Judge Randolph M. Hammock, Case Number: 24STCV12038, Date: 2024-11-20 Tentative Ruling

Judge: Randolph M. Hammock, Case: 24STCV12038, Date: 2024-11-20 Tentative Ruling

Plaintiff 3Sixty Innovation, Inc., was the contractor on a Caltrans highway construction project. Plaintiff subcontracted with Defendant Cemen Tech, Inc., to provide volumetric trucks. Plaintiff alleges Defendant provided defective trucks that did not conform to the requirements of the Contract. Plaintiff asserts causes of action for (1) breach of contract and (2) breach of implied covenant of good faith and fair dealing.

Pursuant to Plaintiff’s request, the court takes judicial notice of records from the California Secretary of State confirming Cemen Tech is not authorized to do business in California. (RJN, Exh. 1.)

Forum non conveniens “is an equitable doctrine invoking the discretionary power of a court to decline to exercise the jurisdiction it has over a transitory cause of action when it believes that the action may be more appropriately and justly tried elsewhere.” (Stangvik v. Shiley Inc. (1991) 54 Cal.3d 744, 751.) The common law doctrine of forum non conveniens is codified in Code of Civil Procedure (“CCP”) section 410.30. Subdivision (a) of the statute provides: “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.” (Id., 410.30(a).)

The defendant, as the moving party on a motion for forum non conveniens, generally bears the burden of proof. (Ibid.) In determining whether to grant a motion based on forum non conveniens, a court must (1) determine whether the alternate forum is a “suitable” place for trial, and if it is, then (2) “consider the private interests of the litigants and the interests of the public in retaining the action for trial in California.” (Stangvik, supra, 54 Cal.3d at 751.)

Defendant moves the Court for an order dismissing the Complaint on the ground of forum non conveniens. Defendant argues the provision in the governing Lease Agreements attached to Plaintiff’s Complaint includes a mandatory forum selection clause that requires any lawsuit be litigated in the State of Iowa.

In California, “forum 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.” (Korman v. Princess Cruise Lines, Ltd. (2019) 32 Cal. App. 5th 206, 213.) “[A] forum selection clause is presumed valid and will be enforced unless the plaintiff shows that enforcement of the clause would be unreasonable under the circumstances of the case.” (Id.)

“In a contract dispute in which the parties’ agreement contains a forum selection clause, a threshold issue in a forum non conveniens motion is whether the forum selection clause is mandatory or permissive. A mandatory clause ordinarily is ‘given effect without any analysis of convenience; the only question is whether enforcement of the clause would be unreasonable.’ [Citation.] But, if ‘the clause merely provides for submission to jurisdiction and does not expressly mandate litigation exclusively in a particular forum, then the traditional forum non conveniens analysis applies. [Citation.]’ [Citation.]” (Id. at 215.) “To be mandatory, a clause must contain language that clearly designates a forum as the exclusive one.” (Id.)

Cemen Tech is a “corporation organized and existing under and by virtue of the laws of the State of Iowa.” (Compl. ¶ 3.) Plaintiff alleges that “[o]n or around June 21, 2023, 3Sixty entered into a written contract with Cemen Tech (“Contract”) whereby Cemen Tech would provide 3Sixty with volumetric trucks in exchange for payment by 3Sixty to Cemen Tech of the original Contract price of $32,000.00.” (Compl. ¶ 8, Exh. 1.) The Contract includes a paragraph providing in relevant part:

exclusively by the provisions hereof and by the laws of the State of Iowa as the same may from time to time exist. This Lease shall be enforceable in the Iowa District Court for Warren County, to which Court the parties grant exclusive jurisdiction.

Plaintiff argues this clause is not mandatory, only permissive, and relies on Berg v. MTC Elecs. Techs. (1998) 61 Cal. App. 4th 349, 357.) But Plaintiff’s reliance on Berg supports the opposite conclusion. In Berg, the contract clause provided: “The company [MTC] 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 proceedings arising out of this Offering.” (Id.) The Court held that this was only a permissive clause because it did “not contain express language of exclusivity of jurisdiction or a mandatory place of litigation. Instead, the clause simply state[d] that MTC submits to jurisdiction in Los Angeles.” (Id. at 358.)

Here, unlike in Berg, the clause plainly contains language of “exclusivity of jurisdiction” where it states that the parties “grant exclusive jurisdiction” to Iowa courts. (Compl. ¶ 8, Exh. 1, ¶ 29.) This is a mandatory clause in that it designates the Iowa forum as the exclusive one. (See, e.g., Cal-State Bus. Prod. & Servs., Inc. v. Ricoh (1993) 12 Cal. App. 4th 1666, 1672 [clause was mandatory where it stated New York courts “shall have exclusive jurisdiction over any case of controversy”].)

Therefore, the court may disregard this mandatory choice of jurisdiction only if there is “a showing that enforcement of the forum selection clause would be unfair or unreasonable.” (EpicentRx, Inc. v. Superior Ct. (2023) 95 Cal. App. 5th 890, 899.) “In the context of forum selection clauses, enforcement is considered unreasonable where ‘the forum selected would be unavailable or unable to accomplish substantial justice’ or there is no ‘rational basis’ for the selected forum. [Citation.]” (Korman v. Princess Cruise Lines, Ltd. (2019) 32 Cal. App. 5th 206, 216.) The clause is “presumed valid” and Plaintiff “bears the ‘substantial’ burden of proving why it should not be enforced.” (Glob. Packaging, Inc. v. Superior Ct. (2011) 196 Cal. App. 4th 1623, 1633.)

Plaintiff argues Defendant consented to jurisdiction in California because it is not authorized to do business in California. (See RJN, Exh. 1.) Plaintiff relies on California Corporations Code section 2203(a), which provides in relevant part, that “[a]ny foreign corporation which transacts intrastate business and which does not hold a valid certificate from the Secretary of State…by transacting unauthorized intrastate business, shall be deemed to consent to the jurisdiction of the courts of California in any civil action arising in this state in which the corporation is named a party defendant.”

Plaintiff has cited no authorities suggesting that section 2203’s consent to jurisdiction overrides a mandatory forum selection clause. This portion of the Corporations Code “does not include a provision that the corporation may not defend an action brought against it.” (Mediterranean Exports, Inc. v. Superior Ct. (1981) 119 Cal. App. 3d 605, 614.) Defendant has defended the action by bringing this motion to dismiss for forum non conveniens.

Plaintiff’s other arguments also do not defeat the mandatory forum selection clause. The “balance of factors” Plaintiff discusses in its motion—including that the project was a California public works project and involves California witnesses—might weigh against jurisdiction if the clause were permissive. However, Iowa is also a rational forum choice because the Defendant is alleged to be incorporated there. (Compl. ¶ 3.) With this in mind, Plaintiff has not met its heavy burden to establish that Iowa courts would be “unable to accomplish substantial justice” between the parties. (Korman, supra, 32 Cal. App. 5th at 216.)