The Franchise Memorandum

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 franchise agreements made between the parties. Corbin moved to dismiss, claiming the amount in controversy did not exceed $75,000, Ohio did not have personal jurisdiction over him, and the venue was improper. The court denied Corbin’s motion based on the amount in controversy but requested supplemental briefing for the remaining issues.

In its second opinion, the court denied Corbin’s motion to dismiss based on lack of personal jurisdiction and improper venue. The court focused on the contradictory choice-of-law and forum selection clauses in two franchise agreements: a Contract Staffing Agreement named Ohio as the proper forum and controlling law in arbitration, while a franchise agreement more generally named Pennsylvania as providing the proper forum and controlling law. With regard to the choice-of-law issue, the court reasoned that Pennsylvania law should apply, as the parties’ franchise agreement stipulated that Pennsylvania law would govern “all matters relating to or arising out of the[ir] relationship,” and nothing suggested that Pennsylvania law would be inappropriate under the circumstances. As for the forum selection and personal jurisdiction issues, the court read the agreements together and concluded that permissive language allowed the parties to bring a dispute in either Ohio or Pennsylvania. Accordingly, by signing the agreements, Corbin gave effective consent to personal jurisdiction and venue in the Ohio federal court, making it proper for that court to hear and decide the case so long as it applied Pennsylvania law.