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The Franchise Memorandum

Posts in Choice of Forum/Venue.

A federal court in Missouri recently granted a franchisor’s motion to dismiss and enforced the franchise agreement’s forum selection provision. Fogle Enters. v. CiCi Enters., 2022 WL 5246446 (W.D. Mo. Oct. 6, 2022).

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A federal court in Virginia held void a franchise agreement’s forum selection provision and granted a franchisee’s motion to transfer the case to California. JTH Tax, LLC v. Leggat, 2022 WL 3970197 (E.D. Va. Aug. 31, 2022).

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The Eleventh Circuit Court of Appeals recently reversed a lower court’s dismissal for lack of jurisdiction, upholding a floating forum selection clause in a franchise agreement. AFC Franchising, LLC v. Purugganan, 43 F.4th 1285 (11th Cir. 2022).

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A federal court in New Jersey refused to dismiss a counterclaim filed in violation of a contractual forum selection provision because, even though the provision was mandatory and enforceable, the plaintiff’s filing of the initial complaint waived the right to enforce it. The Indian Express Private Ltd. v. Hali, 2022 WL 154354 (D.N.J. Jan. 18, 2022).

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The Sixth Circuit Court of Appeals ruled that a forum selection clause in a franchise agreement was unenforceable. Lakeside Surfaces, Inc. v. Cambria Co., LLC, --- F.4th ---, 2021 WL 4807182 (6th Cir. Apr. 20, 2021).

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The Eighth Circuit Court of Appeals reversed a district court’s dismissal of a lawsuit against a franchisor based on the doctrine of forum non conveniens. Estate of I.E.H. v. CKE Rests. Holdings, Inc., 2021 WL 1653036 (8th Cir. Apr. 28, 2021).

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A federal court in Colorado held that entities controlled by former franchisees were bound by the forum selection clauses in the franchisees’ terminated franchise agreements. Fitness Together Franchise, LLC v. EM Fitness, LLC, 2020 WL 6119470 (D. Colo. Oct. 16, 2020). EM Fitness and related franchiseedefendants operated several Fitness Together franchises in Ohio under franchise agreements that contained post-termination noncompetition and Colorado forum selection clauses. The franchiseedefendants negotiated the early termination of their franchise agreements ...

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A federal court granted a motion to transfer venue of a distributor’s claims from the Eastern District of Michigan to the Central District of California. Complete Med. Sales, Inc. v. Genoray Am., Inc., 2020 WL 4013306 (E.D. Mich. July 16, 2020). Complete Medical Services had entered into a distribution agreement with Genoray America to sell Genoray America’s manufactured medical diagnostic equipment. The parties also entered into a dealer policy which, among other things, specified that “any case of dispute or legal cases will follow the law of the state of California ...

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A federal court in Pennsylvania recently transferred a franchise dispute to Delaware pursuant to the franchise agreement’s forum selection clause, even though some defendants were not party to the agreement. Sweet Charlie’s Franchising, LLC v. Sweet Moo’s Rolled Ice Cream, LLC, 2020 WL 3405769 (E.D. Pa. June 19, 2020). Franchisor Sweet Charlie’s brought an action against a franchisee, Peter Aguib, and other third-parties (collectively, “Aguib”), alleging misappropriation of confidential information that Aguib gained while attending a training program for ...

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A federal court in Connecticut has ruled that a franchisor’s successor-in-interest cannot invoke a choice of venue provision in an agreement that refers to its predecessor’s principal place of business. Purugganan v. AFC Franchising, LLC, 2020 WL 2494718 (D. Conn. May 13, 2020). Purugganan entered into the Master Development Agreement with AFC’s predecessor-in-interest, Doctors Express Franchising LLC, to obtain exclusive rights to develop franchises in two New York counties and one county in Connecticut. Purugganan alleged AFC was not honoring the Master ...

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A federal court in Michigan recently dismissed a complaint filed by a distributor against its former manufacturer, rejecting the application of Michigan franchise laws and enforcing the choice of a Minnesota forum in the agreements between the parties. Lakeside Surfaces, Inc. v. Cambria Co., 2020 WL 1227047 (W.D. Mich. Mar. 13, 2020). Lakeside is a Michigan countertop distributor; Cambria is a Minnesota manufacturer of countertops. Cambria unilaterally terminated the relationship between the two over a disagreement concerning Lakeside’s offering of non-Cambria ...

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A hotel guest has sued a Turkish franchisee and several Wyndham entities in Delaware federal court, alleging she was sexually assaulted during her stay at a franchised Wyndham hotel in Istanbul. Roe v. Wyndham Worldwide, Inc., 2020 WL 707371 (D. Del. Feb. 12, 2020). The Wyndham defendants moved to dismiss the negligence and vicarious liability claims against them, arguing both that that the doctrine of forum nonconveniens barred litigation in the United States and that the guest had failed to state a valid claim against them. The court denied both grounds for dismissal.

In evaluating ...

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A federal court in Tennessee granted a manufacturer’s motion to transfer venue under a forum selection clause. C&S Outdoor Power Equip., Inc. v. ODES Indus. LLC, 2019 WL 4197608 (W.D. Tenn. Sept. 4, 2019). ODES manufactured vehicles and entered into an agreement with C&S Outdoor Power Equipment authorizing it as a dealer for ODES’s vehicles. The franchise agreement between ODES and C&S contained a forum selection clause which stated that any litigation relating to the agreement “shall exclusively be filed in a State or District court in (venue) Fort Worth, Texas, and each ...

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A federal court in Florida dismissed a challenge to the validity of the forum selection clause in Burger King Corporation’s franchise agreement. Capital Rest. Grp., LLC v. Burger King Corp., 2019 WL 5102162 (S.D. Fla. Oct. 11, 2019). Plaintiff Capital Restaurant Group brought a declaratory judgment suit against Burger King in federal court, noting that it wished to sue Burger King for a number of state claims in Florida state court, but was prohibited from doing so under the forum selection clause. Capital Restaurant Group asked for a declaration regarding the validity of that ...

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A federal district court has granted summary judgment in favor of franchisor CK Franchising, Inc. (Comfort Keepers) enforcing the forum-selection clause in the parties’ arbitration agreement. CK Franchising, Inc. v. SAS Servs. Inc., 2019 WL 3006546 (E.D. Ky. July 10, 2019). SAS Services had been a Comfort Keepers franchisee in the Somerset, Kentucky area since 2007. In April 2017, SAS signed a renewal franchise agreement containing forum-selection clauses that closely resembled the ADR provisions in the parties’ 2007 agreement. Specifically, the agreement required ...

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A Michigan federal court denied a motion by the defendant franchisees to dismiss or, in the alternative, transfer venue in an action brought by Little Caesar to enforce the termination of the parties’ franchise agreements. Little Caesar Enters., Inc. v. Miramar Quick Service Rest. Corp., 2018 WL 6002511 (E.D. Mich. Nov. 15, 2018). Gray Plant Mooty represents Little Caesar in this matter. In their motion, the Massachusetts‐ and Connecticut‐based franchisees argued that a Michigan venue was either improper or overwhelmingly inconvenient because the events giving rise to ...

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A federal district court in Nevada transferred a franchisee’s lawsuit against a franchisor to another district court in which the franchisor had filed suit against the franchisee just hours earlier. Khutob v. L.A. Ins. Agency Franchising, LLC, 2018 WL 4286171 (D. Nev. Sept. 8, 2018). When a dispute arose between the parties and settlement negotiations broke down, the franchisor, L.A. Insurance Agency (LAIA), filed suit against the franchisee, Khutob, in the U.S. District Court for the Eastern District of Michigan. Later that same day, Khutob filed a parallel lawsuit against ...

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A South Carolina federal court has denied a franchisee’s motion to dismiss for improper venue, as well as the franchisee’s alternative motion to transfer venue, based on a forum selection clause in the parties’ franchise agreement. ARCpoint Fin. Grp., LLC v. Blue Eyed Bull Inv. Corp. (BEBIC), 2018 WL 2971205 (D.S.C. June 13, 2018). In denying franchisee BEBIC’s motion to dismiss for improper venue, the court held that franchisor ARCpoint had made a prima facie showing that venue was proper because a substantial part of the events giving rise to its claims occurred within the ...

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A district court in Missouri recently held that a forum selection clause did not survive the mutual termination of a franchise agreement. Serv. Team of Prof’ls, Inc. v. Folks, 2018 WL 2051516 (W.D. Mo. May 2, 2018). The parties had previously entered into a franchise agreement with a forum selection clause dictating that all actions be brought in Kansas City, Missouri. Following a dispute between the parties, they agreed to terminate the franchise agreement and enter into a settlement agreement. The settlement agreement provided that except for certain post-termination ...

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A series of agreements between a franchisee operating in Buffalo, New York, and Dollar Rent-a-Car and Hertz included a floating forum selection clause. The clause provided that the franchisee consented to jurisdiction in the district court where the principal place of business of the franchisor is located. When the relationship between the parties soured, Dollar Rent-a-Car and Hertz filed an action in Florida against franchisee Westover Car Rental for breach of the license agreements and associated personal guarantees. Dollar Rent a Car, Inc. v. Westover Car Rental, LLC, 2017 WL ...

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In ServiceMaster of Fairfax, Inc. v. ServiceMaster Residential/Commercial Services, L.P., 2017 WL 3023342 (D. Md. July 17, 2017), a multi-unit franchisee brought suit against ServiceMaster in Maryland state court for, among other things, violations of Maryland's franchise disclosure laws. ServiceMaster removed the case to federal court in Maryland and moved to transfer the case to the United States District Court for the Western District of Tennessee pursuant to the forum selection clause contained in the parties’ franchise agreements. Gray Plant Mooty represented ...

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A Wisconsin federal court recently granted a manufacturer's motion to transfer venue on the basis of a forum selection clause contained in the parties' distribution agreement. Brava Salon Specialists, LLC v. Label.M USA, Inc., 2016 WL 632649 (W.D. Wis. Feb. 16, 2016). Brava had filed suit against the manufacturer, Label.M, in state court and raised claims for breach of contract and violations of the Wisconsin Fair Dealership Law ("WFDL"). After removing the case to federal court in Wisconsin, Label.M moved to transfer the case to the Southern District of Florida on the grounds the ...

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The United States District Court for the Eastern District of North Carolina has granted a hotel franchisor's motion to transfer venue based on the forum selection clause in the parties' franchise agreement. Generation Companies, LLC v. Holiday Hospitality Franchising, LLC, 2015 WL 7306448 (E.D.N.C. Nov. 19, 2015). Generation, a franchisee of the Staybridge Suites brand, brought suit alleging that Holiday Hospitality (the franchisor of the Staybridge Suites system) was liable for tortious interference with contract, slander, and unfair trade practices as a result of its ...

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The United States District Court for the Eastern District of Arkansas recently held that a forum selection clause in a series of franchise agreements was enforceable and did not violate Arkansas public policy. Ajax Holdings, LLC v. Comet Cleaners Franchise Grp., LLC, 2015 WL 5898310 (E.D. Ark. Oct. 9, 2015). Ajax and Comet Cleaners entered into a series of franchise agreements for Ajax to operate Comet Cleaners dry cleaning and laundry businesses. Under the franchise agreements, the parties agreed to bring all lawsuits arising from or relating to the agreements in the state or ...

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The United States Court of Appeals for the First Circuit recently affirmed a decision enforcing a forum selection clause contained in sales invoices that partially governed the relationship between a manufacturer and its local retailer. Carter's of New Bedford, Inc. v. Nike, Inc., 2015 U.S. App. LEXIS 10692 (1st Cir. June 24, 2015). The dispute arose when Nike notified Carter's, a clothing and footwear business located in Massachusetts and longtime retailer of Nike products, that it was terminating the parties' relationship. When Carter's brought suit in Massachusetts seeking ...

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In Ramada Worldwide, Inc. v. SB Hotel Management Inc., 2015 U.S. Dist. LEXIS 20955 (D.N.J. Feb. 23, 2015), a federal court in New Jersey denied a franchisee's attempt to dismiss the complaint for improper venue or, alternatively, transfer the case to Minnesota. Ramada brought an action against the franchisee, SB, in New Jersey federal court for breach of a license agreement for the operation of a Ramada Inn located in Wisconsin. In the license agreement, SB consented to the nonexclusive jurisdiction of the New Jersey courts for any dispute between the parties. In response to the ...

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The federal district court in South Dakota recently denied a defendant's motion to reconsider an order invalidating a forum-selection clause because it violated the public policy of the forum state. Black Hills Truck & Trailer, Inc. v. MAC Trailer Mfg., Inc., 2014 U.S. Dist. LEXIS 157968 (D.S.D. Nov. 6, 2014). MAC moved the court to transfer the litigation to the Northern District of Ohio based on a mandatory forum-selection clause in a distribution agreement between the parties. The court held that South Dakota's strong public policy rendered the forum-selection clause ...

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In a franchise termination case, a federal district court recently enforced a Florida forum selection clause and denied the franchisee's motion to transfer the action to a California federal court where the franchisee had amended its complaint in a previously-filed action to add claims directly challenging the termination. The parties in Benjamin Franklin Franchising, LLC v. On Time Plumbers, Inc., 2014 U.S. Dist. LEXIS 131800 (N.D. Fla. Sept. 19, 2014), had entered into a BFF plumbing services franchise agreement that contained a Florida forum selection clause. The franchise ...

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A federal court in Puerto Rico granted a franchisor's motion to transfer a case to the United States District Court for the Southern District of Florida based on the forum selection clause in the franchise agreements. Caribbean Rests., LLC v. Burger King Corp., 2014 U.S. Dist. LEXIS 76352 (D.P.R. June 3, 2014). Burger King and Caribbean Restaurants entered into 182 franchise agreements for Burger King restaurants located throughout Puerto Rico. When Burger King attempted to assert control over Caribbean's expenditure of funds for advertising, promotion, and public relations, by ...

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The Texas Court of Appeals recently affirmed a trial court’s ruling that a franchise agreement’s forum-selection clause was enforceable against a guarantor who had not signed the agreement. Pritchett v. Gold’s Gym Franchising, LLC, 2014 Tex. App. LEXIS 1281 (Tex. Ct. App. Feb. 4, 2014). The forum-selection clause at issue designated Texas as the exclusive venue for disputes. Pritchett, a guarantor to the franchise agreement who owned a 50% interest in the corporate franchisee, argued that the Texas court lacked personal jurisdiction over him because he did not conduct ...

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A federal court granted a franchisor’s motion to dismiss for improper venue in Musavi v. Burger King Corp., 2013 U.S. Dist. LEXIS 154467 (C.D. Cal. Oct. 25, 2013). After Burger King terminated Musavi’s franchise agreements, the parties entered into a Limited License Agreement that permitted Musavi to operate the terminated franchises for a limited time until they could be sold. After the franchises failed to sell, Musavi filed suit in California, where his franchises were located, and challenged the enforceability of the Agreement. Burger King moved to dismiss or transfer ...

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Although the Minnesota Franchise Act (“MFA”) may preclude an out of state franchisor from using a forum selection clause to prevent a Minnesota franchisee from filing a lawsuit in Minnesota, a New Jersey federal court ruled recently that the MFA does not mandate that all litigation involving Minnesota franchisees must be venued in Minnesota. In Ramada Worldwide, Inc. v. Grand Rios Investments, LLC, 2013 U.S. Dist. LEXIS 152140 (D.N.J. Oct. 23, 2013), Ramada initiated litigation in its home state of New Jersey against a Minnesota-based franchisee. The franchisee argued that ...

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The United States District Court for the District of New Jersey recently denied a franchisor’s motion to dismiss based on an area development agreement’s forum selection clause, on the ground that the contract had created a “franchise” and controlling state law did not enforce such clauses against New Jersey franchisees. The parties in Navraj Restaurant Group, LLC v. Panchero’s Franchise Corp., 2013 U.S. Dist. LEXIS 115199 (D.N.J. Aug. 14, 2013), had entered into an area development agreement under which the developer had the right to recruit and solicit franchisees in ...

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The United States District Court for the Eastern District of Pennsylvania has denied a motion to transfer filed by California franchisee defendants, finding the forum selection clause in their franchise agreement valid and enforceable and concluding that the defendants failed to demonstrate that the action should be moved to the Northern District of California. Maaco Franchising, Inc. v. Tainter, 2012 U.S. Dist. LEXIS 80790 (E.D. Pa. June 6, 2013). Franchisor Maaco filed the action asserting breaches of the franchise agreement. The agreement contained a choice-of-law ...

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When two franchise agreements contained contradictory choice-of-law and forum selection clauses, the United States District Court for the Northern District of Ohio decided that Pennsylvania law should control, but that it had personal jurisdiction over the franchisee and Ohio was the appropriate forum. Mgmt. Recruiters Int’l, Inc. v. Corbin, 2013 U.S. Dist. LEXIS 69736 (N.D. Ohio May 16, 2013). In this case, franchisor Management Recruiters International, Inc. brought suit against franchisees Van Corbin and Management Consulting Group, Inc. alleging they owed fees under ...

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The Minnesota federal district court recently transferred to the Northern District of Texas a putative collective action against franchisor Jani-King International and two wholly-owned subsidiaries. Von Brugger v. Jani-King of Minn., Inc., 2013 U.S. Dist. LEXIS 74548 (D. Minn. May 28, 2013). The defendants are Texas corporations headquartered in Texas. Von Brugger, the plaintiff, who worked primarily as an assistant operations manager for Jani-King of Minnesota, claims that the defendants intentionally misclassified him (and other employees) as exempt from the Fair Labor ...

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In Days Inns Worldwide, Inc. v. Royal Hospitality Group, LLC, 2013 U.S. Dist. LEXIS 19464 (D.N.J. Feb. 11, 2013), the United States District Court for the District of New Jersey upheld the validity of a forum selection clause contained in the parties’ franchise agreement. Days Inn terminated the franchise agreement after the franchisees, who were located in California, failed to pay outstanding fees. When Days Inn brought suit in New Jersey for breach of contract, the franchisees moved to dismiss the complaint on the grounds that the court lacked personal jurisdiction over them ...

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A Minnesota federal court has held that a franchisor’s lawsuit was properly filed in its headquarters state because a substantial part of the events giving rise to the claims occurred there. Great Clips, Inc. v. Ross, 2013 U.S. Dist. LEXIS 12530 (D. Minn. Jan. 30, 2013). Great Clips filed the case in Minnesota seeking a declaratory judgment that it did not breach the confidentiality/non-slander clause of a settlement agreement it had signed with a franchisee. In response to the lawsuit, the franchisee moved to dismiss and transfer on the ground that venue was not proper in Minnesota ...

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A federal magistrate judge in Oklahoma recently upheld a forum selection clause found in a dealer agreement in Sundowner Trailers, Inc. v. Snyder Serv., Inc., 2010 U.S. Dist. LEXIS 105183 (E.D. Okla. Sept. 30, 2010). The dispute arose when Synder, a horse trailer dealership, ceased operation and requested that Sundowner, the manufacturer, repurchase all of its unsold equipment and parts at 90-100% of net cost. A Tennessee law requires suppliers to repurchase inventory, at the retailer’s option, in certain situations when the retailer’s contract is terminated. Sundowner ...

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In Terry Delamater, et. al. v. Anytime Fitness, Inc., 2010 U.S. Dist. LEXIS 64126 (E.D. Cal., June 25, 2010), a California federal court granted the franchisor’s motion to dismiss a franchisee’s complaint for declaratory relief that sought to require the parties to mediate in California. The franchisor and the franchisee were parties to several franchise agreements, under which the parties were to engage in mediation at a site selected by the mediation organization before submitting their claims to arbitration or litigation. A dispute arose between the parties, and the ...

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In Webb Candy, Inc. v. Walmart Stores, 2010 U.S. Dist. LEXIS 55985 (D. Minn. June 7, 2010), the court examined the viability of a forum-selection clause after the expiration of the underlying distribution agreements. In this case, Walmart had one-year vendor contracts with two companies that allowed individual stores to buy merchandise directly from those two companies without contacting Walmart’s corporate office. Both of those contracts had expired, but the vendor identification numbers of the companies were still in effect. Webb Candy, a third-party vendor that did not ...

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Taking a broad view of the scope of the California Franchise Relations Act (CFRA), the California Court of Appeal in T-Bird Nevada LLC, et. al. v. Outback Steakhouse, Inc., et al., 2010 Cal. App. Unpub. LEXIS 3610 (Cal. Ct. App. May 17, 2010), voided a Florida forum selection clause in a borrower agreement between Outback Steakhouse and a California developer. The parties had entered into an arrangement under which T-Bird signed off on a multi-million dollar loan to fund Outback’s expansion into California. T-Bird’s owner set up separate companies to act as franchisees for each ...

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In Trakloc Midwest LLC v. Trakloc Int’l, LLC, 2009 WL 4878578 (Wis. App. Dec. 17, 2009), the Wisconsin Court of Appeals affirmed the dismissal for improper venue of a case brought by technology distributor, Trakloc Midwest, against manufacturer Pacific Rollforming. Midwest argued its relationship with Pacific was a franchise relationship and the forum-selection clauses in the contracts violated the Wisconsin Franchise Investment Law (WFIL). Alternatively, Midwest argued that using different forum selection clauses (Alaska and California) in two separate agreements ...

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An Ohio federal court recently granted a franchisor’s motion to transfer venue to Illinois based on the franchise agreement’s forum selection clause. Egrsco, LLC v. Evans Garment Restoration, LLC, 2009 WL 3259432 (S.D. Ohio, Oct. 8, 2009). After the franchisee-plaintiffs suspended the operation of their franchise and sued the franchisor in Ohio, the franchisor moved to transfer venue under the agreement. The plaintiffs argued that the forum selection clause was invalid because: (1) its language was permissive, not mandatory; (2) the franchise agreement was the product of ...

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In a blow to plaintiffs seeking to sue U.S. franchisors in a domestic forum for injuries allegedly incurred at franchised locations outside of the U.S., an Illinois federal court dismissed a lawsuit arising out of the death of an Illinois resident at a franchised hotel in Mexico. In Wozniak v. Wyndham Hotels and Resorts, LLC, 2009 WL 901134 (N.D. Ill. Mar. 31, 2009), an Illinois federal court granted the defendant franchisor’s motion to dismiss under the doctrine of forum non conveniens. The case arose when plaintiff and her husband, who were from Illinois, stayed at a Wyndham hotel ...

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In Luv2bfit, Inc. v. Curves International, Inc., 2008 WL 4443961 (S.D.N.Y. Sept. 29, 2008), a federal court in New York enforced the Texas choice of venue clause in the franchise contracts of a Texas-based franchisor. Several New York franchisees alleged claims related to the purchase of their franchises and the franchisor’s compliance with its franchise agreements. They filed the case in New York, despite a Texas venue provision. The franchisor moved to dismiss for lack of venue or to transfer to Texas.

In granting the franchisor’s motion to transfer, the court first addressed ...

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In July, the United States District Court for the Western District of Kentucky denied a defendant-distributor's motion for a change of venue on a claim brought by a crushing and screening equipment manufacturer that had initiated suit for failure to pay invoices. Powerscreen USA, LLC v. D & L Equipment, Inc., 2008 WL 2944994 (W.D. Ky. July 28, 2008). The court held that where the factors favoring venue in one state or another are basically equal and the forum-selection clauses in the parties' form contracts are conflicting, the plaintiffs' choice of forum was appropriate.

The ...

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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