Hawaii-2014-HB2041-Amended

SECTION 1. Hawaii's franchise investment law regulates the sale of franchises in Hawaii. While franchisors are required to be amenable to the jurisdiction of the courts of this State, franchises may include a pre-dispute forum selection clause that requires the adjudication of disputes in an out-of-state jurisdiction.

The legislature finds that given Hawaii's physical isolation from other states, mandating the imposition of an out-of-state forum selection clause in a franchise without regard to the facts of the dispute is impractical and a great hardship to franchisees. A dispute regarding a Hawaii franchise will typically involve conduct in Hawaii, with the witnesses and physical evidence located in the State. It is frequently cost prohibitive for a franchisee to have disputes adjudicated out-of-state, with the result that the franchisees cannot afford to utilize the protections afforded it under Hawaii law, frustrating a purpose of Hawaii's franchise investment law.

The legislature further finds that having Hawaii franchise disputes adjudicated thousands of miles away in a foreign forum does not allow for the robust and authoritative development of judicial precedent to inform parties about how to interpret and apply Hawaii's law regarding franchisor-franchisee disputes.

The purpose of this Act is to void the use of pre-dispute forum selection clauses in franchises that require the adjudication of disputes in an out-of-state jurisdiction. The purpose of this Act is to also be consistent with the statutory schemes of other states that have enacted franchise investment laws.

SECTION 2. Section 482E-5, Hawaii Revised Statutes, is amended to read as follows:

"§482E-5 General provisions. (a) Every person selling franchises in this State [~~shall~~] at all times shall keep and maintain a complete set of books, records, and accounts of such sales and shall thereafter at such times as are required by the director make and file in the office of the director a report setting forth the franchises sold by it and the proceeds derived therefrom.

(b) It is unlawful for any person in connection with the offer, sale, or purchase of any franchise directly or indirectly:

(1) To make any untrue statement of a material fact in any offering circular or report filed with the director under this chapter or wilfully to omit to state in any offering circular or report, any material fact which is required to be stated therein.

(2) To sell or offer to sell a franchise in this State by means of any written or oral communication which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made in light of the circumstances under which they were made not misleading.

(3) To employ any device, scheme, or artifice to defraud.

(4) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person.

(5) To violate any order of the director.

(c) Any person who is engaged or hereafter engaged directly or indirectly in the sale of a franchise or in business dealings concerning a franchise, either in person or in any other form of communication, shall be subject to this chapter, shall be amenable to the jurisdiction of the courts of this State, and shall be amenable to the service of process as provided by law and rule. Every person who sells a franchise in this State shall file with the director in such form as the director by rule prescribes, an irrevocable consent appointing the commissioner or the commissioner's successor in office to be the person's attorney, to receive service or any lawful process in any noncriminal suit, action, or proceeding against the person or the person's successor, executor, administrator, or personal representative which arises under this chapter or any rule or order hereunder after the consent has been filed, with the same force and validity as if served personally on the person filing consent. A person who has filed such a consent in connection with a previous sale under this law need not file another. Service may be made by leaving a copy of the process in the office of the commissioner but is not effective unless:

(1) The plaintiff, who may be the director, in a suit, action, or proceeding instituted by the plaintiff forthwith sends notice of the service and a copy of the process by registered or certified mail to the defendant or respondent at the defendant's or respondent's last address on file with the director; and

(2) The plaintiff's affidavit of compliance with this section is filed in the case on or before the return day of the process, if any, or within such further times the court allows.

(d) Any provision in a franchise that restricts jurisdiction or venue to a forum outside of this State is void with respect to any claim arising under or relating to a franchise in this State or to business dealings concerning a franchise in this State.

[~~(d)~~] (e) In any proceeding under this chapter, the burden of proving an exception or an exemption from a definition is upon the person claiming it."

SECTION 3. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2112.

HOUSE OF REPRESENTATIVES	H.B. NO.	2041
TWENTY-SEVENTH LEGISLATURE, 2014		H.D. 1
STATE OF HAWAII