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$7.7 Million Default Judgment Stands—C.A.
Presiding Justice Rubin Says Man Who Signed Promissory Note Specifying California As the Forum Is to Be Enforced
By a MetNews Staff Writer
The Court of Appeal for this district has affirmed a $7.7 million default judgment in an action for default on a promissory note and related claims, rejecting the defendant contention by the defendant—who says he is a Hong Kong citizen residing in China—that California is an inconvenient forum and the action should be stayed or dismissed.
However, Presiding Justice Laurence D. Rubin of Div. Five pointed out, the promissory note contains a forum-selection clause, reading:
“I hereby agree that this note shall be governed by the laws of the State of California, U.S.A., and any dispute arising from or relating to this note shall be submitted to the exclusive jurisdiction of the courts of the State of California, U.S.A.”
Defendant Jinrong Shen is bound by that clause, Rubin declared in an unpublished opinion filed Monday.
“A mandatory forum-selection clause…does not require consideration of all the typical non conveniens forum factors,” he wrote, saying that the forum may be objected to “only if is unfair or unreasonable under the circumstances of the case.”
Los Angeles Superior Court Judge Elaine W. Mandel did not abuse her discretion in finding a lack of unfairness or unreasonableness, he said.
Service by Publication
Plaintiff Default Recoveries (assignee of the note) searched for Shen both in California and China and, when he could not be located, applied for an order for publication of the summons, which was granted by Mandel on Nov. 18, 2019.
The summons was published once a week for four weeks, in December 2019, in a newspaper of general circulation, as statutorily required, and a proof of publication was filed on Jan. 2, 2020. Six days later, Shen filed a motion to quash service of process, contending that “Shen is a non-resident and lacks sufficient contacts with California” and that the court “lacks personal jurisdiction over Mr. Shen.”
Mandel denied the motion on Feb. 25, 2020. Pointing to the forum-selection clause in the promissory note, she said:
“As Shen does not dispute he signed this note, he has consented to personal jurisdiction in California.”
The Court of Appeal summarily denied Shen’s petition for a writ of mandate and the California Supreme Court denied review.
Forum Non Conveniens
On Oct. 9, 2020, Shen filed a motion to dismiss based on California being an inconvenient forum, arguing that he, the witnesses and the evidence are in China; travel restrictions and health concerns during the pandemic rendered it impracticable to travel from China to California; California has no interest in the matter; and the matter of the note is intertwined with “extremely complex” litigation in China involving various cases and parties.
He argued:
“Even though the Courts generally honor the parties’ right to choose the forum per agreement, a forum clause may be unreasonable if the forum is so gravely difficult and inconvenient that the party will for all practical purposes be deprived of his day in court.”
Motion Denied
Mandel, on Jan. 22, 2021, denied the motion, pointing out that U.S. Supreme Court in 2013 held in Atlantic Marine Const. Co., Inc. v. U.S. Dist. Court for Western District of Texas:
“When parties agree to a forum selection clause, they waive the right to challenge the preselected forum as inconvenient.”
She said in the minute order:
“Neither party disputes there is a forum selection clause identifying California as the chosen forum. The clause is enforceable under U.S. and Chinese law, regardless of whether California is an inconvenient forum. MOTION DENIED.”
Shen did not file a responsive pleading, and on Aug. 8, 2021, Mandel granted judgment in favor of Default Recoveries in the amount of $7,633,915.23, including damages, prejudgment interest, and costs.
The defendant appealed, challenging both the denial of his motion to quash and denial of the motion alleging forum non conveniens.
2011 Decision
Shen relied upon the 2011 opinion Global Packaging, Inc. v. Superior Court. There, the parties agreed that resolution of any dispute would be “venued” in Orange County.
Justice William W. Bedsworth, while pointing out that parties cannot designate county in which venue lies, said:
“[W]e cannot agree that consenting to a location in and of itself carries with it a consent to personal jurisdiction.”
He determined that the judge “improperly conflated venue, forum, and jurisdiction to imply” the defendant’s “consent to personal jurisdiction.”
Global Packaging Differentiated
Rubin pointed out that the clause in Global Packaging was “nearly incomprehensible,” quoting Bedsworth as remarking:
“A court should not be called upon to function as a backstop for sloppy contract drafting.”
By contrast, Rubin said, the promissory note signed by Shen “is unambiguous.”
The presiding justice wrote:
“[W]hen presented with a word salad of a clause buried in an end-user license agreement, the court in Global Packaging declined to hold the defendant had consented to personal jurisdiction in California courts. At most, the court held that choice-of-venue clauses do not automatically confer personal jurisdiction. We agree but conclude, for the reasons stated, the promissory note here did convey personal jurisdiction over appellant.”
He added in a footnote:
“To the extent Global Packaging can be read to require the granting of the forum non conveniens motion, we respectfully decline to follow the opinion.”
Supreme Court Precedent
He determined that the California Supreme Court’s 2020 decision in Rockefeller Technology Investments (Asia) VII v. Changzhou Sinotype Technology Co., Ltd. is controlling. Writing for a unanimous court, Justice Carol Corrigan said:
“When parties agree to California arbitration, they consent to submit to the personal jurisdiction of California courts….” Rubin set forth: “In the same way, a forum-selection clause constitutes consent to personal jurisdiction in the selected forum.”
Service by Publication
Shen asserted that Default Recoveries violated the Hague Convention by failing to make a reasonable effort to locate Shen in China. Rubin responded:
“We conclude that once appellant’s lawyers in China represented that appellant was living in California, respondent was not required to undertake further efforts to locate him abroad. Taken as a whole, the evidence was sufficient to support the trial court’s finding that respondent was reasonably diligent in attempting to locate appellant. Accordingly, the Hague Convention did not apply, and service by publication was proper.”
(When Shen is a resident of China, as he declared, or California, as Default Recoveries contended, remains unresolved.)
An order for service by publication also requires reasonable diligence in an effort to locate a defendant. Rubin found that substantial evidence justified Mandel’s conclusion that meaningful efforts had been made both in China and California to ascertain Shen’s whereabouts.
Concurring Opinion
Justice Carl H. Moor signed Rubin’s opinion. Justice Lamar Baker wrote a concurring opinion, saying:
“Although I do not subscribe to the opinion for the court’s analysis in all its particulars, I agree the opinion reaches the correct result. The majority’s opinion correctly holds defendant and appellant consented to personal jurisdiction in California…; language in an earlier-decided Court of Appeal case that points to a contrary conclusion (Global Packaging, Inc. v. Superior Court…) is unpersuasive and should not be followed. Service of the summons and complaint was proper under the circumstances. And denial of defendant and appellant’s forum non conveniens motion was not an abuse of discretion.”
The case is Default Recoveries LLC v. Shen, B316051.
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