Judge Holly J. Fujie, Case Number: 23STCV28910, Date: 2024-04-02 Tentative Ruling

RESPONDING PARTY: Plaintiffs MJ Global Enterprise, Inc., Crossing Storage Services, Inc., and Hyung Do Min

On November 28, 2023, Plaintiffs MJ Global Enterprise, Inc., Crossing Storage Services, Inc., and Hyung Do Min (“Plaintiffs”) filed the operative Complaint against Defendants Apex Funding Source, LLC and DOES 1 to 50 (“Defendants”), inclusive for: (1) Fraud and Deceit; (2) Usury; (3) Unfair Business Practices (B&P § 17200); (4) Violation of California Financing Law (Financial Code § 22000, et seq.); and (5) Injunction.

On January 19, 2024, Defendant Apex Funding Source, LLC (“Apex”) filed this instant Motion to Dismiss Complaint. On February 21, 2024, Plaintiffs filed their opposition. On February 22, 2024, Apex filed their reply.

In support of their opposition, Plaintiffs advanced the declarations of Calvin Park and Hyung Do Min. Apex objected to portions of these declarations.

“When a court upon motion of a party or its own motion finds that in the interest of substantial justice an action should be heard in a forum outside this state, the court shall stay or dismiss the action in whole or in part on any conditions that may be just.” (Code Civ. Proc., § 410.30, subd. (a).)

“A defendant, on or before the last day of his or her time to plead or within any further time that the court may for good cause allow, may serve and file a notice of motion for…(2) to stay or dismiss the action on the ground of inconvenient forum.” (Code Civ. Proc., § 418.10, subd. (a)(2).)

Apex moves for an order to dismiss this action in its entirety on the ground of forum non conveniens. Apex argues the forum selection clause is mandatory because the relevant contract language clearly requires the parties to litigate their disputes in the designated forum. Furthermore, Apex contends the inclusion of the phrase “if [Apex] so elects” makes the requirement conditional, but no less mandatory when the condition is triggered, thus properly construed, the forum selection clause requires that suit be instituted in New York if Apex so chooses. Moreover, Apex argues the California Finance Law is inapplicable because Apex is not a finance lender and the Agreement was not a loan. (Cal. Fin. Code § 22324; Civ. Code §§ 1638-1639.) Apex also asserts California’s interest in enforcing the Agreement does not outweigh the State of New York’s interest in enforcing its own laws and statutes, whereas the California law would impair and impede the Judgment already entered by a New York court and would clearly promote and encourage forum-shopping.

In opposition, Plaintiffs argue Apex has unclean hands because Apex’s contract was intentionally designed to evade California licensing requirements. Plaintiffs further contend the transaction was a loan as implied by the name of the defendant, “Apex Funding Source” and Apex represented itself as a lender. Plaintiffs also argue the choice of law provision is unenforceable because it is discretionary. Additionally, Plaintiffs contend their action is not contract-based but seeks relief that Apex activities in the State of California comply with California Constitution and Regulations. Similarly, Plaintiffs assert the forum selection clause is unreasonable and unfair because Apex defrauded them and induced them to sign a contract that is against public policy and illegal. Specifically, Plaintiffs contend Apex is not a licensed lender in California, the subject contract is clearly a loan, and the interest rate is usurious because it is 160 percent. Likewise, Plaintiffs assert the contract is a pre-printed, boilerplate agreement; there was no negotiation of the terms; and Apex misrepresented the nature of the contract to induce Plaintiffs to enter into the agreement. Also, Plaintiffs assert the forum selection clause is unreasonably favorable to Apex because New York would not invalidate the term sand conditions, particularly the interest rate. Lastly, Plaintiffs argue they had no meaningful choice in agreeing to the forum selection provision and it would be unfair and unreasonable to require they litigate in a distant court.

In reply, Apex argues no authority cited by Plaintiffs provides that a motion to dismiss can be denied based on mee allegations of unclean hands. Furthermore. Apex contends Plaintiffs have not shown that the California Finance Law applies to Apex or the subject contract because Apex is not a finance lender and the Agreement was not a loan. Apex also contends Plaintiffs cannot dispute that frum selection clauses are presumed valid by California law because it is mandatory and does not contain a “service of suit” clause. Moreover, Apex argues the forum selection clause is reasonable and Plaintiffs have not shown anything more than mere inconvenience or additional expense if the contract is enforce, which does not satisfy the unreasonableness requirement. In addition, Apex argues Plaintiffs cite to no authority to support the contention that a forum selection clause in a form contract is unenforceable. Finally, Apex asserts there is no evidence that litigating the case in New York would cause unfair oppression or burden to Plaintiffs.

Pursuant to California Finance Code Section 22009, a “Finance Lender” is “any person who is engaged in the business of making consumer loans or making commercial loans. The business of making consumer loans or commercial loans may include lending money and taking, in the name of the lender, or in any other name, in whole or in part, as security for a loan, any contract or obligation involving the forfeiture of rights in or to personal property, the use and possession of which property is retained by other than the mortgagee or lender, or any lien on, assignment of, or power of attorney relative to wages, salary, earnings, income, or commission.” (Cal. Fin. Code § 22009.)

Furthermore, “[a]ny person who contracts for or negotiates in this state a loan to be made outside the state for the purpose of evading or avoiding the provisions of this division is subject to the provisions of this division.” (Cal. Fin. Code § 22324.)

Here, Apex attests that it is not a lender but a limited liability company organized and doing business in New York, where it specializes in providing funding solutions to businesses including purchasing future accounts receivable of a business and providing a fixed up-front capital-infusion.

(Bak Decl., ¶ 3.) Furthermore, Plaintiffs’ counsel admits that Apex is not licensed in the State of California to engage in lending activities. Also, there is no evidence submitted that indicates Apex is licensed in any other state such as New York to engage in lending activities or supports that Apex is in fact a lender as defined by California Finance Code Section 22009. Thus, Apex is not a lender subject to the California Finance Code.

Assuming arguendo that Apex was a lender the contract was not a loan. First, the Agreement is entitled “Sale of Future Receipts Agreement.” (Bak Decl., ¶ 4; Ex. 1.) Further, the Agreement designates Apex as “Buyer” and the business-identified above, i.e., Plaintiffs as “Seller” and purports that Plaintiffs sells future receivables to Apex in Paragraph 1. Similarly, the Agreement states in Paragraph 5 in bold font and capitalize letters that “THIS IS NOT A LOAN.” Thus, it is clear from the express language of the Agreement that the subject contract entered into by the parties was not a loan but rather a purchase of future receivables.

As such, the Court turns in determination of whether or not the forum selection clause is mandatory.

In Berg v. MTC Electronic Technologies, 61 Cal.App.4th 349, 358, the court held “If there is no mandatory forum selection clause, a forum non conveniens motion ‘requires the weighing of a gamut of factors of public and private convenience....’” (Berg v. MTC Electronic Technologies, 61 Cal.App.4th 349, 358.) “However if 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.” (Id.) “If, by contrast, a clause merely provides for submission to jurisdiction, and does not expressly mandate litigation exclusively in a particular forum, the normal forum non conveniens analysis applies.” (Id.)

In Paragraph 22 of the Sale of Future Receipts Agreement, the forum selection clause states in relevant part:

“Binding effect, Governing Law, Venue and Jurisdiction, Service of Process. This Agreement shall be binding upon and inure to the benefit of Seller, Buyer, Guarantor and their respective successors and assigns, except that Seller shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of Buyer which consent may be withheld in Buyer’s sole discretion. Except as set forth in the Arbitration section, this Agreement shall be governed by and construed in accordance with the laws of the state of New York, without regard to any applicable principles of conflicts of law. Any suit, action or proceeding arising hereunder, or the interpretation, performance or breach of this Agreement, shall, if Buyer so elects, be instituted in any court sitting in New York or the state where Seller is located, (the Acceptable Forums). Seller and Guarantor agree that the Acceptable Forums are convenient to it, and submit to jurisdiction of the Acceptable Forums and waives any and all objections to jurisdiction or venue. Should such proceeding be initiated in any other forum, Seller and Guarantor waive any right to oppose any motion or application made by Buyer to transfer such proceeding to an Acceptable Forum.”

Here, the forum selection clause contained in the Agreement between Apex and Plaintiffs is permissive not mandatory because it merely provides for submission to either any court in New York or the state where Plaintiffs are located as “Acceptable Forums.” Although the forum selection clause includes language that if Plaintiffs initiated a proceeding in any other forum outside of Acceptable Forums they would waive any right to oppose any motion or application made by Apex to transfer the proceeding to the Acceptable Forums, there is no express language used such as “exclusive” or “only” to signal that jurisdiction is appropriate in New York only and none other. As such, the Court will now turn to the normal forum non conveniens analysis.

The court must consider: (1) the availability of a suitable alternative forum for the Plaintiff; (2) the private interests of the litigants; (3) the public interest of the forum state; and (4) the resident Plaintiff’s choice of the forum.

Here, New York is an available and suitable alternative forum for Plaintiffs to have their case heard. The Agreement provides for any courts in New York to hear Plaintiffs’ claims. Furthermore, Apex is a limited liability company organized and doing business in New York, which indicates it has a private interest in having the case heard there. Moreover, New York would have a public interest in ruling on a case that affects its domiciled business. In fact, a court in New York has already rendered Judgment against Plaintiffs on matters related to this Agreement. On the contrary, Plaintiffs’ private interests are also given substantial deference. As discussed above, the subject Agreement was entered into here in California. Also, the Plaintiffs’ are residents of California. However, Plaintiffs’ have not shown that litigating the case in New York, where they are currently attempting to set aside judgement would be unduly burdensome or unreasonable. Thus, in the interest of substantial justice the action should be heard in New York.

Parties who intend to submit on this tentative must send an email to the Court at SMC_DEPT56@lacourt.org as directed by the instructions provided on the court website at www.lacourt.org. If the department does not receive an email and there are no appearances at the hearing, the motion will be placed off calendar.

Hon. Holly J. Fujie

Judge of the Superior Court