The Franchise Memorandum

A federal court in Nevada recently transferred a franchisor’s trademark infringement lawsuit to Illinois, the location of the franchise, declining to rule on the franchisor’s motion for preliminary injunction. Hofbräuhaus of Am., LLC v. Oak Tree Mgmt. Servs., 2023 WL 24179 (D. Nev. Jan. 3, 2023). The parties’ 2017 franchise agreement provided for Illinois choice of law and venue, while the parties’ 2018 franchise agreement had a forum selection and choice-of-law provision in favor of Nevada. In the spring of 2019, Oak Tree Management Services began operating the Hofbräuhaus-branded brewpub franchise in Illinois, but it allegedly defaulted on its obligations by mid-2019. Actions in multiple jurisdictions were then filed, including Hofbräuhaus’s claims in the Nevada action for breach of the franchise agreement and trademark infringement. Hofbräuhaus moved for a preliminary injunction, and Oak Tree moved to transfer or dismiss Hofbräuhaus’s claims in the Nevada action.

The court transferred venue to Illinois federal court “because the likelihood of confusion is in Illinois, and an Illinois court is best positioned to order and enforce injunctive relief if such relief is appropriate.” The court did not discuss the application of the forum-selection clause in the franchise agreement. Instead, the court reached its conclusion by addressing whether convenience and the interests of justice favored transfer. In view of the transfer, the court declined to rule on the motion for a preliminary injunction, holding that those issues should be decided by the transferee court.