United States District Court, W.D. Arkansas, Fayetteville Division
MEMORANDUM OPINION AND ORDER
TIMOTHY L. BROOKS, District Judge.
Currently before the Court are Defendants' Motion to Transfer Venue (Doc. 6) and Memorandum in Support (Doc. 7), Plaintiff's Response in Opposition (Doc. 11), Defendants' Reply (Doc. 13), and Plaintiff's Sur-Reply (Doc. 19). Also currently before the Court are Plaintiff's Motion to Disqualify Robert L. Zisk (Doc. 15) and Motion to Disqualify Michael R. Gray (Doc. 21), and Defendants' Response in Opposition (Doc. 24). The Court heard oral argument on these Motions during a case management hearing that was held on June 18, 2015. During that hearing, the Court DENIED Plaintiff's Motions as premature and took Defendants' Motion under advisement. The Court now rules that Defendants' Motion is also DENIED. This Opinion and Order explains the basis for these rulings. To the extent anything in this Order differs from what the Court stated from the bench, this Order will control.
Plaintiff Rob & Bud's Pizza ("R&B") is a franchisee with Defendants (collectively, "Papa Murphy's"), and it owns and operates multiple Papa Murphy's Take n' Bake Pizza restaurants in Bentonville, Rogers, Springdale, Fayetteville, Van Buren, and Fort Smith, Arkansas, as well as in Missouri and Kansas. On April 24, 2014, R&B filed a complaint (along with many other Papa Murphy's franchisees) against Papa Murphy's (along with many various other Papa Murphy's subsidiaries, holding companies, officers, and directors) in the Superior Court of the State of Washington ("the Washington litigation"). The plaintiffs in the Washington litigation alleged eleven causes of action against the defendants, essentially claiming that the defendants induced them to purchase Papa Murphy's franchises through various fraudulent and deceptive misrepresentations and omissions.
While the Washington litigation was ongoing, R&B initiated the instant lawsuit on April 17, 2015, by filing its original Complaint (Doc. 3) in the Circuit Court of Benton County, Arkansas, seeking a declaratory judgment and permanent injunction. In that Complaint, R&B alleged that Papa Murphy's was unlawfully attempting to terminate R&B's franchise agreement in retaliation for R&B's refusal to accede to Papa Murphy's settlement demands in the Washington litigation. Papa Murphy's removed the Benton County case to this Court on April 23, 2015, (Doc. 1), and one week later filed their Motion to Transfer Venue to the Western District of Washington. On May 14, 2015, Papa Murphy's was granted leave in the Washington litigation to file a counterclaim there against R&B concerning some of the same issues presented in the instant case. (Doc. 13-4). Also on May 14, 2015, R&B added a claim of tortious business interference in the instant action through its First Amended Complaint (Doc. 9), in response to which Papa Murphy's filed their Answer (Doc. 18) on May 28, 2015. On May 21, 2015, and June 2, 2015, R&B filed Motions to Disqualify Papa Murphy's attorneys Robert L. Zisk and Michael R. Gray, respectively - both of whom had been admitted by this Court to appear pro hac vice in this case. Papa Murphy's Motion to Transfer Venue and R&B's Motions to Disqualify are all now ripe for consideration.
A. PAPA MURPHY'S MOTION TO TRANSFER VENUE
1. Enforceability of the Forum Selection Clauses
Papa Murphy's contends that its franchise agreements with R&B all contain valid, enforceable, and mandatory forum selection clauses that require all litigation between the parties to occur in courts located in Clark County, Washington. Although the Eighth Circuit appears not to have resolved the matter, Servewell Plumbing, LLC v. Fed. Ins. Co., 439 F.3d 786, 789 (8th Cir.2006), this Court believes that the question of whether a forum selection clause is enforceable is a procedural question and therefore one that is governed by federal rather than state law, Bright Harvest Sweet Potato Co., Inc. v. H.J. Heinz Co., L.P., 2013 WL 2458685 at *2 (W.D.Ark. June 6, 2013). See also Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). Under federal law, "[f]orum selection clauses are prima facie valid and are enforced unless they are unjust or unreasonable or invalid for reasons such as fraud or overreaching." M.B. Rests., Inc. v. CKE Rests., Inc., 183 F.3d 750, 752 (8th Cir.1999). However, "consideration of the public policy of the forum state must be part of that analysis." Union Elec. Co. v. Energy Ins. Mut. Ltd., 689 F.3d 968, 974 (8th Cir.2012).
In the instant case, the public policy of Arkansas (the forum in which this suit was brought) strongly weighs against enforcing the forum selection clause. The Arkansas Procedural Fairness for Restaurant Franchisees Act ("APFRFA") states that "a party to a restaurant franchise may commence a civil action... in Arkansas if either party to the restaurant franchise is a resident of Arkansas, " Ark. Code Ann. § 4-72-602, and states furthermore that "[n]either a franchisee nor a franchisor shall be deprived of the application and benefits of this subchapter by a provision of a franchise purporting to designate the law of another jurisdiction as governing or interpreting the franchise, or to designate a venue outside of Arkansas for the resolution of disputes." Ark. Code Ann. § 4-72-603(c). Therefore, under Arkansas public policy, the forum selection clauses at issue should not be enforceable unless (1) neither R&B nor Papa Murphy's is a resident of Arkansas within the meaning of the APFRFA; or (2) R&B and Papa Murphy's are not parties to a restaurant franchise within the meaning of the APFRFA.
The Arkansas Supreme Court has acknowledged that "a foreign corporation may so establish its business within the state in conformity with local laws as to justify treatment of the corporation as a resident' for certain purposes, depending on the context of the statute in which the term is used and the purpose and object to be obtained." Douglass v. Levi Strauss & Co., 315 Ark. 380, 382 (1993) (quoting 17 W. Fletcher, Cyclopedia of the Law of Private Corporations, § 8300 (Perm. Ed. 1987)). Although the APFRFA does not explicitly define "resident, " it does say that "[t]his subchapter applies to a restaurant franchise operated in whole or in part in Arkansas and to the parties to the restaurant franchise." R&B and Papa Murphy's agree that R&B operates restaurants in Arkansas pursuant to their franchise agreement. See Doc. 9, ¶ 1; Doc. 18, ¶ 1. Therefore, the Court finds that R&B is a resident of Arkansas within the meaning of the APFRFA.
The APFRFA does explicitly define "restaurant franchise" as:
a contract or agreement... between two (2) or more persons, by which
(A) A franchisee is granted the right to engage in the business of offering, selling, or distributing food or beverages intended or suitable for immediate consumption on or off the premises of the franchisee under a marketing plan ...