According to the Chem Dry Franchise Agreement, how are disputes resolved?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
MARYLAND
This Addendum relates to franchises sold in the state of Maryland and/or to residents of the state of Maryland and is intended to comply with Maryland statutes and regulations. In consideration of the execution of the Franchise Agreement, CDI and Franchisee agree to amend the Agreement as follows:
- The Franchise Agreement is amended by the addition of the following language:
The representations hereunder 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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- Our right to terminate pursuant to Section 15(15) of the Franchise Agreement if you commence bankruptcy may not be enforceable under federal bankruptcy law (11 U.S.C.A. 101 et seq.).
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- The acknowledgements Section 1(a)(iii) of the Franchise Agreement and the following language from Section 18 (a) of the Franchise Agreement, are deleted: "By signing this Agreement, FRANCHISEE certifies that it has received and reviewed CDI's Franchise Disclosure Document along with its Exhibits and this Agreement and its Exhibits fourteen (14) calendar days, or a different period if applicable where FRANCHISEE is located, prior to signing this Agreement or prior to paying any monies to CDI or its affiliates."
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- Section 17 of the Franchise Agreement is amended by the addition of the following language:
Pursuant to the Maryland Franchise Registration and Disclosure Law, the Franchisee is permitted to bring a lawsuit in Maryland for claims arising under this Law.
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- Any general release required as a condition of renewal, sale, and/or assignment or transfer of the Store or the Franchise Agreement shall not apply to any liability 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 Registration and Disclosure Law. In light of the Federal Arbitration Act, there is some dispute as to whether this forum selection requirement is legally enforceable.
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- Sections 13 and 14 of the Agreement is amended by the addition of the following language:
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
Based on the 2024 Chem Dry Franchise Disclosure Document, dispute resolution is addressed through addendums that vary by state. For instance, in Maryland, the Franchise Agreement stipulates that disputes are typically resolved through arbitration. However, Maryland franchise regulations consider it an unfair practice to force a franchisee to waive their right to file a lawsuit in Maryland for violations of the Maryland Franchise Registration and Disclosure Law. This creates a conflict, as the enforceability of the forum selection requirement (arbitration) is disputed due to the Federal Arbitration Act.
In Virginia, if any clause regarding default or termination within the franchise agreement does not align with the "reasonable cause" definition under the Virginia Retail Franchising Act or Virginia laws, that specific clause might not be enforceable. This implies that Virginia franchisees have some protection against arbitrary or unreasonable termination.
For franchisees in Minnesota, the FDD states that Chem Dry and the franchisee waive any right to punitive or exemplary damages against each other, except for punitive damages available to either party under federal law and the franchisee’s obligation to indemnify Chem Dry for third-party claims. In the event of a dispute, the claiming party is limited to equitable relief and recovery of actual damages sustained. These state-specific addendums highlight the importance of understanding the specific legal context of the franchise within the franchisee's state.
Furthermore, in any action or dispute related to the Assignment, the prevailing party is entitled to recover attorney's fees, costs, and expenses from the non-prevailing party, covering trial, appeal, arbitration, or bankruptcy proceedings. This provision could significantly impact the financial implications of pursuing or defending against legal claims related to the Assignment.