Judge: Serena R. Murillo, Case: 22STCV11246, Date: 2023-09-27 Tentative Ruling

Case Number: 22STCV11246    Hearing Date: September 27, 2023    Dept: 31

TENTATIVE

Defendant Ehab Atalla’s motion for forum non conveniens is GRANTED.

Evidentiary Objections

Defendant’s Objections to Plaintiff’s Declaration Nos. 1, 9-14, 17 are SUSTAINED. Defendant’s Objections to Plaintiff’s Declaration Nos. 2-8, 15-16, 18-25 are OVERRULED. Defendant’s Objections to Samy Habashi Declaration Nos. 1-2, 4, 5 are OVERRULED. Defendant’s Objections to Samy Habashi Declaration Nos. 3 is SUSTAINED.
Defendant’s Objections to Victor Ramsis Kozman Declaration Nos. 1-5 are SUSTAINED. Defendant’s Objections to Tony Khalaf Declaration Nos. 1-6 are OVERRULED.

Legal Standard

Forum non conveniens is “an equitable doctrine invoking the discretionary power of a court to decline the exercise of 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.) “In California, the procedure for enforcing a forum selection clause is a motion to stay or dismiss for forum non conveniens pursuant to Code of Civil Procedure sections 410.30 and 418.10 [citation], but a motion based on a forum selection clause is a special type of forum non conveniens motion.”¿ (Berg v. MTC Electronics Technologies¿(1998) 61 Cal.App.4th 349, 358.)¿

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Code of Civil Procedure section 410.30(a) states, “[w]hen 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 of Civil Procedure section 418.10(a)(2) states, “[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 one or more of the following purposes: ¶ [t]o stay or dismiss the action on the ground of inconvenient forum.”¿

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“‘California favors contractual¿forum¿selection¿clauses¿so long as they are entered into freely and voluntarily . . .’”¿ (Verdugo v. Alliantgroup, L.P.¿(2015) 237 Cal.App.4th 141, 146.)¿ “California courts routinely enforce¿forum¿selection¿clauses¿even where the chosen forum is far from the plaintiff's residence.”¿ (Net2Phone, Inc. v. Superior Court¿(2003) 109 Cal.App.4th 583, 588.)¿ “California law is ‘in accord with the modern trend which favors enforceability of such [mandatory] forum selection clauses.¿ [Citations.]”¿ (Quanta Computer Inc. v. Japan Communications Inc.¿(2018) 21 Cal.App.5th 438, 444.)¿ “‘The factors that apply generally to a forum non conveniens motion do not control in a case involving a mandatory forum selection clause.¿ [Citations.]¿ Where 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.¿ [Citation.]¿ A court will usually honor a mandatory forum selection clause without extensive analysis of factors relating to convenience.¿ [Citation.]’¿ [Citation.]”¿ (Id. at 445.)¿

“A permissive forum selection clause is subject to traditional forum non conveniens analysis to determine whether the designated forum is a suitable alternative forum and whether the balancing of various private and public interest factors favors retaining the action in California.”  (Verdugo v. Alliantgroup, L.P.¿(2015) 237 Cal.App.4th 141, 147 fn. 2.)

“Forum non conveniens is an equitable doctrine, codified in Code of Civil Procedure section 410.30, under which a trial court has discretion to stay or dismiss a transitory cause of action that it believes may be more appropriately and justly tried elsewhere.”  (Animal Film, LLC v. D.E.J. Productions, Inc., 193 Cal. App. 4th 466, 471 (2011) (emphasis added); accord Stangvik v. Shiley Inc., 54 Cal. 3d 744, 751 (1991).  Accordingly, “[t]he inquiry is whether ‘in the interest of substantial justice an action should be heard in a forum outside this state . . . .’”  (Animal Film, LLC, 193 Cal. App. 4th at 471 (quoting Civ. Proc. Code § 410.30(a)).)¿¿

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“In determining whether to grant a motion based on forum non conveniens, a court must first determine whether the alternate forum is a ‘suitable’ place for trial.”  (Stangvik, 54 Cal. 3d at 751.)  “The threshold issue of suitability of the alternative forum is . . . determined by a two-pronged test: There must be jurisdiction over the defendant and the assurance that the action will not be barred by a statute of limitations.”  (Shiley Inc. v. Superior Court, 4 Cal. App. 4th 126, 133 (1992).¿¿

The alternative forum is “suitable” if its law provides a remedy for the claim sued upon. It is sufficient that the action can be brought, although not necessarily won, in the alternative forum. (Guimei v. General Elec. Co. (2009) 172 CA4th 689, 696; Roman v. Liberty Univ., Inc. (2008) 162 CA4th 670, 683.)

The other forum's law need not be as favorable to plaintiff as local law. (If that were required, most forum non conveniens motions would be denied.) (Stangvik v. Shiley Inc., supra, 54 C3d at 754,—advantages of Calif. procedural or substantive law “cannot be considered as a factor” (emphasis added); Boaz v. Boyle & Co., Inc. (1995) 40 CA4th 700, 711—immaterial that plaintiff will probably or even certainly lose in alternative forum.).)

Indeed, the alternative forum's law is irrelevant unless the remedy provided is so clearly inadequate or unsatisfactory that it is no remedy at all. (Stangvik v. Shiley Inc., supra, 54 C3d at 764; Piper Aircraft Co. v. Reyno (1981) 454 US 235, 254—(the fact that Scotland does not recognize products liability claim did not constitute deprivation of “any” remedy, since negligence recovery possible.).)

The “no remedy at all” exception applies only in rare circumstances, “such as where the alternative forum is a foreign country whose courts are ruled by a dictatorship, so that there is no independent judiciary or due process of law.” (Shiley Inc. v. Sup.Ct. (Alsup) (1992) 4 CA4th 126, 133-134.)

If there is a suitable alternate forum, then “the next step is to consider the private interests of the litigants and the interests of the public in retaining the action for trial in California.”  (Stangvik, 54 Cal. 3d at 751.)  “The private interest factors are those that make trial and the enforceability of the ensuing judgment expeditious and relatively inexpensive, such as the ease of access to sources of proof, the cost of obtaining attendance of witnesses, and the availability of compulsory process for attendance of unwilling witnesses.”  (Id.)  “The public interest factors include avoidance of overburdening local courts with congested calendars, protecting the interests of potential jurors so that they are not called upon to decide cases in which the local community has little concern, and weighing the competing interests of California and the alternate jurisdiction in the litigation.” (Id.)¿¿

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Generally, “[o]n a motion for forum non conveniens, the defendant, as the moving party, bears the burden of proof.”  (Id.)  If the defendant’s motion is granted, then “the court shall stay or dismiss the action in whole or in part on any conditions that may be just.”  (Civ. Proc. Code § 410.30(a).)¿¿

Discussion

On May 25, 2022, the Court continued this motion to dismiss or abate on the ground of forum non-conveniens.  The Court found that the forum selection clause (the “Clause”) is permissive and not mandatory. As a result, the Court stated it would apply a traditional forum non conveniens analysis to determine whether the designated forum is a suitable alternative forum and whether the balancing of various private and public interest factors favors retaining the action in California. However, the court found that it is unclear whether a Court in Egypt would lack jurisdiction over this matter.  It noted that if the Court were to dismiss this matter, there would be a significant risk that a court in Egypt may not have jurisdiction over Plaintiff’s claims, which would deprive Plaintiff of his day in court.  However, Defendant argued that Article 12 of the subject Agreements required the parties to arbitrate their disputes and that an arbitration is ongoing with the full participation of Plaintiff, through his counsel.

As to the private and public interest factors, the Court found that while Defendant represented that Plaintiff will be able and is representing his interest in ongoing arbitration in Egypt that Plaintiff is participating in, there was no evidence that Plaintiff has asserted his claims in that arbitration, and the Court was not convinced that Plaintiff would have his day in Court.  The Court agreed with Defendant that this matter favors a forum in Egypt because the Agreements were to obtain property and assets in Egypt, and the disputes are governed by Egyptian Law.  In addition, while Plaintiff contended that all material witnesses are located in the United States Plaintiff failed to identify those witnesses, other than Mr. Habashi. 

Nevertheless, the Court found that it is in the best interest of justice to stay this matter, as the arbitration outcome in Egypt could well determine whether the instant action goes forward. If Plaintiff is able to press his claims in that proceeding the Court could find that this action is moot.

The Court required the Parties to provide a status report relating to the Egyptian proceedings and whether Plaintiff was able to assert there the claims he asserts in the instant Complaint.

The Court now additionally finds that the forum¿selection¿clause¿was entered into freely and voluntarily. Plaintiff argues that he entered into the agreement without having a chance to read it or consult with a legal counsel about its actual substance. (Habashi Decl. ¶ 6; Hakim Decl. ¶¶ 5-6.) However, in reply, Defendant argues that the Promise of Sale Agreements were not enforceable in Egypt until Atalla and Hakim together (or their designated representatives) presented them to, and obtained formal approval from, a court in Egypt and Plaintiff therefore had weeks to review the Promise of Sale Agreements, consult with attorneys, and assert any objections, before the Egyptian court approved them. (See Milad Decl., ¶¶ 3-5 & Exhs. 1, 3-5.) The Court finds that Plaintiff failed to meet his burden to show that he did not enter into the forum selection clause freely and voluntarily.

Since the continuance, Defendant has filed additional declarations and Plaintiff filed a supplemental opposition. Plaintiff argues in his supplemental opposition (filed in Jan. 2023) that the motion to dismiss should be denied because the case in Egypt is still underway. In Egypt, in cases where the three arbitrators do not agree in a result, the case may be appealed to civil courts. That is what happened in this case. The arbitrators ruled in favor of Defendant Attala 2-1. The Court’s disposition since May 2022 has been to stay these proceedings pending the outcome of the arbitration in Egypt. Those proceedings are not complete.

However, Defendant has submitted supplemental declarations which state that there were two arbitration proceedings which involve all four promise of sale agreements, which were decided in favor of Defendant. Plaintiff separately appealed both decisions, which were affirmed by the Court of Appeal. (Abdalla Second Decl. ¶ 12, Third Decl, ¶ 3.) As such, the proceedings are complete.

Next, Plaintiff argues that the remedies available in Egypt are insufficient to protect Plaintiff’s rights in the United States. Plaintiff argues a key assurance Defendant Atalla made to the arbitral tribunal was that he had released the liens on Plaintiff’s properties in the United States. That was a lie. Neither the arbitral tribunal nor the cassation courts in Egypt can enforce that condition. Only a United States court can enforce that promise, and his failure to release the liens thus far, despite his assurance to the arbitral tribunal that he had done so is evidence that the enforcement remedies available in the courts in Egypt are insufficient to protect Plaintiff’s interests.

However, Abdalla, who was Defendant’s attorney in the arbitration proceeding in Egypt, declares under penalty of perjury that he did not represent to the arbitration tribunal that Defendant had released liens and guarantees concerning assets and property in California. He further attests that the tribunal did not order Defendant to release those liens and guarantees. (Adballa Second Suppl. Decl., ¶ 8.) On the contrary, he merely advised the tribunal that in the event that all of Defendant’s claims are affirmed and the award is fully satisfied by Plaintiff, a portion of the liens and guarantees which relate to the monetary obligations under the promise to sale agreement at issue would be null and void. (Id., ¶ 9; Exh. 5, at p. 14, ¶ 67; p. 75, ¶ 261.)

As such, Plaintiff has not shown that the remedies provided in Egypt are insufficient.

Next, Plaintiff argues that the Court should deny the motion because Plaintiff’s claims are outside the scope of the case in Egypt. In the Egypt case, Defendant alleges breach of contract. Here, Plaintiff alleges conduct outside the four promises of sale. Plaintiff alleges that Defendant breached his agreement as an investor in Plaintiff’s company by only paying $6.8 million rather than the agreed amount of $12 million, and after the business went bad, he fraudulently asserted that the investment was rather a loan to be repaid. Plaintiff argues that all that was litigated was the four promises of sale, not Plaintiff’s additional claims of fraud, unfair business practices, money laundering, double-dipping, unjust business practices and possible punitive damages.

However, Abdalla declares under penalty of perjury that Plaintiff made the same factual or legal claims asserted in the complaint in this action in the arbitration, and that the arbitration tribunal carefully reviewed and considered each of those contentions before issuing the award. (Adballa Second Suppl. Decl., ¶ 5.) For example, in the complaint in this action, Plaintiff alleges that Defendant entered into a “verbal understanding” to “partner with [Plaintiff] in his corporations” and that the funds paid by Defendant under the promise of sale agreements were in fact “money received toward [Defendant’s] percentage share in the corporation.” (Compl., ¶¶ 8-9.) This is the same allegation Plaintiff made at the arbitration. (Adballa Second Suppl., ¶ 6; Exh. 5, at p. 19, ¶ 92.) Similarly, in the complaint, although admitting that he signed the four promise of sale agreement, Plaintiff alleges that Defendant “fraudulently” caused him to sign the promise of sale agreements because he did not receive the promised consideration. (Compl, ¶¶ 11-12.) Again, this is the same contention Plaintiff made at the arbitration. (Adballa Second Suppl., ¶ 6; Exh. 5, at p. 49, ¶ 204; p. 50, ¶ 205; p. 51, ¶ 212; p. 72, ¶ 258.) And, in the complaint in this action, Plaintiff alleges that Defendant is liable for “money laundering” because he allegedly paid funds to Plaintiff under the promise of sale agreements in “cash.” Again, this is the same allegation Plaintiff made at arbitration. (Adballa Second Suppl., ¶ 6; Exh. 5, at p. 25, ¶ 112; p. 26, ¶ 114; p. 27, ¶ 116; pp. 40-42, ¶ 167; pp. 52-56, ¶ 218-220.)

As such, as demonstrated by the above evidence, Plaintiff’s claims are not outside the scope of the arbitration proceedings in Egypt.

Plaintiff also argues that the court should deny the motion to dismiss because several of the grounds upon which the appeal in Egypt are based involve whether the courts in Egypt have jurisdiction over the dispute.

However, the Second Arbitration Tribunal rejected Plaintiff’s contention that it was not competent to hear the dispute or did not have jurisdiction over the subject matter of the case which should instead be adjudicated in the United States. (Abdalla Second Decl., 23; Third Decl, 3.)

As a result, based on the declaration of Abdalla that the Court of Appeal found they had jurisdiction, and the fact that this matter was heard by the arbitral tribunal and affirmed by the Court of Appeal in Egypt, the Court finds that there was a suitable forum. Further, as the claims in the complaint were brought in Egypt by Defendant in this matter, there was a remedy there. If defendant demonstrates that it is amenable to process in the alternative forum and there is no procedural bar to the foreign court's deciding the case on the merits, the burden falls on plaintiff to show that the alternative forum is nevertheless unsuitable. (Hahn v. Diaz-Barba (2011) 194 CA4th 1177, 1191.)

Plaintiff has failed to show that the Egyptian’s judicial system is not adequate.

Moreover, as to the private and public interest factors, as noted above, on May 25, 2022, the Court agreed with Defendant that this matter favors a forum in Egypt because the Agreements were to obtain property and assets in Egypt, and the disputes are governed by Egyptian Law.  In addition, while Plaintiff contended that all material witnesses are located in the United States Plaintiff failed to identify those witnesses, other than Mr. Habashi. 

Therefore, Defendant’s motion is GRANTED.

Conclusion

Defendant’s motion to dismiss on the ground of forum non conveniens is GRANTED.

Moving party is ordered to give notice.