What is the impact of the Maryland Franchise Registration and Disclosure Law on the enforceability of arbitration clauses in the Bumble Roofing Franchise Agreement?
Bumble_Roofing Franchise · 2025 FDDAnswer from 2025 FDD Document
The Franchise Agreement provides that disputes are resolved through arbitration. A Maryland franchise regulation states that it is an unfair or deceptive practice to require a franchisee to waive its right to file a lawsuit in Maryland claiming a violation of the Maryland Franchise Law. In light of the Federal Arbitration Act, there is some dispute as to whether this forum selection requirement is legally enforceable.
Nothing in the Franchise Agreement operates to reduce the 3-year statute of limitations afforded to a franchisee for bringing a claim arising under the Maryland Franchise Registration and Disclosure Law. Further, any claims arising under the Maryland Franchise Registration and Disclosure Law must be brought within 3 years after the grant of the franchise.
Source: Item 17 — RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION (FDD pages 43–45)
What This Means (2025 FDD)
According to Bumble Roofing's 2025 Franchise Disclosure Document, the Maryland Addendum to the Franchise Agreement addresses the enforceability of arbitration clauses in light of the Maryland Franchise Registration and Disclosure Law. The addendum acknowledges that a Maryland franchise regulation considers it an unfair or deceptive practice to require a franchisee to waive their right to file a lawsuit in Maryland for violations of the Maryland Franchise Law. However, the document also notes that there is some dispute as to whether this forum selection requirement is legally enforceable, considering the Federal Arbitration Act.
This means that while the Bumble Roofing franchise agreement may contain a clause requiring disputes to be resolved through arbitration, a Maryland franchisee may still have the right to bring a lawsuit in Maryland for claims arising under the Maryland Franchise Registration and Disclosure Law. The enforceability of the arbitration clause is uncertain due to the conflict between Maryland law and the Federal Arbitration Act.
Furthermore, the Maryland Addendum clarifies that no statement or acknowledgment signed by a franchisee can waive claims under any applicable state franchise law, including fraud in the inducement, or disclaim reliance on statements made by the franchisor. The addendum also ensures that the general release required for renewal, sale, or transfer of the franchise does not apply to liabilities under the Maryland Franchise Registration and Disclosure Law. Additionally, any claims arising under the Maryland Franchise Registration and Disclosure Law must be brought within 3 years after the grant of the franchise.
In practical terms, a prospective Bumble Roofing franchisee in Maryland should be aware that their ability to pursue legal action in Maryland for violations of franchise law is protected, despite any arbitration clauses in the franchise agreement. They should consult with an attorney to understand their rights and the potential implications of the arbitration clause, given the existing legal uncertainty. The franchisee should also keep in mind the 3-year statute of limitations for claims under the Maryland Franchise Registration and Disclosure Law.