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Court Watch

By Charles G. Miller and Darryl A. Hart
December 18, 2009

Pennsylvania Choice of Law Clause Works in California

In Portnoy v. Dollar Financial Corp., Bus. Franchise Guide (CCH), 14, 252 (C.D. Cal. Aug. 11, 2009), a We The People franchisee sued the franchisor and parent companies in California. The franchise agreement had a Pennsylvania choice-of-law provision because the franchisor and parent were Pennsylvania companies. It also had an arbitration agreement requiring arbitration in Pennsylvania. Under the arbitration clause, the arbitrator's authority was limited to the extent he or she could not extend, modify, or suspend the terms of the agreement or stay, rescind, or postpone any termination. Further, damages were limited to actual damages; no others, including punitive damages or lost profits, could be awarded. The franchisor moved to compel arbitration, and the franchisee argued that the arbitration agreement was unconscionable because it required arbitration in Pennsylvania, contrary to the California Franchise Relations Act, and because of the two other provisions discussed above. The court granted the motion and upheld the arbitration provision based on Pennsylvania law.

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