Montana Court Decision ‘Threatens To Undermine Franchising As We Know It’

WASHINGTON, DC— If the findings of a Montana Court that the franchise agreement entered into between Ticknor Lodging Corp. and Choice Hotels International— reviewed and subsequently upheld by a Court of Appeals in that state— is allowed to stand unchallenged, the result “threatens to undermine franchising as we know it.” So suggested Neil Simon, president of the National Franchise Council here, regarding the Montana State Court’s decision that the franchise agreement entered into between Bozeman, MT-based Ticknor and Silver Spring, MD-based Choice was in effect “an unconscionable contract [in that it qualified as a contract of adhesion].” According to Simon, the ruling on this standardized, non-negotiated pact was wrong for a number of reasons, including: • Ticknor was in no way compelled to enter into this particular agreement; • there was nothing “unique” about the Choice contract or Ticknor’s participation in it; • had the lodging company so desired, there were a number of franchise alternatives available with which to establish an operating relationship; and • a reasonable “cooling-off period” following the pre-sale disclosure effectively eased the decision-making on Ticknor vis-à-vis this agreement. Essentially, this situation developed in the wake of Choice reportedly terminating Ticknor’s franchise agreement (in 1999) for failure to pay outstanding fees, followed by the brand’s filing of a demand for arbitration as set forth in the standard language of the contract. However, Ticknor resisted this call for arbitration and instead filed suit in Montana State Court for “breach of contract.” Ultimately, the court ruled that Ticknor “should not be forced to arbitrate [its dispute]in Choice’s home state of Maryland.” To this end, NFC’s Simon pointed out: “Montana has a long history of hostility to provisions regarding issues of arbitration outside its borders.” In accordance with a joint consensus that “the success of franchising depends on contract uniformity…which can only be maintained if contracts are enforceable,” Choice currently has a writ of certiorari and NFC has a supportive amicus curiae on the matter before the U.S. Supreme Court.