The Franchise Memorandum

A Missouri federal court denied a motion to dismiss for improper venue filed by a group of franchisees , finding the franchisor had properly filed in Missouri, where its home offices are based.  The case is Hardee’s Food Systems, Inc. v. Hallbeck, et al., No. 4:09-cv-664 (E.D. Mo. Mar. 22, 2010).  Gray Plant Mooty assisted Hardee’s in opposing the motion. Hardee’s sued for breach of contract and of personal guarantees after the franchisees, all residents of Wisconsin, closed one of their restaurants in Ottawa, Illinois, before the expiration of its term.  The franchisees filed a motion to dismiss or to transfer venue of the case to the Northern District of Illinois, contending that the counterclaims they intended to assert all relate to Hardee’s performance in Illinois and involve Illinois witnesses. 

The court rejected the franchisees’ argument, noting that there is a substantial connection between the Eastern District of Missouri and the claims, as there were numerous communications between the parties that originated in or were directed to Hardee’s home office in St. Louis, Missouri.  The court also found that the franchisees’ proposed counterclaims alleging lack of business support and poor business and advertising decisionmaking on Hardee’s part relate to decisions made by Hardee’s in Missouri.  The court refused to consider the franchisees’ argument that the forum selection clause in the franchise agreement was barred by the Illinois Franchise Disclosure Act, because Hardee’s chose expressly not to rely upon the clause in asserting that its choice of venue was proper under federal venue statute.