Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—2d Cir.: Appeals court affirms denial of summary judgment to New Jersey restaurant franchisors, (Sep 9, 2026)

By Donielle Tigay Stutland, J.D.

Franchisors could not rely on the arbitration clause and choice-of-law provision for jurisdiction, as they did not seek to compel or enforce arbitration.

The Court of Appeals for the Second Circuit affirmed the decision of the federal district court in New York City which had denied two related restaurant franchisors' motion for a default judgment on their claims including breach of franchise agreements for failure to pay royalties against a group of Italian corporate franchisees and their individual guarantors who had entered into agreements to operate restaurant franchises in Italy. The Second Circuit affirmed the dismissal of a default-judgment action by Everything Yogurt Brands, LLC and Villa Pizza, LLC against Italian franchisees alleged to have missed payments under franchise agreements because of the lack of personal jurisdiction. The Second Circuit agreed that here, as the franchisors do not seek to compel or enforce arbitration, they cannot rely on the arbitration clause and choice-of-law provision in the parties agreements as a basis for consent to jurisdiction (Everything Yogurt Brands, LLC v. Bianco, No. 24-2282-cv (2d Cir. Sep. 9, 2026)).

Background. Everything Yogurt Brands, LLC (EYB) and Villa Pizza, LLC (Villa) are Delaware limited liability company entities, each headquartered in New Jersey and registered to do business in New York. The two related entities franchise various restaurant brands, including Villa Pizza, South Philly Cheesesteaks & Fries, Green Leaf's, and Cozzoli's Pizza. EYB and Villa entered into nine franchise agreements for restaurants to be operated in Italy. Following nonpayment of franchise royalties, EYB and Villa sued the franchisees and guarantors (eight corporate entities and seven individuals) in federal district court for breach of contract, breach of the good faith and fair dealing implied covenant, and unjust enrichment. The defendants, all residing in Italy or Italian companies with principal places of business in Italy, were served per the requirements of the Hague Convention and the relevant Italian laws, but none answered the complaint, appeared, or otherwise responded to the lawsuit. The Clerk of the Court issued a Certificate of Default against the defendants.

After EYB and Villa moved for a default judgment against the defendants, the district court denied the motion and dismissed the suit because of a lack of personal jurisdiction. The franchisors now appeal.

Analysis. On appeal, the franchisors argued that the franchisees consented to personal jurisdiction in New York in the parties’ franchise agreements. The franchisors pointed to the franchise agreements, which contain identical arbitration clauses, providing, in relevant part, that “all controversies, disputes or claims arising between [the parties]... shall be settled by binding arbitration... in New York, New York, USA.” The agreements also contain New York choice-of-law clauses, providing that the agreements “shall be governed by and construed in accordance with the laws of the State of New York, USA.”

The Second Circuit concluded that the district court properly rejected the franchisors’ argument. A party that consents to arbitration in New York necessarily consents to the jurisdiction of a court sitting in New York for the purpose of enforcing the arbitration agreement. However, the court stressed that the “scope of the parties’ consent... can extend no further than what is implied by their agreement to arbitrate in New York, i.e., that they agree to the jurisdiction of the New York courts on matters necessary to make the clause effective.” The Second Circuit agreed that here, as the franchisors do not seek to compel or enforce arbitration, they cannot rely on the arbitration clause and choice-of-law provision as a basis for consent to jurisdiction.

The court also found the franchisors reliance on the franchise agreements’ New York choice-of-law provision unpersuasive. “[A] choice of law provision in a contract does not constitute a voluntary submission to personal jurisdiction.” The court detailed that the franchisors’ argument fails because they seek to establish jurisdiction based on consent, not specific jurisdiction under N.Y. C.P.L.R. § 302(a). And, the court found no basis for specific jurisdiction in New York because the franchisees did not have any relevant contacts with New York, see N.Y. C.P.L.R. § 302(a), and “[a] choice of law provision in an agreement, while relevant, is insufficient by itself to confer personal jurisdiction over a defendant in New York under CPLR 302(a)(1).”

The Case is No. 24-2282-cv.

Judge: Raggi, R.

Attorneys: Bob Kasolas (Brach Eichler LLC) for Everything Yogurt Brands, LLC.

Companies: Everything Yogurt Brands, LLC

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