STAND. COM. REP. NO. 2495

Honolulu, Hawaii

RE:    S.B. No. 2623

       S.D. 1

Honorable Donna Mercado Kim

President of the Senate

Twenty-Seventh State Legislature

Regular Session of 2014

State of Hawaii

Madam:

     Your Committees on Commerce and Consumer Protection and Judiciary and Labor, to which was referred S.B. No. 2623 entitled:

"A BILL FOR AN ACT RELATING TO FRANCHISES,"

beg leave to report as follows:

     The purpose and intent of this measure is to void provisions in a franchise agreement with a Hawaii franchise that restricts the pre-dispute forum selection to a jurisdiction outside of Hawaii.

     Your Committees received testimony in support of this measure from The Chamber of Commerce of Hawaii, Edible Arrangements Manoa, and two individuals.  Your Committees received comments on this measure from the Business Registration Division of the Department of Commerce and Consumer Affairs.

     Your Committees find that many current franchise agreements include clauses that require franchisees to travel to the franchisor's venue to resolve franchise-related disputes.  Given Hawaii's geographic isolation from other states, the imposition of a mainland forum selection clause is impractical and creates a significant hardship for local franchise owners.  A Hawaii-based franchisee is put at a great disadvantage because of the expense of traveling to the mainland for resolution due to these forum selection clauses, which often dictate whether and how a Hawaii-based franchisee is able to obtain relief.

     Your Committees further find that this measure does not mandate that all disputes be heard in Hawaii.  Rather, it corrects an injustice to local franchisees by ensuring that Hawaii remains a forum selection option for claims arising under or relating to a franchise or the business dealings of a franchise in the State.  This measure provides an opportunity for Hawaii-based franchisees to reduce costs, increase efficiency, and seek relief in a convenient forum.

     Your Committees have amended this measure by:

     (1)  Inserting an effective date of July 1, 2050, to encourage further discussion; and

     (2)  Making a technical, nonsubstantive amendment for the purposes of clarity and consistency.

     As affirmed by the records of votes of the members of your Committees on Commerce and Consumer Protection and Judiciary and Labor that are attached to this report, your Committees are in accord with the intent and purpose of S.B. No. 2623, as amended herein, and recommend that it pass Second Reading in the form attached hereto as S.B. No. 2623, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committees on Commerce and Consumer Protection and Judiciary and Labor,

____________________________ CLAYTON HEE, Chair

____________________________ ROSALYN H. BAKER, Chair