Out-of-state franchisees. The Washington Franchise Investment Protection Act's (FIPA's) anti-waiver provision did not apply to a junk removal business franchise agreement between two Oregon residents and a Canadian franchisor, according to a federal district court in Seattle. Even though the agreement expressly stated that it "shall be construed and interpreted according to the laws of the state of Washington," the Act limited the scope of its protections to franchise-related conduct occurring in Washington, and neither the franchisees nor any aspect of agreement or relationship with the franchisor occurred in Washington. Thus, FIPA's anti-waiver provision did not apply to bar a settlement agreement executed by the parties, and the franchisor was entitled to summary judgment on the franchisees' claims because they had been released by the settlement.

The franchisees sued the franchisor after learning that exclusive agreements between third-party junk haulers and the counties comprising their franchise territory effectively prevented them from operating their franchise. The franchisees did not dispute that they had entered into the settlement agreement with the franchisor. Instead, they alleged that their claims for breach of contract and violation of FIPA, among others, were still viable because FIPA's anti-waiver provision voided the settlement agreement. The anti-waiver provision invalidated a release of FIPA claims unless the franchisee was represented by independent counsel and the franchisees had not been represented by counsel when they negotiated the settlement, the court noted.

Both the Fourth and the Seventh Circuits had addressed the key issue in dispute --whether a statutory territorial restriction operated to preclude coverage when the parties had contracted that Washington law governed their dispute. The court observed that both of those circuits determined that a specific territorial limitation on the application of a state law must be given effect even where the parties contractually agreed that the law of that state applied. Further, when presented with a similar issue, the Ninth Circuit adopted and applied the reasoning of the Fourth and Seventh Circuits. Thus, the franchisees were not entitled to FIPA's protections and the settlement and release agreement was valid and barred their claims, the court held.

Taylor v. 1-800-Got-Junk?, LLC, DC Wash., ¶14,197.