What happens if the limitation on class action arbitration is deemed unenforceable for Alloy?
Alloy Franchise · 2025 FDDAnswer from 2025 FDD Document
In the event a court determines that this limitation on joinder of or class action certification of claims is unenforceable, then this entire commitment to arbitrate will become null and void and the parties must submit all claims to the jurisdiction of the courts.
The arbitration must take place in the city of our then-current headquarters.
The arbitrator must follow the law and not disregard the terms of this Agreement or disregard the law based on principles of justice or equity which are not a specific part of the applicable law.
The arbitrator must have at least 5 years of significant experience in franchise law. A judgment may be entered upon the arbitration award by any state or federal court in the state where we maintain our headquarters or the state where your Facility is located. The decision of the arbitrator will be final and binding on all parties to the dispute; however, the arbitrator may not under any circumstances: (1) stay the effectiveness of any pending termination of this Agreement; (2) assess punitive or exemplary damages; or (3) make any award which extends, modifies or suspends any lawful term of this Agreement or any reasonable standard of business performance that we set.
Source: Item 23 — RECEIPTS (FDD pages 69–245)
What This Means (2025 FDD)
According to Alloy's 2025 Franchise Disclosure Document, if a court determines that the limitation on joining or certifying claims as a class action is unenforceable, the entire agreement to arbitrate becomes null and void. In this case, all claims must be submitted to the jurisdiction of the courts. This means that any disputes between Alloy and its franchisees that would have been subject to arbitration will instead be resolved through the court system.
For a prospective Alloy franchisee, this clause has significant implications. It means that Alloy retains the right to take disputes to court rather than arbitration if the class action waiver is deemed unenforceable. Arbitration is often seen as a faster and less expensive alternative to litigation, so the loss of this option could increase the costs and time involved in resolving disputes. It also means that franchisees could potentially participate in class action lawsuits against Alloy if the limitation is deemed unenforceable.
This provision highlights the importance of understanding the dispute resolution process outlined in the franchise agreement. Franchisees should be aware of the potential for disputes to end up in court and should consider the costs and risks associated with litigation. It is advisable for prospective franchisees to seek legal counsel to fully understand the implications of this clause and how it may affect their rights and obligations under the franchise agreement.
It's also worth noting that the arbitration must take place in the city of Alloy's then-current headquarters, and the arbitrator must have at least 5 years of significant experience in franchise law. The arbitrator's decision is final and binding, but they cannot stay the effectiveness of any pending termination, assess punitive damages, or modify any lawful term of the agreement.