Under the Carls agreement, what state's laws govern the agreement, and where is the exclusive jurisdiction and venue for dispute resolution?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
22. GOVERNING LAW, FORUM AND LIMITATIONS
- A. This Agreement and any claim or controversy arising out of, or relating to, rights and obligations of the parties under this Agreement and any other claim or controversy between the parties shall be governed by and construed in accordance with the laws of the State of Tennessee without regard to conflicts of laws principles.
Nothing in this Section is intended, or shall be deemed, to make any Tennessee law regulating the offer or sale of franchises or the franchise relationship applicable to this Agreement if such law would not otherwise be applicable.
- B. The parties agree that, to the extent any disputes cannot be resolved directly between them, Developer shall file any suit against CJR only in the federal or state court having jurisdiction where CJR's principal offices are located at the time suit is filed.
CJR may file suit in the federal or state court located in the jurisdiction where its principal offices are located at the time suit is filed or in the jurisdiction where Developer resides or does business or where the Development Territory or any Franchised Restaurant is or was located or where the claim arose.
Developer consents to the personal jurisdiction of those courts over Developer and to venue in those courts.
- C. Except for payments owed by one party to the other, and unless prohibited by applicable law, any legal action or proceeding (including the offer and sale of a franchise to Developer) brought or instituted with respect to any dispute arising from or related to this Agreement or with respect to any breach of the terms of this Agreement must be brought or instituted within a period of 2 years after the initial occurrence of any act or omission that is the basis of the legal action or proceeding, whenever discovered.
Source: Item 23 — RECEIPTS (FDD pages 80–480)
What This Means (2024 FDD)
According to Carls's 2024 Franchise Disclosure Document, the franchise agreement is governed by the laws of Tennessee, without regard to its conflict of laws principles. This means that Tennessee law will be used to interpret the agreement, unless those laws would normally defer to another jurisdiction. However, the FDD specifies that this does not mean that Tennessee franchise laws apply if they wouldn't otherwise.
For dispute resolution, a franchisee must file suit against Carls only in the federal or state court having jurisdiction where Carls's principal offices are located at the time the suit is filed. Carls, however, has more flexibility. Carls may file suit against the franchisee in the federal or state court where its principal offices are located, where the franchisee resides or does business, where any franchised restaurant is or was located, or where the claim arose. The franchisee consents to the personal jurisdiction and venue of these courts.
However, there are exceptions to this rule for franchisees in certain states. For example, Minnesota statutes prohibit Carls from requiring litigation to be conducted outside of Minnesota, or reducing a franchisee's rights to any procedure, forum, or remedies provided by the laws of the jurisdiction. Similarly, for Washington franchisees, the Washington Franchise Investment Protection Act will prevail in the event of a conflict of laws. In any arbitration or mediation involving a franchise purchased in Washington, the arbitration or mediation site will be either in the state of Washington, or in a place mutually agreed upon at the time of the arbitration or mediation, or as determined by the arbitrator or mediator at the time of arbitration or mediation. In addition, if litigation is not precluded by the franchise agreement, a franchisee may bring an action or proceeding arising out of or in connection with the sale of franchises, or a violation of the Washington Franchise Investment Protection Act, in Washington.