Can class actions be permitted in arbitration proceedings under the Hydrodog franchise agreement?
Hydrodog Franchise · 2025 FDDAnswer from 2025 FDD Document
- 21.7 No Collateral Estoppel or Class Actions.
All arbitration findings, conclusions, orders and awards made by the Arbitrators will be final and binding on you and us; however, such arbitration findings, conclusions, orders and awards may not be used to collaterally estop either you or we from raising any like or similar issue or defense in any subsequent arbitration, litigation, court hearing or other proceeding involving third parties, including other franchisees.
You and we agree that no person or entity except you and we, and your and our respective officers, directors, owners and/or personal guarantors will have the right to join in, become a party, litigate or participate in any arbitration proceeding arising under this Agreement, and therefore, you and we specifically agree that the American Arbitration Association and the Arbitrators appointed under the American Arbitration Association procedural rules will not be authorized to permit class actions or to permit any other person or entity to be involved, participate, or be named as a litigating party in any arbitration proceeding or matter brought under this Agreement by you or we or your and our respective officers, directors, owners and/or personal guarantors.
Source: Item 23 — RECEIPTS (FDD pages 43–166)
What This Means (2025 FDD)
According to Hydrodog's 2025 Franchise Disclosure Document, class actions are not permitted in arbitration proceedings. The franchise agreement explicitly states that no person or entity, other than the franchisee and Hydrodog, along with their respective officers, directors, owners, and personal guarantors, has the right to participate in any arbitration proceeding.
Specifically, the agreement emphasizes that the American Arbitration Association and the appointed Arbitrators are not authorized to allow class actions or permit any other person or entity to be involved or named as a litigating party in any arbitration matter brought under the agreement. This means that franchisees are restricted from joining together to pursue collective claims against Hydrodog through arbitration.
This clause ensures that disputes are handled on an individual basis, preventing franchisees from consolidating their claims into a single, larger action. While this may limit a franchisee's ability to share resources and potentially reduce legal costs through a class action, it also protects Hydrodog from facing large-scale, multi-claimant arbitration proceedings. This is a fairly common practice in franchising, as franchisors often prefer to handle disputes individually to maintain control over the resolution process and minimize potential financial exposure.