On May 6, 2026, the New York State Supreme Court’s Appellate Division, Second Department, issued a decision in Westchester Fitness, LLC v. Retrofitness, LLC (258 N.Y.S.3d 694) that offers a useful, if narrow, refresher on two recurring issues in franchise litigation: (1) how much a franchisee must show to defeat a forum selection clause, and (2) how far a forum selection clause reaches once a dispute grows beyond the four corners of the franchise agreement itself. Neither issue is new, but the case is a clean illustration of both — and a reminder to franchisors that a well-drafted, well-litigated forum selection clause is a durable asset, but not an unlimited one.
Background
In 2009, Westchester Fitness, LLC entered into a franchise agreement with Retrofitness, LLC to operate a Retrofitness gym. Like many franchise agreements, it contained a forum selection clause — here, requiring that disputes be litigated exclusively in New Jersey state or federal court.
The agreement expired in September 2019. Retrofitness promptly sued Westchester Fitness and its principal, Holly Wallman, in New Jersey state court over post-expiration obligations. While that suit was pending, Westchester Fitness turned around and sued Retrofitness in New York (Suffolk County) for breach of the same franchise agreement. Retrofitness removed the New York action to federal court, and, notably, the parties spent the ensuing months negotiating what they believed was a global settlement of both the New Jersey and New York disputes. That settlement fell apart in June 2020, and negotiations were unsuccessful in reaching agreement (or at least, the parties did not agree as to whether any agreement was reached).
The federal court eventually decided it lacked subject matter jurisdiction and remanded the New York case back to Suffolk County. Once back in state court, the plaintiffs amended their complaint — adding two individual plaintiffs, two additional defendants, and several new causes of action arising out of the failed settlement negotiations themselves. Retrofitness (the franchisor) then moved to dismiss the entire amended complaint under CPLR 3211(a), invoking the New Jersey forum selection clause. The trial court granted the motion in full. The plaintiffs appealed.
The Appellate Division’s Holding
The New York State Court Appellate Division’s (Second Department) affirmed in part and reversed in part, drawing a sharp — and instructive — line.
- The forum selection clause was enforced for claims arising under the franchise agreement. As to the first through sixth and twelfth causes of action, which sounded in breach of the franchise agreement itself, the court held the forum selection clause fully enforceable and dismissed those claims from the New York action.
- The clause was not enforced for claims arising from the failed settlement. The seventh through eleventh causes of action — which arose out of the parties’ separate, later settlement negotiations, not out of the original franchise agreement — fell outside the clause’s scope. The court reinstated those claims, holding that a forum selection clause’s reach is defined by “the language of the forum selection clause itself,” not by the general subject matter of the underlying dispute. Because those causes of action did not arise out of the franchise agreement, the New Jersey forum selection clause simply did not speak to those causes of action.
- Litigating elsewhere did not waive the clause. The plaintiffs also argued that Retrofitness had waived its right to invoke the forum selection clause by removing the case to federal court and otherwise participating in the New York litigation. The Second Department rejected that argument outright, holding that participation in litigation — including affirmative steps like removal — did not waive the forum selection defense.
The Legal Standard the Court Applied
The court’s forum-selection-clause analysis tracks well-settled New York law, and is worth restating because it is the standard franchisors will typically face whenever a franchisee tries to avoid a contractually chosen forum:
- A forum selection clause is documentary evidence that can support dismissal under CPLR 3211(a)(1).
- Such clauses are prima facie valid and enforceable.
- To defeat one, the resisting party must make a “strong showing” that the clause is unreasonable, unjust, contrary to public policy, the product of fraud or overreaching, or that litigating in the chosen forum would be so gravely difficult that the party would, for all practical purposes, be deprived of its day in court.
- General, unparticularized allegations of fraud relating to the underlying contract are not enough to invalidate a forum selection clause embedded in that same contract. The fraud has to go to the clause itself (or otherwise meet the demanding standard), not merely color the franchisee’s broader grievance against the franchisor.
Westchester Fitness showed none of these factors, held the court. It did not show unconscionability, did not show unequal bargaining power or high-pressure tactics, did not tie its fraud allegations to the forum clause specifically, and offered no evidence that litigating in New Jersey would functionally deny it a forum at all. That is a fairly typical failure pattern, and it is why forum selection clauses tend to survive challenge: the bar to defeat them is high, and courts are reluctant to let a franchisee’s general dissatisfaction with the franchise relationship do the work of invalidating a freely negotiated contract term.
Why the Scope Ruling Matters More Than the Enforcement Ruling
Franchisor’s counsel will find the enforceability holding reassuring but unsurprising — courts routinely enforce forum selection clauses against franchisees who cannot clear the “strong showing” bar. The more practically significant part of the decision is the scope holding: the clause did not reach claims arising from the parties’ post-dispute settlement negotiations.
That result follows logically from the reasoning the court relied on — a forum selection clause’s applicability does not depend on the “nature of the underlying action” as a category (e.g., “this is a franchise dispute, so the clause covers everything related to it”); it depends on the actual language of the clause and whether the specific claim arises out of the agreement containing it. Settlement negotiations conducted after the franchise agreement expired, over a settlement agreement that was never actually executed, are a different animal from a breach-of-franchise-agreement claim, even though they grew directly out of the same underlying relationship and even the same litigation.
This is a distinction franchise litigators see recur in other contexts too: disputes over side letters, subsequent amendments, verbal modifications, releases, or freestanding settlement agreements can easily fall outside a forum selection (or arbitration) clause drafted only to cover “this Agreement,” even when the parties and the underlying commercial relationship are identical to those in the franchise agreement.
Lessons for Franchisors
- Draft forum selection (and arbitration) clauses to reach beyond the four corners of the agreement, if that’s the intent. If a franchisor desires that its chosen forum govern any dispute connected to the franchise relationship — including disputes over settlement of franchise disputes, post-termination negotiations, or ancillary agreements — the clause needs broader language than “disputes arising under this Agreement.” For example, one might consider language capturing disputes “arising out of or relating to” the franchise relationship, the franchise agreement, “or any amendment, side agreement, or settlement thereof.” Standard-form clauses drafted decades ago (the subject franchise agreement was signed in 2009) often use narrower “arising under” language that, as this case shows, will not automatically follow the parties into every subsequent dispute connected to the franchise relationship.
- You can litigate defensively without waiving a forum selection clause — but do not assume that’s true everywhere or in every posture. Retrofitness (the franchisor) removed the case to federal court, participated in the resulting jurisdictional fight, and, it seems, only after remand moved to dismiss based on the forum clause. The New York state court found no waiver. That’s a favorable and useful data point, but franchisors should still move to enforce a forum selection clause at the earliest practical opportunity. Waiver arguments are fact-specific, and a franchisor who litigates on the merits for an extended period, files affirmative claims of its own in the “wrong” forum, or otherwise engages substantively before raising the clause runs a real risk that a different court reaches a different result.
- Settlement negotiations are not “off the books” for litigation risk — document them carefully. The claims that survived here (the seventh through eleventh causes of action) arose because the parties negotiated toward a settlement, allegedly reached one, and then one side told the court no settlement existed. Whatever actually happened in those negotiations, the case is a reminder that failed settlement talks can generate an entirely separate, independently litigable dispute — one that won’t necessarily be covered by the underlying agreement’s forum selection or dispute-resolution clauses. Franchisors negotiating settlements of franchise disputes should consider using written settlement term sheets or agreements that contain their own forum selection and dispute-resolution provisions, rather than relying on the original franchise agreement’s clause to cover a later, distinct settlement dispute.
- A forum selection clause remains one of the most durable protections a franchisor can build into a system-wide agreement. Litigating dozens or hundreds of franchisee disputes in the franchisor’s home jurisdiction (or another consistent, chosen forum) is a significant efficiency and cost benefit, and this decision confirms that New York courts will hold franchisees to that bargain absent a genuinely strong showing of unfairness — general fraud allegations about the franchise relationship won’t cut it.
Takeaway
Westchester Fitness v. Retrofitness does not break new legal ground, but it is a powerful illustration of two principles franchise counsel should keep close at hand: forum selection clauses are strongly enforced under New York law, and their reach is governed strictly by their text. Franchisors that desire broad, durable forum protection — covering not just the franchise agreement itself but everything that flows from the franchise relationship, including its eventual unwinding or settlement — should make sure their agreements state that explicitly, rather than relying on courts to read that intent in after a dispute has already fractured into multiple, only partially related, claims.
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This blog post is provided for informational purposes only and does not constitute legal advice. For guidance on a specific matter, please contact Kaufmann Gildin & Robbins LLP. If you would like counsel on any franchise legal issues or situations, including forum selection clauses and franchise litigation, contact us to see if we can help. Call David B. Ramsey, Esq. at 212-755-3100 or email [email protected].
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