In a case reminiscent of a man-bites-dog story, a franchisor’s action to enforce its post-term restrictive covenant was recently dismissed for being in violation of its own forum selection clause. TGA Premier Junior Golf Franchise v. BP Bevins Golf, C.A. No. 12-4321 (D.N.J. Oct. 12, 2012), concerns a franchisor’s unremarkable decision to waive its contractual right to sue in California and instead bring suit in New Jersey against its former New Jersey franchisee. By all accounts, the franchisee always operated in New Jersey, was allegedly competing in New Jersey and had no relationship whatsoever with California other than it being where the franchisor was located.
There are many reasons why a franchisor might elect not to sue in its home forum, including a desire to avoid the time and cost of opposing a transfer motion based on it being unfair or oppressive to force a franchisee to travel great distances to defend itself. State franchise laws that prohibit out-of-state litigation may also sway a franchisor to disregard its forum selection clause. (See e.g., Cal. Bus. & Prof. Code § 20040.5 (voiding any provision in a franchise agreement requiring a California franchisee to litigate outside of California); Kubis & Persyzky Assoc. v. Sun Microsystems, 146 N.J. 176 (1996) (holding that forum selection clauses in franchise agreement are presumptively invalid under New Jersey Franchise Practices Act).) Substantive law also can play a role, especially where, as in TGA Premier, the selected forum (California) is generally hostile to the claim being asserted. (See Cal. Bus. & Prof. Code § 16600 (generally prohibiting enforcement of noncompetition covenants).)
