Does the arbitrator have the authority to award punitive damages in a Belocal franchise dispute?
Belocal Franchise · 2025 FDDAnswer from 2025 FDD Document
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- (5) The arbitrator shall have no power or authority to award punitive damages and, with respect to any claim for damages, the arbitrator shall be authorized to award only actual damages sustained by a party.
- (6) If Franchisor, Franchisee, or any of Franchisee's Principals files in court any claim that should have been brought in arbitration under this Section 14.C., and the other party succeeds in a motion to compel arbitration of such claim, the party filing such claim in court must reimburse the other party its reasonable attorneys' fees and costs for defending against the l
Source: Item 22 — CONTRACTS (FDD page 71)
What This Means (2025 FDD)
According to Belocal's 2025 Franchise Disclosure Document, an arbitrator does not have the authority to award punitive damages. The agreement specifies that the arbitrator's power is limited to awarding only the actual damages sustained by a party. This limitation is further reinforced by a clause where both parties waive, to the fullest extent permitted by law, any right to claim punitive or exemplary damages against each other.
This means that if a Belocal franchisee has a dispute with the franchisor that goes to arbitration, the arbitrator can only compensate the franchisee for direct losses or harm they have actually suffered. The arbitrator cannot impose additional penalties on Belocal, even if their conduct was particularly egregious. This could limit the potential financial recovery for a franchisee in a dispute.
It is fairly common in franchise agreements to restrict or waive the ability to claim punitive damages in arbitration. This is intended to provide more predictable and controlled dispute resolution costs. However, franchisees should carefully consider the implications of waiving the right to seek punitive damages, as it may affect their ability to be fully compensated in certain situations. Franchisees should consult with a legal professional to fully understand these limitations.