In March 2023 in the case of Singh v. Wireless Vision, LLC, the federal court for the Eastern District of California denied a subfranchisor’s motion to change venue to the Eastern District of New York. It concluded that its Operator Agreement was a franchise agreement under California law. Therefore, the forum-selection clause was invalid under the California Franchise Relations Act (CFRA). In the case, Singh and Ameritel had entered into an Operator Agreement giving Singh the right to sell exclusively T-Mobile services and products. At the time of the agreement, Singh paid Ameritel a $10,000 good faith deposit.

Thereafter, Singh spent at least $160,000 purchasing equipment and building a store. The Operator Agreement was later assigned to Wireless Vision and then terminated by Wireless Vision.

Singh sued Wireless Vision for breach of contract, violation of the CFRA, violations of the California Labor Code, and unfair business practices. Wireless Vision filed a motion to change venue pursuant to the Operator Agreement’s forum selection clause. Singh opposed the motion. He argued that the forum-selection clause was void under the CFRA.

The court denied Wireless Vision’s motion to change venue. It found the forum-selection clause in the Operator Agreement was unenforceable because the CFRA voids any provision in a franchise agreement restricting venue to a forum outside California.

The court further held that the Operator Agreement satisfied the definition of a franchise under California law since Singh (1) was granted the right to engage in the business of selling goods at a price determined by T-Mobile or Ameritel Management in accordance with T-Mobile standard procedures and was not allowed to engage in the sale of other cellular services; (2) was told he would have a branded T-Mobile store containing signs and displays listing the T-Mobile brand and trademarks; and (3) satisfied the franchise fee requirement by making a $10,000 deposit. The court determined, while Singh’s payments may have gone to third parties, Wireless Vision benefited from the payments because they were used to improve the premises which remained in their possession after the Operator Agreement was terminated.

If you own a franchise in California and have a dispute with your franchisor, consult your business attorney. You likely can stay home to litigate the matter.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.