- If you are a franchisee being threatened with a termination of your franchise in NJ, you must act immediately before your franchisor goes to court.
In a recent case, a dispute arose between a franchisor and franchisee. During negotiations to resolve the dispute, the franchisor filed a termination lawsuit in South Carolina in spite of the fact that the franchisee was a New Jersey franchise. The District Court Judge of South Carolina acknowledged that the franchisee had a strong claim under the NJFPA, but because of the franchise agreement’s choice-of-law provision, the Court refused to apply it. Had the franchisee filed first, this issue would not have existed.
If you have a franchise dispute and you think litigation is inevitable, you must file in NJ immediately to avoid having the laws of another state located hundreds or thousands of miles away applied to your case.
The lesson to be learned is that it is vital that New Jersey franchisees seeking to gain protection under the New Jersey Franchise Protection Act (NJFPA) seek to initiate litigation in New Jersey. New Jersey has a strong policy in favor of protecting its franchisees, and where New Jersey has significant contact with the franchise transaction, New Jersey Courts will, in most cases, hold that New Jersey is the state of applicable law.
Importance of First to File Rule
One way franchisees can, at the very least, increase their chances of maintaining litigation in New Jersey is to be the first to file. The first-filed rule requires that “in all cases of federal concurrent jurisdiction, the Court which first has possession of the subject must decide it” and enjoin the subsequent prosecution of similar cases in different federal district courts.” For the first-filed rule to apply there must be a substantial connection between the parties of the case. Because litigating in New Jersey is so important, franchises are implicitly encouraged to be the first to file, and it is critical they attempt to do so.
To discuss your NJ franchise matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com. Please ask us about our video conferencing consultations if you are unable to come to our office.
By Fredrick P. Niemann, Esq. of Hanlon, Niemann & Wright, a Freehold, Township, Monmouth County, NJ Franchise Attorney