What happens to the arbitration clause in the Chem Dry franchise agreement if the paragraph prohibiting class-wide arbitration is deemed invalid?
Chem_Dry Franchise · 2024 FDDAnswer from 2024 FDD Document
CDI and FRANCHISEE agree that arbitration shall be conducted on an individual, not a class wide, basis and that an arbitration proceeding between CDI and FRANCHISEE and their respective affiliates, shareholders, officers, directors, agents, and/or employees shall not be consolidated with any other arbitration proceeding involving CDI and any other person.
The parties further agree that if this Paragraph is held by any court, agency or tribunal with competent jurisdiction to be: (a) invalid, (b) contrary to, or (c) in conflict with, any applicable present or future law or regulation, the entire Section 17.F. will be deemed null and void and the dispute resolution shall be governed by Section 17.I.
Source: Item 23 — Receipts (FDD pages 68–264)
What This Means (2024 FDD)
According to Chem Dry's 2024 Franchise Disclosure Document, the franchise agreement contains a clause that arbitration will be conducted on an individual basis, not a class-wide basis. It also specifies that an arbitration proceeding between Chem Dry and a franchisee will not be consolidated with any other arbitration proceeding involving Chem Dry and any other person.
However, the agreement also states that if a court, agency, or tribunal with competent jurisdiction determines that the paragraph prohibiting class-wide arbitration is invalid, contrary to, or in conflict with any applicable present or future law or regulation, then the entire Section 17.F of the franchise agreement will be deemed null and void.
In this case, the dispute resolution will then be governed by Section 17.I of the Chem Dry franchise agreement. Prospective franchisees should carefully review Section 17.I to understand the alternative dispute resolution methods that would apply if the class-wide arbitration prohibition is invalidated.