In disputes with Carvel, are punitive damages waived to the fullest extent permitted by law?
Carvel Franchise · 2025 FDDAnswer from 2025 FDD Document
- F.
Waiver of Punitive Damages.
EXCEPT FOR YOUR OBLIGATION TO INDEMNIFY US FOR THIRD PARTY CLAIMS UNDER SECTION 13.1 (INDEMNIFICATION), CLAIMS FOR YOUR INFRINGEMENT OF OUR INTELLECTUAL PROPERTY, AND CLAIMS FOR YOUR BREACH OF YOUR OBLIGATIONS UNDER SECTION 15.2 (PROTECTION OF CONFIDENTIAL INFORMATION AND TRADE SECRETS) OF THIS AGREEMENT, NEITHER PARTY WILL BE ENTITLED TO RECOVER SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES UNDER THIS AGREEMENT.
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- The Franchise Agreement requires you to waive your right to collect exemplary or punitive damages. This provision may not be enforceable under North Dakota law.
**4.
General Release.** A release or waiver of rights in the franchise agreement or related agreements purporting to bind the franchisee to waive compliance with any provision under the Washington Franchise Investment Protection Act or any rules or orders thereunder is void except when executed pursuant to a negotiated settlement after the agreement is in effect and where the parties are represented by independent counsel, in accordance with RCW 19.100.220(2).
Source: Item 23 — Receipts (FDD pages 100–353)
What This Means (2025 FDD)
According to Carvel's 2025 Franchise Disclosure Document, both Carvel and the franchisee generally waive the right to recover special, consequential, exemplary, or punitive damages to the fullest extent permitted by law. However, this waiver does not apply to the franchisee's obligation to indemnify Carvel for third-party claims, claims for the franchisee's infringement of Carvel's intellectual property, and claims for the franchisee's breach of obligations relating to the protection of confidential information and trade secrets.
This means that, in most disputes, a Carvel franchisee will not be able to seek punitive damages from Carvel, and vice versa. Punitive damages are intended to punish a party for egregious misconduct, and the waiver suggests that Carvel aims to limit its potential liability to actual, direct losses suffered by the other party. However, there are specific carve-outs where Carvel retains the right to seek these damages, particularly where the franchisee's actions could harm Carvel's brand or financial interests through intellectual property infringement, breach of confidentiality, or failure to cover third-party claims for which the franchisee is responsible.
It's important to note that addenda to the FDD for certain states like North Dakota and Washington may impact the enforceability of such waivers. For example, the FDD states that in Washington, a release or waiver of rights is void unless executed pursuant to a negotiated settlement after the agreement is in effect and where both parties are represented by independent counsel. Similarly, in North Dakota, the franchise agreement requires the franchisee to waive their right to collect exemplary or punitive damages, but this provision may not be enforceable under North Dakota law. Therefore, franchisees should carefully review the addenda applicable to their state and consult with legal counsel to understand the specific limitations on damage waivers in their jurisdiction.