Rob & Bud's Pizza ("R&B") is a Papa Murphy's franchisee and owns and operates multiple Papa Murphy's Take 'n' Bake Pizza restaurants in Arkansas, Missouri and Kansas. In April 2014, R&B and other Papa Murphy's franchisees sued Papa Murphy's in its home state of Washington alleging that Papa Murphy's induced them to purchase franchises through fraudulent and deceptive misrepresentations and omissions.
While the Washington litigation was ongoing, R&B initiated another lawsuit in Arkansas state court alleging Papa Murphy's was unlawfully attempting to terminate R&B's franchise agreements in retaliation for R&B's refusal to agree to Papa Murphy's settlement demands in the Washington litigation. Papa Murphy's then removed the Arkansas state court case to Federal district court and filed a Motion to Transfer Venue to Washington.
R & B's franchise agreements all contained mandatory forum selection clauses that required all litigation to occur in Washington. However, the Arkansas Procedural Fairness for Restaurant Franchisees Act ("APFRFA") states that:
a party to a restaurant franchise may commence a civil action ... in Arkansas if either party to the restaurant franchise is a resident of Arkansas, [and] [n]either a franchisee nor a franchisor shall be deprived of the application and benefits of this subchapter by a provision of a franchise purporting to designate the law of another jurisdiction as governing or interpreting the franchise, or to designate a venue outside of Arkansas for the resolution of disputes.
The Arkansas court reasoned, under Arkansas public policy, that the Washington forum selection clauses should not be enforceable unless:
(1) neither R&B nor Papa Murphy's were residents of Arkansas; or
(2) R&B and Papa Murphy's were not parties to a restaurant franchise within the meaning of the APFRFA.
The Court found that R&B was indeed a resident of Arkansas due to its operation of Papa Murphy's restaurants in Arkansas and that, despite the Washington forum selection language in the franchise agreements, Arkansas public policy strongly weighed against enforcement of the forum selection clauses, and accordingly denied Papa Murphy's motion to transfer the case to Washington. The Court also found that convenience to the parties weighed in favor of denying a transfer of venue to Washington because the events took place in Arkansas, most of R&B's restaurants were in Arkansas, and R&B's principal who was central to the facts of this case, lived closer to Arkansas than Washington.
This case demonstrates the importance of researching a state's public policy when bringing cases against a franchisor. Franchisees may be able to benefit from the courts in their home state despite language in the franchise agreement to the contrary.
Read the entire decision: Rob & Bud's Pizza, LLC v. Papa Murphy's Int'l, LLC
