Kava Culture Franchise Grp. Corp. v. Dar-Jkta Enters.

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KAVA CULTURE FRANCHISE GROUP CORP., a Florida corporation, Plaintiff, v. DAR-JKTA ENTERPRISES LLC, a Texas limited liability company, DARRIGAN INVESTMENTS LLC, a Texas limited liability company, DAVID DARRIGAN, an individual, JOHNNY QUBTY, an individual, Defendants.

No. 2:23-cv-278-JLB-KCD

United States District Court, M.D. Florida, Fort Myers Division

May 18, 2023

ORDER

JOHN L. BADALAMENTI, UNITED STATES DISTRICT JUDGE

This is an action by a franchisor, Kava Culture Franchise Group Corporation (“Plaintiff”), seeking, among other things, to enforce non-compete clauses in two franchise agreements (referred to herein as the “Franchise Agreements”). This Court previously granted a temporary restraining order preventing one of the defendants from operating a competing business in violation of one of the noncompete provisions. (See Doc. 13 at 18-19).

At issue is whether the case should proceed in the United States District Court for the Middle District of Florida given the identical forum-selection clause in the Franchise Agreements. The Court conducted a hearing addressing this issue (see Doc. 34; Doc. 42), and provided the parties time to brief this issue after that hearing (see Doc. 43).

The forum-selection clause in the Franchise Agreements states that “[j]urisdiction and venue of any lawsuit between the parties hereto shall be in the Lee County Court in Fort Myers, Florida, U.S.A.” (Doc. 2-2 at 28, § 18.03; Doc. 2-3 at 31, § 18.03).

The Eleventh Circuit has explained that a plaintiff generally dictates where a case will proceed. “A plaintiff's choice of forum is entitled to deference, and there is a presumption in favor of a plaintiff's choice.” Wilson v. Island Seas Invs., Ltd., 590 F.3d 1264 1269 (11th Cir. 2009). But where parties have agreed to a valid forumselection clause, the plaintiff's choice of forum “merits no weight” and “a district court should ordinarily transfer the case to the forum specified in that clause.” Atlantic Marine Const Co., Inc. v. U.S. Dist. Court for Western Dist. of Texas, 571 U.S. 49, 62-63 (2013). Absent “extraordinary circumstances unrelated to the convenience of the parties,” a forum-selection clause should be enforced. Id. at 52. And “the practical result is that forum-selection clauses should control except in unusual cases.” Id. at 64.

Plaintiff and Defendants agree that the Franchise Agreements contain a forum-selection clause, but Plaintiff requests that the Court either ignore the clause or stretch its meaning beyond the words included in such clause. (See Doc. 48). And although Defendants initially argued that the forum-selection clause was unenforceable because it was part of an “illegal” contract (see Doc. 29 at 2) they changed course in later briefing, agreeing that the Court should dismiss this matter because it does not comply with the forum-selection clause. (See Doc. 47 at 3).

I. Whether the forum-selection clause is enforceable.

First, this litigation clearly falls under the forum-selection clause because the text describing its subject matter is incredibly broad: “Jurisdiction and venue of any lawsuit between the parties hereto shall be in the Lee County Court.” (Doc. 2-2 at 28, § 18.03; Doc. 2-3 at 31, § 18.03) (emphasis added).

“Forum-selection clauses are presumptively valid and enforceable unless the plaintiff makes a ‘strong showing' that enforcement would be unfair or unreasonable under the circumstances.” Krenkel v. Kerzner Int'l Hotels Ltd., 579 F.3d 1279, 1281 (11th Cir. 2009) (citation omitted).

A forum-selection clause will be invalidated when: (1) its formation was induced by fraud or overreaching; (2) the plaintiff would be deprived of its day in court because of inconvenience or unfairness; (3) the chosen law would deprive the plaintiff of a remedy; or (4) enforcement of the clause would contravene public policy.

Id. Defendants initially seemed to argue that enforcement of the forum-selection clause would contravene public policy because the Franchise Agreements are illegal under Texas law. (See Doc. 29 at 4-5). In their subsequently filed brief addressing the impact of the forum-selection clause, Defendants switched gears and asserted that the Court should enforce the forum-selection clause. (See Doc. 47). Nevertheless, the Court addresses this argument since it is part of the record and because Plaintiff suggests that the Court need not enforce the forum-selection clause because Defendants have alleged fraud. (See Doc. 48 at 8-9).

Defendants have not made a “strong showing” that the forum-selection clause in the Franchise Agreements was the product of fraud. The Eleventh Circuit has found that a party's “reliance on [a] broader alleged fraudulent scheme . . . is a nonstarter.” Don't Look Media LLC v. Fly Victor Ltd., 999 F.3d 1284, 1298 (11th Cir. 2021).

The fraud exception ‘does not mean that any time a dispute arising out of a transaction is based upon an allegation of fraud, as in this case, the clause is unenforceable. Rather, it means that a[] . . . forum-selection clause in a contract is not enforceable if the inclusion of that clause in the contract was the product of fraud or coercion.

Don't Look Media LLC, 999 F.3d at 1298 (alterations in original) (quoting Scherk v. Alberto-Culver Co., 417 U.S. 506 (1974)). Defendants do not allege that inclusion of the forum-selection clause in the Franchise Agreements was the product of fraud. And their allegations that the overall Franchise Agreements are void and unenforceable are unpersuasive and, in fact, abut conclusory. Even assuming the Franchise Agreements were, somehow, void and unenforceable, that would not impact the enforceability of the agreed-upon forum-selection clause the Franchise Agreements prescribed-the Lee County Court. See Rucker v. Oasis Legal Fin., L.L.C., 632 F.3d 1231, 1237-38 (11th Cir. 2011) (rejecting premise that a forum selection clause could not be given effect because it was included within a contract that was void as a matter of law, and stating that “[a] forum selection clause is viewed as a separate contract that is severable from the agreement in which it is contained”); AFC Franchising, LLC v. Purugganan, 43 F.4th 1285, 1293 (11th Cir. 2022) (“[A] forum-selection clause isn't automatically rendered unenforceable if one of the parties claims that the contract of which it is part is void or voidable due to fraud, illegality, etc.”).

Thus, the Court finds that the forum-selection clause itself is enforceable and need not decide whether the overall Franchise Agreements are illegal, void, or unenforceable.

II. Whether the forum-selection clause is mandatory.

Having found that the forum-selection clause applies to this matter and is enforceable, the Court addresses Defendants' argument that the forum-selection clause is not mandatory. Defendants seem to have reneged on this argument, now arguing that the clause is enforceable (see Doc. 47), but the Court addresses it in an abundance of caution.

“[C]ourts frequently classify forum selection clauses as either permissive or mandatory.” Global Satellite Comm. Co. v. Starmill U.K. Ltd., 378 F.3d 1269, 1272 (11th Cir. 2004). While a permissive clause “authorizes jurisdiction in a designated forum,” a mandatory clause “dictates an exclusive forum for litigation under the contract.” Id. (emphasis added) (citing Snapper, Inc. v. Redan, 171 F.3d 1249, 1262 n.24 (11th Cir. 1999)). Moreover, a forum-selection clause “may constitute a waiver of a defendant's right to remove an action to federal court” and the Eleventh Circuit has held that “the determination of whether such a clause constitutes a waiver, in the context of removal based solely on diversity jurisdiction, is to be determined according to ordinary contract principles.” Id.

Defendants initially argued that the forum-selection clause is permissive, seemingly because it includes the word “shall.” (Doc. 29 at 2). The word “shall” can be permissive in some contexts. For example, a forum-selection clause stating that a court “shall have jurisdiction” has been found to be permissive because it states only that a court has jurisdiction, not that a particular court is the only court that has jurisdiction. See First State Bank of Nw. Arkansas v. Georgia 4-S Investments LLP, 418 Fed.Appx. 838, 839 (11th Cir. 2011) (where forum selection clause stated that a party “agree[d] that the courts of the State of Georgia shall have jurisdiction to hear and determine” certain disputes, the district court held [and the Eleventh Circuit agreed] that the clause did not preclude suit in a federal court in Georgia because “[t]he clause [did] not contain any language indicating exclusivity,” only requiring that the party must submit to the jurisdiction of Georgia state courts, but not mandating that all litigation falling under the clause occur there).

But where a contract provision states that “[v]enue shall be in” a place, the Eleventh Circuit has found that “because it uses the imperative ‘shall,'” the provision is most reasonably interpreted to mandate venue in that specific area. See Global Satellite Communication Co., 378 F.3d at 1272 (emphasis added). Defendants seem to have misunderstood the Global Satellite case to support their reading that the forum-selection clause here is permissive. In Global Satellite, the contract provision stated that “[v]enue shall be in Broward County,” which the Court found did not designate any particular forum, but rather mandated that the suit take place somewhere in Broward County, “such that a suit either in the Seventeenth Judicial District of Florida, or in the Fort Lauderdale Division of the Southern District of Florida, both of which are located in Broward County, would satisfy the venue requirement.” Id. In other words, the...