post-Soviet Russia. This was, however, not the only obstacle Claimant had to face.
14. Beginning in the mid-1990's, Subway's founder, Fred Deluca, began a strategy of eliminating the master franchise agreements that Subway had entered into in numerous markets internationally. In or about 1999, while Claimant was still engaged in its efforts to regain possession of its flagship restaurant in Russia, Subway C.V., in furtherance of this strategy, attempted to terminate the 1993 MFA notwithstanding the existence of a force majeure clause contained in the 1993 MFA. Arbitration proceedings to terminate the agreement were commenced that were vigorously defended by Subway Russia and ultimately dismissed by Subway C.V.
15. In 2003, Claimant regained possession of its Nevsky Prospect restaurant after arbitration proceedings in Stockholm, legal proceedings in Russia and political intervention by both the U.S. government and the Russian Federation government. The restaurant reopened in April, 2004. At that time Subway Russia had approximately five Subway restaurants in Russia.
16. From 2004, Subway Russia successfully grew its business in Russia. Subway Russia grew the number of its restaurants in Russia by 104% in 2010; 96% in 2011; and over 60% in 2012. Claimant opened 220 new Subway restaurants in 2012 and 210 in 2013; a restaurant opening rate of 2 restaurants every 3 days of the year. Unfortunately, intervening events over which Claimant had no control dramatically altered this growth.
V.
THE GEOPOLITICAL LANDSCAPE IN RUSSIA
17. In March, 2014, the Russia Federation annexed Crimea and instigated a war in the Donbas region of Ukraine. At the time of the Crimea annexation Claimant's restaurant count in Russia had grown to over 700 restaurants.
18. In response to the Crimea annexation and the war in Eastern Ukraine, the United States and other Western powers initiated a series of escalating economic sanctions that remain in place today. In response to the Western sanctions, the Russian Federation launched counter-sanctions against the U.S. and other Western countries which include, among other things, blanket prohibitions against the import of Western agricultural products, almost all of which are essential to Subway's core menu.
19. The Western sanctions have had a severe negative effect on the Russian economy. Consumer confidence (as well as real wages and spending outside the home) critical to consumer spending, dropped precipitously after the commencement of Western sanctions and remains critically low.
20. As a consequence of the sanctions, the decline in consumer confidence and the resulting economic malaise, sales of Subway franchises in Russia went from 210 in 2013 to 122 in 2014, 53 in 2015, 24 in 2016, 23 in 2017, 23 in 2018 and 9 in 2019. Claimant's restaurant count dropped from over 700 in 2014 to 506 in March, 2020, at the beginning of the COVID 19 pandemic, as restaurants closed in the face of declining sales driven by economic uncertainty and consumer fears. As a consequence of the Covid 19 pandemic, Claimant's restaurant count has now dropped to 466 as of the date of this Arbitration Demand.
21. In a franchise-based system, franchisees must have confidence in the value of their respective investments, and that is not the case in Russia today, even pre-COVID 19. With the decline in the economy the Russian ruble has declined in value against the U.S. dollar from approximately 30 per 1 USD in 2014 to approximately 77.46 as of October 8, 2020. This currency decline has caused Claimant's royalty income in US dollars to be cut by more than half since 2014. Notwithstanding the significant financial impact, Claimant has maintained its level of investment in Russia, with steady wage and salary increases for its Russian staff, and particularly its franchise sales team, who have seen their commission income drop to almost nothing in the past several years.
22. Even with the substantial decline in sales and restaurant count, Claimant's business has a conservative market valuation of more than $60 million at the present time. This entire value will be forfeited if the MFA, as modified, is not renewed or if Respondent terminates it.
VI.
RESPONDENT'S ATTEMPTS TO THWART CLAIMANT'S RIGHT TO RENEW ITS MASTER FRANCHISE AGREEMENT
23. Against the above background, Respondent is now attempting to block Claimant's right to continue operating in Russia by denying Claimant's right to renew its master franchise agreement and by declaring Claimant in default. The history of the Parties' contractual relationship follows.
24. The 1993 MFA was for an initial term of twenty (20) years, with an unlimited number of subsequent two-year renewals on the same terms and conditions as the 1993 MFA. The unlimited number of two-year renewal terms was a heavily negotiated term of the agreement. Because Claimant was proposing to develop fast-food franchising in Russia, a highly risky and undeveloped market, Claimant sought and obtained an agreement with a sufficiently lengthy term that would provide Claimant with an opportunity to sell its business if it was successful in developing that business. Claimant alleges, on information and belief, that this contract term granting the right to an unlimited number of contract renewals was unique in the history of Respondent SIBV and its predecessors.
25. In 2013, at the end of the initial 20-year term, the 1993 MFA was renewed for the first of the unlimited number of two-year renewals. Claimant and Respondent agreed to modify certain provisions in the 1993 MFA to take into consideration changed circumstances and technological advances that had occurred during the initial term of the 1993 MFA. The parties executed the 2013 MFA, which was referred to as the First Renewal. (A true and accurate copy of the First Renewal is also being submitted separately.)
26. In 2015, at the end of the First Renewal period, the parties executed an “Amendment To Master Franchise Agreement, as modified by the First Renewal (hereafter the “2015 Amendment” or “Second Renewal”.) In the 2015 Amendment, the parties agreed that the second renewal period would be for a five-year term, rather than for the second of the unlimited number of two-year terms. The parties agreed that negotiating renewal of the MFA every two years was inefficient and a poor use of the parties' resources. In the 2015 Amendment, however, the parties did not agree to change the length of any of the subsequent renewal terms from the two-year terms specified in the 1993 MFA, as modified by the First Renewal. Consequently, any further renewals after the 2015 Second Renewal would be for two-year terms unless the parties agreed otherwise. (A true and accurate copy of the Second Renewal is also being submitted separately.)
27. The 2015 renewal extended the MFA to October 19, 2020. Because the first two MFA renewals required negotiations over an extended period of time, the negotiations for the Third Renewal began in March, 2019. The first formal meeting to discuss the terms and conditions of the third renewal took place in Dallas on March 12, 2019, and was attended by the parties' representatives and counsel. Further discussions led to agreement on all but three issues prior to the next formal meeting of the parties' representatives and counsel, which took place in Toronto, Canada in August, 2019. Written proposals were exchanged by the parties subsequent to the August meeting that led to a December, 2019 letter from Respondent which stated, in pertinent part:
1. We agree to delete the “McDonald's” clause.
2. We agree that the development schedule should be re-evaluated after several years to determine if it still makes sense given market and geopolitical conditions. However, we propose that the schedule be reviewed every three years, rather than every five.
3. We agree that upon review, if the parties cannot come to an agreement about the subsequent development schedule, the parties will arbitrate in New York wherein the only relief sought at that time will be a determination of a new development schedule (assuming there are no other contract defaults at that time).
4. We agree to a penalty of $2500 per restaurant that is under the development schedule. We propose that a bonus of $2500 per restaurant over the development schedule be made available to the Master Franchisee as well.”
28. The so-called “McDonald's Clause, ” referred to in paragraph 26 above, provided, in pertinent part:
“Master Franchisee must develop in the territory to equal the number of units of the fast food chains with the most units in the Territory….” (See, 2013 First Renewal, Section 7(A).)
29. Upon receipt of the December 19, 2019 letter, all but two of the open issues between the parties had been agreed upon in writing. The two remaining issues were (1) the term of the Third Renewal; and, (2) whether Claimant's development requirements (i.e. the number of new or re-opened Subway restaurants in Russia) would be counted as “net” or “gross” new or re-opened restaurants. The difference between “net” and “gross” was that “net” new or re-opened restaurants would take the number of restaurant closings into consideration, whereas “gross” new or re-opened restaurants would not. By way of example, if Claimant opened twenty-five restaurants in 2021 and closed ten, the “gross” restaurant gain would be twenty-five and the “net” restaurant gain would be fifteen;
30. With respect to issue 1, the term of the third renewal, Respondent offered three consecutive ten-year renewal periods in consideration for Claimant agreeing to forgo its contractual right to an unlimited number of two-year renewal options. Claimant's offer was that it would give up its right to an unlimited number of two-year renewals in consideration for Respondent agreeing to one twenty-year renewal period followed by two consecutive ten-year renewal periods.
31. With respect to issue 2, the restaurant development schedule, Respondent proposed that Claimant be required to open a “net” twenty new or reopened restaurant in each of the next three years. Claimant's offer was that it would be required to open a “gross” twenty new or re-opened restaurants in each of the next three years.
32. The parties agreed to meet in person in Dubai in February, 2020 to attempt to resolve the remaining two open issues. That in-person meeting, and other subsequently scheduled meetings were postponed, first by events in the Middle East and then by the rapid Covid 19 developments.
33. When it became apparent that an in-person meeting to resolve the two remaining issues was unlikely to take place, on July 28, 2020 Claimant accepted, in writing, both of Respondent's offers on the two remaining open issues.
34. With Claimant's acceptance of Respondent's offers, all material issues were resolved and a revised contract (the Third Renewal) was formed. At no time prior to acceptance of Respondent's offer was Respondent's offer ever withdrawn.
35. Respondent now denies the existence of the Third Renewal agreement.
36. Instead, Respondent contends that Claimant is in breach of the MFA, as modified by the First and Second Renewals. Respondent has threatened to terminate and not renew the MFA, as modified by the First and Second Renewals.
VII.
RESPONDENT'S ALLEGATIONS OF DEFAULT
37. On May 6, 2020, in the midst of the world-wide COVID 19 pandemic, and at a time when all Subway restaurants in Russia were closed by governmental order, Respondent declared Claimant to be in breach of the MFA, as modified by the First and Second Renewals.
38. Historically, Respondent has given notice of alleged breaches of the MFA as part of the process of negotiating each renewal of the 1993 MFA.
39. The May 6, 2020 default notice alleged that Claimant was in default of two provisions of the MFA, as modified by the First and Second Renewals. First, Respondent contends Subway Russia breached section 7(A), the so-called “McDonald's Clause, ” even though Respondent had explicitly agreed to delete this clause.
40. Further, paragraph 7(A) is not a material term of the agreement, as demonstrated both by Respondent's agreement to delete it in December, 2019 and by the history of the parties' contractual relationship.
41. As alleged above, Claimant became the Subway master franchisee for Russia in 1993. In 2006, 13 years after entering into the 1993 MFA, claimant had only 20 restaurants in Russia. Claimant did not comply with the ‘McDonald's' clause until 2011, 18 years into the 1993 MFA, when Claimant's restaurant count at year end had grown from 20 in 2006 to 324 in 2011. Claimant's growth continued until 2014, when Russia annexed Crimea from Ukraine and started the war in the Donbass region of Eastern Ukraine.
42. Paragraph 7(A) does not seek reasonable and actual damages but, rather, seek to impose penalties on a party alleged to have breached a contract term. Further, the so-called ‘McDonalds clause' does not provide a reasonable attempt to measure or estimate the actual damages sustained by SIBV in the event Claimant failed to maintain a restaurant count that is greater than the restaurant count of McDonalds, KFC or any other branded fast food franchising company.
43. Paragraph 7(A) is designed to compel franchise performance from Claimant out of fear of economic deprivation; i.e., the complete loss of Claimant's twenty-five plus year investment. If enforced, paragraph 7(A) would allow SIBV to terminate all of Claimant's rights under the MFA and deprive Claimant of the benefit twenty-seven years of faithful performance and effort. As such, SIBV would reap a windfall far in excess of any actual damages that could be claimed or proved. The so-called “McDonalds Clause constitutes an impermissible penalty or punishment.
44. Enforcement of the McDonald's clause, and the resulting forfeiture of Claimant's under the MFA, as modified by the First and Second Renewals, would be a drastic remedy, the significance of which would be grievously disproportionate to any alleged injury caused to SIBV from Claimant's alleged failure to franchise restaurants in a number equal to the number of McDonalds or KFC units within Russia. Claimant has operated for more than twenty-seven years under the MFA, as modified, and had in excess of 700 franchised restaurants in Russia in 2014 when Russia annexed Crimea and fomented the war in Eastern Ukraine. At the time, Claimant had more restaurants in Russia than KFC, McDonalds or any other branded fast-food chain. To deprive Claimant from continuing to operate in the Territory for currently failing to meet what is in fact an arbitrary quota is simply unjust. This is especially true, as the inability of Claimant to develop more franchises is the result of political and economic factors beyond its control.
45. Even if paragraph 7(A) is enforceable, the MFA, as modified, contains a force majeure clause that applies to the current situation. As alleged above, the significant decline in the Russian economy is a direct result of the sanctions imposed on Russia for annexing Crimea and fomenting the war in Eastern Ukraine. The Russian economy and attendant lack of consumer confidence has directly resulted in the decline of Claimant's restaurant count.
46. Second, Respondent contends that Claimant violated section 7(D) of the MFA, which became part of the agreement in the 1993 First Renewal. Section 7(D) provides, in pertinent part:
“For this Agreement, the parties have agreed that the required average weekly Gross Sales (or “AUV”) will be not less than $5400 U.S. Dollars, which figure shall remain in effect for the Term of this Agreement.”/
47. Paragraph 7(D) required average weekly restaurant Gross Sales (or “AUV”) to be not less than $5400 U.S. Dollars.
48. As alleged above, the requirement of AUVs of $5400 USD became part of the agreement on Oct. 19, 2013. At that time, the dollar ruble exchange rate was 31.9 rubles per dollar. The provision also stated that the $5400 figure “shall remain in effect for the Term of this Agreement.”
49. During the course of the negotiations on the Third Renewal of the MFA, Respondent admitted that its current policy was to measure international sales performance in local currencies, rather than in U.S. dollars. In its negotiations with Claimant, Respondent agreed to revise the MFA agreement to re-state the AUV requirements in rubles. The AUV requirement stated in rubles in the MFA, as modified in 2013, was $5400 x 31.9 = 172, 260 rubles. As alleged, this rate was to remain in effect for the term of the agreement.
50. Claimant's AUVs, prior to the onslaught of the Covid 19 pandemic and government restrictions imposed on restaurant operations, were greater than 172, 260. Now that restrictions on restaurant operations in Russia have been eased by the Russian government, the AUVs of Claimant's restaurants in Russia are now also in excess of the 172, 260 ruble requirement.
51. Claimant is not in default of paragraph 7(D) of the MFA, as modified.
52. On July 23, 2020, Respondent submitted a revised notice of default under the MFA, as modified. The July 23 default notice repeated the allegations of default contained in the May 6, 2020 notice of default and alleged an additional default: the alleged violation of paragraph 11 (C), which requires Claimant to submit its most current version of the Operations Manual, with an English translation, to the Company for review on an annual basis.
53. Paragraph 11 (C) is not a material term of the MFA, as modified, the breach of which would justify termination.
54. Nonetheless, Claimant has provided its most current version of the Operations Manual, with an English translation, within the cure period provided and is not in violation of this provision.
FIRST CLAIM - DECLARATORY RELIEF
55. Subway Russia re-alleges and incorporates by reference paragraphs 1 through 54 above, as though fully set forth here.
56. At present, there is a controversy between the parties. Claimant Subway Russia contends that:
(i) A binding and enforceable contract (the Third Renewal) was formed when Claimant accepted, in writing, Respondent's offer on the two remaining issues for renewal of the MFA, as modified by the First and Second Renewals;
. (ii) Claimant has the right to renew the MFA for the first of its three consecutive ten-year terms from and after October 19, 2020 on the same terms and conditions as set forth in the 1993 MFA, as modified by the 2013 First Renewal, the 2015 Second Renewal and the 2020 Third Renewal;
(iii) Claimant is not in default under the 1993 MFA, as modified by the 2013 First Renewal, the 2015 Second Renewal and the 2020 Third Renewal;
(iv) Respondent waived its right to enforce the so-called McDonald's clause;
(v) Respondent is estopped from enforcing the McDonald's clause by its conduct over the twenty-seven year history of the parties' contractual relationship;
(vi) Enforcement of the McDonald's clause is contrary to New York law;
(vii) Claimant is not in violation of section 7(D) of the MFA, as modified by the First, Second and Third Renewals;
(viii) Claimant is not in violation of section 11(C) of the MFA, as modified by the First, Second and Third Renewals;
(ix) Claimant is in substantial compliance with the requirements of the MFA, as modified;
(x) Respondent offered and Claimant accepted a contract term of three consecutive ten-year terms in consideration for Claimant surrendering its right to an unlimited number of consecutive two-year terms; and,
(xi) Subway Russia has the right to renew the MFA on the same terms and conditions, as modified by the First, Second and, now, Third Renewal.
57. Conversely, Respondent SIBV contends that:
(i) A binding and enforceable contract (the Third Renewal) was not formed when Claimant accepted, in writing, Respondent's offer on the two remaining issues for renewal of the MFA, as modified by the First and Second Renewals;
(ii) Respondent did not agree to delete or waive its right to enforce section 7(A), the so-called “McDonald's Clause” of the contract;
(iii) Respondent is not estopped from enforcing the McDonald's Clause;
(iv) Claimant is in violation of section 7(D), the AUV provision of the MFA, as modified;
(v) Respondent did not offer and Claimant did not accept a contract term of three consecutive ten-year terms in consideration for Claimant surrendering its right to an unlimited number of consecutive two-year terms;
(vi) Subway Russia is not in compliance with the requirements of the MFA, as modified by the First and Second Renewals;
(vii) Subway Russia is in default of the MFA, as modified by the First and Second Renewals;
(viii) The term of the MFA, as modified by the First and Second Renewals, expires on October 19, 2020; and,
(ix) Subway Russia has no right to renew the MFA, as modified by the First, Second and now Third Renewal.
58. Under the circumstances, Subway Russia seeks a declaration of its rights under the MFA, as modified, from this Tribunal that:
(i) A binding and enforceable contract (the Third Renewal) was formed when Claimant accepted, in writing, Respondent's offer on the two remaining issues for renewal of the MFA, as modified by the First and Second Renewals;
(ii) Claimant has the right to renew the MFA for the first of its three consecutive ten-year terms from and after October 19, 2020 on the same terms and conditions as set forth in the 1993 MFA, as modified
by the 2013 First Renewal, the 2015 Second Renewal and the Third Amendment;
(iii) Respondent agreed to delete and has waived section 7(A), the so-called “McDonald's Clause” of the contract. Claimant is not in default of this provision.
(iv) Claimant is not in violation of section 7(D) of the MFA, as modified.
(v) Claimant is not in violation of section 11 (C) of the MFA, as modified.
(vi) Claimant is in substantial compliance with the requirements of the MFA, as modified;
(vii) Performance of the MFA, as modified by the First and Second Renewals, was excused or delayed under the force majeure provision;
(viii) Subway Russia is not in default under the MFA, as modified; and,
(ix) Subway Russia has the right to renew the MFA on the same terms and conditions, as modified by the First, Second and, now, Third Renewals.
SECOND CLAIM - BREACH OF CONTRACT SPECIFIC PERFORMANCE
59. Subway Russia re-alleges and incorporates by reference paragraphs 1 through 57 above as though fully set forth here.
60. By contending that Subway Russia is in default of the MFA, as modified, and that Subway Russia has no right to renew the MFA on the same terms and conditions, and denying that the parties have reached an agreement (the “Third Renewal”) as of July 28, 2020, SIBV has breached the MFA, as modified by the First, Second and Third Renewals.
61. Paragraph 23 of the MFA, as modified, provides that in the event Respondent seeks to terminate the agreement, Claimant has the right to challenge the termination in arbitration. In the event that Claimant is successful in this arbitration, Claimant seeks specific performance of (1) the MFA, as modified by the First, Second and Third Renewals; or, in the alternative, (2) specific performance of the MFA as modified by the First and Second Renewals.
62. Absent the remedy of specific performance, SIBV will be unjustly enriched in seizing control of Subway Russia's operations without legal or factual justification. Therefore, Subway Russia seeks the remedy of specific performance.
63. Specific performance will not impose a disproportionate inequitable burden on SIBV, as the parties will be continuing to perform the MFA, as modified, under the same terms and conditions. Nor will Subway Russia be seeking any greater rights than it would have received had SIBV acknowledged the existence of the Third Renewal or, in the alternative, recognized Subway Russia's right to renew under the MFA as modified by the First and Second Renewals.
64. Consequently, Claimant seeks an order of specific performance that it be permitted to renew its master franchise agreement with the Company as set forth in the 1993 MFA, as modified by the 2013 First Renewal, the 2015 Second Renewal, and, now, the 2020 Third Renewal.
THIRD CLAIM FOR RELIEF BREACH OF CONTRACT - DAMAGES
65. Subway Russia re-alleges and incorporates by reference paragraphs 1 through 57 above as though fully set forth here.
66. As a direct consequence of Respondent's breach, Claimant has been damaged in an amount according to proof in this arbitration, but in a sum not less than $30,000,000.00.
WHEREFORE, Claimant prays:
1. For a declaration from this Tribunal on its First Claim for Declaratory Relief that:
(i) A binding and enforceable contract (the Third Renewal) was formed when Claimant accepted, in writing, Respondent's offer on the two remaining issues for renewal of the MFA, as modified by the First and Second Renewals;
(ii) Claimant has the right to renew the MFA for the first of its three consecutive ten-year terms from and after October 19, 2020 on the same terms and conditions as set forth in the 1993 MFA, the 2013 First Renewal, the 2015 Second Renewal and the Third Renewal;
(iii) Respondent agreed to delete and has waived section 7(A), the so-called “McDonald's Clause” of the contract. Claimant is not in default of this provision.
(iv) Claimant is not in violation of section 7(D) of the MFA, as modified.
(v) Claimant is not in violation of section 11(C) of the MFA, as modified.
(vi) Claimant is in substantial compliance with the requirements of the MFA, as modified;
(vii) Performance of the MFA, as modified by the First and Second Renewals, was excused or delayed under the force majeure provision; (viii) Subway Russia is not in default under the MFA, as modified; and, (ix) Subway Russia has the right to renew the MFA on the same terms and conditions, as modified by the First, Second and, now, Third Renewals.
2. For an Order on Claimant's Second Claim for Specific Performance ordering Respondent to specifically perform in conformance with
the terms and conditions of the Master Franchise Agreement, as modified by the First, Second and Third Renewals.
3. For damages on Claimant's Third Claim for breach of contract in an amount according to proof, but not less than $30,000,000.00; and, 4. For such other and further relief this Tribunal deems appropriate.