A district court in Arizona granted a franchisor’s motion to transfer venue to Missouri pursuant to the terms of the franchise agreement.
S&G Elite LLC (“S&G”) and ST National Franchising, LLC (“Franchisor”) entered into a franchise agreement in March 2023 for the operation of a franchised “The Mail Center” location in Tucson, Arizona. The franchise agreement contained a forum selection clause, which provided that the venue and jurisdiction for any claims would be in the state and federal court nearest to Franchisor’s corporate headquarters, located in Kansas City, Missouri at the time of execution.
S&G filed claims against Franchisor for fraudulent inducement, breach of contract, and breach of the covenant of good faith and fair dealing in federal court in Arizona. Franchisor filed a motion to transfer venue, arguing the forum selection clause in the Franchise Agreement is mandatory and requires all disputes to be litigated in the state or federal courts nearest Franchisor’s corporate headquarters in Kansas City, Missouri.
While a civil action may be brought where any defendant resides, if all defendants are residents of the same state, or where a substantial part of the events or omissions giving rise to the claim occurred, a district court may transfer an action to any district where all the parties have consented. As such, forum selection clauses are given controlling weight in all but the most exceptional cases.
S&G argued that its case was exceptional, in that transferring its case to Missouri would not be more equitable or fair. It claimed the franchise agreement, including the forum selection clause, was fraudulently induced by Franchisor based on false promises regarding the franchise’s profitability and reputation.
The court determined that S&G failed to show that enforcement of the forum selection clause would be unjust or unreasonable and that the general allegations of misrepresentation of the franchise’s profitability and reputation were insufficient to invalidate the forum selection clause. Therefore, the court held the forum selection clause was valid and enforceable.
Forum selection clauses are common tools for franchisors to determine where an action may be brought. Franchisors should consult with counsel to ensure their franchise agreements contain enforceable forum selection clauses.
S&G Elite LLC v. ST National Franchising, LLC, No. CV-25-00037-TUC-RM (D. Ariz. Feb. 13, 2025)
