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Choice of Law: CA Court Strikes Down Florida Clause

By Charles Miller

Burgo v. Lady of America Franchise Corp., CCH Bus. Franchise Guide '13,367 (C.D. Cal. May 4, 2006) addresses choice of law clauses that often come into effect in franchisor-franchisee disputes. Twenty-two franchises of this women's fitness franchise filed suit in a California federal court against the Florida-based franchisor ('LOA') and its Florida-based president ('Wittenberns') for violations of the California Franchise Investment Law ('CFIL') and the California Unfair Trade Practices Act, common law fraud, and violations of the Florida Deceptive and Unfair Practices Act, and the Florida Franchise Misrep-resentation Act ('FFMA'). The franchise agreement contained a choice of law clause, which provided that the agreement and 'the relationship created thereby' would be 'construed and governed solely by internal Florida Law, without regard to any conflict of laws rules.' LOA moved to dismiss the complaint for failure to state a claim, and Wittenberns moved to dismiss for lack of in personam jurisdiction.

The plaintiffs argued that the court had in personam jurisdiction over Wittenberns by virtue of the provisions in the CFIL ('31302, Cal. Corp. Code) that impose liability on corporate officers who are controlling persons. The court held that it was not enough to rely on the liability provisions of the CFIL, since they were premised on the existence of in personam jurisdiction, citing Thomson v. Anderson, 113 Cal. App. 4th 258, 267-70 (2003), and did not create it. Since Wittenberns had insufficient minimum contacts with California, he was dismissed for lack of jurisdiction.

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