Judge: H. Jay Ford, III, Case: 24SMCV02526, Date: 2025-04-24 Tentative Ruling

Case Number: 24SMCV02526    Hearing Date: April 24, 2025    Dept: O

  Case Name:  702 Crescent LLC v. United Texas Bank, et al.

SUBJECT:                 MOTION FOR STAY OF EXECUTION OR DISMISS THE ACTION BASED ON FORUM NON CONVENIENS

MOVING PARTY:   Specially Appearing Defendants United Texas Bank and Jarrod Beck

RESP. PARTY:         Plaintiff 702 Crescent, LLC

TENTATIVE RULING

            Specially Appearing Defendants United Texas Bank and Jarrod Becks Motion to Stay the Action or Dismiss the Acton based on Forum Non Conveniens under CCP §§ 410.30(a), 418.10 is GRANTED. Defendants meet their burden to show that the forum selection clause controls. The Complaint is based on the alleged Modification Agreement entered into between the parties on 2-27-24, and Plaintiffs do not show that the Modification Agreement preempted the initial loan agreement’s forum selection clause, nor that the clause is unfair or unreasonable.

            The Motion to dismiss and to transfer this action to a court in Dallas, Texas is GRANTED as to Specially Appearing Defendants United Texas Bank and Jarrod Beck. All proceedings in this action are hereby stayed until the Texas litigation is completed as to 702 Crescent’s claims against UTB and Beck. Specially appearing Defendants are to give notice.

REASONING

“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.4th 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 [holding 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].) 

            “[T]he existence of a contractual forum selection clause requires a court to decline jurisdiction under Code of Civil Procedure section 410.30, absent a showing that enforcement would be unfair or unreasonable.” (Furda v. Superior Court (1984) 161 Cal.App.3d 418, 424–425.) “[A] phrase such as “shall be litigated” generally has been construed to indicate that the forum selection clause is mandatory.” (Korman v. Princess Cruise Lines, Ltd. (2019) 32 Cal.App.5th 206, 215–216.) A forum selection clause is reasonable, and, therefore, enforceable, if it: (1) “has a logical connection with at least one of the parties or their transaction,” and (2) the selected forum is not “unavailable to [the plaintiff] or unable to accomplish substantial justice.” (Korman, supra 32 Cal. App. 5th at p. 216.) “[N]either inconvenience nor additional expense in litigating in the selected forum are part of the test of unreasonability.” (Cal-State Business Products & Services, Inc. v. Ricoh (1993) 12 Cal.App.4th 1666, 1679, as modified (Feb. 4, 1993).)

            The party opposing enforcement of a forum selection clause bears the burden of proving that the clause should not be enforced. (See Valentino & Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491, 496.) “That burden, however, is reversed when the claims at issue are based on unwaivable rights created by California statutes. In that situation, the party seeking to enforce the forum selection clause bears the burden to show litigating the claims in the contractually-designated forum “will not diminish in any way the substantive rights afforded ... under California law.” (Verdugo v. Alliantgroup, L.P. (2015) 237 Cal.App.4th 141, 147.)

I.                Existence of an Enforceable Forum Selection Clause

Defendants United Texas Bank (“UTB”) and Jarrod Beck (“Beck”) (collectively “Defendants”) argue that the loan documents agreed upon by Defendants and Plaintiff

702 Crescent, LLC (“Plaintiff”) (collectively the Loan Agreement) contains a mandatory forum selection clause, setting the forum in Dallas, Texas. (See Motion, p. 6: Beck Decl., ¶¶ 7–9, Ex. 2–4.) The attached 1-27-22 loan documents do in fact include a mandatory form clause whereby the parties agreed to the “substantive laws of the State of Texas.” with “any court of competent jurisdiction in Dallas County, Texas” as the proper venue. (Beck Decl., ¶ 7, Ex. 2 (“Deed of Trust”).) Plaintiff does not dispute the existence of the forum selection clause within the initial loan documents.

Plaintiff argues the First Amended Complaint (“FAC”) is not based on the initial loan documentation. Instead, Plaintiff argues the FAC is based on an alleged Modification Agreement entered into between the parties on 2-27-24 via email. (See FAC, ¶¶ 17–39.) Plaintiff, however, has not provided any evidence of the Modification Agreement nor show how that Modification Agreement preempts all of the terms of all the original loan documents or otherwise is unenforceable.

            Plaintiff additionally argues that there is no suitable alternative forum available since the Plaintiff’s lawsuit concerns real property in Los Angeles County. Where there is a mandatory selection clause, the Court does not weigh the “factors of public and private convenience,” but only considers whether the clause is unfair or unreasonable. (Berg, supra,  61 Cal. App. 4th at p. 358; Quanta Computer Inc., supra, 21 Cal.App.5th at p. 445.) Plaintiff does not meet its burden to show that the clause is unfair or unreasonable.

In the Reply, Defendants argue that the alleged Email Modification Agreement is not applicable because it is not a written modification to the Loan Agreement comporting with the statute of frauds. (See Reply, p. 1:8–17; see also Secrest v. Security National Mortgage Loan Trust 2002-2 (2008) 167 Cal.App.4th 544, 552, as modified on denial of reh'g (Nov. 3, 2008) [“A mortgage or deed of trust also comes within the statute of frauds,” and “[a] contract coming within the statute of frauds is invalid unless it is memorialized by a writing subscribed by the party to be charged or by the party's agent.”]  

It is undisputed that a valid mandatory forum selection clause exists between the parties under the Loan Agreement. The Court is not persuaded the Modification Agreement is a “new agreement” that supersedes or otherwise preempts the enforcement of the forum selection clause in the Loan Agreement. Plaintiff has not provided any evidence that the Modification Agreement was intended to preempt the initial loan agreement’s forum selection clause, or that the clause is unfair or unreasonable.