(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
KUBIS & PERSZYK ASSOCIATES, INC. V. SUN MICROSYSTEMS, INC., ET AL. (A-104-95)
Argued February 26, 1996 -- Decided July 23, 1996
STEIN, J., writing for a majority of the Court.
In this appeal, the Court addresses the enforceability of forum-selection clauses in franchise
agreements subject to the New Jersey Franchise Practices Act (Franchise Act).
Kubis & Perszyk Associates, Inc., doing business as Entre Computer (Entre), was a New Jersey
corporation founded in 1983. From 1983 to mid-1990, Entre was a franchisee of Entre Computer Centers,
Inc., engaging in the sale of personal computers manufactured by IBM, Compaq, and others.
Sun Microsystems, Inc. is a California corporation engaged in the distribution of computing
technologies, products, and services. Its subsidiary, Sun Microsystems Computer Corp. (Sun Computer), is
primarily responsible for marketing the computer-hardware segment of Sun Microsystems' business.
Allegedly Sun Microsystems and Sun Computer (collectively, Sun) command a large share of the growing
market for computer workstations and servers.
In 1990, Sun solicited Entre to serve as a reseller of Sun products. Entre agreed and became a Sun
distributor. The parties entered into a Value Added Dealer Agreement as of December 21, 1990. That
agreement was superseded as of April 9, 1993, by a new Indirect Value Added Reseller Agreement (IVAR
Agreement). Pursuant to that agreement, Entre was obligated to use its best efforts to promote the sale of
Sun products and to market those products in accordance with the Sun-approved business plan. According
to Entre, sales of Sun products in both 1991 and 1992 constituted over 85" of its total sales.
The IVAR Agreement provided that the parties were independent contractors. The agreement also
provided that any related action would be governed by California law. The contract had a forum-selection
clause, requiring that any suit related to the agreement "be brought exclusively in the United States District
Court for Northern California or the California Superior Court for the County of Santa Clara."
Sun terminated the agreement with Entre in October 1993. Entre alleges that Sun's decision was
without good cause and was precipitated by the actions of Karl E. Holzthum, Elliot Mayo and Robert B.
Klopman (the individual defendants) who were employed by Sun as part of its direct sales force in New
Jersey. Entre sued Sun and the individual defendants in December 1993, alleging in part that the
termination of the IVAR Agreement violated the Franchise Act and that the defendants tortiously interfered
with Entre's business relationships. Entre sought to enjoin termination of its contract, and also sought
damages and counsel fees.
Sun moved for dismissal of the complaint on the basis of the forum-selection clause. Without
addressing whether the underlying contract was subject to the Franchise Act, the Law Division dismissed the
complaint on the basis of the forum-selection clause.
On appeal, the Appellate Division affirmed the dismissal on the condition that the California court
apply New Jersey law if it concluded that the IVAR Agreement constituted a franchise subject to the Act.
The court temporarily enjoined termination of the agreement until the application for injunctive relief could
be filed with and adjudicated by the designated California court.
The Supreme Court granted Entre's petition for certification.
HELD: Forum-selection clauses in franchise agreements are presumptively invalid, and should not be
enforced unless the franchisor can satisfy the burden of proving that such a clause was not imposed
on the franchisee unfairly on the basis of the franchisor's superior bargaining power.
1. Enforceability of the forum-selection clause should be determined prior to final resolution of the question
whether Sun's agreement with Entre constitutes a franchise subject to the Franchise Act. The latter issue
should be resolved on remand by the Law Division, informed by the analysis of the definitional components
of a franchise set forth in Instructional Systems Inc., v. Computer Curriculum Corp.. For purposes of
resolving the enforceability issue, it will be assumed that the Sun-Entre agreement is a franchise subject to
the Franchise Act. (pp. 7-11)
2. The Franchise Act was enacted in an attempt to remedy the effects of unequal bargaining power by
prohibiting the inclusion in the contact of provisions that would relieve franchisors of liability under the Act
or would unfairly prejudice the franchisee in the operation of its franchise. The Franchise Act was amended
in 1989 to effectively invalidate forum-selection clauses in franchise agreements covering automobile
dealerships. The legislative findings persuade the Court that the Legislature considered such clauses in
general to be inimical to the rights afforded all franchisees under the Act. (pp. 11-14)
3. The prevailing approach to the enforceability of forum-selection clauses is based on M/S Bremen v.
Zapata Off-Shore Co., a U.S. Supreme Court case. In Bremen, the Court held that a freely negotiated
forum-selection clause should be enforced unless the resisting party proves that the clause is unreasonable or
enforcement would contravene the strong public policy of the forum in which suit is brought. However,
some courts applying the Bremen standard have determined that forum-selection clauses need not invariably
be honored.
(pp. 14-23)
4. Enforcement of forum-selection clauses in contracts subject to the Franchise Act would substantially
undermine the protections that the Legislature intended to afford to all New Jersey franchisees. Forum-selection clauses in such contracts are presumptively invalid because they fundamentally conflict with the
basic legislative objectives of protecting franchisees from the superior bargaining power of franchisors and
providing swift and effective judicial relief against franchisors that violate the Act. If unchallenged by the
franchisee, a forum-selection clause can materially diminish the rights guaranteed by the Act because the
franchisee must assert those rights in an unfamiliar and distant forum, with out-of-state counsel, and bear the
added expense of litigating in the franchisor's designated forum. (pp. 23-27)
5. Forum selection clauses in franchise agreements are presumptively invalid because the general
enforcement of such clauses would frustrate the legislative purpose of leveling the playing field for
franchisees and preventing their exploitation by franchisors with superior economic resources, and would
substantially circumvent the public policy underlying the Franchise Act. Evidence that the forum-selection
clause was included as part of the standard franchise agreement, without more, is insufficient to overcome
the presumption of invalidity. Unless the franchisor provides persuasive proof that the clause was not
imposed on the franchisee against its will, the clause will not be enforceable. (pp. 27-30)
Judgment of the Appellate Division is REVERSED and the matter is REMANDED to the Law
Division for further proceedings consistent with this opinion.
JUSTICE GARIBALDI, dissenting, in which JUSTICE POLLOCK joins, is of the view that the
plain language of the Franchise Act, as well as the legislative history, provide that forum-selection clauses
should ordinarily be enforced,unless one of the Bremen exceptions apply. Because none of those exceptions
apply in this case, Entre's suit should be dismissed and Entre should pursue its action in California.
JUSTICES HANDLER, O'HERN and COLEMAN join in JUSTICE STEIN's opinion. JUSTICE
GARIBALDI filed a separate dissenting opinion in which JUSTICE POLLOCK joins. CHIEF JUSTICE
WILENTZ did not participate.
SUPREME COURT OF NEW JERSEY
A-
104 September Term 1995
KUBIS & PERSZYK ASSOCIATES, INC.,
d/b/a ENTRE COMPUTER,
Plaintiff-Appellant,
v.
SUN MICROSYSTEMS, INC., SUN
MICROSYSTEMS COMPUTER CORPORATION,
KARL E. HOLZTHUM, ELLIOT MAYO, and
ROBERT B. KLOPMAN,
Defendants-Respondents.
Argued February 26, 1996 -- Decided July 23, 1996
On certification to the Superior Court,
Appellate Division.
Douglas S. Eakeley argued the cause for
appellant (Lowenstein, Sandler, Kohl, Fisher
& Boylan, attorneys; Mr. Eakeley and Maureen
A. Ruane, on the briefs).
Andrew T. Berry argued the cause for
respondents (McCarter & English, attorneys;
Mr. Berry and Teresa L. Moore, on the brief).
The opinion of the Court was delivered by
STEIN, J.
In Instructional Systems, Inc. v. Computer Curriculum Corp.,
130 N.J. 324 (1992), we declined to enforce a provision in a
franchise agreement subject to the New Jersey Franchise Practices
Act, N.J.S.A. 56:10-1 to -15 (Franchise Act), mandating that the
agreement and the relationships of the signatory parties be
governed by California law. We determined that application of
California law to the franchise agreement in issue "would be
contrary to a fundamental policy of [New Jersey] which has a
materially greater interest than [California] in the
determination of the particular issue and which * * * would be
the state of the applicable law in the absence of an effective
choice of law by the parties." Id. at 342 (quoting Restatement
(Second) of Conflict of Laws § 187(2)(b) (1969)).
The franchise agreement involved in this appeal also
provides that it shall be governed by California law, and in the
same sub-paragraph requires that any suit related to the
agreement "be brought exclusively in the United States District
Court for Northern California or the California Superior Court
for the County of Santa Clara." When the franchisor terminated
the agreement in October 1993, the franchisee instituted suit in
the Law Division of the Superior Court of New Jersey, and that
court dismissed the action on the franchisor's motion, holding
that the forum-selection clause was enforceable. In an
unreported opinion, the Appellate Division affirmed the dismissal
on the condition that the California court apply New Jersey law
if it concluded that the agreement between the parties
constituted a franchise subject to the Act, and temporarily
enjoined termination of the agreement until an application for
injunctive relief could be filed with and adjudicated by the
designated California court.
We granted plaintiff's petition for certification,
142 N.J. 571 (1995), to consider the enforceability of forum-selection
clauses in franchise agreements subject to the Act. We reverse.
Plaintiff, Kubis & Perszyk Associates, Inc., doing business as Entre Computer (Entre), was a New Jersey corporation founded in 1983 by its sole owners, Robert Kubis and Benedict Perszyk. From 1983 to mid-1990, Entre was a franchisee of Entre Computer Centers, Inc., engaging in the sale of personal computers manufactured by IBM, Compaq, and other producers.
Defendant Sun Microsystems, Inc. is a California corporation engaged in the distribution of computing technologies, products, and services. Its subsidiary, defendant Sun Microsystems Computer Corp. (Sun Computer), is primarily responsible for marketing the computer-hardware segment of Sun Microsystems' business, including workstations, servers, central processing units, and operating systems. Sun Computer sells its products through a direct sales force as well as through indirect resellers. Allegedly, Sun Microsystems and Sun Computer (collectively "Sun") command a large share of the growing market for computer workstations and servers. Sun maintains three New Jersey offices.
Sun solicited Entre in 1990 to serve as a reseller of Sun products. Entre elected to become a Sun distributor, committing itself to de-emphasizing the sale of personal computers to concentrate on marketing Sun's more sophisticated workstations and operating systems. Sun and Entre entered into a Value Added Dealer Agreement as of December 21, 1990. That agreement was superseded as of April 9, 1993, by a new Indirect Value Added
Reseller Agreement (IVAR Agreement). Pursuant to the IVAR
Agreement, Entre was obligated to use its best efforts to promote
the sale of Sun products and to market those products in
accordance with a Sun-approved business plan. Entre agreed to
maintain a prescribed inventory of Sun demonstration products at
its sales office, and to employ a Sun-trained sales
representative and systems engineer. Entre was also authorized
to distribute and sub-license Sun software for use on Sun Central
Processing Units sold to Entre customers, and to use the Sun
Value Added Reseller logo and Sun trademarks in its advertising
and marketing materials. Entre alleges that its sales of Sun
products totaled $4,866,490.23 in 1991, constituting 86.3" of
Entre's total sales, and $4,052,479.07 in 1992, comprising 85.7" of Entre's sales.
The IVAR Agreement described the contracting parties as
independent contractors, stating expressly that no other
relationship was contemplated: "The parties are independent
contractors under this Agreement and no other relationship is
intended, including a partnership, franchise, joint venture,
agency, employer/employee, or master/servant relationship."
The critical provision of the IVAR Agreement is subparagraph
17A, entitled Dispute Resolution, which provides:
Any action related to this Agreement will be
governed by California law, excluding choice
of law rules, and will be brought exclusively
in the United States District Court for
Northern California or the California
Superior Court of the County of Santa Clara.
The parties hereby submit to the personal
jurisdiction and venue of such courts.
Sun states that Entre's principals did not object to the forum
selection clause before signing the IVAR Agreement and asserts
that the clause was negotiable. Entre characterizes the forum
selection clause as a "boilerplate" provision in Sun's standard
contract, and Entre's principals assert that they did not believe
that the clause was negotiable.
Entre alleges that Sun's decision to terminate their
relationship was precipitated by the individual defendants who
were employed by Sun as part of its direct sales force in New
Jersey. Entre contends that those defendants interfered with a
large Entre sale of Sun products to AT&T, disparaged Entre's
abilities and services to potential customers, and refused to
provide information and assistance contemplated by the IVAR
Agreement. According to Entre, those defendants allegedly
induced Sun to terminate the IVAR Agreement by letter of October
1, 1993, effective as of December 31, 1993. Entre asserts that
the termination was without good cause.
Entre instituted this action against Sun and the individual
defendants in December 1993, alleging in part that the
termination of the IVAR Agreement violated the Franchise Act and
that the defendants tortiously interfered with Entre's business
relationships. Entre sought to enjoin termination of its
contract, and also sought damages and counsel fees. Sun moved
for dismissal of the complaint on the basis of the forum-selection clause. Without addressing whether the underlying
contract was subject to the Franchise Act, the Law Division
dismissed the complaint, concluding that the forum-selection
clause was enforceable. Prior to resolving Entre's appeal, the
Appellate Division stayed the order of dismissal and temporarily
enjoined Sun from terminating the agreement and from instituting
an action against Entre in California.
Before the Appellate Division, Sun contended that its
relationship with Entre did not constitute a franchise. However,
Sun conceded that if its agreement were determined to create a
franchise, the choice-of-law provision would not be enforceable
and the rights of the parties would be governed by the Franchise
Act. The Appellate Division also took note of Sun's concession
that, if the forum-selection clause were to be sustained,
dismissal of the New Jersey action could be conditioned on the
California court's application of the Franchise Act to the
parties' relationship, with the result that the agreement's
choice-of-law provision would apply only if the California court
determined that no franchise had been created.
The Appellate Division concluded that the forum-selection
clause should be enforced, observing that "we should trust the
courts of California to be as protective of the rights of the New
Jersey litigant under New Jersey law as it would hope another
state would protect a California resident under California law,
if the case were referred elsewhere." The court stated:
We do not see our enforcement of these
clauses as committing our residents to the
"tender mercies" of provincial judges.
Rather, we are merely permitting the decision
to be made by a jurist of a sister state who
will fairly and impartially adjudicate the
dispute between the parties in accordance
with the governing law, which in this case
might happen to be the law of New Jersey.
The Appellate Division's affirmance of the dismissal order was
conditioned on the California court's applying New Jersey law to
ascertain whether a franchise existed and, if so, the rights of
the parties, and the court continued its temporary injunction in
effect until an application for similar relief could be presented
to a California court.
Primarily, we note our agreement with the assumption implicit in the Appellate Division's decision that the enforceability of the forum-selection clause should be determined prior to final resolution of the question whether Sun's agreement with Entre constitutes a franchise subject to the Franchise Act. In our view, the latter issue should be resolved on remand by the Law Division on the basis of an adequate record, informed by the analysis of the definitional components of a franchise set forth in Instructional Systems, Inc., supra, 130 N.J. at 351-66. For purposes of resolving the enforceability of forum-selection clauses in franchise agreements, we shall assume that the Sun-Entre agreement is a franchise subject to the Franchise Act.
To determine whether forum-selection clauses are
reconcilable with the broad statutory protections accorded to New
Jersey franchises under the Franchise Act, we first review the
conditions that prompted the Legislature to pass the Act as well
as the provisions enacted to compensate for the economic
imbalance between franchisors and franchisees. As the Court
observed in Westfield Centre Service, Inc. v. Cities Service Oil
Co.,
86 N.J. 453 (1981):
Though economic advantages to both
parties exist in the franchise relationship,
disparity in the bargaining power of the
parties has led to some unconscionable
provisions in the agreements. Franchisors
have drafted contracts permitting them to
terminate or to refuse renewal of franchises
at will or for a wide variety of reasons
including failure to comply with unreasonable
conditions. Some franchisors have terminated
or refused to renew viable franchises,
leaving franchisees with nothing in return
for their investment. Others have threatened
franchisees with termination to coerce them
to stay open at unreasonable hours, purchase
supplies only from the franchisor and at
excessive rates or unduly expand their
facilities.
[Id. at 461-62.]
See also Shell Oil Co. v. Marinello,
63 N.J. 402, 408 (1973)
("[I]t becomes apparent that Shell is the dominant party and that
the relationship lacks equality in the respective bargaining
positions of the parties. For all practical purposes Shell can
dictate its own terms."), cert. denied,
415 U.S. 920,
94 S. Ct. 1421,
39 L. Ed.2d 475 (1974).
At the legislative hearing preceding enactment of the
Franchise Act, several proponents of the Act complained that
franchise agreements often were contracts of adhesion, the
franchisors not being willing to negotiate in good faith about
terms and conditions of the franchise. A witness representing
gasoline retailers stated that "our dealers . . . should take
these contracts--these franchise contracts--to their lawyers [],
but the pressure is put on them to sign these things in a hurry
and often they do sign them with clauses in them that should not
be there." Franchise Practices Act: Hearing on A. 2063 Before
the Assembly Judiciary Comm., 194th Leg., 2d Sess., at 29 (March
29, 1971) (statement of Jacob Petuska, President, N.J. Gasoline
Retailers Assoc.). Another witness observed: "At the core of
the franchise relationship is unilateral control exercised by the
franchisor over every aspect of the franchisee's business. . . .
The franchise agreement in many cases is not a matter of mutual
consent but actually a contract of adhesion--either take it or
leave it." Id. at 35 (statement of Robert M. Burd, President,
N.J. Automobile Dealers Assoc.). Another witness acknowledged
the problem of unequal bargaining power:
When a man wants to sign up for a particular
franchise, I think that he should have an
ability to negotiate the contractual
relationship pursuant to which, in many
instances, his entire life savings are going
to be invested. However, the older more
established businesses, franchisors, such as
in the automobile industry, will not tolerate
the negotiation of even a comma, even a
period.
[Id. at 114 (statement of Glen Davis, Esq.,
representing Gulf Oil Corp.).]
Another recurring theme at the hearing on the Franchise Act
was the complaint that franchisees whose contracts were cancelled
could not obtain prompt and effective judicial relief. As one
veteran Buick dealer explained:
Today, if I wanted to sue the
manufacturer on a vital issue, such as
cancellation, it would cost me somewhere
between one-quarter and one-half million
dollars. And today I could very likely be
out of business two or three years before the
situation came to a hearing.
This bill--one of the greatest things in
this bill, as the gasoline dealer testified
to, is that it gives us a day in court. It
gives us virtually an automatic injunction if
our cause for going into court is reasonable.
Today this is very difficult to get.
[Id. at 52-53 (statement of Walter
W. Stillman).]
Another automobile-dealer representative concurred:
A-2063 would utilize our own State courts--the traditional forum for resolving disputes
between businessmen--as the arbitrator of any
dispute that may arise in the franchise
relationship. . . . Today in New Jersey, a
franchisee has no automatic right to obtain
an injunction against a capricious
cancellation. Without adequate notice or
injunctive relief--both of which are provided
in A-2063--a dealer could be put out of
business immediately.
. . . . By the time a dealer obtains a
court ruling, his place of business could
long since have been closed. Even if he wins
in court, he would most likely find it almost
impossible to renew operations. A-2063 would
give the small businessman adequate time to
begin a court action to preserve his
business.
[Id. at 39-40 (statement of Robert M. Burd,
President, N.J. Automobile Dealers Assoc.).]
Gulf Oil Corporation's representative also endorsed the proposed
bill's provision authorizing injunctive relief:
What [A-2063] does is establish, quite
clearly and conclusively, a course of action
which a dealer would merely point to and
allege in his pleadings, that given acts or
actions on the part of the franchisor are
unreasonable, and, based upon that, a court--a chancery court--would, assuming the
validity of the allegations of
unreasonableness and the acts complained of,
grant the interlocutory relief on a temporary
basis so that the case could proceed.
One of the tactics utilized in fighting
termination cases by the manufacturers, of
course, is their overwhelming resources. So,
the harder they make it to get that initial
injunction, the more likely they will be able
to avoid the determination of the ultimate
issues by an impartial court of law--a tactic
that in itself is somewhat unfair and, if you
will, subversive of the American system of
jurisprudence.
[Id. at 117-18 (statement of Glen Davis,
Esq., representing Gulf Oil Corp.).]
As enacted, the Franchise Act addressed the concerns relating to both unequal bargaining power and the unavailability of prompt judicial relief. The Act expressly prohibits franchisors from requiring franchisees to agree to unreasonable standards of performance, or to releases or waivers that would relieve franchisors from liability under the Act. N.J.S.A. 56:10-7. In addition, termination of or failure to renew a franchise without good cause constitutes a violation of the Act, and good cause is limited to a franchisee's failure "to substantially comply with those requirements imposed . . . by the franchise." N.J.S.A. 56:10-5. The Act expressly authorizes
franchisees to institute suit against franchisors "in the
Superior Court of the State of New Jersey to recover damages
sustained by reason of any violation of this act and, where
appropriate, . . . [for] injunctive relief." N.J.S.A. 56:10-10.
Successful franchisees are also entitled to recover reasonable
attorney's fees. Ibid.
In 1989, the Legislature amended the Act, L. 1989, c. 24,
specifically to enhance the protection afforded to motor-vehicle
franchisees. The legislative findings incorporated in the
amendment included declarations that inequality of bargaining
power continues to favor motor-vehicle franchisors
notwithstanding the provisions of the Franchise Act; that such
inequality of bargaining power enables such franchisors to compel
motor-vehicle franchisees to execute agreements containing
detrimental terms and conditions that require franchisees "to
relinquish their rights . . . established by the [Franchise
Act];" and that such terms and conditions deny to motor-vehicle
franchisees "the opportunity to have disputes . . . heard in an
appropriate venue, convenient to both parties, by tribunals
established by statute for the resolution of these disputes."
N.J.S.A. 56:10-7.2. The Sponsor's Statement also observed that
under the Franchise Act and similar state statutes, the
franchisees' rights
generally are enforceable in state courts or
through state agencies. However, in the last
several years manufacturers and distributors
have sought to circumvent these laws by
offering dealers franchise renewal agreements
which require them to settle disputes through
compulsory arbitration instead of exercising
their rights as spelled out under New Jersey
law. Other proposed agreements transfer the
disputes from New Jersey's courts or
administrative tribunals, as provided by the
"Franchise Practices Act," to another state.
[Sponsor's Statement to S. 2737,
L. 1989, c. 24 (June 30, 1988).]
Accordingly, the 1989 amendment provides that a motor
vehicle franchisor violates the Act if it requires a motor-vehicle franchisee to accept a provision in a franchise agreement
that specifies the jurisdictions in which disputes shall or shall
not be submitted for resolution or prohibits a motor-vehicle
franchisee from instituting suit in a forum otherwise available
under New Jersey law. Any such provision may be revoked by the
franchisee by notice to the motor-vehicle franchisor within sixty
days of receipt of the executed franchise agreement. N.J.S.A.
56:10-7.3. Pursuant to the amendment, forum-selection clauses
are presumed to be invalid unless the franchisor can prove that
it offered the franchisee the opportunity to sign an identical
franchise agreement containing no forum-selection clause. Ibid.
Sun contends that the 1989 amendment reflects the
Legislature's intention to prohibit forum-selection clauses only
in motor-vehicle franchise agreements. We agree that by the
amendment the Legislature effectively invalidated forum-selection
clauses in franchise agreements covering automobile dealerships.
However, the legislative findings persuade us that the
Legislature considered such clauses in general to be inimical to
the rights afforded all franchisees under the Act. The
Legislature apparently elected to limit their express prohibition
only to motor-vehicle franchises based on its determination that
the use of unequal bargaining power to compel the inclusion of
such clauses was largely confined to motor-vehicle franchise
agreements.
The earliest attempts by parties to designate the jurisdiction in which suits against them could be instituted were generally rejected by state and federal courts. For example, in Nute v. Hamilton Mutual Insurance Co., 72 Mass. (6 Gray) 174 (1856), the insurance company's by-laws required suits to be brought in the County of Essex and the insured filed suit in the County of Suffolk. Rejecting the insurance company's plea of lack of jurisdiction, the court held that no agreement of the parties can alter the legal rules that determine "in what courts and counties actions may be brought." Id. at 184. The principle developed that "parties by agreement cannot oust a court of jurisdiction otherwise obtaining." Wm. H. Muller & Co. v. Swedish Am. Line Ltd., 224 F.2d 806, 808 (2d Cir.), cert. denied, 350 U.S. 903, 76 S. Ct. 182, 100 L. Ed. 793 (1955); cf. Krenger v. Pennsylvania R. Co., 174 F.2d 556, 561 (2d Cir. 1949) (Hand, J., concurring) ("In truth, I do not believe that, today at least, there is an absolute taboo against such contracts at all; in the words of the Restatement, they are invalid only when unreasonable."), cert. denied, 338 U.S. 866, 70 S. Ct. 140, 94 L. Ed. 531 (1949). See generally Arthur Lenhoff, The Parties' Choice of a Forum: "Prorogation Agreements," 15 Rutgers L. Rev. 414, 430-39 (1961) (reviewing earlier cases and contemporary approaches to forum-selection clauses).
The modern approach to the question of enforceability of forum-selection clauses is characterized by the United States Supreme Court's decision in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S. Ct. 1907, 32 L. Ed.2d 513 (1972), in which the Court enforced a forum-selection clause in a contract between Zapata, a Texas-based American corporation engaged in the oil drilling business, and Unterweser Reederei GMBH, a German corporation engaged in the vessel-towing business. Unterweser had contracted to tow Zapata's ocean-going, self-elevated drilling rig (Chaparral) from Louisiana to the Adriatic Sea near Ravenna, Italy, where Zapata planned to drill for oil. Responding to Zapata's request for towing bids, Unterweser was the low bidder and submitted a contract that provided: "Any dispute arising must be treated before the London Court of Justice." 407 U.S. at 2, 92 S. Ct. at 1909, 32 L. Ed. 2d at 516. Zapata reviewed the contract and negotiated various modifications, but did not seek to modify the forum-selection clause. Id. at 3, 92 S. Ct. at 1910, 32 L. Ed. 2d at 516.
While Unterweser's deep-sea-tug Bremen was towing the Chaparral in the Gulf of Mexico en route to Italy, a severe storm caused the Chaparral's elevator legs to break off, seriously damaging the vessel. Zapata instructed the Bremen to tow the
damaged rig to Tampa, Florida, the nearest port. Zapata then
instituted a suit in admiralty in the federal court in Tampa
against Unterweser and against the Bremen in rem, alleging
negligence and breach of contract. Invoking the forum-selection
clause, Unterweser moved to dismiss for lack of jurisdiction or
on forum non conveniens grounds. The District Court denied
Unterweser's motion on the basis that forum-selection clauses
were contrary to public policy, and a divided panel of the Court
of Appeals affirmed. Id. at 4-8, 92 S. Ct. at 1910-12, 32
L. Ed.
2d at 517-19.
Reversing, the Supreme Court observed that "[t]he expansion
of American business and industry will hardly be encouraged if,
notwithstanding solemn contracts, we insist on a parochial
concept that all disputes must be resolved under our laws and in
our courts." Id. at 9, 92 S. Ct. at 1912, 32 L. Ed.
2d at 519-20. Concluding that forum-selection clauses should be enforced
unless "enforcement is shown by the resisting party to be
'unreasonable' under the circumstances," id. at 10, 92 S. Ct. at
1913, 32 L. Ed.
2d at 520, the Court noted that the contract in
question was "a freely negotiated private international
agreement, unaffected by fraud, undue influence, or overweening
bargaining power." Id. at 12, 92 S. Ct. at 1914, 32 L. Ed.
2d at
522. The Court observed that because the vessel was to be towed
a long distance through international waters, the parties could
reasonably conclude that a forum-selection clause was in their
mutual interest and was taken into account in negotiating the
financial terms of the agreement. Id. at 13-14, 92 S. Ct. at
1915, 32 L. Ed.
2d at 522-23. The Court acknowledged that "[a]
contractual choice-of-forum clause should be held unenforceable
if enforcement would contravene a strong public policy of the
forum in which suit is brought, whether declared by statute or by
judicial decision." Id. at 15, 92 S. Ct. at 1916, 32 L. Ed.
2d
at 523. The Court remanded the matter to the District Court to
permit Zapata to attempt to prove that "enforcement would be
unreasonable and unjust, or that the clause was invalid for such
reasons as fraud or overreaching." Ibid.
The holding in The Bremen represents the prevailing view on
the enforceability of forum-selection clauses, and is consistent
with the position adopted by the Restatement (Second) of Conflict
of Laws § 80 (1969) ("The parties' agreement as to the place of
the action cannot oust a state of judicial jurisdiction, but such
an agreement will be given effect unless it is unfair or
unreasonable."). The Bremen approach generally has been applied
by federal and state courts confronted by jurisdictional choices
involving forum-selection clauses. See, e.g., Carnival Cruise
Lines, Inc. v. Shute,
499 U.S. 585, 593-95,
111 S. Ct. 1522, 1527
-28,
113 L. Ed.2d 622, 632-33 (1991) (upholding, 7-2, validity
of forum-selection clause in form cruise-ship passage contract
although not subject to bargaining, and noting special interest
of cruise line in limiting fora in which passengers might sue and
that enforcement of clause benefits passengers because cruise
line's savings undoubtedly are reflected in lower fares); Moses
v. Business Card Express, Inc., 929 F.2d 1131, 1136-39 (6th Cir.) (upholding Michigan district court's discretionary ruling not to return venue to Alabama after Alabama district court changed venue from Alabama to Michigan in damage suit by Alabama franchisee pursuant to contract requiring that suit be brought only in Michigan court, but noting that forum-selection clause is not dispositive of change of venue motions and should be considered along with convenience of parties and witnesses and overall fairness, and concluding that transfer did not constitute abuse of discretion), cert. denied, 502 U.S. 821, 112 S. Ct. 81, 116 L. Ed.2d 54 (1991); Plum Tree, Inc. v. Stockment, 488 F.2d 754 (3d Cir. 1973) (reversing District Court decision granting franchisee's motion to transfer franchisor's Pennsylvania action to Texas on ground that forum-selection clause designating Pennsylvania as place of suit was contrary to public policy, and remanding to District Court to reconsider on adequate record whether enforcement of forum-selection clause would be unreasonable); Kline v. Kawai Am. Corp., 498 F. Supp. 868 (D.C. Minn. 1980) (transferring dealer's Minnesota action against supplier of pianos and organs to California based on forum-selection clause in "boilerplate" dealer agreement, and finding dealer had failed to sustain burden of proving that enforcement of forum-selection clause would be unreasonable); Dick Proctor Imports, Inc. v. Sumitomo Corp. of Am., 486 F. Supp. 815 (E.D. Mo. 1980) (granting franchisor's motion to transfer franchisee's Missouri action to New York pursuant to forum-selection clause,
and holding that enforcement of forum-selection clause was
neither unreasonable nor incompatible with Missouri public
policy); ABC Mobile Sys., Inc. v. Harvey,
701 P.2d 137 (Colo. Ct.
App. 1985) (enforcing forum-selection clause designating
California as exclusive forum against California franchisor that
relocated to Massachusetts and sued franchisee in Colorado, and
holding enforcement of clause against franchisor not unreasonable
notwithstanding franchisor's contention that clause was inserted
in contract primarily for its benefit); Horner v. Tilton,
650 N.E.2d 759 (Ind. Ct. App. 1995) (dismissing dealer's suit against
supplier filed in Marion County, Indiana, and enforcing forum-selection clause designating Peoria County, Illinois, as
exclusive forum, holding that underlying agreement did not
constitute franchise, finding that forum-selection clause was not
product of overreaching or unequal bargaining power, and noting
that enforcement of clause would not impose heavy burden on
dealer); Jacobson v. Mailboxes Etc. U.S.A., Inc.,
646 N.E.2d 741
(Mass. 1995) (holding that franchise agreement designating
California courts as exclusive forum and California law as
controlling required court to determine whether forum-selection
clause was enforceable under California law; concluding that such
clauses were enforceable under California law if not
unreasonable, but remanding to trial court to determine whether
pre-contract claims for deceit were dominant claims alleged, in
which event forum-selection clause in franchise contract would
not apply); Minuteman Press Int'l, Inc. v. Hoffman,
826 S.W.2d 34
(Mo. Ct. App. 1992) (holding that Missouri courts would enforce
New York judgment obtained by franchisor against Missouri
franchisee where New York action was instituted pursuant to
forum-selection clause of franchise agreement; concluding that
franchisees were validly served with process under New York's
long-arm statute and that enforcement of forum-selection clause,
which was not product of fraud or overreaching, would be
reasonable); Bakhsh v. JACRRC Enters., Inc.,
895 P.2d 746 (Okla.
Ct. App. 1995) (affirming trial court's decision dismissing
franchisee's Oklahoma action against franchisor, and holding that
enforcement of forum-selection clause designating Texas as
exclusive forum was not unreasonable).
Some courts applying the Bremen standard have nevertheless
determined that forum-selection clauses need not invariably be
honored. In Hoffman v. Minuteman Press International, Inc.,
747 F. Supp. 552 (W.D. Mo. 1990), a franchisee sued its franchisor in
Missouri alleging pre-contract fraud and breach of the franchise
agreement. The franchisor moved to change venue to New York,
relying on the contract's forum-selection and choice-of-law
clauses. The court acknowledged that in resolving change-of-venue motions under
28 U.S.C. §1404(a), a forum-selection clause
is a significant factor, along with the convenience of parties
and witnesses and other practical considerations relating to
trial convenience. Id. at 553-54. The court noted "the extreme
hardship that litigating in New York would impose on these
plaintiffs" and that the defendant could easily accommodate
litigation in Missouri. Id. at 559. The court also observed
that the complaint alleged that plaintiffs were fraudulently
induced to enter into the franchise contract that contained the
forum-selection clause, an allegation that, if proved, would
render the clause "not worth the paper on which it is written."
Ibid. Accordingly, the court denied defendant's motion to
transfer.
A Wisconsin federal court declined to enforce a forum-selection clause in Cutter v. Scott & Fetzer Co.,
510 F. Supp. 905 (E.D. Wis. 1981), primarily on the basis that Wisconsin's
Fair Dealership Law was intended to provide remedies to dealers
beyond those available at common law, the court concluding that
the statute's underlying remedial purposes would best be served
by denying the franchisor's motion to transfer venue to Ohio.
Id. at 909. The court also observed that the franchise agreement
contained predominately "boilerplate" language and that there was
no indication in the record that the forum-selection clause was
the subject of negotiation between the parties. Id. at 908; see
also Lulling v. Barnaby's Family Inns, Inc.,
482 F. Supp. 318,
320-21 (E.D. Wis. 1980) (citing The Bremen, but declining to
enforce forum-selection clause in franchise agreement; relying
primarily on public policy reflected in Wisconsin Franchise
Investment Law, and concluding that Wisconsin public policy can
best be enforced by Wisconsin courts); Wimsatt v. Beverly Hills
Weight Loss Clinics Int'l, Inc.,
38 Cal. Rptr 2d 612 (Cal. Ct.
App. 1995) (declining to enforce Virginia forum-selection clause
in California suit against Virginia franchisor; relying on strong
public policy underlying California's Franchise Investment Law,
which voids any provision in franchise agreement that waives
protections afforded by that statute, and requiring franchisor to
prove on remand that enforcement of forum-selection clause will
not diminish substantive rights of plaintiffs guaranteed by
California law).
Only a few reported decisions in New Jersey involve the
enforcement of forum-selection clauses. In Wilfred MacDonald
Inc. v. Cushman Inc.,
256 N.J. Super. 58 (App. Div.), certif.
denied,
130 N.J. 17 (1992), a retailer of turf-maintenance
equipment brought suit in New Jersey against its supplier on the
ground that the impending termination of part of its dealership
product line violated the Franchise Act. The supplier moved to
dismiss on the basis of a forum-selection clause in the
dealership agreement that designated Nebraska courts as the
exclusive forum. Reversing the trial court's denial of the
motion to dismiss, the Appellate Division observed that the
record contained no proof of fraud or overreaching in relation to
the forum-selection clause, id. at 63-64, and expressed
confidence in the ability of Nebraska federal and state courts to
apply New Jersey law if it was determined that the Franchise Act
was implicated. Id. at 66. (An unpublished disposition by the
Eighth Circuit Court of Appeals reveals that a Nebraska federal
court, applying Nebraska rather than New Jersey law, initially
denied MacDonald's motion for a preliminary injunction and
subsequently granted summary judgment in favor of Cushman,
dismissing all claims. The Eighth Circuit affirmed both
dispositions. Wilfred MacDonald, Inc. v. Cushman, Inc.,
29 F.3d 628, 1
994 WL 375968 (unpublished) (8th Cir. July 19, 1994)). See
also Shelter Systems Group Corp. v. Lanni Builders, Inc.,
263 N.J. Super. 373-75 (App. Div. 1993) (enforcing forum selection
clause against corporate builder and its principal as guarantor,
and finding no coercive bargaining power or contrary public
policy); Air Economy Corp. v. Aero Flow Dynamics,
122 N.J. Super. 456, 457-58 (App. Div. 1973) (upholding forum selection clause
based on absence of proof that clause was unfair, unreasonable or
contrary to public policy); Fairfield Lease Corp. v. Liberty
Temple Universal Church of Christ, Inc.,
221 N.J. Super. 647 (Law
Div. 1987) (denying summary judgment to lessor of vending machine
suing on New York judgment, where jurisdiction over defendant
allegedly rested on forum-selection clause in vending machine
"boilerplate" lease agreement providing for waiver of personal
service, and court determined that record presented factual
issues concerning reasonableness and enforceability of forum-selection clause).
We are persuaded that enforcement of forum-selection clauses in contracts subject to the Franchise Act would substantially
undermine the protections that the Legislature intended to afford
to all New Jersey franchisees. We hold that such clauses are
presumptively invalid because they fundamentally conflict with
the basic legislative objectives of protecting franchisees from
the superior bargaining power of franchisors and providing swift
and effective judicial relief against franchisors that violate
the Act.
A significant difference exists between the function of a
forum-selection clause in an arms-length commercial contract and
its function in a typical contract subject to the Franchise Act.
For example, the forum-selection clause in Bremen was proposed by
a German company engaged in the towing of large vessels through
international waters, and accepted by an American company engaged
in world-wide oil-drilling operations at sea. The towing
contract was the subject of competitive bidding and the parties
apparently possessed relatively equal bargaining power.
Moreover, a forum-selection clause was clearly relevant to the
transaction, and may have served the interests of both parties.
In contrast, although some franchisees entering into
contracts subject to the Franchise Act may be sophisticated and
substantial economic entities, the Act's legislative history as
well as our common experience suggests that the financial
resources of most franchisees pale by comparison to the financial
strength and profitability of their franchisors. Because
franchisors usually do business in many markets through multiple
dealers, franchisors tend to be larger and more sophisticated
entities than franchisees.
At the contract stage, the franchisor typically submits a
standard contract and, depending on the potential value and
profitability of the franchise, a franchisee may elect not to
test the negotiability of terms of the contract to avoid the risk
of antagonizing the franchisor and losing the franchise. In that
setting, a franchisor has little to lose by including a forum-selection clause in its standard agreement. Although such a
clause directly benefits the franchisor by requiring suit to be
filed in a geographically convenient state of choice where it can
be defended by the franchisor's regular litigation counsel, the
indirect benefit to franchisors is to make litigation more costly
and cumbersome for economically weaker franchisees that often
lack the sophistication and resources to litigate effectively a
long distance from home. Particularly in the context of a claim
for wrongful termination, a forum-selection clause, if enforced,
deprives the franchisee of the right to seek prompt injunctive
relief from a New Jersey court, and requires a franchisee to seek
that relief, at greater cost and inconvenience, in the designated
forum. Thus, if unchallenged by the franchisee, a forum-selection clause can materially diminish the rights guaranteed by
the Franchise Act because the franchisee must assert those rights
in an unfamiliar and distant forum, with out-of-state counsel,
and bear the added expense of litigation in the franchisor's
designated forum.
One of the fundamental assumptions of the Franchise Act,
verified by the testimony before the Assembly Judiciary
Committee, is that the bargaining power of parties to franchise
agreements is generally disproportionate. That assumption finds
concrete expression in the provisions of the Franchise Act that
prohibit franchisors from coercing franchisees to consent to
various specified unreasonable conditions in the franchise
agreement. See N.J.S.A. 56:10-7. Although exceptions
undoubtedly will occur, we are convinced that forum-selection
clauses in the vast majority of franchise agreements are not the
subject of arms-length negotiation between parties of comparable
bargaining power. In that connection we note that the Uniform
Law Commissioners' Model Choice of Forum Act would not authorize
enforcement of a forum-selection clause that was obtained by
"misrepresentation, duress, the abuse of economic power, or other
unconscionable means." Model Choice of Forum Act § 3(4) (1968).
The Commissioners' comment addressing that provision of the Model
Act states: "A significant factor to be considered in
determining whether there was an 'abuse of economic power or
other unconscionable means' is whether the choice of forum
agreement was contained in an adhesion, or, 'take-it-or-leave-it,' contract." Id. § 3 cmt. on clause (4).
Accordingly, we hold that forum-selection clauses in
franchise agreements are presumptively invalid, and should not be
enforced unless the franchisor can satisfy the burden of proving
that such a clause was not imposed on the franchisee unfairly on
the basis of its superior bargaining position. Evidence that the
forum-selection clause was included as part of the standard
franchise agreement, without more, is insufficient to overcome
the presumption of invalidity. We anticipate that a franchisor
could sustain its burden of proof by offering evidence of
specific negotiations over the inclusion of the forum-selection
clause and that it was included in exchange for specific
concessions to the franchisee. Absent such proof, or other
similarly persuasive proof demonstrating that the forum-selection
clause was not imposed on the franchisee against its will, a
trial court should conclude that the presumption against the
enforceability of forum-selection clauses in franchise agreements
subject to the Act has not been overcome.
The strongest single factor weighing against enforcement of
forum-selection clauses in franchise agreements is the
Legislature's avowed purpose, plainly expressed in the Franchise
Act, to level the playing field for New Jersey franchisees and
prevent their exploitation by franchisors with superior economic
resources. The general enforcement of forum-selection clauses in
franchise agreements would frustrate that legislative purpose,
and substantially circumvent the public policy underlying the
Franchise Act. As the Supreme Court acknowledged in The Bremen,
supra: "A contractual choice-of-forum clause should be held
unenforceable if enforcement would contravene a strong public
policy of the forum in which suit is brought, whether declared by
statute or by judicial decision." 407 U.S. at 15, 92 S. Ct. at
1916, 32 L. Ed.
2d at 523.
As noted, the Franchise Act attempted to remedy the effects
of unequal bargaining power by prohibiting the inclusion in the
contract of provisions that would relieve franchisors of
liability under the Act or would unfairly prejudice the
franchisee in the operation of its franchise. See N.J.S.A.
56:10-7. The Legislature sought to prevent franchisors from
acquiring the business of a successful franchisee by preventing
termination of franchises without good cause. See N.J.S.A.
56:10-5. And in response to concerns about effective enforcement
of franchisees' rights expressed at the legislative hearing, the
Legislature established a cause of action in the courts of this
state for damages, injunctive relief, and counsel fees. N.J.S.A.
56:10-10.
That comprehensive legislative design for the protection of
New Jersey franchisees would be severely undermined if forum-selection clauses in franchise agreements were to be generally
enforced and ultimately were to become commonplace in franchise
agreements. In such event, the inevitable result would be to
limit severely the availability of New Jersey courts as a forum
for the enforcement of franchisees' claims under the Act, a
result that the Legislature assuredly would find intolerable.
Contrary to the Appellate Division's view, our concern is
not focused only on the likelihood that the court in the
designated forum would properly interpret and apply the Franchise
Act, but rather on the denial of a franchisee's right to obtain
injunctive and other relief from a New Jersey court. The added
expense, inconvenience, and unfamiliarity of litigating claims
under the Act in a distant forum could, for some marginally
financed franchisees, result in the abandonment of meritorious
claims that could have been successfully litigated in a New
Jersey court. Although the Legislature expressly has prohibited
the use of forum-selection clauses only in motor-vehicle
franchise agreements, N.J.S.A. 56:10-7.3; supra at ___ (slip op.
at 13), we entertain little doubt that the Legislature would
prefer to extend that prohibition to other franchisees rather
than to permit forum-selection clauses to thwart the vindication
of franchisees' rights under the Act.
Parochialism plays no role in our decision. We have no
doubt that courts in other states, both state and federal, would
faithfully and fairly apply the Franchise Act to suits within
their jurisdiction involving issues controlled by that statute.
We recognize, however, that even if a California and a New Jersey
court afforded identical relief under the Act to an aggrieved
franchisee, there may be a difference of substantial magnitude in
the practical accessibility of that relief from the perspective
of an unsophisticated and underfinanced New Jersey franchisee.
Nor does our holding in any respect undermine the interests
served by enforcing contracts freely negotiated by responsible
parties with comparable bargaining power. We simply acknowledge
that the vast majority of franchise contracts do not fit within
that category. We are confident that a rule of law generally
barring enforcement of forum-selection clauses in contracts
subject to the Franchise Act best serves the public policies
vindicated by the Act and faithfully adheres to the Legislature's
objectives in adopting the Act. Although our decision
establishes a new rule of law, settled principles dictate that it
should apply retroactively to franchise agreements entered into
prior to the filing of this opinion. See Frazier v. New Jersey
Mfrs. Ins. Co.,
142 N.J. 590, 606-07 (1995); Williams v. Bell
Tel. Laboratories, Inc.,
132 N.J. 109, 122-23 (1993).
We reverse the judgment of the Appellate Division and remand
the matter to the Law Division for further proceedings consistent
with this opinion.
JUSTICES HANDLER, O'HERN and COLEMAN join in JUSTICE
STEIN's opinion. JUSTICE GARIBALDI filed a separate dissenting
opinion in which JUSTICE POLLOCK joins. CHIEF JUSTICE WILENTZ
did not participate.
SUPREME COURT OF NEW JERSEY
A-
104 September Term l996
KUBIS & PERSZYK ASSOCIATES, INC.,
d/b/a ENTRE COMPUTER,
Plaintiff-Appellant,
v.
SUN MICROSYSTEMS, INC., SUN
MICROSYSTEMS COMPUTER CORPORATION,
KARL E. HOLTZTHUM, ELLIOT MAYO,
and ROBERT B. KLOPMAN,
Defendants-Respondents.
GARIBALDI, J., dissenting.
The New Jersey Franchise Practices Act, N.J.S.A. 56:10-1 to -15 (Franchise Act) prohibits forum-selection clauses only in certain instances between motor vehicle franchisors and franchisees. Notwithstanding the absence of statutory authorization, the majority concludes that "our reading of the legislative findings persuades us that the Legislature considered such clauses to be inimical to the rights afforded all franchisees under the Act." Ante at __ (slip op. at 13). The majority therefore contrives a test allowing such clauses only when the franchisor can prove that the clause resulted from good-faith and specific negotiation; a test that, it concedes, is "a rule of law generally barring enforcement." Ante at __ (slip op.
at 30). Because the plain language of the Franchise Act as well
as the legislative history provide that forum-selection clauses
should ordinarily be enforced, I dissent.
As the majority explains, the modern common-law view is that forum-selection clauses are enforceable unless the clause is the result of "fraud, undue influence, or overweening bargaining party," is "unreasonable," or violates "a strong public policy." M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10-15, 92 S. Ct. 1907, 1913-16, 32 L. Ed.2d 513, 520-23 (1972).
New Jersey courts have consistently applied that common-law rule to approve forum-selection clauses. See, e.g., Shelter Systems Group Corp. v. Lanni Builders, Inc., 263 N.J. Super. 373, 375 (App. Div. 1993); Wilfred MacDonald, Inc. v. Cushman, Inc., 256 N.J. Super. 58 (App. Div.), certif. denied, 130 N.J. 17 (1992); Air Economy Corp. v. Aero-Flow Dynamics, Inc., 122 N.J. Super. 456, 457-58 (App. Div. 1973).
Courts have rejected the standard that the majority adopts, namely, that unless a party specificaly negotiates over the inclusion of a forum-selection clause, it is unenforceable. In Wilfred MacDonald, supra, 256 N.J. Super. at 64, the Appellate Division enforced the forum selection despite MacDonald's contention that the agreement was a boilerplate document and not open to negotiations. Similarly, in Haskel v. FPR Registry, Inc., 862 F. Supp. 909 (E.D.N.Y. l994), the plaintiff alleged
that the forum-selection clause should not be enforced because
the contract was merely a form contract that the defendant used
in nearly all its contracts. The court held that "mere absence
of negotiation over the actual terms of the contract and the
forum-selection clause itself does not make a forum selection
clause unenforceable." Id. at 9l6; see also Carnival Cruise
Lines, Inc. v. Shute,
499 U.S. 585, 593, lll S. Ct. l522, l527,
ll
3 L. Ed.2d 622, 632 (l99l) ("As an initial matter, we do not
adopt the Court of Appeals' determination that a nonnegotiated
forum selection clause in a form ticket is never enforceable
simply because it is not the subject of bargaining."); Karl Koch
Erecting Co. v. New York Convention Ctr. Dev. Corp.,
838 F.2d 656, 659 (2d Cir. l988) (holding forum-selection clause between
sophisticated parties enforceable although "the parties engaged
in little negotiations over its terms, as is the case with many
public contracts entered into after competitive bidding"); Elite
Parfums, Ltd. v. Rivera, 872 F. Supp. l269, l273 (S.D.N.Y. l995)
(rejecting argument that forum-selection clause is unenforceable
if not specifically negotiated); Weiss v. Columbia Pictures
Television, Inc., 80l F. Supp. l276, l279 (S.D. N.Y. l992)
(holding forum selection clause enforceable even if parties did
not negotiate clause).
In the absence of an alternative rule in the Franchise Act,
the common-law rule would apply to the forum-selection clause in
the contract here, as well as to all other franchise contracts.
Thus, the question is whether the Franchise Act provides a
different rule.
"The interpretation of any statute necessarily begins with consideration of its plain language." Lammers v. Board of Educ., 134 N.J. 264, 267 (1993). Accord State v. Sutton, 132 N.J. 471, 479 (1993)(Stein, J.)("As a general rule, we consider first the plain language of the statute."). An examination of the plain language of the Franchise Act establishes that in most cases forum-selection clauses are enforceable.
When the Franchise Act was enacted in 1971, L. 1971, c. 356, it contained two provisions relevant to forum-selection clause analysis. First, N.J.S.A. 56:10-7 lists several practices that are prohibited by the Franchise Act, including any requirement by the franchisor that the franchisee "assent to a release, assignment, novation, waiver or estoppel which would relieve any person from liability imposed by this act." N.J.S.A. 56:l0-7(a). (emphasis added). Under that provision, the franchise contract may not waive any substantive rights creating liability. However, that plain