Judge: H. Jay Ford, III, Case: 22SMCV02457, Date: 2023-03-16 Tentative Ruling

Case Number: 22SMCV02457    Hearing Date: March 16, 2023    Dept: O

  Case Name:  Velaro, Inc. v. LG Electronics Alabama, Inc.

SUBJECT:                 (1) MOTION TO DISMISS PLAINTIFF’S FIRST AMENDED COMPLAINT OR IN THE ALTERNATIVE, MOTION TO STAY THIS ACTION PURSUANT TO CCP §418.10

                                    (2) APPLICATION FOR WRIT OF ATTACHMENT

MOVING PARTY:   (1) Defendant LG Electronics Alabama, Inc.

                                    (2) Plaintiff Velaro, Inc.        

RESP. PARTY:         (1) Plaintiff Velaro, Inc.

                                    (2) Defendant LG Electronics Alabama, Inc.

TENTATIVE RULING

            Defendant LG Electronics Alabama, Inc.’s Motion to Dismiss Plaintiff’s FAC is GRANTED. The action is dismissed pursuant to ¶9(a) of the 5-27-08 Agreement and CCP §418.10.

            Plaintiff’s Application for Writ of Attachment is off calendar in light of the dismissal. 

            Defendant’s RJN ISO of the Motion to Dismiss is GRANTED.

            Defendant’s Objections to the Dec. of A. Bloom are SUSTAINED. 

I.  Applicable law governing mandatory forum selection clauses

            “In California, the procedure for enforcing a forum selection clause is a motion to stay or dismiss for forum non conveniens pursuant to Code of Civil Procedure sections 410.30 and 418.10, but a motion based on a forum selection clause is a special type of forum non conveniens motion.”  Berg v. MTC Electronics Technologies (1998) 61 Cal.App.4^th 349, 358 (contractual clause wherein defendant “expressly submitted to the jurisdiction of the State of California and United States Federal court sitting in the City of Los Angeles, California” was not a mandatory forum selection clause).  “The factors that apply generally to a forum non conveniens motion do not control in a case involving a mandatory forum selection clause.  Where there is a mandatory forum selection clause, the test is simply whether application of the clause is unfair or unreasonable, and the clause is usually given effect. Claims that the previously chosen forum is unfair or inconvenient are generally rejected.  A court will usually honor a mandatory forum selection clause without extensive analysis of factors relating to convenience.”  Quanta Computer Inc. v. Japan Communications Inc. (2018) 21 Cal.App.5th 438, 445 (mandatory forum selection clause designating California as forum for Japanese and Taiwanese companies’ contractual dispute was enforceable, but trial court acted within its discretion in granting motion to dismiss based on traditional forum non conveniens grounds because neither company nor the contract in dispute had any nexus or relationship to California). 

II.  Applicable law governing interpretation of contract

Interpretation of contract is a question of law for the court, and the goal should be to give effect to the mutual intent of the parties.  See Pacific Gas & E. Co. v. G.W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33, 37; MacKinnon v. Truck Ins. Exch. (2003) 31 Cal.4th 635, 647-648. (citing Cal. Civ.Code § 1636). Such intent is to be inferred, if possible, from the written provisions of the contract based on their “ordinary and popular sense,” unless a “technical sense or special meaning is given to them by their usage.”  Id. at 648 (citing Cal. Civ.Code §§ 1639, 1644, 1638).  If the contractual language is clear and explicit, it governs. Id.     

“If no extrinsic evidence was presented or if the extrinsic evidence was not in conflict, the resolution of the ambiguity is a question of law, which is subject to independent review on appeal.  Even where uncontroverted evidence allows for conflicting inferences to be drawn, our Supreme Court treats the interpretation of the written contract as solely a judicial function.”  Scheenstra v. California Dairies, Inc. (2013) 213 Cal.App.4th 370, 390.  

III. The Alabama mandatory forum selection clause in ¶9a of the 5-27-08 Agreement applies

            Plaintiff and Defendant submit two competing mandatory forum selection clauses contained in two different agreements that they entered into in connection with their business relationship.  Defendant argues the mandatory forum selection clause contained in the parties 5-27-08 Agreement designating Alabama as the exclusive forum applies here.  See Defendant’s RJN, Ex. A, Plaintiff’s FAC, Ex. 1, 5-27-08 Agreement, ¶15(g).  Plaintiff argues the mandatory forum selection clause contained in the Terms of Service designating Los Angeles County applies.  Id. at Ex. A, Plaintiff’s FAC, Ex. 3, Terms of Service, ¶7.  Neither party disputes the mandatory nature of each forum selection clause or the substance of the clauses. 

            Plaintiff is suing for breach of the 5-27-08 Agreement, including Amendments 1-7 thereto.  See FAC, ¶¶15-24.  Specifically, Plaintiff alleges that under Amendment No. 7 executed on 2-8-22, Defendant was committed to a two-year term and a minimum of 122 licenses at a price of $299.95 per license.  Id. at ¶20.  Plaintiff alleges Defendant prematurely terminated the agreement on 6-15-22, only months after Amendment No. 7 was executed.  Id. at ¶27.  Plaintiff seeks to recover all amounts due through the end of the term of the 5-27-08 agreement pursuant to ¶9(a) thereof.  Id. at ¶28.  Plaintiff is also seeking recovery of attorney’s fees pursuant to ¶15(g) of the 5-27-08 Agreement.  Id. at 7:15. 

            Based on a review of the complaint, Plaintiff is not seeking any recovery for breach of the Terms of Service (“TOS”).  Plaintiff alleged the existence of the TOS in ¶25 of the FAC as an apparent afterthought.  No provision of the TOS is alleged as grounds for recovery of the $205,270.20 in damages sought.  That amount is based solely on the 5-27-08 Agreement and Defendant’s premature termination of the parties’ agreement per Amendment No. 7.  Plaintiff is also seeking attorney’s fees under ¶15(g) of the 5-27-08 Agreement.  Because Plaintiff’s causes of action and requested for relief are based entirely on the 5-27-08 Agreement, the forum selection clause contained in the 5-27-08 Agreement designation Alabama as the exclusive forum applies here. 

In addition, according to Plaintiff, the TOS is a form “clickwrap agreement” that a user accessing Plaintiff’s software must accept before gaining access to the software.  See Dec. of A. Bloom, ¶9, Ex. 3; B.D. v. Blizzard Ent., Inc. (2022) 76 Cal. App. 5th 931, 945.  Plaintiff’s evidence fails to establish that anyone authorized by Defendant ever accepted the TOS.  Id. at Ex. 4.  Plaintiff’s evidence that Vicki Dion accessed its software on 10-21-22 lacks foundation.  Defendant’s objection to this evidence is sustained.  Plaintiff therefore fails to establish that Defendant ever agreed to the TOS. 

Moreover, the TOS explicitly states that it does not supersede the parties’ existing agreement.  The TOS states:  “This License constitutes the entire agreement between the parties

with respect to the use of the Software and supersedes all prior or contemporaneous understandings or agreements, written or oral, regarding such subject matter, except in the cases where a mutually signed non-expired agreement links directly to this agreement, this agreement will serve as additional agreed upon licensing terms.”  Here, it is undisputed that there was a “mutually signed non-expired agreement” between the parties when Dion allegedly “clicked” on the TOS and accepted its terms on 10-20-21.  See Defendant’s RJN, Ex. A, FAC.  Plaintiff is suing on that “mutually signed non-expired agreement,” i.e. the 5-27-08 Agreement. 

            The 5-27-08 Agreement also specifies that its terms can only “be modified only by a further written agreement executed by an authorized representative of the parties hereto.”  See Defendant’s RJN, Ex. A, FAC, Ex. 1, 15(j).  Based on the parties’ conduct over their 14-year relationship and the seven formal amendments to the 5-27-08 Agreement executed by the parties, a form “clickwrap” agreement that any user of the software must “click” and accept does not satisfy the “further written agreement” requirement under ¶15(j).  “The interpretation of a contract is often shown by the acts and conduct of the parties subsequent to the execution of the contract and prior to its controversy.”  Meadows v. Lee (1985) 175 Cal.App.3d 475, 484. 

            The applicable forum selection clause is that contained in the 5-27-08 Agreement, because it is the basis of Plaintiff’s claims.  Plaintiff fails to establish that the TOS applies to this dispute.  Thus, Alabama is the mandatory forum for this action, unless Plaintiff can establish that enforcement of the clause is unreasonable.  See Korman v. Princess Cruise Lines, Ltd. (2019) 32 Cal.App.5^th 206, 213 (burden of proof is on plaintiff to show enforcement of mandatory forum selection clause is unreasonable).  Plaintiff does not argue that Alabama is an unreasonable or unsuitable forum.