Does the Canine Dimensions Franchise Agreement's arbitration clause prevent a franchisee from filing a lawsuit in Maryland claiming a violation of Maryland Franchise Law?
Canine_Dimensions Franchise · 2025 FDDAnswer from 2025 FDD Document
The appropriate sections of the Franchise Agreement are amended accordingly.
Exhibit G to the FDD is hereby amended to provide that all representations requiring prospective franchisees to assent to a release, estoppel or waiver of liability are not intended to nor shall they act as a release, estoppel or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law.
The Franchise Agreement is hereby amended to state that any representations which require a prospective franchisee to assent to any general release, estoppel or waiver of liability as a condition of purchasing a franchise are not intended to nor shall they act as a release, estoppel or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law.
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- 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.
Source: Item 22 — CONTRACTS (FDD page 36)
What This Means (2025 FDD)
According to Canine Dimensions' 2025 Franchise Disclosure Document, the franchise agreement includes an arbitration clause for dispute resolution. However, 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 Maryland Franchise Law. The FDD acknowledges that there is some dispute as to whether this forum selection requirement is legally enforceable, especially in light of the Federal Arbitration Act.
To address this, the Canine Dimensions FDD includes an amendment stating that representations requiring a prospective franchisee to release, waive, or estop any liability are not intended to act as a release, estoppel, or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law. This suggests that while arbitration is generally required, the franchisee's right to pursue a lawsuit in Maryland for violations of Maryland Franchise Law is intended to be preserved.
In practical terms, a Canine Dimensions franchisee in Maryland may still have the right to file a lawsuit in Maryland courts for violations of the Maryland Franchise Law, despite the arbitration clause. However, due to the acknowledged legal dispute between Maryland law and the Federal Arbitration Act, the enforceability of the arbitration clause in this specific context remains uncertain. Prospective franchisees should seek legal counsel to fully understand their rights and obligations.