Judge Jill Feeney, Case Number: 23STCV14512, Date: 2024-02-05 Tentative Ruling

This is an action for goods and services sold and delivered, for an account stated, for an open book account, and breach of contract. Plaintiff alleges that it issued a workers’ compensation policy to Defendants for a policy period of May 16, 2021 to May 16, 2022. In November 2022, Defendants defaulted on their payments on the policy and thereafter refused to pay the remaining $1,362,236.77.

Code Civ. Proc., section 397 provides, in pertinent part, as follows: “The court may, on motion, change the place of trial in the following cases…(a) when the court designated in the complaint is not the proper court” or when “(c) when the convenience of witnesses and the ends of justice would be promoted by the change.”

A venue selection clause is enforceable if the venue selected is proper under statutory venue provisions. (Battaglia Enterprises, Inc. v. Superior Court (2013) 215 Cal.App.4th 309, 317-318.) It follows that the venue selection clause is only unenforceable if it seeks to fix “venue in some location other than that allowed by statute,” as this would constitute a violation of public policy. (Id. at p. 317, italics omitted.)

When parties make forum selection clauses mandatory, courts will enforce “unless they are unfair or unreasonable.” (Berg v. MTC Electronics Technologies (1998) 61 Cal.App.4th 349, 358.) A forum selection clause is presumed to be valid and the burden to establish unfairness or unreasonableness is on the party opposing enforcement. (Schlessinger v. Holland America, N.V. (2004) 120 Cal.App.4th 552, 558; Benefit Assn. Internat., Inc. v. Superior Court (1996) 46 Cal.App.4th 827, 835 (Benefit Assn. Internat.).)¿

Pursuant to Code of Civil Procedure section 395, subdivision (a), “the superior court in the county where the defendants or some of them reside at the commencement of the action is the proper court for the trial of the action,” and as to a corporate entity, Code of Civil Procedure section 395.5, states that “[a] corporation or association may be sued in the county where the contract is made or is to be performed, or where the obligation or liability arises, or the breach occurs; or in the county where the principal place of business of such corporation is situated.”

“If legal action is required to collect the Final Audit premium due and owing under this policy of insurance, you agree that legal action shall be properly filed in the Superior Court of the State of California, County of San Francisco, California and consent to jurisdiction in that court. The prevailing party to such action to collect said premium shall be entitled to reasonable costs and attorney fees, as well as interest if applicable.” (Motion, Exh. B, pdf p. 23.)

Additionally, the payments on the policy were due in San Francisco County, meaning the contract was to be performed in San Francisco County. Therefore, venue is proper in San Francisco County. Plaintiff argues that Los Angeles is also a proper venue because Defendants’ audit pursuant to policy requirements was completed in Los Angeles, meaning part of the contract was performed in Los Angeles. Although Los Angeles is a proper forum, it is immaterial to this analysis because the issue here is whether the venue to which Defendants seek to move the action pursuant to the venue selection clause is proper.

Plaintiff argues that the agreement did not mandate venue in San Francisco County. Specifically, Plaintiff alleges that the language in the agreement does not require the parties to litigate exclusively in San Francisco County. Rather, the language means that the parties agreed to submit to jurisdiction in San Francisco County, but had not ruled out other counties.

Plaintiff relies on Berg v. MTC Electronics Technologies (1998) 61 Cal.App.4th 349, 360 in support of its argument. In Berg, the action involved a clause which stated a company “has expressly submitted to the jurisdiction of the State of California and United States Federal Courts sitting in the City of Los Angeles, California, for the purpose of any suit, action or proceeding arising out of this Offering.” (Id at p.358.) There, the court found that the clause made a jurisdiction permissive, rather than clearly stating the jurisdiction was an exclusive forum. (Id at p. 361.) Berg cited various examples of provisions that fail to state venue is exclusive: “Franchise Owner stipulates that the courts of the State of Michigan shall have personal jurisdiction over its person, that it shall submit to personal jurisdiction,” “the courts of California, County of Orange, shall have jurisdiction,” “Insured, will submit to the jurisdiction of any court of competent jurisdiction within the United States and will comply with all requirements necessary to give such court jurisdiction and all matters arising hereunder shall be determined in accordance with the law and practice of such court.” (Id at p. 359.)

Here, the venue selection clause at issue states legal action “shall be filed” in the County of San Francisco. Unlike the clause in Berg, which did not contain any language specifying the jurisdiction was exclusive, here, the word “shall” is a mandatory term that operates to show the parties agreed to filing legal action in San Francisco County if it is required to collect the insurance premium. Moreover, the clause is distinguishable from the other examples of permissive clauses discussed in Berg because the clause here does not merely give a court jurisdiction over this action. Rather, the language specifically states any legal action required to collect the insurance premium must be filed in San Francisco County. Although Plaintiff argues the clause does not contain exclusivity language such as “only,” exclusivity may be expressed through other words. Here, the word “shall” is sufficient exclusivity language which operates to state that filing legal action associated with collection of the insurance premium is mandatory. Thus, the venue selection clause is mandatory, not merely permissive.

Code Civ. Proc., section 396b provides that “if an action or proceeding is commenced in a court having jurisdiction of the subject matter thereof, other than the court designated as the proper court for the trial thereof, under this title, the action may, notwithstanding, be tried in the court where commenced, unless the defendant, at the time he or she answers, demurs, or moves to strike, or, at his or her option, without answering, demurring, or moving to strike and within the time otherwise allowed to respond to the complaint, files with the clerk, a notice of motion for an order transferring the action or proceeding to the proper court, together with proof of service, upon the adverse party, of a copy of those papers. Upon the hearing of the motion the court shall, if it appears that the action or proceeding was not commenced in the proper court, order the action or proceeding transferred to the proper court.”

“In its discretion, the court may order the payment to the prevailing party of reasonable expenses and attorney's fees incurred in making or resisting the motion to transfer whether or not that party is otherwise entitled to recover his or her costs of action. In determining whether an order for fees and costs shall be made, the court shall take into consideration “(1) whether an offer to stipulate to change of venue was reasonably made and rejected, and (2) whether the motion or selection of venue was made in good faith given the facts and law the party making the motion or selecting the venue knew or should have known.” (Code Civ. Proc., 396b(b).)

Here, Defendants are the prevailing party on this motion because the motion was granted. The Court declines to exercise its discretion to award attorney's fees. Although the Court did rule in Plaintiff's favor, the Court does not find the Plaintiff acted in bad faith.