A federal district court in Texas denied an individual defendant’s motion to dismiss for lack of personal jurisdiction, finding the defendant—the owner of the company that was granted a franchise—was bound in his individual capacity to a franchise agreement’s forum selection clause.

Alamo Intermediate Holdings, the franchisor of Alamo Drafthouse movie theaters, entered into a franchise agreement with an entity franchisee for the development of an Alamo Drafthouse in Alabama. Defendant Renfroe signed the franchise agreement as a representative of the franchisee entity, but not in his individual capacity. Renfroe was also named as the Operating Principal and Controlling Principal in the franchise agreement.

When development of the Alamo Drafthouse failed, Alamo filed suit in Texas asserting, among other things, breach of contract against both the franchisee entity and Renfroe for violating the franchise agreement.

Renfroe, individually, moved to dismiss for lack of personal jurisdiction, arguing he is a resident of Alabama, has no contact within the State of Texas to confer personal jurisdiction, and is not a party to the franchise agreement that contains the forum selection clause and waiver of jurisdiction that Alamo Drafthouse sought to enforce, and therefore, cannot be bound by the franchise agreement’s forum selection clause.

The court disagreed. While the franchise agreement does not define the term “party,” it indicated the entity franchisee is not the only party bound to its terms. Under Texas law, Renfroe is a “party” to the franchise agreement if he otherwise indicated his consent to be bound by its terms. The court concluded the franchise agreement bound Renfroe individually, having identified himself and signed as the Operating Principal and Controlling Principal of the franchisee entity.

The court also noted that, even if Renfroe was not a party, he would still be bound by the forum selection clause based on his close relation of the parties, his involvement in negotiating the franchise agreement, and his obligations under the franchise agreement which made it foreseeable that he would be bound by the forum selection clause.

To avoid future surprises, both individuals and representatives of a franchisee entity should consult with franchise counsel to assess their obligations and liabilities prior to executing a franchise agreement.

Alamo Intermediate II Holdings, LLC v. Birmingham Alamo Movies, LLC, No. SA-23-CV-01531-JKP, 2024 U.S. Dist. LEXIS 75339 (W.D. Tex. Apr. 25, 2024)