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The Franchise Memorandum

Court Holds Nonexclusive Forum Selection Provision Is Not Barred by the Minnesota Franchise Act

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 lawsuit, SB argued that the addendum to the license agreement, which referenced the Minnesota Franchise Act, created a valid forum selection clause that required the litigation to take place in Minnesota.

The court rejected this interpretation of the agreement, noting that SB's consent to nonexclusive jurisdiction in New Jersey did not require litigation to occur there, but merely allowed it. The court further noted that the Minnesota Franchise Act ensures only that Minnesota franchisees have the right to bring their own lawsuits in that state, regardless of any attempt in a licensing agreement to waive that right. After reviewing the Minnesota Franchise Act in combination with the nonexclusive jurisdiction provided in the license agreement, the court concluded that both New Jersey and Minnesota were proper forums, and for that reason denied SB's motion to dismiss. In response to SB's alternative request for a transfer of venue to Minnesota, the court noted that both states' interests in the action were equal, and because SB did not present evidence that a change in venue from New Jersey to Minnesota would do anything other than shift the inconvenience of litigating in a different state from it to Ramada, the court concluded that no transfer was warranted.

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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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