The Franchise Memorandum

A federal court in Connecticut enforced the choice of law provision in a master franchise agreement entered into with the franchisor’s predecessor. Purugganan v. AFC Franchising, LLC, 2021 WL 723916 (D. Conn. Feb. 24, 2021). Plaintiff Danilo Purugganan was a master franchisee of Doctors Express. He developed and managed Doctors Express Urgent Care franchises in New York and Connecticut. Defendant AFC Franchising later acquired Doctors Express, and Purugganan’s Master Developer Agreement (MDA) was assigned to AFC. Years after this acquisition, AFC made plans to purchase four franchises in Purugganan’s territory, and he sued AFC in Connecticut to stop the purchases. AFC sought to dismiss the lawsuit, arguing that the choice of forum clause required lawsuits to be brought in the same location as its principal place of business in Alabama. In an earlier decision, the court denied the motion, concluding that the choice of forum did not give Purugganan notice that it would “float” with a successor franchisor. AFC thereafter moved for judgment on the pleadings as to many of Purugganan’s claims on the basis of the MDA’s choice of law provision.

Unlike the choice of forum provision, the court did enforce the choice of law provision selecting the law of Maryland to govern the dispute. The court rejected Purugganan’s argument that the choice of law provision was unenforceable because neither he nor AFC has any relationship to Maryland. The fact that Doctors Express was a Maryland resident when the MDA was formed supplied a sufficient relationship at the time of formation, and AFC stands in its predecessor’s shoes for the purposes of the MDA. Having determined that Maryland law applied to Purugganan’s contract-based claims, the court granted AFC judgment on the pleadings as to several of them. It found that the application of Maryland law precluded Purugganan’s Connecticut Unfair Trade Practices Act claim; that Maryland law subsumed his bad faith, promissory estoppel, and UCC claims under his breach of contract claim; and that his claims for tortious interference with contract and prospective economic relations could not be maintained under Maryland law because AFC was a party to the relevant contracts and economic relationships. The court also granted AFC judgment on the pleadings as to Purugganan’s claims for violation of the Sherman Act and Connecticut Franchise Act, and his claim for abuse of process.