A federal court in Virginia recently granted a motion brought by equipment suppliers DET Diesel Emission Technologies, LLC and Synergy Catalyst, LLC, together doing business as "Recore," to enforce a forum selection clause and transfer claims brought by franchisee Iron Horse Transport, LLC to a federal court in Texas. Iron Horse Transp., LLC v. DET Diesel Emission Techs., LLC, 2024 WL 3878433 (W.D. Va. Aug. 20, 2024). Iron Horse is a franchisee of DPF Alternatives, LLC, providing diesel particulate filer services. In 2021, Iron Horse entered into a Master Services Agreement (MSA) with DET to rent equipment for use in its franchised business. Problems arose under the MSA, which resulted in DET terminating the agreement based on Iron Horse's alleged defaults, and Iron Horse subsequently filing various claims against Restore, including false marketing, breach of contract, and unlawful cancellation of a franchise under the Virginia Retail Franchising Act (VRFA). Restore brought a motion to transfer the claims to a Texas federal court based on the forum selection clause in the MSA.
Iron Horse resisted the transfer, claiming it would violate Virginia's strong public policy in favor of the protection of franchisees as set forth in the VRFA. The VRFA is intended to equalize the balance of power between franchisors and franchisees by requiring franchisors to deal fairly with franchisees. While the Virginia court acknowledged that certain public interest factors could outweigh the impact of a valid forum-selection clause in limited circumstances, the court explained that public interest factors will rarely defeat a transfer motion. The court found the public interest factors here were insufficient to defeat Restore's transfer motion, determining that Virginia public policy does not require that the remedies provided under the VRFA be litigated in Virginia, and reasoning that nothing in the statute requires VRFA claims be heard in Virginia and courts outside of Virginia have regularly adjudicated claims under the VRFA.
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