A federal appellate court declined to enforce a choice-of-forum clause finding enforcement would conflict with Michigan’s Franchise Investment Law (“MFIL”).

Lakeside Surfaces, Inc., a maker of stone countertops, sued Cambria Company, LLC, a manufacturer of countertop products, in a Michigan federal court for breach of the parties’ Business Partner Agreement, violations of the MFIL and Uniform Commercial Code, and promissory estoppel. Cambria successfully moved to dismiss the case based on the agreement’s forum-selection clause, which required all lawsuits to be in Minnesota state court. Lakeside appealed. The district court held that Lakeside’s allegations adequately pled a franchise relationship, which was not challenged on appeal.

The appellate court reversed the district court’s dismissal, agreeing with Lakeside that the forum-selection clause could be unenforceable if it conflicted with fundamental public policy exemplified by the MFIL. The MFIL requires franchisors to provide franchisees a list of provisions the law renders void, with a written statement telling the franchisee that if these provisions are in the franchise documents, they are void and cannot be enforced against the franchisee. The court found the forum-selection clause was inconsistent with MFIL public policy if a cause of action was made pursuant to the MFIL. The appellate court noted its holding was limited to causes of actions under the MFIL and did not void the forum-selection clause in its entirety.

Franchisees should consult franchise counsel to review franchise agreements with forum-selection clauses, evaluate in what jurisdiction the franchisee will be required to sue and whether any state laws apply, such as in Michigan and California, that make a forum-selection clause unenforceable for violations of laws that seek to protect franchisees.

See: Lakeside Surfaces, Inc. v. Cambria Co., No. 20-1335 (6th Cir. Oct. 15, 2021)