The Franchise Contract. Kubis & Perszyk Associates, Inc, was in business as Entre Computer. As a franchise, Entre sold, among other products, computer systems marketed by Sun Microsystems, Inc Entre's agreement with Sun included a forum-selection clause

Question

that provided that any suit between the parties had to be filed in a California court. When Sun terminated its relationship with Entre, Entre filed a suit in a New Jersey state court. Sun asked the court to dismiss the suit on the basis of the forum-selection clause. Entre argued that the clause violated state franchise law, which invalidated such clauses in auto dealership franchises. On what basis might the court extend this law to cover Entre's franchise? Discuss.

Answer 1

The franchise contract
The New Jersey state trial court dismissed the suit, a state appellate court affirmed the dismissal, but on Entre's appeal, the New Jersey Supreme Court reversed. The state supreme court extended the state auto-dealer franchise law to cover other franchisees on the basis of "public policy." The court reasoned that "a forum-selection clause can materially diminish the rights guaranteed by the [state franchise law] 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." Forum-selection clauses "fundamentally conflict with the basic * * * objectives of protecting franchisees from the superior bargaining power of franchisors and providing swift and effective judicial relief against franchisors that violate the [law]." The court pointed out, however, that a clause might be enforced if the parties specifically negotiated to include it in their agreement or if it was not otherwise "imposed on the franchisee unfairly on the basis of [the franchisor's] superior bargaining position."