The Franchise Memorandum

A federal court in Florida recently dismissed a franchisee’s lawsuit sua sponte pursuant to the forum-selection clause in the parties’ franchise agreements, finding the clause valid, mandatory, and enforceable. Kava Culture Franchise Grp. Corp. v. Dar-Jkta Enters. LLC, 2023 WL 3568598 (M.D. Fla. May 18, 2023). Franchisee Kava Culture entered into a franchise agreement with Dar-Jkta Enterprises and a separate franchise agreement with Darrigan Investments. Both franchise agreements provided that the jurisdiction and venue of any lawsuit between the parties shall be in the Lee County Court in Fort Myers, Florida. After Kava Culture filed suit in federal court in Florida, the court issued an order directing Kava Culture to show cause as to why the matter should not be transferred or dismissed. Defendants Dar-Jkta Enterprises and Darrigan Investments initially argued that the forum-selection clause was unenforceable because it was part of an “illegal contract” but changed course in later briefing, agreeing that the court should dismiss the matter because filing suit in the Middle District of Florida did not comply with the forum-selection clause.

The court concluded that the forum-selection clause was valid and enforceable. It rejected Defendants’ initial argument that the forum-selection clause would contravene public policy as illegal under Texas law because there was no indication that inclusion of the forum-selection clause was the product of fraud. It observed that the allegations that the overall franchise agreements are void and unenforceable were not persuasive, and even if the franchise agreements were somehow void, that would not impact the enforceability of the agreed-upon forum-selection clause. The court also concluded that the forum-selection clause was mandatory, not permissive. Despite neither party filing a motion to dismiss for forum non conveniens, the court sua sponte dismissed the case under the doctrine, concluding that Kava Culture failed to carry its burden to establish that the public-interest weighed against filing the case in the agreed upon forum and failed to establish any exceptional circumstances that should overrule a valid forum-selection clause.

*Aubrey Kramer is a Summer Associate for Lathrop GPM who contributed to the writing of this post.