Judge Salvatore Sirna, Case 22PSCV00376 2022-12-06 Tentative Ruling

Judge: Salvatore Sirna, Case: 22PSCV00376, Date: 2022-12-06 Tentative Ruling

Case Number: 22PSCV00376 Hearing Date: December 6, 2022 Dept: A

Defendant Shuai Deng’s Motion to Enforce Forum Selection Clause

Respondent: NO OPPOSITION (Due 11/1)

TENTATIVE RULING

Defendant Shuai Deng’s Motion to Enforce Forum Selection Clause is GRANTED. Plaintiffs Sihui City Yongjia Concrete Co., Ltd. and Yiwen Lin’s action against Defendants Shuai Deng and Uhome Solar Technology Inc. is STAYED.

BACKGROUND

This is a contractual fraud action arising from a stock purchase agreement. In September 2018, Plaintiffs Sihui City Yongjia Concrete Co., Ltd. (Yongjia Concrete) and Yiwen Lin (Lin) entered into a “Stock Purchase Agreement and Plan of Reorganization” with Defendants Uhome Solar Technology Inc. (Uhome) and Uhome CFO Shuai Deng (Deng). Under the agreement, Uhome agreed to sell 51% of its shares to Yongjia Concrete at a price of $400,000. The parties signed a second Put/Call Agreement in September 2021. The Plaintiffs then claim Defendants failed to transfer 51% ownership to them and failed to secure a work visa for Lin.

On April 14, 2022, Plaintiffs filed a complaint against Deng, Uhome, Prodigy Asset Management Group, Inc., and Does 1 through 20, alleging the following causes of action: (1) breach of contract; (2) common counts; and (3) fraud. On August 11, Plaintiffs filed a First Amended Complaint that added Deacon Zhang and Shang Wu as defendants and alleged the following additional causes of action: (4) civil conspiracy; (5) conversion; (6) constructive trust; (7) accounting; (8) unjust enrichment; (9) equitable indemnity; and (10) unfair business practices.

On October 19, 2022, Deng filed an answer with a general denial and also submitted the present motion. A CMC and OSC Re: “Failure to File Proof of Service on First Amended Complaint” are set for December 6, 2022.

LEGAL STANDARD

“A defendant may enforce a forum-selection clause by bringing a motion pursuant to [Code of Civil Procedure] sections 410.30 and 418.10, the statutes governing forum non conveniens motions, because they are the ones which generally authorize a trial [c]ourt to decline jurisdiction when unreasonably invoked and provide a procedure for the motion.” (Cal-State Business Products & Services, Inc. v. Ricoh (1993) 12 Cal.App.4th 1666, 1680 (Cal-State).) Pursuant to Code of Civil Procedure, section 410.30, subdivision (a), a court will stay or dismiss an action in whole or in part if it finds substantial justice supports the action being heard in another forum.

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.).)

However, “courts will refuse to defer to the selected forum if to do so would substantially diminish the rights of California residents in a way that violates our state’s public policy.” (America Online, Inc. v. Superior Court (2001) 90 Cal.App.4th 1, 12.) Thus, if the action is based on rights under California statutes that cannot be waived, “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 (Verdugo), quoting Wimsatt v. Beverly Hills Weight Loss Clinics Internat., Inc. (1995) 32 Cal.App.4th 1511, 1520-1524.)

ANALYSIS

Deng argues the stock purchase agreements in this case have mandatory forum selection clauses and requests the court enforce them. The court agrees.

The September 2018 stock purchase agreement and September 2021 put/call agreement both include the identical provision below.

The Parties agree and confirm that any dispute arising from or in connection with this Contract/Agreement, whichever may not be settled within 45 days upon and from the occurrence of dispute through friendly negotiation by the Parties, shall be submitted to China Zhanjiang Court of International Arbitration (CZCIA) for arbitration under sole arbitrator tribunal in which the arbitrator shall be appointed by CZCIA. The arbitration shall be conducted in accordance with the CZCIA’s arbitration rules and PRC applicable laws in effect at the time of applying (excluding Hong Kong, Taiwan and Macao laws). The arbitration tribunal shall render the final arbitration award within 45 days after the closing of examination and hearing (provided not in conflict to the CZCIA’s arbitration rules). The arbitration venue is in Nanjing, PRC and the arbitration language shall be Chinese. The arbitral award is final and binding upon the Parties. (FAC, Ex. A., § 5.10, Ex. B, ¶ 9.)

A forum selection 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, supra, 237 Cal.App.4th at p. 147, fn. 2.) Mandatory forum selection clauses usually contain “language of exclusivity.” (Animal Film, LLC v. D.E.J. Productions, Inc. (2011) 193 Cal.App.4th 466, 472; see, e.g., Smith, Valentino, & Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491, 494 [stating one party “agreed to bring all actions arising out of the agency agreement only in Philadelphia” and the other party “agreed to bring all such actions only in Los Angeles”]; Cal-State, supra, 12 Cal.App.4th at p. 1672, fn. 4 [stating any court in Manhattan “shall have exclusive jurisdiction”]); Furda v. Superior Court (1984) 161 Cal.App.3d 418, 422, fn. 1 [stating any action under agreement “shall be litigated either in a state court for Ingham County, Michigan, or in the U.S. District Court for the Western District of Michigan”].)

Here, the court finds this language is mandatory on its face as it uses the mandatory “shall” and explicitly identifies the location (Nanjing) and tribunal (China Zhanjiang Court of International Arbitration) for resolving disputes under the stock purchase agreements.

Deng also argues Plaintiffs’ First Amended Complaint arises from and is connected to the stock purchase agreements. The forum selection clause is limited to “any dispute arising from or in connection with this Contract/Agreement.” (FAC, Ex. A., § 5.10, Ex. B, ¶ 9.) When interpreting arbitration agreements, such language is considered “broad” and does not limit the scope of the agreement to contractual disputes, instead allowing “every dispute between the parties having a significant relationship to the contract and all disputes having their origin or genesis in the contract.” (Rice v. Downs (2016) 248 Cal.App.4th 175, 186, quoting Simula, Inc. v. Autoliv, Inc. (9th Cir. 1999) 175 F.3d 716, 721.)

Here, all of Plaintiffs’ claims have a connection to the stock purchase agreements at issue and are based on the allegations that Defendants made promises to Plaintiffs, accepted the Plaintiffs’ money, and failed to perform. Furthermore, the only statutory cause of action asserted by the Plaintiffs is unfair business practices under Business and Professions Code, section 17200. However, courts have not considered this kind of claim to be a non-waivable statutory right. (See Handoush v. Lease Finance Group, LLC (2019) 41 Cal.App.5th 729, 734, fn. 3; Net2Phone, Inc. v. Superior Court (2003) 109 Cal.App.4th 583, 589.)

Because the forum selection clause in the stock purchase agreements is mandatory and applies to Plaintiffs’ claims, the burden is on Plaintiffs to oppose its enforcement on the grounds of unfairness or reasonableness. Plaintiffs have not made any argument to justify invalidating the forum selection clause. Accordingly, the court will enforce the forum selection clause. (Benefit Assn. Internat., supra, 46 Cal.App.4th at p. 835.) The court will stay Plaintiffs’ action against Deng and Uhome, but declines to stay Plaintiffs’ action against the other defendants who were not parties to the stock purchase agreement. (David v. Medtronic, Inc. (2015) 237 Cal.App.4th 734, 744-745.)

CONCLUSION

Based on the foregoing, the court GRANTS Defendant Deng’s motion to enforce the forum selection clause. The Plaintiffs’ action against Deng and Uhome is STAYED pending arbitration with the China Zhanjiang Court of International Arbitration (CZCIA) in Nanjing, China, as contemplated under the forum selection clause.