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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

CHOICE HOTELS INTERNATIONAL, INC. , Plaintiff

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v. * JAMES GROSE, et al., * Defendants ********

Civil Action No. RWT 03-3052

MEMORANDUM OPINION On September 7, 2004, this Court entered a Memorandum Opinion and Order dismissing the Plaintiff's Application to Confirm Arbitration Award on the basis that the documents filed with the Court made clear that the matters that were submitted to, and made the subject of an award by, the arbitrator were expressly excluded from the scope of the agreement to arbitrate. The Ex-Parte Award of Arbitrator, a copy of which is attached to the Plaintiff's Petition, purported to award injunctive relief in favor of Choice Hotels International, Inc. ("Choice") against the Defendants, James Grose ("Grose") and J&L Markle, Inc. (`Markle"), concerning use by Defendants of the trademarks and service marks of Choice. In addition, it awarded $217,021.25 in damages against Grose,1 including $14,383.35 for trademark infringement, and $43,150.05 consisting of treble damages for trademark infringement.

The arbitrator's award did not provide for monetary relief against Markle, because of bankruptcy proceedings with respect to it, but did award post-petition injunctive relief for infringement of intellectual property citing the decision in Laramie Ltd. v. Yes! Entertainment Corporation, 244 B.R. 56 (D.N.J. 2000).

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Choice has moved to reconsider arguing that (1) the Defendants have waived any right to object to arbitrability; and (2) the award, at least in part, is within the scope of the agreement of the parties to arbitrate. The Fourth Circuit has recognized three grounds "for amending an earlier judgment: (1) to accommodate an intervening change in controlling law; (2) to account for new evidence not available at trial; or (3) to correct a clear error of law or prevent manifest injustice." Hutchinson v, Staton, 994 F.2d 1076, 1081 (4th Cir. 1993). Choice asserts that the Court made an error of "apprehension" when it expressed concern that the arbitrator's award was granted outside of the parties' agreement to arbitrate. See Clark v. Virginia Bd. Of Bar Examiners, 861 F. Supp. 512, 518 (E.D. Va. 1994), citing, Above the Belt, Inc. v. Mel Bohannan Roofing, inc., 99 F.R.D. 99, 101 (1983). After reviewing Choice's Memorandum in support of its Motion To Alter Judgment and the Affidavit of Kerry McGeever which is attached to it, the Court agrees that it must reconsider its decision. A. Award of Injunctive Relief

It is axiomatic that the power of arbitrators is derived from the contractual understanding between the parties. In the absence of an agreement to arbitrate, arbitrators are powerless to act, and courts appropriately may refuse to enforce awards where a jurisdictional prerequisite to an arbitrator's authority to act, i.e., an agreement to arbitrate, is lacking. Mountaineer Gas Co. v. Oil, Chemical & Atomic Workers Int'l Union, 76 F.3d 606, 608 (4th Cir. 1996) (holding that an arbitration award can be overturned by a court if the award "fails to draw its essence" from the agreement). The Court's concern in this case arose from the agreement to arbitrate which is located in the parties' franchise agreement and reads as follows: 22. Arbitration. Except for our claims against you for indemnification, actions for 2

collection of moneys owed us under this Agreement, or actions seeking to enjoin you from using the Marks in violation of this Agreement, any controversy or claim relating to this Agreement, or the breach of this Agreement, including any claim that this Agreement or any part of this Agreement is invalid, illegal, or otherwise voidable or void, will be sent to final and binding arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The arbitrator will apply the substantive laws of Maryland, without reference to its conflict of laws provision. Judgment on the arbitration award may be entered in any court having jurisdiction. If any party fails to appear at any properly noticed arbitration proceeding, an award may be entered against the party, notwithstanding its failure to appear. Any arbitration will be conducted at our headquarters office in Maryland. The language of this clause expressly excludes the award of injunctive relief relating to the use of Choice's trademarks from the enumeration of arbitrable disputes. When Choice filed its Application to Confirm Arbitration award, the existing record did not show that Defendants had consented to interim injunctive relief. Thus, the Court was understandably troubled by Choice's attempt to enforce an award on an issue that it was seemingly unentitled to arbitrate. Now, however, Choice has filed an affidavit and other documents which indicate that Defendants were fully aware of the arbitration proceedings and, in fact, consented to interim injunctive relief. Aff. Of Kerry McGeever at

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Maryland Law