Lead Opinion
The opinion of the Court was delivered by
In Instructional Systems, Inc. v. Computer Curriculum Corp., 130 N.J. 324,
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
We granted plaintiffs petition for certification, 142 N.J. 571,
I
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 Microsystem’s 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
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
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
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 ease 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.
II
A. New Jersey Franchise Practices Act
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,
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 them facilities.
[Id. at 461-62,432 A.2d 48 .]
See also Shell Oil Co. v. Marinello, 63 N.J. 402, 408,
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
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 ai’e 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 Buiek 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 year’s before the situation came to a hearing.
Tliis 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 ai’e 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.
[/A 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:
*184 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 eases by the manufacturers, of course, is them overwhelming resources. So, the harder they malee 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
generally are enforceable in state courts or through state agencies. However, in the last several yeai's 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
B. Forum-Selection Clauses
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.,
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,
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,
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,
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,
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
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., 32 Cal.App.4th 1511,
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,
Ill
We are persuaded that enforcement of forum-selection clauses in contracts subject to the Franchise Act would substan
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 fran
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).
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
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 185,
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,
IV
We reverse the judgment of the Appellate Division and remand the matter to the Law Division for further proceedings consistent with this opinion.
Dissenting Opinion
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 “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.” Ante at 185,
I.
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 power,” 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,
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,
Courts have rejected the standard that the majority adopts, namely, that unless a party specifically negotiates over the inclusion of a forum-selection clause, it is unenforceable. In Wilfred MacDonald, supra, 256 N.J.Super. at 64,
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.
II.
“The interpretation of any statute necessarily begins with consideration of its plain language.” Lammers v. Board of Educ., 134 N.J. 264, 267,
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. 56:10-7(a). (emphasis added). Under that provision, the franchise contract may not
Other states have enacted franchise acts that contain broad non-waiver language. California, for example, prohibits “any condition, stipulation or provision purporting to bind any person acquiring any franchise to waive compliance with any provision of this law or any rule or order hereunder.” Cal. Corp.Code § 31512 (emphasis added). See also Haw.Rev.Stat. § 482E-6(2)(F); Ill.Stat.Ann. ch. 815, ¶ 705/41; Mich. Comp. Laws. Ann. § 445.1527(b); Minn.Stat.Ann. § 80C.21; N.Y. Gen. Bus. Law § 687(4); N.D. Cent.Code § 51-19-16(7); Okla. Stat. Ann. Title 71, § 826(C); Wash. Rev.Code Ann. § 19.100.220(2); Wisc. Stat. Ann. § 553.76. Courts in California and Wisconsin have refused to apply forum-selection clauses because of the broad nature of the non-waiver statutes in those states. See Wimsatt v. Beverly Hills Weight Loss Clinics Int’l, Inc., 32 Cal.App.4th 1511, 38 Cal.Rptr.2d 612, 613 (1995) (“Yet a critical feature of California’s Franchise Investment Law is an antiwaiver statute voiding any provision of a franchise agreement which forces a franchisee to give up any of the protections afforded by the law.”); Lulling v. Barnaby’s Family Inns, Inc., 482 F.Supp. 318, 320 n. (E.D.Wis.1980) (“The Wisconsin Franchise Investment Law prohibits any attempt by parties to contract out from under Wisconsin law, and thus renders void the clauses requiring the application of Illinois law.”). But see Bakhsh v. JACRRC Enters., Inc.,
The other relevant provision that was contained in the original Franchise Act is N.J.S.A. 56:10-10, which provides that
Any franchisee may bring an action against its franchisor for violation of this act 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, shall be entitled to injunctive relief.
This provision grants jurisdiction to the Superior Court, but says nothing about the effectiveness of forum-selection clauses whereby the parties agree to litigate elsewhere. Accord Wilfred MacDonald, supra, 256 N.J.Super. at 66-67,
Until 1989, those were the only relevant provisions to assist this Court in considering forum-selection clauses. However, in 1989, the Legislature amended the Franchise Act to address forum-selection clauses. L. 1989, c. 24. The Legislature declared that
[the] inequality of bargaining power enables motor vehicle franchisors to compel motor vehicle franchisees to execute franchises and related leases and agreements which contain terns and conditions that would not routinely be agreed to by the motor vehicle franchisees absent the compulsion and duress which arise out of the inequality of bargaining power____ As a result, motor vehicle franchisees have been denied 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(b), (c)].
To remedy the inequality of bargaining power, the Legislature decided that it would be a violation of the Franchise Act to “speeif[y] the jurisdictions, venues, or tribunals in which disputes arising with respect to the franchise, lease or agreement shall or
The clear meaning of N.J.S.A. 56:10-7.3(a)(2) is that the Franchise Act only modifies the common law to prohibit certain forum-selection clauses in motor vehicle franchise agreements, but does not change the common law to prohibit or restrict those clauses in other franchise agreements. Indeed, the Legislature itself has confirmed that understanding. In 1994, Assembly Bill No. 1165 was introduced to extend the prohibition on forum-selection clauses to all franchises. That legislation provided that “it shall be a violation of this act for any franchisor ... to require a franchisee at the time of entering into a franchise agreement to assent to any provision which would require that arbitration or litigation be conducted outside this State.” 1994 New Jersey Assembly Bill No. 1165, 206th Legislature, First Regular Session (emphasis added). That legislation has not passed, but its introduction clearly indicates that the statute does not currently forbid forum-selection clauses. See Croswell v. Shenouda, 275 N.J.Super. 614, 621-22,
The majority contends that, while the Legislature has only banned forum-selection clauses in motor vehicle franchises, it would find “intolerable” the routine use of forum-selection clauses in other franchise situations. Ante at 196,
III.
As the United States Supreme Court has noted, judicial antipathy to forum-selection clauses is derived from “resistance to any attempt to reduce the power and business of a particular court ____ It reflects something of a provincial attitude regarding the fairness of other tribunals.” Bremen, supra, 407 U.S. at 12, 92 S.Ct. at 1914,
The majority denies that its motivation in forbidding forum-selection clauses is based upon a provincial attitude that other courts are inferior and cannot be trusted. Instead, the majority writes that its concern is that “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 eould have been successfully litigated in a New Jersey court.” Ante at 196,
However, that argument is unpersuasive. Entre, the franchisee in the current appeal, has hired a prominent New Jersey law firm to handle its appeal, and I cannot see why Entre could not hire a prominent California law firm to handle its case if the forum-selection clause was enforced. In either venue, franchisees will usually hire an attorney who understands and is familiar with the rules of that venue. See infra at 207,
Although some marginal franchises might not be able to enforce their rights in a foreign court due to the incremental added expense, that does not justify the majority’s wholesale creation of
A franchise agreement is, of course, a contract. As this Court has recognized, that contract “has significant advantages for both parties.” Westfield Centre Service, Inc. v. Cities Service Oil Co., 86 N.J. 453, 461,
Defendant entered into contracts with several other resellers; some of those contracts did not contain a forum-selection clause, evidently because those resellers negotiated a change with Sun, presumably in exchange for some further concession. Entre, an experienced, multimillion-dollar computer-reseller that had dealt •with many other large computer companies, presumably was free to negotiate a change in its two-page contract, but decided that it was willing to accept the forum-selection clause. “[I]t would be unrealistic to think that the parties did not conduct their negotiations, including fixing the monetary terms, with the consequences of the forum clause figuring prominently in their calculations.” Bremen, supra, 407 U.S. at 14, 92 S.Ct. at 1915,
IV.
Aside from the complete lack of statutory authorization for the majority’s new test, the test represents poor public policy. I am unwilling to subject the enforceability of forum-selection clauses to a case-by-case evaluation of whether the clause was fairly negotiated or negotiable. Each time that the enforceability of a forum-selection clause is challenged, there will be a lawsuit in which the parties will be put to the difficult task of seeking to recall negotiations of a contract that they agreed to many years before trial.
This case presents an example of the difficulties and the time-consuming and expensive procedure that will result from the Court’s holding. Plaintiff has not claimed that there was fraud that would justify a refusal to enforce the choice of forum clause. Nor has plaintiff asserted lack of notice as a defense to the enforcement of the clause. It has not even alleged that Sun refused to negotiate over the clause but merely that “the parties did not discuss the provision and Entre’s principals did not understand it to be negotiable.”
In contrast, the standard enunciated in Bremen, supra, 407 U.S. at 10-15, 92 S.Ct. at 1913-16,
The trial court did not need to conduct a factual hearing to recreate prior negotiations; it simply found that “plaintiff had notice of the forum selection clause and could have objected, but did not, did not disagree with it, nor did he seek modification of the provisions.” The court further observed that the contract was only three pages long and that “the provisions of forum selection clause are not hidden, not confusing and are signed by Entre’s president.” I agree with the standard applied by the trial court and the Appellate Division and would affirm.
Every party seeking to have a court declare a forum-selection clause unenforceable will now allege that the clause was not specifically negotiated. The majority will now force Sun, and all other franchisors affected by this retroactive decision, to prove that they did negotiate the specific provision’s inclusion in a negotiation that happened many years ago when the parties never imagined that specific negotiation was required. The majority’s test not only makes every trial more expensive and time-consuming, but also fails to recognize the commercial reality that not every clause in a freely-negotiated contract is specifically addressed in negotiations.
V.
In the absence of any legislative forum-selection rule, I would follow the general approach of Bremen and uphold forum-selection clauses absent evidence of (1) fraud or overweening bargaining power, (2) a violation of strong public policy, or (3) serious inconvenience for the trial. Wilfred MacDonald, supra, 256 N.J.Super, at 63-64,
Since the Legislature specifically has decided to allow forum-selection clauses, a judicial declaration that forum-selection clauses violate public policy would be a usurpation of the Legislature’s role. It would be highly inappropriate for the Court to announce that a contractual term violates public policy, as derived from prior legislative enactments, when the Legislature has specifically decided not to reject that contractual term.
Finally, plaintiffs claim of inconvenience is similarly unpersuasive. “[W]hen it can be said with reasonable assurance that at the time they entered the contract, the parties to a freely negotiated private ... agreement contemplated the claimed inconvenience, it is difficult to see why any such claim of inconvenience should be heard to render the forum clause unenforceable.” Bremen, supra, 407 U.S. at 16, 92 S.Ct. at 1916,
I would therefore uphold forum-selection clauses in franchise agreements unless one of the Bremen exceptions applied. As
Justice Pollock joins in this opinion.
For reversal and remandment — Justices HANDLER, O’HERN, STEIN and COLEMAN — 4.
For affirmance — Justices POLLOCK and GARIBALDI — 2.