Opinion
G054935
07-23-2018
QUICK BRIDGE FUNDING, LLC, Plaintiff and Appellant, v. SOUTHWEST FIBER OPTIC COMMUNICATIONS -LLC, et al., Defendants and Respondents.
Salisian Lee, Neal S. Salisian, H. Han Pai and Yujin Chun for Plaintiff and Appellant. Law Office of William Hopkins and William R. Hopkins; and James Cuzzolina for Defendants and Respondents.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2016-00883222) OPINION Appeal from an order of the Superior Court of Orange County, Derek W. Hunt, Judge. Reversed and remanded. Salisian Lee, Neal S. Salisian, H. Han Pai and Yujin Chun for Plaintiff and Appellant. Law Office of William Hopkins and William R. Hopkins; and James Cuzzolina for Defendants and Respondents.
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This case arises out of a collections action involving breach of a written business loan agreement and corresponding personal guarantees of that agreement. California company Quick Bridge Funding, LLC (Quick Bridge) appeals from an order staying its collection action against Southwest Fiber Optic Communications-LLC, a Texas corporation, and its owners Alejandro and Hilda Ayub, both Texas residents (collectively referred to as Southwest Fiber), on the basis of inconvenient forum. Quick Bridge contends the trial court misapplied the forum non conveniens standard in determining the enforceability of the mandatory forum selection clause between the parties. We conclude the court abused its discretion because it failed to make any finding that application of the parties' mandatory forum selection clause would be unreasonable. We therefore reverse the order staying the underlying action.
For clarity and ease of reference, we refer to Alejandro and Hilda Ayub by their first names. We intend no disrespect.
I
FACTUAL AND PROCEDURAL BACKGROUND
In 2016, Quick Bridge sued Southwest Fiber for defaulting on a loan agreement (Agreement) and accompanying personal guaranties, all arising out of a $31,200 loan funded by Quick Bridge. The Agreement's forum selection clause read: "CONSENT TO EXCLUSIVE JURISDICTION AND VENUE OF CALIFORNIA. [Southwest Fiber] and [Quick Bridge] agree that any action or proceeding to enforce or arising out of this Agreement will be exclusively commenced in any court of the State of California or in the United States District Court for the District of California, and [Southwest Fiber] waives personal service of process and agrees that a summons and complaint commencing an action or proceeding in any such court will be properly served and confer personal jurisdiction if served by registered or certified mail to [Southwest Fiber], or as otherwise provided by the laws of the State of California or the United States of America. [Southwest Fiber] and [Quick Bridge] agree that venue is proper in such courts."
Southwest Fiber filed a motion to quash service of summons for lack of personal jurisdiction, or, in the alternative, to stay or dismiss the action on the ground of forum non conveniens. Southwest Fiber based its motion on the grounds that (1) there was no basis for personal jurisdiction over Southwest Fiber, and (2) "Texas [was] the suitable forum and not California" and therefore "under the doctrine of forum non conveniens, [the] matter should be stayed."
Southwest Fiber filed a supporting declaration by Alejandro, who explained a Quick Bridge agent in Texas offered Southwest Fiber a business loan. Alejandro further declared Southwest Fiber did not conduct any business in California and the company derived its income entirely from activities conducted in Texas. Other than the Agreement with Quick Bridge, Southwest Fiber had no other contacts with California and had done nothing purposefully to avail themselves of any benefits from doing business in California, nor had they placed a product in the stream of commerce that reaches California. Hilda did not file a declaration, but the trial court assumed she also resided in Texas.
Quick Bridge's opposition to the Motion argued Southwest Fiber had purposefully availed itself of California laws to warrant personal jurisdiction and that Southwest Fiber failed to establish the "requisite burden to justify a stay or dismissal of this action in favor of trying it in Texas."
The trial court denied the motion to quash service of summons, but granted the motion to stay the California action on the basis of forum non conveniens. The court acknowledged that forum selection clauses are "generally considered presumptively valid unless . . . the enforcement would . . . contravene a strong public policy of the forum of which the suit is brought." The court also stated, "my own recollection of the recent state of jurisprudential questions of jurisdiction is that it comes down to a decision by the judge about whether the choice of forum is considered reasonable under the particular circumstances."
The trial court then focused its analysis on public policy, stating "so does California have a strong public policy that the moving party has briefed for? I don't think so. The party just says we get to go to Texas." The court opined that the outcome "comes down to a decision by the judge about whether the choice of the forum is considered reasonable under the particular circumstances . . . ." It also stated that given "the absence of any minimum contact evidence from [Quick Bridge], there is just nothing."
II
DISCUSSION
Quick Bridge contends the trial court erred by granting the motion to stay because the parties' mandatory forum selection clause governed the underlying dispute. We agree.
A mandatory forum selection clause, like the one included in the Agreement at issue, is "generally given effect unless enforcement would be unreasonable or unfair. [Citations]." (Verdugo v. Alliantgroup, L.P. (2015) 237 Cal.App.4th 141, 147 (Verdugo).) "[T]he general factors [relevant to a forum non conveniens motion which is not based on a contractual forum selection clause] are pertinent only in the absence of a contractual provision, since under those circumstances neither party possesses a right to any particular forum and the selection of one over the other requires the weighing of a gamut of factors of public and private convenience, not to mention the strong interest of a plaintiff's domicile in providing the plaintiff access to its courts. However, a party which has contracted away its right to choose its home forum (as well as all the concomitant conveniences of a home forum) has presumably done so because the value it receives from the negotiated deal is worth the chance the party may be required to litigate disputes elsewhere. To apply the general factors in this context would in essence be rewriting the bargain struck between the parties, which might not have been consummated in the absence of the forum-selection clause." (Cal-State Business Products & Services, Inc. v. Ricoh (1993) 12 Cal.App.4th 1666, 1683 (Cal-State).)
The party seeking to avoid application of the forum selection clause bears a "substantial burden" to prove unreasonableness. (CQL Original Products, Inc. v. National Hockey League Players' Assn. (1995) 39 Cal.App.4th 1347, 1354.) Inconvenience or expense is not the test for unreasonableness for a mandatory forum selection clause. (Ibid.) "A clause is reasonable if it has a logical connection with at least one of the parties or their transaction. [Citations.]" (Verdugo, supra, 237 Cal.App.4th at p. 147.) Courts refuse to enforce a forum selection clause where a forum is "'unavailable or unable to accomplish substantial justice,'" where the selected forum has no "'rational basis in light of the facts underlying the transaction,'" or where enforcement would be contrary to public policy. (Cal-State, supra, 12 Cal.App. 4th at pp. 1679-1680.)
We review the trial court's decision under the abuse of discretion standard of review. (Verdugo, supra, 237 Cal.App.4th at p. 148.) "[F]orum selection clauses are valid and may be given effect, in the court's discretion and in the absence of a showing that enforcement of such a clause would be unreasonable." (Smith, Valentino & Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491, 496.) "'Action that transgresses the confines of the applicable principles of law is outside the scope of discretion and we call such action an "abuse" of discretion.'" (Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 773.)
We note the minority view applies the substantial evidence standard. (Cal-State, supra, 12 Cal.App. 4th at pp. 1680-1681.)
Here, there is no dispute that the forum selection clause at issue is mandatory. It states, in clear terms, that "any action . . . arising out of this Agreement will be exclusively commenced in any court of the State of California." On appeal, Southwest Fiber does not argue the underlying agreement was unenforceable.
We note that Southwest Fiber raised the issue of enforceability in its motion to the trial court. But Southwest Fiber presented no admissible evidence supporting its contentions that it lacked equal bargaining power for negotiating the underlying agreement. "The fact the forum-selection clause is contained in a contract of adhesion and was not the subject of bargaining does not defeat enforcement as a matter of law, where there is no evidence of unfair use of superior power to impose the contract upon the other party and where the covenant is within the reasonable expectations of the party against whom it is being enforced." (Cal-State, supra, 12 Cal.App.4th at p. 1679.) --------
Here, the trial court erred by considering the reasonableness of the forum selection clause at the time of trial. Instead, the proper inquiry was whether the forum selection clause was reasonable and enforceable at the time the parties entered into the agreement. The court, however, failed to make any findings concerning the clause's unenforceability or reasonableness when the contract was formed. The court erroneously stated the decision depended "in large part of what the cause of action is." Instead of deciding whether the selected forum was "'available'" and "able to 'accomplish substantial justice,'" or if it had a "logical nexus to one of the parties or the dispute," the court erroneously considered the inconvenience and expense Southwest Fiber would suffer if the court enforced the forum selection clause requiring the parties to litigate in California. (America Online, Inc. v. Superior Court (2001) 90 Cal.App.4th 1, 12; Verdugo, supra, 237 Cal.App.4th at p. 147 ["A clause is reasonable if it has a logical connection with at least one of the parties or their transaction"].)
Southwest Fiber's only evidence to support the unreasonableness of the forum selection clause was Alejandro's declaration, which did not discuss the forum or any factors bearing on the reasonableness of the forum selection clause. Instead, it stated Southwest Fiber did not conduct business in California, earn income in California, or engage in activities in California.
Lu v. Dryclean-U.S.A. of California, Inc. (1992) 11 Cal.App.4th 1490 (Lu), is instructive. There, plaintiff franchisees sued their franchisor for rescission and damages. (Id. at p. 1492.) The underlying franchise agreement contained the following forum selection clause: "'[a]ny and all litigation that may arise as a result of this Agreement shall be litigated in Dade County, Florida.'" (Id. at p. 1492.) The trial court granted the franchisees' motion to dismiss the action in California based upon the forum selection clause and the Court of Appeal affirmed. (Ibid.) The franchisees argued enforcement of the forum selection clause was unreasonable because there was an insufficient connection between them and the chosen forum of Florida. (Id. at p. 1493.) In support, franchisees submitted a declaration asserting they both resided in California, neither had visited Florida in connection with the business, and the parties negotiated the agreement in California. (Ibid.) The Court of Appeal observed franchisees were "in essence arguing that enforcement of the forum selection clause would be unreasonable because it would be inconvenient for them to litigate in the chosen forum of Florida," but explained "[t]his argument has been flatly rejected by the California Supreme Court, which has held '"[m]ere inconvenience or additional expense is not the test of unreasonableness since it may be assumed that the plaintiff received under the contract consideration for these things."' [Citation.]" (Ibid.)
Like the underlying agreement in Lu, the parties here had a binding, mandatory forum selection clause. While litigating the underlying dispute in California could cause Southwest Fiber inconvenience or additional expense, those considerations are irrelevant when considering whether a forum selection clause was reasonable. The trial court erred by applying the incorrect legal standard governing enforceability because it decided the reasonableness of the forum, rather than the reasonableness of the forum selection clause.
III
DISPOSITION
The order staying the action is reversed. The case is remanded to the trial court to reconsider the motion with the correct legal standards applicable to forum selection clauses. Quick Bridge shall recover its costs on appeal.
ARONSON, ACTING P. J. WE CONCUR: THOMPSON, J. GOETHALS, J.