Court Opinion

ID: 9706695
Source: CourtListenerOpinion
Date Created: 2023-08-26 01:49:38.876023+00
Date Added: 2024-06-11T15:41:28.473176
License: Public Domain

GARIBALDI, J.,
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, 680 A.2d at 623. The majority therefore contrives a test allowing such clauses only when the franchisor can prove that the clause resulted from good-faith and specific negotiation; a test that, it concedes, is “a rule of law generally barring enforcement.” Ante at *198197, 680 A.2d at 628. Because the plain language of the Franchise Act as well as the legislative history provide that forum-selection clauses should ordinarily be enforced, I dissent.
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, 32 L.Ed.2d 513, 520-23 (1972).
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, 622 A.2d 1345 (App.Div.1993); Wilfred MacDonald, Inc. v. Cushman, Inc., 256 N.J.Super. 58, 606 A.2d 407 (App.Div.), certif. denied, 130 N.J. 17, 611 A.2d 655 (1992); Air Economy Corp. v. Aero-Flow Dynamics, Inc., 122 N.J.Super. 456, 457-58, 300 A.2d 856 (App.Div.1973).
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, 606 A.2d 407, the Appellate Division enforced the forum selection despite MacDonald’s contention that the agreement was a boilerplate document and not open to negotiations. Similarly, in Haskel v. FPR Registry, Inc., 862 F.Supp. 909 (E.D.N.Y.1994), the plaintiff alleged that the forum-selection clause should not be enforced because the contract was merely a form contract that the defendant used in nearly all its contracts. The court held that “mere absence of negotiation over the actual terms of the contract and the forum-selection clause itself does not make a forum selection clause unenforceable.” Id. at 916; see also Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593, 111 S.Ct. 1522, 1527, 113 L.Ed.2d 622, 632 (1991) (“As an initial matter, we do not adopt the *199Court of Appeals’ determination that a nonnegotiated forum selection clause in a form ticket is never enforceable simply because it is not the subject of bargaining.”); Karl Koch Erecting Co. v. New York Convention Ctr. Dev. Corp., 838 F.2d 656, 659 (2d Cir.1988) (holding forum-selection clause between sophisticated parties enforceable although “the parties engaged in little negotiations over its terms, as is the ease with many public contracts entered into after competitive bidding”); Elite Parfums, Ltd. v. Rivera, 872 F.Supp. 1269, 1273 (S.D.N.Y.1995) (rejecting argument that forum-selection clause is unenforceable if not specifically negotiated); Weiss v. Columbia Pictures Television, Inc., 801 F.Supp. 1276, 1279 (S.D.N.Y.1992) (holding forum selection clause enforceable even if parties did not negotiate clause).
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, 633 A.2d 526 (1993). Accord State v. Sutton, 132 N.J. 471, 479, 625 A.2d 1132 (1993) (Stein, J.) (“As a general rule, we consider first the plain language of the statute.”). An examination of the plain language of the Franchise Act establishes that in most cases forum-selection clauses are enforceable.
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 *200waive any substantive rights creating liability. However, that plain language does not prohibit contracts that provide for a different forum to litigate those same rights. See Alpert v. Alphagraphics Franchising, Inc., 731 F.Supp. 685, 688 (D.N.J.1990) (“This provision does not render arbitration clauses unenforceable. An arbitration clause does not relieve a party from liability under the Franchise Act, it simply determines the forum in which relief may be sought.”)
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., 895 P.2d 746 (Okla.Ct.App.1995) (enforcing forum-selection clause despite broad non-waiver statute). Had the Legislature desired to bar or restrict forum-selection clauses, it could have chosen to use the same language used by those other states; its decision to use different *201language is evidence of its intent to allow forum-selection clauses in accordance with common-law standards.
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, 606 A.2d 407. Similarly, 28 U.S.C.A § 1833 provides that “[t]he district courts shall have original jurisdiction, exclusive of the courts of the States, of ... [a]ny civil ease of admiralty or maritime jurisdiction.” (emphasis added). Despite the even more directory language in that statute, the United States Supreme Court in Bremen, supra, approved of a forum-selection clause in a “suit in admiralty.” 407 U.S. at 3, 92 S.Ct. at 1909, 32 L.Ed.2d at 517. Like 28 U.S.C.A. § 1333, N.J.S.A. 56:10-10 is simply a grant of jurisdiction that indicates nothing about the enforceability of forum-selection clauses.
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 *202shall not be submitted for resolution or otherwise prohibits a motor vehicle franchisee from bringing an action in a particular forum otherwise available under the law of this State.” N.J.S.A. 56:10-7.3(a)(2) (emphasis added). However, if the franchisee freely agrees to the forum selection by choosing to accept a contract with a forum selection instead of an identical contract without a forum selection, then the clause is enforceable. N.J.S.A 56:10-7.3(b).
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, 646 A.2d 1140 (Ch.Div.1994) (holding that introduction of bill to amend statute to cover certain category is “strong evidence” that the statute did not currently cover that category.); see also Borough of Matawan v. Monmouth County Bd. of Taxation, 51 N.J. 291, 299, 240 A.2d 8 (1968) (“An amendment ... may be resorted to for discovery of legislative intent in the enactment amended.”)
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, 680 A.2d at 628. That *203conclusion is clearly wrong in view of the Legislature’s apparent tolerance of forum-selection clauses and continued rejection of legislation aimed at banning such clauses. The Court should not short-circuit the democratic process by deciding to create a new statutory hurdle that the Legislature has refused to create on its own.
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, 32 L.Ed.2d at 521. E.g., Wimsatt, supra, 38 Cal.Rptr.2d at 617 (acknowledging that its opinion “sound[s] ‘provincial’ ”). I do not share that provincial attitude and am willing to trust our sister states to properly apply the law.
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, 680 A.2d at 628.
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, 680 A.2d at 633 (discussing claims of inconvenience).
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 *204a new pseudo-statutory right. In any category of forum-selection clauses, some marginally financed plaintiffs may be forced to abandon their rights if forced to sue elsewhere. However, we enforce forum-selection clauses because the parties have agreed to those clauses in a freely-negotiated contract.
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, 432 A.2d 48 (1981). Parties should be allowed to structure their own contracts, including forum-selection clauses. Courts should not rewrite contracts between private parties. If a contract did not benefit both parties, then it would not be signed. Under the common-law, the parties’ contract is ordinarily respected. While the Franchise Act does partially limit the parties’ freedom to contract, the Court should hesitate before extending that limitation beyond the contours of the Act and further rewriting private contracts. Cf. Oswin v. Shaw, 129 N.J. 290, 310-11, 609 A.2d 415 (1992) (stating that statutes in derogation of common law should be interpreted narrowly to make “the least rather than the most major change in the common law.”) (citation omitted).
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, 32 L.Ed.2d at 523. Absent a legislative decision, the Court should not allow Entre to *205modify its contract without providing consideration to defendant in exchange.
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, 32 L.Ed.2d at 520-23, and Wilfred MacDonald, supra, 256 N.J.Super. at 63-64, 606 A.2d 407, is much easier and less expensive to apply. In the current appeal, the trial court held the forum-selection clause to be enforceable, citing Wilfred MacDonald, supra, 256 N.J.Super. at 64, 606 A.2d 407, where the Appellate Division held the clause to be enforceable even though MacDonald claimed that the Master Agreement was a “boilerplate” document that had not been open to negotiations and was a contract of adhesion. “It is moreover, further significant ... that this was not an agreement entered into by an unaware, unsuspecting dealer. Rather, MacDonald’s president *206read the forum clause and understood it, yet neither discussed it not questioned it at that time.” Ibid.
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, 606 A.2d 407 (citing Bremen, supra). Plaintiff asserts that the forum-selection clause was the result of overweening bargaining power, violates a strong public policy as embodied in the Franchise Act, and is also seriously inconvenient. None of these claims is persuasive.
*207As the trial court found, “Entre has been in business for a number of years, since 1983, and has had experience in negotiating resale contracts with a number of suppliers such as IBM, Compaq and Hewlett Packard. Plaintiff ... was a subsidiary of Intelligent Electronics, a billion-dollar computer business.” It is, therefore, difficult to see how the contract could be the result of inequalities in bargaining power, especially since other resellers were able to negotiate changes to the forum-selection clause.
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, 32 L.Ed.2d at 524. Defendant is headquartered in California while plaintiff was located in New Jersey. Obviously, either jurisdiction would be somewhat inconvenient for one of the parties; as part of the contract, the parties contemplated that plaintiff would face that additional inconvenience. That inconvenience, however, is insufficient to void the forum-selection clause. Plaintiff has not alleged that the inconvenience is such as to leave it, “for all practical purposes ... deprived of [its] day in court.” Bremen, supra, 407 U.S. at 18, 92 S.Ct. at 1917, 32 L.Ed.2d at 525.
I would therefore uphold forum-selection clauses in franchise agreements unless one of the Bremen exceptions applied. As *208none of the exceptions apply to this case, I would dismiss plaintiffs suit and require plaintiff to pursue its action in California.
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.