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California Supreme Court:
Lack of Jury Right in Selected Forum Does Not Negate Clause
Opinion Says Contractual Provision Not Unenforceable Simply Because Requires Litigation in Jurisdiction That Does Not Afford Civil Litigants Same Procedural Protections as Would Apply in California Courts
By Kimber Cooley, associate editor
The California Supreme Court yesterday held that a forum selection clause is not unenforceable simply because it requires the parties to litigate in a jurisdiction that does not afford parties the same right to trial by jury that would attach in California.
In a unanimous opinion authored by Chief Justice Patricia Guerrero, the court declared:
“California has a strong public policy, based on the California Constitution, in favor of the right to trial by jury. But California’s strong public policy protects the jury trial right in California courts, not elsewhere. It does not speak to the availability of the jury trial right in other forums. A forum selection clause is not unenforceable simply because it requires the parties to litigate in a jurisdiction that does not afford civil litigants the same right to trial by jury as litigants in California courts enjoy.”
At issue is whether a forum selection clause in a company’s certificate of incorporation is enforceable against a minority shareholder who filed a complaint against the corporation in California state court, asserting causes of action for breach of contract and fraudulent concealment, among other claims.
In 2022, EpiRx LP filed suit in San Diego Superior Court against EpicentRx Inc., its controlling stockholder, and various individuals, alleging in its operative complaint that the plaintiff had invested $5 million in the defendant company, a biotechnology firm that was incorporated in Delaware and principally operated out of California.
‘Big Exit’
EpiRx claims that it was promised a “big exit” on its investment and later learned that certain officers involved with the company had siphoned off some investor funds for personal use and failed to deliver shares in return. This misconduct purportedly rendered the company financially unfit for an initial public offering and revealed the company’s promises to EpiRx to be false and misleading.
EpicentRx Inc. and several related defendants moved to dismiss the complaint under Code of Civil Procedure §418.10(a)(2) on the ground that the court was an “inconvenient forum,” citing a clause in the certificate of incorporation designating the Delaware Court of Chancery as the “sole and exclusive forum for any stockholder” to bring “any derivative action” or “claim of breach of fiduciary duty.”
San Diego Superior Court Judge Timothy B. Taylor concluded that, under California law, the plaintiff was entitled to a trial by jury on the asserted fraud claims but had no such right in the Delaware Court of Chancery, which sits as a court of equity. Taylor denied the motion to dismiss, reasoning that the choice of forum provision runs afoul of California’s public policy against pre-dispute waivers of the right to a trial by jury.
The defendants responded by filing a petition for a writ of mandate challenging the denial. In 2023, Div. One of the Fourth District Court of Appeal agreed with the trial court and denied the request.
Yesterday’s decision reverses the judgment and disapproves of two Court of Appeal cases that found forum selection clauses to be unenforceable pre-dispute jury waivers under similar circumstances—the 2019 decision of the First District’s Div. Three in Handoush v. Lease Finance Group LLC and last year’s opinion by this district’s Div. Four in The Comedy Store v. Moss Adams LLP.
Forum Selection Clauses
Guerrero noted that trial courts generally have broad discretion in determining whether a different forum is better suited to try a case, but acknowledged that “[t]his approach changes significantly if the parties have agreed to resolve their disputes in a non-California forum.”
Saying that forum selection clauses will generally be given effect unless the enforcement would be unreasonable, she remarked: “[I]t appears self-evident that a court may refuse to enforce a contractual forum selection clause on public policy grounds, just as it may refuse to enforce other contractual provisions that violate a fundamental public policy of California.”
The jurist clarified that “[t]his exception, however, does not give courts unbounded discretion to decline to enforce otherwise valid forum selection clauses,” citing the public policy in favor of enforcing valid contracts.
She pointed out that courts have declined to give effect to some clauses where the Legislature has identified public policy concerns with the circumstances surrounding a particular type of provision, such as an employment contract requiring a California resident to litigate claims against his employer in some other state, commenting:
“Plaintiff does not contend that any statute or constitutional provision expressly prohibits enforcement of the forum selection clause at issue here….[P]laintiff maintains that a court cannot enforce a forum selection clause that would require a party to litigate in a forum, like the Delaware Court of Chancery, that does not afford the party the same right to a jury trial as in California. We disagree. Even where enforcement of a forum selection clause may effectively deprive a plaintiff of the right to trial by jury, this circumstance alone does not provide a basis to avoid its enforcement.”
Jury Trial Right
Guerrero affirmed that the “plaintiff is correct that California public policy supports the right to trial by jury where applicable,” noting that “the right itself is guaranteed by the California Constitution.” However, she concluded:
“The California Constitution and related statutory provisions do not reflect any public policy regarding the right to a civil jury trial in other forums.”
As to the lower court’s view that the forum selection clause amounts to a pre-dispute jury trial waiver, she said that the California Supreme Court has held that such disclaimers are unenforceable—in the 2005 case of Grafton Partners LP v. Superior Court of Alameda—but said the “analogy is inapt.” She opined:
“A forum selection clause is not equivalent to a predispute jury trial waiver. The former reflects where a dispute will be litigated, while the latter reflects how it will be litigated. Grafton Partners considered the circumstances in which California courts may enforce a jury trial waiver. It did not consider whether parties may agree to avoid the California forum altogether. Although the practical effect of the forum selection clause may be that plaintiff’s claims are not heard by a jury, California public policy does not require invalidation of the forum selection clause in all circumstances for that reason alone.”
Distinct Considerations
Continuing, the chief justice added:
“California has a strong public policy in favor of the right to a jury trial and against predispute waivers of that right. But California does not have a strong public policy against forum selection clauses or agreements to litigate in a jurisdiction that does not recognize the same civil jury trial right. The considerations surrounding each policy are distinct, and one does not necessarily follow from the other. The Court of Appeal below, and Handoush before it, erred by treating them as equivalents.”
Reasoning that the contrary view would lead to problematic results, she explained:
“Under plaintiff’s theory, any litigant who can satisfy California’s jurisdiction and venue requirements could maintain an action in California so long as the litigant invokes the right to a jury trial, notwithstanding an agreement to litigate its claims in a foreign forum, if the litigant could show its jury trial rights in the foreign forum would be impaired. Because civil jury trials are highly atypical outside the United States, California would become a magnet for such foreign disputes—again, notwithstanding the fact that the litigants have expressly agreed to submit to a foreign forum.”
The case is EpicentRx Inc. v. Superior Court, 2025 S.O.S. 2034.
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