The Franchise Memorandum

The Fifth Circuit Court of Appeals recently affirmed the enforcement of a jury trial waiver against a franchisee. Pizza Hut L.L.C. v. Pandya, 79 F.4th 535 (5th Cir. Aug. 22, 2023). Pizza Hut originally filed suit against franchisee Jignesh Pandya and his entities, alleging various breach of contract and intellectual property claims. Pandya counterclaimed, alleging breach of contract and various tort claims, and later demanded a jury trial. Pizza Hut moved to strike Pandya's jury demand based on a jury trial waiver in a transfer agreement entered into by the parties. Pandya countered that the jury trial waiver was invalid because the transfer agreement was procured by fraud. The district court enforced the jury trial waiver because: (1) the parties had relatively equal bargaining power; (2) Pandya is an experienced businessman; (3) Pandya had an opportunity to negotiate the transfer agreement’s terms; and (4) the jury trial waiver was conspicuously placed in the short contract. Pandya appealed.

On appeal, the Fifth Circuit affirmed. First, the court held that Pandya’s fraud claim did not invalidate the jury trial waiver since Pandya failed to allege that the jury trial waiver itself was procured by fraud. Second, the court of appeals found that the record supported the district court’s determination that Pandya negotiated the terms of the transfer agreement, including the fact that the waiver provision was mutual. Third, the waiver was conspicuous, the court determined, since it was on the last page of a short agreement and Pandya had circled it. Fourth, the court rejected Pandya’s arguments that there was unfair bargaining power and that Pizza Hut did not prove that he had sufficient business acumen, based on the facts that Pandya was an operator of 43 franchised restaurants and stated in his own complaint that he was a “well-known and successful businessman with multiple companies.” Finally, the Fifth Circuit held that the scope of the jury trial waiver expressly applied to any litigation between the parties.