Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. Ariz.: Court transfers Mail Center franchise dispute to Missouri despite TRO, (Feb 25, 2025)

By George Basharis, J.D.

Arizona federal judge enforces forum selection clause in franchise agreement, dissolving temporary restraining order that had protected franchisee from termination.

The United States District Court for the District of Arizona has ordered the transfer of a case between a Mail Center franchisee and its franchisor to the Western District of Missouri, enforcing a forum selection clause in the franchise agreement. The ruling effectively dissolves a temporary restraining order that had temporarily protected the franchisee from termination (S&G Elite LLC v. ST National Franchising LLC, No. CV-25-00037-TUC-RM (D. Ariz. Feb. 13, 2025)).

Background of the franchise dispute. The dispute centers on a franchise location of The Mail Center, a retail business providing mail-related services in Tucson, Arizona. S&G Elite LLC operates the franchise under an agreement with ST National Franchising LLC. The conflict escalated when ST National issued a termination letter, demanding that S&G Elite cease operations.

Soon after, S&G Elite filed suit against ST alleging fraudulent inducement and breach of contract claims. The franchisee sought immediate court protection to prevent business closure. S&G Elite claims ST National misrepresented its reputation, financial stability, and the expected costs and profitability of the franchise to induce S&G Elite into signing the agreement. After execution of the franchise agreement, S&G Elite contends ST National engaged in bad faith conduct, including failing to provide financial reconciliations for tenant improvement funds, imposing unauthorized charges, and making improper electronic withdrawals from S&G Elite's accounts. S&G Elite claims losses of approximately $700,000 with continuing damages.

Initial temporary restraining order success. On February 10, 2025, S&G Elite achieved an initial victory when the Arizona district court issued a temporary restraining order that barred ST National from terminating the franchise agreement and making unauthorized withdrawals from the franchisee's accounts. The court found that S&G Elite had demonstrated “serious questions going to the merits” of its claims and a likelihood of irreparable harm.

The court rejected ST National’s primary defense that relied on the franchise agreement’s integration clause, agreeing with S&G Elite that accepting such an argument would effectively preclude any fraudulent inducement claim. The court determined the scales of hardship tipped sharply in S&G Elite’s favor, finding that without injunctive relief, the plaintiff faced potential business closure, long-term financial damage, and reputational harm.

Motion to transfer venue. However, ST National quickly responded with a Motion to Transfer Venue and to Stay Proceeding Pending Resolution of Motion to Transfer. ST National argued that the franchise agreement contained a mandatory forum selection clause requiring all disputes to be litigated in the state or federal courts nearest ST National’s corporate headquarters in Kansas City, Missouri.

The franchise agreement language specifically stated: “You and we agree that venue and jurisdiction for any Claims, except those required to be submitted to arbitration, shall be proper solely in the state and federal court nearest to our corporate headquarters, presently located in Kansas City, Missouri.” The agreement defined “Claims” as “all claims that in any way relate to or arise out of this Agreement or any of the dealings of the parties.”

After hearing oral arguments from both parties, the court partially granted a temporary restraining order, thereby enjoining the defendants from taking actions related to the franchise agreement but only pending resolution of the motion to transfer.

Court’s analysis of the forum selection clause. The court provided a detailed analysis of the legal standards governing forum selection clauses. The court cited the Supreme Court's decision in Atlantic Marine Construction Co. v. U.S. District Court for Western District of Texas, 571 U.S. 49 (2013), which established that forum selection clauses should be “given controlling weight in all but the most exceptional cases.”

The court noted that when parties agree to a forum selection clause, they waive the right to challenge the preselected forum as inconvenient for themselves or witnesses, and the district court “should not consider arguments about the parties' private interests.” Instead, courts must focus on public-interest factors, which “will rarely defeat a transfer motion.”

S&G Elite opposed the transfer, arguing that the Western District of Missouri was not a more equitable or fair venue. The franchisee contended that because the entire franchise agreement, including its forum selection clause, was fraudulently induced, Atlantic Marine should not apply because that case “dealt with a ‘valid’ forum-selection clause.” S&G Elite also emphasized concerns about increased litigation costs and inconvenience to potential witnesses.

ST National countered that S&G Elite’s allegations of fraudulent inducement did not invalidate the forum selection clause because the franchisee had not alleged or demonstrated that the clause itself, rather than the entire agreement, was the product of fraud. ST National maintained that arguments regarding witness convenience and increased litigation costs were private interest factors, which are irrelevant under the framework established in Atlantic Marine.

Court’s decision to transfer. The court sided with ST National, finding that S&G Elite “has not shown that the enforcement of the Franchise Agreement's forum-selection clause would be unjust or unreasonable, or that the clause is invalid due to fraud or overreaching.” The court noted that S&G Elite had not alleged or provided specific evidence that the clause itself was procured through fraud. Rather, the franchisee’s allegations pertained to the entire franchise agreement and general misrepresentations about profitability and operations. The court cited precedent affirming enforcement of a forum selection clause where fraud allegations pertained to the entire agreement rather than the clause itself.

Furthermore, the court found that S&G Elite had not identified any extraordinary public interest factors that would justify overriding the forum selection clause. The court specifically noted that concerns about witness convenience and litigation costs are private interest factors that courts are instructed to disregard when evaluating a motion to transfer based on a valid forum selection clause.

Impact on the temporary restraining order. The court’s order has significant immediate consequences for S&G Elite, leaving S&G Elite vulnerable to the franchise termination it had sought to prevent through court intervention. By its own terms, the temporary restraining order was dissolved with the resolution of ST National’s Motion to Transfer Venue. Moreover, the court noted that S&G Elite “may apply for further injunctive relief in the Western District of Missouri,” suggesting that the franchisee would need to restart its efforts to obtain protection in the new venue.

The Case is No. CV-25-00037-TUC-RM.

Judge: Márquez, R.

Attorneys: Richard John Edwards (FR Law Group PLLC) for S&G Elite LLC. Nico B. Stillwell (Edelman Liesen & Myers LLC) for ST National Franchising LLC.

Companies: S&G Elite LLC; ST National Franchising LLC

Cases: FranchisingDistribution ArizonaNews