You be the Judge: Franchise

If you operate a franchise, this may interest you.

Franchisees are sometimes at a disadvantage when disputes develop with their franchisors.  New Jersey recognized this and enacted the New Jersey Franchise practice Act (NJFPA) years ago to protect franchisees from abuse.

The NJFPA specifically provided that franchisees could institute suit against franchisors in the Superior Court in New Jersey to recover damages or injunctive relief for a violation of the NJFPA.

Often franchise agreements require disputes with the franchisor be exclusively adjudicated in foreign jurisdictions convenient to the franchisor. 

YOU BE THE JUDGE: Can a franchisee be compelled to arbitrate disputes with a franchisor in an inconvenient place designated in a franchise agreement?

New Jersey courts have held these forum-selection clauses are presumptively invalid because they conflict with the purpose of the NJFPA to protect New Jersey franchisees..

Recently, a judge of the Chancery Division examined a franchise agreement with a different wrinkle--the agreement provided that disputes be exclusively determined in arbitration in Minnesota under the Federal Arbitration Act.  Because federal law--and not New Jersey law--was invoked, the judge held the forum-selection clause was not presumptively invalid. 

The judge held that a franchisee could still attack the forum-selection clause under basic contract principles.  However, in the case under consideration, the franchisee had not shown any reason to avoid arbitration in Minnesota.

The decision points out that a courtroom can bring justice and may be the only way to protect your rights. We know courtrooms; we have harnessed the power of the law in courtrooms to bring justice for our clients for decades. Please contact us to discuss how we can help you in a new lawsuit or provide a "second opinion" about your pending lawsuit. There is no obligation for the initial consultation.