In the event of a dispute with Itan, what is the effect of settlement negotiations on admissibility of evidence in court?
Itan Franchise · 2025 FDDAnswer from 2025 FDD Document
All negotiations and mediation proceedings (including all discovery conducted therein and statements and settlement offers made by either party or the mediator in connection with the mediation): (a) shall be strictly confidential; (b) shall constitute "settlement negotiations" for purposes of federal and state rules of evidence; and (c) shall not be admissible or otherwise used for any purpose in any court or arbitration proceeding (except evidence that would otherwise be discoverable or admissible shall not be excluded from discovery or made inadmissible simply because of its use in mediation). The mediator may not be called as a witness for any purpose in any court proceeding.
Source: Item 23 — RECEIPT (FDD pages 44–190)
What This Means (2025 FDD)
According to Itan's 2025 Franchise Disclosure Document, all negotiations and mediation proceedings are considered settlement negotiations for the purposes of federal and state rules of evidence. This means that any statements, settlement offers, or discovery conducted during these negotiations are strictly confidential and cannot be used as evidence in court or arbitration proceedings. This protection extends to anything said by either party or the mediator during the process.
However, there is an important exception: any evidence that would otherwise be discoverable or admissible does not become excluded simply because it was used in mediation. This ensures that parties cannot hide existing evidence by introducing it in mediation. The mediator is also prohibited from being called as a witness in any court proceeding.
This clause encourages open and honest communication during settlement negotiations, as franchisees can speak freely without fear that their words will be used against them later in court. However, franchisees should still be mindful of the information they disclose, as pre-existing evidence remains discoverable regardless of its use in mediation. Franchisees should seek legal counsel to fully understand the implications of this clause and how it may affect their rights in the event of a dispute with Itan.