Skip to main content

Park Inn International, L.L.C. v. Mody Enterprises, Inc.

99-4415 (U.S. Dist. Ct. D. N.J. 2000) (Unpublished)

FRANCHISES; FORUM SELECTION—New Jersey public policy does not require setting aside a forum selection contract clause that establishes jurisdiction in a state other than where the franchised business operates if the franchised business is not in New Jersey.

The operator of four hotels in New Mexico operated one of them under a franchisor’s service mark pursuant to a franchise agreement. That agreement contained the following provision: “This agreement will be construed in accordance with the laws of the State of New Jersey.” The franchisee also consented to non-exclusive personal jurisdiction of courts in the State of New Jersey and waived objection to venue there. The franchisee argued that this was a standard form agreement whose venue term had not been negotiated. Further, the franchisee argued that its principal, not being fluent in the English language, did not read the agreement carefully before signing. The federal court followed the basic rule that the validity of a forum selection clause is to be evaluated under state law. In New Jersey, outside of Franchise Practices Act cases, state courts routinely find forum selection clauses prima facie valid and enforceable. This substantially mirrors their favorable treatment in federal courts. The franchisee argued that because New Jersey law would invalidate a forum selection clause in a franchise agreement if that clause chose a venue other than New Jersey, it should invalidate the selection of New Jersey in a franchise agreement as the appropriate venue for a business outside of New Jersey. The Court rejected this argument, pointing out that the policies of New Jersey are only to ensure that New Jersey franchisees have the benefit of a local forum. But, as the Court pointed out, this hotel franchise was not subject to the New Jersey act because the performance of the agreement did not require that the hotel be located within the State of New Jersey. Consequently, New Jersey’s case law was of no application. To extend New Jersey’s “presumption of invalidity to an out-of-state franchisee’s agreement to a litigant in [New Jersey] would have no basis in New Jersey public policy, would not further the purpose of the statute, and would be unwarranted.” Further, unlike some other jurisdictional bars, “personal jurisdiction can be waived by the parties.” Lastly, failure to read a contract “will not excuse a party who signs it nor would the party’s ignorance of the its obligation.”

66 Park Street • Montclair, New Jersey 07042
tel: 973-783-3000 • fax: 973-744-5757 •