Does the exclusion of consequential damages for Aira Fitness extend to third parties?
Aira_Fitness Franchise · 2025 FDDAnswer from 2025 FDD Document
uding, without limitation, legal and accounting fees. You must give us written notice at least thirty (30) days prior to the date of commencement of any offering or other transaction covered by this Section.
13. DISPUTE RESOLUTION
A. Arbitration; Mediation. Except as qualified below, any dispute between you and us and any of our or your affiliates, officers, directors, shareholders, members, guarantors, employees or owners arising under, out of, in connection with or in relation to this Agreement, any lease for the Aira Fitness Business or Authorized Location, the parties' relationship, the Aira Fitness Business, our Standards, or the scope or validity of the arbitration obligations under this Section must be submitted to binding arbitration under the authority of the Federal Arbitration Act and must be arbitrated in accordance with the then-current rules and procedures and under the auspices of the American Arbitration Association ("AAA"). Any arbitration must be on an individual basis, and not as part of a consolidated, common, or class action, and you and/or your Owners waive any right to proceed on a consolidated, common, or class basis. Multiparty arbitration is specifically excluded, and the parties and the arbitrator will have no authority or power to proceed with any claim as a class action or otherwise to join or consolidate any claim with any claim or other proceeding involving third parties. In the event a court or arbitrator determines that this exclusion of multiparty arbitration (including class arbitration) is unenforceable, then this entire commitment to arbitrate will be null and void and the parties must submit all claims to the jurisdiction of the courts. Arbitration shall take place in the Chicago, Illinois metropolitan area. The arbitrators must follow the law and not disregard the terms of this Agreement. Any arbitrator must have at least five years' experience in franchising or in franchise law.
Any unappealed decision of the arbitrator(s) will be final and binding on all parties to the dispute; however, the arbitrator(s) shall have no authority to: (i) stay the effectiveness of any pending termination of this Agreement; (ii) assess punitive or exemplary damages; (iii) certify a class or consolidate an action, or (iv) make any award which extends, modifies or suspends any lawful term of this Agreement or any reasonable standard of business performance that we set. A judgment may be entered upon the arbitration award by any court of competent jurisdiction.
We and you agree to be bound by the provisions of any limitation on the period of time by which claims must be brought under this Agreement or applicable law, whichever expires first. We and you further agree that, in connection with any arbitration proceeding, each party must submit or file any claim which would constitute a compulsory counterclaim (as defined by the then-current Rule 13 of the Federal Rules of Civil Procedure) within the same proceeding as the claim to which it relates. Any such claim which is not submitted or filed in such proceeding will be barred. The arbitrator may not consider any settlement discussions or offers that might have been made by either you or us. We reserve the right, but have no obligation, to advance your share of the costs of any arbitration proceeding in order for such arbitration proceeding to take place and by doing so will not be deemed to have waived or relinquished our right to seek the recovery of those costs in accordance with Section 13.D. Except as may be required by law, neither a party nor an arbitrator may disclose the existence, content, or results of any arbitration under this Section 13 without the prior written consent of both parties. The provisions of this Section are intended to benefit and bind certain third-party non- signatories and will continue in full force and effect subsequent
to and notwithstanding the expiration or termination of this Agreement.
Any award rendered by the arbitrator(s) may be appealed pursuant to the AAA's Optional Appellate Arbitration Rules in effect as of the Effective Date of this agreement ("Appellate Rules"). Any award will, at a minimum, be a reasoned award. The award will not be considered final until after the time for filing the notice of appeal pursuant to the Appellate Rules has expired. Appeals must be initiated within thirty (30) days of receipt of an award, as defined by Rule A-3 of the existing Appellate Rules, by filing a notice of appeal with any AAA office. The appeal tribunal may affirm, reverse, or modify the award of the arbitrator(s), or return the matter to the arbitrator(s) for further action. A final award may be entered once the appeal process is complete or the time for filing an appeal has expired, and a judgment may be entered upon the arbitration award in accordance with the procedures identified above.
Before the filing of any arbitration, the parties agree to mediate any dispute that does not include injunctive relief or specific performance actions covered under Section 13.B, provided that the party seeking mediation must notify the other party of its intent to mediate prior to the termination of this Agreement. Mediation will be conducted by a mediator or mediation program agreed to by the parties and will take place in McHenry County, Illinois. Persons authorized to settle the dispute must attend any mediation session. The parties agree to participate in the mediation proceedings in good faith with the intention of resolving the dispute if at all possible within thirty (30) days of the notice from the party seeking to initiate the mediation procedures. If not resolved within thirty (30) days, the parties are free to pursue arbitration.
- B. Injunctive Relief. Notwithstanding Section 13.A, the parties agree that the following claims will not be subject to arbitration or mediation: (i) any action for declaratory or equitable relief, including, without limitation, seeking preliminary or permanent injunctive relief, specific performance, other relief in the nature of equity to enjoin any harm or threat of harm to such party's tangible or intangible property, brought at any time, including without limitation, prior to or during the pendency or any arbitration proceeding initiated under Section 13.A; or (ii) any action in ejectment or for possession of any interest in real or personal property; or (iii) our decision in the first instance to issue a notice of default and/or notice of termination, or undertake any other conduct with respect to the franchise relationship that might later result in a dispute or controversy between us.
- C. Governing Law/Consent to Jurisdiction**.** Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act 15 U.S.C. Section 1051 et. seq.), and except that all issues relating to arbitrability or the enforcement or interpretation of the agreement to arbitrate set forth in this Section shall be governed by the United States Arbitration Act (9 U.S.C.
Source: Item 23 — **RECEIPTS (FDD pages 59–254)
What This Means (2025 FDD)
Based on the 2025 Aira Fitness Franchise Disclosure Document, the agreement contains provisions regarding dispute resolution and arbitration, but it does not explicitly state whether the exclusion of consequential damages extends to third parties. The document outlines that any dispute between the franchisee and Aira Fitness must be submitted to binding arbitration, excluding multiparty arbitration and class actions. The arbitrator cannot assess punitive or exemplary damages or make any award that extends, modifies, or suspends any lawful term of the agreement. This suggests a limited scope of liability for Aira Fitness in disputes.
However, the FDD also includes an indemnification clause where the franchisee agrees to indemnify Aira Fitness, its affiliates, and their shareholders, directors, officers, employees, agents, and transferees against various liabilities, damages, and costs. This indemnification includes actual and consequential damages, as well as legal fees and expenses. This clause implies that while Aira Fitness aims to limit its liability, the franchisee may be responsible for covering consequential damages incurred by Aira Fitness, potentially involving third-party claims.
The insurance requirements outlined in the FDD mandate that the franchisee maintain various insurance policies, including comprehensive general liability insurance, professional liability insurance, and cyber liability insurance, with Aira Fitness named as an additional insured on all liability policies. These insurance policies suggest that Aira Fitness seeks to protect itself from potential liabilities, including those involving third parties, by ensuring the franchisee has adequate coverage.
Since the FDD does not explicitly address whether the exclusion of consequential damages extends to third parties, a prospective franchisee should seek clarification from Aira Fitness regarding the scope of liability and indemnification obligations, particularly concerning claims involving third parties. Understanding the extent to which the franchisee may be responsible for consequential damages to third parties is crucial for assessing the financial risks associated with the franchise.