Are punitive or exemplary damages allowed against Fly Fitness, the Developer, or entities related to either of them in an arbitration proceeding?
Fly_Fitness Franchise · 2024 FDDAnswer from 2024 FDD Document
- 10.3.3 This arbitration provision is self-executing and will remain in full force and effect after expiration or termination of this Agreement. Any arbitration will be conducted on an individual, and not a class-wide or multiple plaintiffs, basis. If either party fails to appear at any properly noticed arbitration proceeding, an award may be entered against the party by default or otherwise, notwithstanding the failure to appear. Judgment upon an arbitration award may be entered in any court having jurisdiction and will be binding, final and not subject to appeal. No punitive or exemplary damages will be awarded against Franchisor, Developer, or entities related to either of them, in an arbitration proceeding or otherwise, and are hereby waived.
Source: Item 23 — RECEIPT (FDD pages 45–182)
What This Means (2024 FDD)
According to Fly Fitness's 2024 Franchise Disclosure Document, punitive or exemplary damages will not be awarded against Fly Fitness, the Developer, or any related entities in an arbitration proceeding. This is explicitly waived in the agreement. This means that if a dispute arises that goes to arbitration, the arbitrator cannot award damages intended to punish or set an example, regardless of the behavior of Fly Fitness or the Developer.
This waiver is significant for a prospective Fly Fitness franchisee because it limits the potential financial recovery in case of a dispute. While compensatory damages (to cover actual losses) might still be possible, the franchisee cannot seek additional damages beyond those losses, even if Fly Fitness's actions are particularly egregious. This is a notable point to consider, as punitive damages can sometimes be a substantial part of a settlement or award.
It is important to note that this limitation applies specifically to arbitration proceedings. The FDD does not specify whether this limitation extends to disputes litigated in court. Franchisees should seek legal counsel to fully understand their rights and potential remedies in case of a dispute with Fly Fitness, especially regarding situations that might warrant punitive damages and whether those could be pursued outside of arbitration.