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The Franchise Memorandum

Court Enforces Franchisor’s Forum Selection Clause

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 clause. Burger King moved to dismiss, arguing that the forum selection clause included in the parties’ franchise agreement validly requires all claims be litigated in the Southern District of Florida.

Capital Restaurant Group argued that the forum selection clause is invalid because it expands the federal court’s jurisdiction by circumventing the resident defendant rule found in 28 U.S.C. § 1441(b)(2). The resident defendant rule limits the right of defendants in state court to remove diversity cases if the defendant is from the forum state. The court, however, noted that forum selection clauses are presumptively valid and enforced absent any evidence of fraud, overreaching, or similar inequitable conduct. Relying on the decisions of other district courts for guidance, the court determined that the resident defendant rule is a procedural rule rather than a jurisdictional limitation. Therefore, the plaintiff waived its right to bring claims in state court or rely on the resident defendant rule when it signed the franchise agreement, and the court dismissed the declaratory judgment action.

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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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