January 07, 2026|Franchise Frontlines
January 7, 2026 | U.S. District Court, District of Colorado
Executive Summary
In a published decision, Senior District Judge William J. Martínez of the District of Colorado denied a franchisor’s motion to compel arbitration in a personal injury action arising from a trampoline park accident. The plaintiff, acting on behalf of a minor, asserted product liability and negligence claims against the franchisor, which sought to enforce an arbitration provision contained in a release signed with the franchisee. The franchisor argued that the broadly worded agreement applied to all “Protected Parties,” including itself. The plaintiff contended that no arbitration agreement existed between her and the franchisor. The court agreed with the plaintiff, concluding that the arbitration provision applied only to the signatory parties—the participant and the franchisee—and that the franchisor, as a nonsignatory, failed to establish any basis to enforce the agreement.
Relevant Background
The case arose from injuries allegedly sustained by a minor at a trampoline park operating within the Urban Air franchise system. The facility was owned and operated by a franchisee, while the defendant franchisor was alleged to have designed, manufactured, or supplied the equipment at issue. Before entering the park, the child’s parent executed a release and indemnification agreement with the franchisee as a condition of participation.
The release identified multiple entities, including the franchisor, as “Protected Parties” for purposes of liability waivers and indemnification. The agreement also contained a dispute resolution provision requiring arbitration of claims arising out of the participant’s use of the premises or activities. However, the arbitration clause referred specifically to disputes brought by “the parties” to the agreement and included language expressly referencing the participant and the franchisee.
After the lawsuit was filed and removed to federal court, the franchisor moved to compel arbitration, arguing that the claims fell within the scope of the arbitration provision and that it was entitled to enforce the agreement despite not being a signatory.
Decision
The court began by reaffirming that arbitration remains a matter of contract and that a party cannot be compelled to arbitrate absent an agreement to do so. Although federal law favors arbitration, the court emphasized that the Federal Arbitration Act does not expand arbitration beyond the bounds of contract formation. The threshold issue, therefore, was whether an agreement to arbitrate existed between the plaintiff and the franchisor.
Applying Colorado contract law, the court closely examined the language of the release. While the franchisor was expressly included among the “Protected Parties” for purposes of liability and indemnity, the arbitration provision did not extend to those entities. Instead, the agreement consistently framed arbitration as applying to disputes between the “parties,” which the court interpreted—based on the agreement’s structure and preamble—to mean the participant and the franchisee.
The court rejected the franchisor’s attempt to rely on the broader release language to expand the scope of the arbitration clause. It held that inclusion as a protected or indemnified party does not, without more, create contractual rights to compel arbitration. The court further noted that the franchisor failed to meaningfully develop any argument under recognized nonsignatory enforcement doctrines, such as third-party beneficiary status, agency, equitable estoppel, or alter ego. Without invoking or supporting such theories, the franchisor could not bridge the contractual gap.
The court also addressed the franchisor’s argument that the arbitrator should decide arbitrability. It rejected that position, finding no “clear and unmistakable” evidence that the plaintiff agreed to arbitrate arbitrability with the franchisor. Because no agreement to arbitrate existed between those parties in the first instance, there was no basis to delegate threshold questions to an arbitrator.
Having concluded that the franchisor was neither a signatory nor entitled to enforce the arbitration agreement under any recognized theory, the court denied the motion to compel arbitration and allowed the case to proceed in federal court.
Looking Forward
This decision underscores a recurring issue in franchise systems: the disconnect between operational documentation at the unit level and litigation strategy at the brand level. Franchisors frequently rely on customer-facing agreements executed by franchisees, but those agreements do not automatically extend arbitration rights to the franchisor.
The case illustrates how courts will strictly construe arbitration provisions and will not infer rights that are not clearly expressed. For franchisors, the distinction between being included as a “protected party” for liability purposes and being a contracting party to an arbitration agreement is critical. The former may provide substantive defenses, but it does not establish procedural rights to compel arbitration.
The decision also highlights the importance of proactively addressing nonsignatory enforcement theories. Where a franchisor intends to rely on arbitration provisions executed by franchisees, the underlying agreements should be structured to clearly include the franchisor within the scope of the arbitration clause itself or otherwise support enforcement through recognized legal doctrines. Absent that clarity, franchisors risk being forced to litigate in court while related claims against franchisees proceed in arbitration, creating inefficiencies and inconsistent outcomes.
More broadly, this case serves as a reminder that systemwide risk management requires alignment between franchise documentation and litigation posture. Arbitration provisions remain a valuable tool, but their effectiveness depends on careful drafting and a clear articulation of who is entitled to enforce them.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Partner at Buchalter LLP and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
