What rule defines a compulsory counterclaim in the context of Cream's arbitration agreement?
Cream Franchise · 2025 FDDAnswer from 2025 FDD Document
We and you agree to be bound by the provisions of any applicable contractual or statutory limitations provision, whichever expires earlier. We and you further agree that, in any arbitration proceeding, each party must submit or file any claim which would constitute a compulsory counterclaim (as defined by Rule 13 of the Federal Rules of Civil Procedure) within the same proceeding. Any claim which is not submitted or filed as required will be forever barred. The arbitrator may not consider any settlement discussions or offers that might have been made by either you or us.
Source: Item 23 — RECEIPTS (FDD pages 61–192)
What This Means (2025 FDD)
According to Cream's 2025 Franchise Disclosure Document, in any arbitration proceeding, both Cream and the franchisee must submit or file any claim that would constitute a compulsory counterclaim, as defined by Rule 13 of the Federal Rules of Civil Procedure, within the same proceeding. Failure to do so will result in the claim being permanently barred. This means that if a franchisee has a claim against Cream that arises out of the same transaction or occurrence as Cream's claim against them, the franchisee must raise it during the arbitration.
This requirement is significant because it compels franchisees to bring all related claims in a single arbitration proceeding. If a franchisee fails to raise a compulsory counterclaim, they lose the right to pursue that claim in the future. This can impact a franchisee's legal strategy and potentially limit their ability to seek full redress for any grievances they may have against Cream.
Rule 13 of the Federal Rules of Civil Procedure provides the specific legal definition of what constitutes a compulsory counterclaim. While the FDD mentions this rule, it does not provide the text of the rule itself. A prospective franchisee should familiarize themselves with Rule 13 to fully understand their obligations under Cream's arbitration agreement. Franchisees may want to consult with an attorney to fully understand the implications of this clause.