Does the Deka Lash franchise agreement's dispute resolution through arbitration potentially conflict with Maryland franchise regulations regarding waiving the right to file a lawsuit in Maryland?
Deka_Lash Franchise · 2024 FDDAnswer from 2024 FDD Document
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- This 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 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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- No statement, questionnaire, or acknowledgment signed or agreed to by a franchisee in connection with the commencement of the franchise relationship shall have the effect of (i) waiving any claims under any applicable state franchise law, including fraud in the inducement, or (ii) disclaiming reliance on any statement made by any franchisor, franchise seller, or other person acting on behalf of the franchisor. This provision supersedes any other term of any document executed in connection with the franchise.
Source: Item 23 — RECEIPT (FDD pages 63–234)
What This Means (2024 FDD)
According to the 2024 Deka Lash Franchise Disclosure Document, the franchise agreement includes a provision for dispute resolution through arbitration. However, Maryland franchise regulations state that it is an unfair or deceptive practice to require a franchisee to waive their right to file a lawsuit in Maryland, especially concerning violations of Maryland Franchise Law.
Deka Lash acknowledges that there is some dispute as to whether the forum selection requirement (arbitration) is legally enforceable in light of the Federal Arbitration Act. To address this potential conflict, Deka Lash includes a Maryland addendum to the franchise agreement.
This addendum modifies the franchise agreement to ensure compliance with Maryland law. Specifically, it clarifies that no statement, questionnaire, or acknowledgment signed by the franchisee can waive claims under Maryland franchise law, including claims of fraud. This provision supersedes any other conflicting term in the franchise agreement, offering additional protection to franchisees operating in Maryland.
Prospective Deka Lash franchisees in Maryland should carefully review the Maryland addendum and understand their rights under Maryland Franchise Law. They should also seek legal counsel to fully understand the implications of the arbitration clause and how it interacts with their rights under Maryland law.