Antitrust Law Daily Car rental franchisors Florida suit for breach of contract dismissed for lack of personal jurisdiction over franchisees
Monday, November 20, 2017

Car rental franchisors Florida suit for breach of contract dismissed for lack of personal jurisdiction over franchisees

By Robert B. Barnett Jr., J.D.

After a suit filed by Dollar, Thrifty, and Hertz involving a terminated franchise agreement was dismissed for lack of subject matter jurisdiction—and then resurrected by a new complaint—the suit was again dismissed without prejudice, this time for lack of personal jurisdiction over the New York franchisees, a Fort Myers, Florida district court has ruled. The court declined to exercise personal jurisdiction because the choice-of-law provision in the franchise agreement conferred jurisdiction on Oklahoma and insufficient evidence existed to establish that the franchisee otherwise had sufficient minimum contacts with Florida (Dollar Rent A Car, Inc. v. Westover Car Rental, LLC, November 16, 2017, Steele, J).

Westover Car Rental, LLC, a Delaware corporation, was in the business of renting and parking cars in western New York. In 2006, it entered into a franchise agreement with Dollar/Thrifty. In 2010, Westover’s five individual owners executed a personal guaranty agreement with Dollar/Thrifty. In 2015, it entered into a vehicle purchase agreement with Hertz. In 2016, it notified the parties that it was terminating the agreements. Dollar, Thrifty, and Hertz then sued Westover and its individual owners alleging breach of contract and asking for a declaratory judgment about the defendants’ post-termination obligation not to compete. At the time the agreements were entered into, Dollar, Thrifty, and Hertz were headquartered in Tulsa, Oklahoma. By the time suit was filed, however, they had moved their headquarters to Ft. Myers, Florida.

Subject matter jurisdiction in the federal suit was based on diversity of citizenship. In April 2017, the court granted Westover’s motion to dismiss the suit on the ground that the complaint failed to establish whether Westover was a citizen of Florida, Oklahoma, or Delaware. The three car rental companies then refiled their complaint, this time pleading that Westover was a citizen of New York, which the court accepted as establishing diversity of citizenship. Westover then filed a motion to dismiss the new complaint for lack of personal jurisdiction or, in the alternative, to transfer the case to Oklahoma.

Waiver. The new complaint alleged that the court had personal jurisdiction because Westover and the five individuals all waived their rights to contest jurisdiction and thus agreed to adjudicate disputes in Florida under the terms of the various agreements. Before turning to the question of whether Florida recognized the contractual provision, the court examined whether each of the complaint’s counts stated a valid claim. While the claims for breach of the two agreements with Dollar/Thrifty and the demand for a declaratory judgment were adequate, the claims arising out of the vehicle purchase agreement with Hertz were not. No breach occurred under terms of that agreement, the court said, because the agreement did not require Westover to purchase any vehicles, and it said that any breach was a breach of a separate license agreement. Thus, the analysis of personal jurisdiction continued without reference to the vehicle purchase agreement.

After changing its law in 1989, Florida now recognizes that parties to an agreement can consent to authorize to have Florida exercise jurisdiction. Under Florida law, however, the mere signing of such an agreement does not automatically confer jurisdiction. The agreement must still comply with other provisions of Florida law, which require that a contract (1) include a choice of law provision designating Florida law as the governing law, (2) include a provision whereby the nonresident agreed to submit to Florida jurisdiction, (3) involve not less than $250,000, (4) not violate the U.S. Constitution, and (5) either bear a substantial relation to Florida or have at least one of the parties be a Florida resident or Florida corporation (Fla. Stat. §§685.101 and 685.102).

The fatal flaw in these agreements was the absence of a choice of law provision designating Florida as the governing law. The personal guaranty agreement, for example, said that the agreement was to be governed by the laws of Oklahoma. The franchise agreement, on the other hand, said that Oklahoma law would govern, except for issues involving the non-compete agreement, which would be governed by the laws of wherever Westover was operating (in this case, New York). As a result, the court dismissed all claims against the five individual owners because the contract failed to satisfy Florida’s requirements for conferring personal jurisdiction.

Long-arm jurisdiction. Even though the franchise agreement did confer personal jurisdiction over the franchisee, the court still, however, had to address whether Florida’s long-arm statute applied to confer personal jurisdiction over Westover. The three rental car companies’ argument was based on three Florida contacts by Westover: (1) it sent a representative to Florida (at Hertz’s request) to attend a three-day training program, (2) it sent letters to Florida about termination of the franchise, and (3) it entered into the vehicle purchase agreement with Hertz after Hertz had relocated to Florida. None of those grounds, the court said, was sufficient for Florida to have personal jurisdiction over Westover. The rental car companies would have needed to establish that Westover carried on a business or a business venture in Florida, which they could not do.

Failure to perform acts. Florida law also permits a Florida court to have personal jurisdiction where a party fails to perform an act it was contractually required to perform in Florida (Fla. Stat. §48.193(1(a)(7)). The three car companies alleged that this requirement was met by Westover’s failure to (1) remit licensing fees before terminating the contract and (2) give the car rental companies timely notice of termination. As for the first condition, the court concluded, all licensing payments were to be made to Tulsa, Oklahoma. As for the second condition, again, all notices were to be sent to Tulsa. The fact that Westover sent communications to Florida that were about the termination did not mean that the termination notices were sent to Florida. If a breach occurred, the court said, it was an Oklahoma breach.

The court, therefore, granted without prejudice Westover and the five individuals’ motion to dismiss for lack of personal jurisdiction. It also denied their motion to transfer venue.

The case is No. 2:16-cv-363-FtM-29CM.

Attorneys: Barry M. Heller (DLA Piper US, LLP) for Dollar Rent A Car, Inc. Jose R. Riguera (Blank Rome, LLP) for Westover Car Rental, LLC.

Companies: Dollar Rent A Car, Inc.; Westover Car Rental, LLC

MainStory: TopStory FranchisingDistribution FloridaNews

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