Judge: Robert B. Broadbelt, Case: 22STCV25303, Date: 2024-01-05 Tentative Ruling

Case Number: 22STCV25303    Hearing Date: March 22, 2024    Dept: 53

Superior Court of California

County of Los Angeles – Central District

Department 53

MOVING PARTY:                Plaintiff and cross-defendant Laundrylux Funding Services, LLC

RESPONDING PARTIES:    Defendants and cross-complainants Cleotilde Ortiz and Jose Alberto Castro

Motion to Dismiss Cross-Complaint for Forum Non Conveniens

The court considered the moving, opposition, and reply papers filed in connection with this motion.

DISCUSSION

Plaintiff and cross-defendant Laundrylux Funding Services, LLC (“Plaintiff”) moves the court for an order dismissing the Cross-Complaint filed by defendants and cross-complainants Jose Alberto Castro and Cleotilde Ortiz (“Defendants”) pursuant to the doctrine of forum non conveniens.

“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).)  “‘Section 410.30 is a codification of the doctrine of forum non conveniens [citation], but the principles governing enforcement of a forum selection clause are not the same as those applicable to motions based on forum non conveniens.  [¶]  In California, “forum selection clauses are valid and may be given effect, in the court’s discretion and in the absence of showing that enforcement of such a clause would be unreasonable.”  [Citation.]  [¶]  The burden of proof is on the plaintiff, and the factors involved in traditional forum non conveniens analysis do not control.  [Citation.]  “Instead, the 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.”  [Citations.]’”  (Korman v. Princess Cruise Lines, Ltd. (2019) 32 Cal.App.5th 206, 213.)  

First, the court finds that Plaintiff has shown that the parties entered into an agreement that includes a mandatory forum selection clause.

“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.”  (Animal Film, LLC v. D.E.J. Productions, Inc. (2011) 193 Cal.App.4th 466, 471; Korman, supra, 32 Cal.App.5th at p. 215.)  “A clause is mandatory if it requires the parties to litigate their disputes exclusively in the designated forum, and it is permissive if it merely requires the parties to submit to jurisdiction in the designated forum.”  (Verdugo v. Alliantgroup, L.P. (2015) 237 Cal.App.4th 141, 147, n. 2.)  “A mandatory clause ordinarily is ‘given effect without any analysis of convenience; the only question is whether enforcement of the clause would be unreasonable.’  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.]’” (Animal Film, LLC, supra, 193 Cal.App.4th at p. 471.)  

Plaintiff has submitted a copy of the “Secured Promissory Note and Agreement” dated March 28, 2018, entered into by and between Defendants (as “Maker[s]”), on the one hand, and Plaintiff (as “Lender”), on the other hand (the “Note”).  (Soloway Decl., Ex. A, Note, p. 1.)  The Note sets forth the following forum selection clause:  “In any litigation with [the] Holder [of the Note], whether or not arising out of or relating to this Note: . . . (C) Maker and all Guarantors irrevocably submit to the jurisdiction of the courts of the State of New York and of the United States having jurisdiction in any of the following counties within the State of New York: New York, Queens, Kings, Bronx, and/or Nassau . . . .  Maker and all Guarantors agree not to bring any action or other proceeding with respect to this Note or with respect to any of its obligations hereunder in any court other than the aforementioned courts unless such courts of the State of New York and of the United States determine that they do not have jurisdiction in the matter.” (Soloway Decl., Ex. A, § 12; Mot., p. 3:12-21.)

The court finds that the Note’s forum selection clause is mandatory because, in asserting that the makers of the Note (i.e., Defendants) “agree not to bring any action or other proceeding  . . . in any court other than the aforementioned courts” unless those courts determine that they do not have jurisdiction, the clause (1) goes beyond merely requiring the parties to submit to jurisdiction in the designated forum and (2) instead designates certain courts to be the exclusive forum for any litigation arising out of the Note or Defendants’ obligations (as the makers) thereunder.  (Soloway Soloway Decl., Ex. A, § 12 [emphasis added]; Verdugo, supra, 237 Cal.App.4th at p. 147,  n. 2 [explaining difference between mandatory and permissive clauses].) 

Second, the court finds that (1) Defendants have shown that their action involves substantive unwaivable rights to a trial by jury and therefore (2) Plaintiff has the burden to show that litigating Defendants’ claims in the foreign forum will not diminish the substantive rights afforded to Defendants under California law.

“‘When a case involves a mandatory forum selection clause, it will usually be given effect unless it is unfair or unreasonable.  [Citation.]’”  (Korman, supra, 32 Cal.App.5th at p. 216.)  “The party opposing enforcement of a forum selection clause ordinarily ‘bears the “substantial” burden of proving why it should not be enforced.’”  (Verdugo, supra, 237 Cal.App.4th at p. 147 [emphasis in original].)  “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.’”  (Ibid., and at p. 145 [“the burden is reversed when the underlying claims are based on statutory rights the Legislature has declared to be unwaivable”]; G Companies Management, LLC v. LREP Arizona, LLC (2023) 88 Cal.App.5th 342, 350 [quoting Verdugo, supra, 237 Cal.App.4th at p. 147].)  

The court notes that Defendants’ Cross-Complaint, filed on January 8, 2024, does not appear to include a demand for a jury trial.  However, on March 3, 2023, the court issued a minute order stating that Defendants demanded a jury trial.  (Mar. 3, 2023 Order, p. 1.) Thereafter, on March 6, 2023, Defendants filed a “Notice of Posting of Jury Fees,” informing the parties and the court that Defendants submitted a jury fee deposit in the amount of $150.  (Mar. 6, 2023 Notice of Posting of Jury Fees, p. 1:21-25.)  Here, the Note includes a provision stating that “all parties to this Note and the following irrevocable Guaranty expressly waive trial by jury . . . .”  (Soloway Decl., Ex. A, Note, § 12; Opp., p. 2:10-12 [quoting Note].)  Thus, Defendants contend that enforcing the forum selection clause in this action would be contrary to California’s public policy to protect the right to a jury trial.

“[B]ecause the right to jury trial in California is a fundamental right that may only be waived as prescribed by the Legislature, courts cannot enforce predispute agreements to waive a jury trial.”  (Handoush v. Lease Finance Group, LLC (2019) 41 Cal.App.5th 729, 737-737, rev. dism. August 12, 2020.)  The court finds that, by demanding a trial by jury on March 3, 2023 and posting jury fees in accordance with that demand on March 6, 2023, Defendants have requested a trial by jury in this action, including on the claims alleged in their Cross-Complaint.  Plaintiff therefore has the burden to show that litigating those claims in New York will not diminish Defendants’ rights under California law.  (Id. at p. 739 [holding that, “because enforcement of the forum selection clause here has the potential to contravene a fundamental California policy of zealously guarding the inviolate right to a jury trial, which is unwaivable by predispute agreements, [the moving defendant] bears the burden of showing that litigation in New York ‘will not diminish in any way [the plaintiff’s] substantive rights . . . under California law’”] [internal citation omitted].)

Third, the court finds that Plaintiff has not met its burden to show that enforcement of the forum selection clause to require Defendants to submit their claims to the foreign forum (i.e., the courts in New York) will not diminish Defendants’ unwaivable rights afforded to them under California law.  (Verdugo, supra, f237 Cal.App.4th at p. 157.)

“As explained above, a defendant seeking to enforce a mandatory forum selection clause [in an action based on unwaivable rights] bears the burden to show enforcement will not in any way diminish the plaintiff’s unwaivable statutory rights.  By definition, this showing requires the defendant to compare the plaintiff’s rights if the clause is not enforced and the plaintiff’s rights if the clause is enforced.  Indeed, a defendant can meet its burden only by showing the foreign forum provides the same or greater rights than California, or the foreign forum will apply California law on the claims at issue.”  (Verdugo, supra, 237 Cal.App.4th at p. 157.)  

Plaintiff did not show that enforcement of the forum selection clause would not substantially diminish Defendants’ rights under California law because Plaintiff did not show that the predispute waiver will not apply to each of Defendants’ legal causes of action.  Although Plaintiff has shown that the predispute jury waiver provision may not be applicable to the second cause of action for fraud or intentional misrepresentation, Plaintiff did not show that the predispute jury waiver provision would be inapplicable to Defendants’ other causes of action, on which they would be entitled to a jury trial (i.e., the causes of action for breach of contract and breach of implied covenant of good faith and fair dealing).  (China Dev. Indus. Bank v. Morgan Stanley & Co. Inc. (2016) 86 A.D. 3d 435, 437-438 [“the motion court properly concluded that the jury waiver provision in the agreement was inapplicable to the fraudulent inducement cause of action”]; Raedeke v. Gibraltar Sav. & Loan Assn. (1974) 10 Cal.3d 665, 671 [a suit to recover damages for “breach of contract is an action at law in which a right to jury trial ordinarily exists”].)  Thus, the court finds that Plaintiff has not shown that enforcing the forum selection clause and requiring Defendants to litigate their claims in New York would not substantially diminish the substantive rights (i.e., their right to jury trial) afforded to them in California.

Fourth, the court notes that Plaintiff has argued that Defendants should be estopped from asserting that forum selection clause in the Note is unenforceable.  (Mot., pp. 5:26-6:1; Reply, p. 2:9-11.)  However, Plaintiff did not meet its burden to show that (1) each element of judicial estoppel has been satisfied and (2) the court should exercise its discretion to apply the doctrine here.  (Victrola 89, LLC v. Jaman Properties 8 LLC (2020) 46 Cal.App.5th 337, 357 [elements of judicial estoppel]; Id. at pp. 357-358 [“‘[e]ven if the necessary elements of judicial estoppel are satisfied, the trial court still has discretion to not apply the doctrine’”] [internal citation omitted].)

For the reasons set forth above, the court finds that Plaintiff has not met its burden to show that litigating the claims alleged in Defendants’ Cross-Complaint will not diminish the substantive rights afforded to Defendants under California law.  The court therefore exercises its discretion to deny Plaintiff’s motion to dismiss the Cross-Complaint pursuant to the doctrine of forum non conveniens.

ORDER

            The court denies plaintiff and cross-defendant Laundrylux Funding Services, LLC’s motion to dismiss cross-complaint for forum non conveniens.

            The court orders defendants and cross-complainants Jose Alberto Castro and Cleotilde Ortiz to give notice of this ruling.

IT IS SO ORDERED.

DATED:  March 22, 2024

_____________________________

Robert B. Broadbelt III

Judge of the Superior Court