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Court Watch

By Charles Miller
March 28, 2007

Choose Language Carefully For an Enforceable Forum Selection Clause

Two recent cases have reinforced the importance of choosing the right words when drafting 'forum selection clauses.' In one case, the language in the forum selection clause was used to deprive a franchisee of its right to remove a case from state to federal court. In the other case, the language of the forum selection clause was narrowly read as a 'venue' clause, resulting in a finding that a motion to dismiss was untimely.

In Quizno's Franchising II LLC v. Gilco, CCH Business Franchise Guide 13,526 (D. Colo. Jan. 22, 2007), the franchise agreement provided that 'the exclusive venue for disputes between them [franchisee and franchisor] shall be in the [state] court or the [federal] court [in Denver], and each party waives any objection it might have to the personal jurisdiction of or venue in such courts.' The franchisor filed suit for breach of contract in state court, and the franchisees removed it to the federal court on the basis of federal diversity jurisdiction. The franchisor moved to remand the case, arguing that the franchisees, by virtue of the referenced clause, waived their right to remove. The district court agreed, based in large part on an unpublished decision by a fellow judge involving the same franchise agreement, and in part on the strong policy disfavoring removal. The court declined to follow another recent decision by the chief judge of the district denying a motion to remand. QFA Royalties LLC v. Bogdanova, CCH Business Franchise Guide 13,478 (D. Colo. Nov. 21, 2006).

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