Who is responsible for litigation expenses in a dispute related to the Creative World School agreement?
Creative_World_School Franchise · 2025 FDDAnswer from 2025 FDD Document
- (k) Except as may be provided for to the contrary in the AAA procedures with respect to the costs of transcriptions of the arbitration hearing, all fees and expenses of the arbitration shall be borne by the parties equally. Each party shall bear the expense of its own counsel, experts, witnesses, and preparation and presentation of proofs; provided, however, that the arbitrator shall have the authority, in its discretion, at the conclusion of the proceeding, to award costs and attorneys' fees to the prevailing party.
Source: Item 23 — RECEIPTS (FDD pages 80–247)
What This Means (2025 FDD)
According to the 2025 Creative World School FDD, in the event of arbitration, the fees and expenses of the arbitration will be shared equally between the parties, unless otherwise specified in the AAA procedures regarding transcription costs. Each party is responsible for their own legal counsel, experts, witnesses, and preparation costs. However, the arbitrator has the discretion to award costs and attorneys' fees to the prevailing party at the conclusion of the proceeding. This allocation of responsibility applies to disputes that proceed to arbitration as outlined in the franchise agreement.
This means that a Creative World School franchisee should anticipate bearing their own costs for legal representation and preparation during any dispute resolution process. While the initial arbitration costs are split, there is a possibility of recovering attorney's fees if the franchisee prevails. This creates a financial risk, as franchisees must be prepared to cover potentially significant legal expenses upfront, with no guarantee of reimbursement.
It is important to note that this arrangement may differ in certain states. For example, the addendum for Minnesota states that nothing in the disclosure document or agreement can reduce a franchisee's rights to any procedure, forum, or remedies provided by Minnesota law. This suggests that Minnesota franchisees may have additional protections or rights regarding the allocation of litigation expenses. Prospective franchisees should carefully review any state-specific addenda to understand how these provisions may modify the standard terms.
In summary, while Creative World School's franchise agreement stipulates that arbitration costs are generally split, the potential for an award to the prevailing party and the existence of state-specific addenda introduce variability. Franchisees should budget for legal expenses and understand the conditions under which they might recover these costs.