Judge: Theresa M. Traber, Case: 23STCV11500, Date: 2024-05-17 Tentative Ruling

Case Number: 23STCV11500    Hearing Date: May 17, 2024    Dept: 47

Tentative Ruling

Judge Theresa M. Traber, Department 47

HEARING DATE:     May 17, 2024             TRIAL DATE: NOT SET

CASE:                         Bill Sezate v. Additive Circuits Technologies, LLC, et al.

CASE NO.:                 23STCV11500           

MOTION TO DISMISS OR STAY ACTION FOR FORUM NON CONVENIENS

MOVING PARTY:               Defendants Additive Circuits Technologies, LLC and Dennis Brown

RESPONDING PARTY(S): Plaintiff Bill Sezate

CASE HISTORY:

·         05/22/23: Complaint filed.

·         05/23/23: First Amended Complaint filed.

·         07/10/23: Cross-Complaint filed.

·         02/27/24: Cross-Complaint dismissed.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

            This is an action for breach of contract, fraud, defamation, and declaratory relief. Plaintiff alleges that Defendants terminated his employment as CEO of Additive Circuits Technologies on false pretenses to avoid providing him the compensation and ownership interest due to him under the agreement.

Defendants move to dismiss, or, in the alternative, stay this action on the grounds of forum non conveniens.

TENTATIVE RULING:

Defendants’ Motion to Dismiss for Forum Non Conveniens is DENIED.

DISCUSSION:

Defendants move to dismiss, or, in the alternative, stay this action on the grounds of forum non conveniens.

Legal Standard

Code of Civil Procedure Section 410.30(a), which codifies the doctrine of forum non conveniens, states: “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.” “On a motion for forum non conveniens, the defendant, as the moving party, bears the burden of proof. The granting or denial of such a motion is within the trial court's discretion, and substantial deference is accorded its determination in this regard.”  (Stangvik v. Shiley Inc. (1991) 54 Cal.3d 744, 751, bold emphasis added.) 

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. If it is, 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. 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. 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.
 

(Stangvik, supra, 54 Cal.3d 744, 751 [Citations omitted].) 

The balancing of private and public interests is a task squarely within the trial court's discretion. . . As noted in Stangvik, the analysis is twofold. "In determining whether to grant a motion based on forum non conveniens, the court first must make a threshold determination whether the alternate forum is a suitable place for trial. This is a nondiscretionary determination.” Indeed, in Stangvik the Supreme Court expressly rejected defendants' suggestion that the suitability of the alternative forum is part of the discretionary determination of the balance of conveniences. ¿ Only if it finds the alternative forum suitable does the court proceed to the discretionary exercise of balancing the private interests of the litigants and the interests of the public in retaining the action in California. In assessing suitability, however, "There is no balancing of interests in this decision, nor any discretion to be exercised." . . . .¿ 

(American Cemwood Corp. v. American Home Assurance Co. (2001) 87 Cal.App.4th 431, 436 [Citations omitted].) 

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Request for Judicial Notice

            Defendants request that the Court take judicial notice of the Complaint filed by Defendant Additive Circuits Technologies, LLC in the Court of Chancery for the State of Delaware in the action titled Additive Circuits Technologies, LLC v. Sezate. Defendants’ request is GRANTED pursuant to Evidence Code § 452(d) (court records).

Timeliness of Motion

            Plaintiff objects to Defendants’ motion on the grounds that it was not brought within a reasonable time.

            A motion to dismiss under section 410.30 must be presented within a reasonable time, and relief will not be granted where the moving party unreasonably delayed in bringing the motion. (See, e.g., Trident Labs, Inc. v. Merrill Lynch Commercial Finance Corp. (2011) 200 Cal.App.4th 147, 155-57.)

            Plaintiff argues that Defendants unreasonably delayed in not bringing this motion for one year since the action commenced. Plaintiff also contends that Defendants litigated this case during that period by filing an Answer and Cross-Complaint in July 2023 and by participating in case management conferences and setting a trial date. Plaintiff cites no authority for the position that this activity constitutes litigation of the claims for an unreasonable period. Indeed, as Defendants argue in reply, well-settled precedent holds that a defendant may make a forum non conveniens motion at any time. (E.g., Britton v. Dallas Airmotive Inc. (2007) 153 Cal.App.4th 127, 133.) Rather, the relevant inquiry is whether Defendants engaged in more substantial activity, such as serving and responding to discovery (e.g., Roulier v. Cannondale (2002) 101 Cal.App.4th 1180, 1191), or otherwise engaging in “extensive” litigation. (See, e.g., Trident Labs, supra, 200 Cal.App.4th at 155-57 [motion filed after 19 months of “extensive” litigation].) Here, Plaintiff concedes in its papers that Defendants have not responded to discovery served upon them, and the Court observes that Defendants have also filed motions for protective orders based on the forum non conveniens issue. No other substantive motions have been filed, nor hearing dates for other motions reserved.

            The Court is not persuaded that the minimal activity in this case renders Defendants’ delay in bringing this motion an unreasonable delay. Plaintiff’s waiver objection is not well-taken, and the Court will consider Defendants’ motion on its merits.

Forum Selection Clause

            Defendants argue that they are entitled to dismissal of this action because it is subject to a mandatory forum selection clause in the employment agreement between the parties.

            As a technical matter, the Employment Contract around which this dispute revolves is not attached to any of the pleadings filed by any of the parties in this action, even though it is referenced by all parties. Defendants have requested judicial notice of a Complaint filed in the Delaware Court of Chancery which includes, as an attached exhibit, an employment agreement dated May 1, 2022 bearing Plaintiff’s name and apparent signature and which matches the description of the agreement in the moving papers and contains excerpts identical to those quoted by the parties. (E.g., Defendants’ RJN Exh. A. ¶ 12.5; Memo of Ps. & As. p.5:21-24.) As the parties do not dispute the existence of the agreement or its contents, notwithstanding their disagreement over its interpretation, the Court construes this exhibit as the Employment Agreement and will rule in reference to this document.

            Paragraph 12.5 of the Agreement states:

The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of Delaware without giving effect to any conflict of law provisions. The parties hereto consent to the exclusive jurisdiction of the state and federal courts located in the State of Delaware with respect to all claims and disputes between or among the parties hereto with respect to the subject matter hereof.

(RJN Exh. A. § 12.5 [emphasis added].) Defendants argue that this is a mandatory forum selection clause which applies to this case because all of Plaintiff’s claims either directly concern the agreement or arise out of the agreement. A forum selection clause may be either “mandatory” or “permissive.” (Animal Film, Inc. v. D.E.J. Productions, Inc. (2011) 193 Cal.App.4th 466, 475.) Clauses which contain “language of exclusivity” are mandatory, whereas clauses which merely provide for submission to jurisdiction are permissive. (Id. at 472.) Mandatory forum selection clauses are given effect without regard to the convenience of the parties unless enforcement would be unfair or unreasonable. (Richtek USA, Inc. v. UPI Semiconductor Corp. (2015) 242 Cal.App.4th 651, 661.)

            Plaintiff argues that the clause is not mandatory because “[t]he parties’ consent to the ‘exclusive’ jurisdiction of Delaware courts relates only to their willingness and consent to be sued in Delaware but does not mean that any lawsuit must be filed only there.” (Opposition p.8:12-14.) To the contrary, the plain meaning of “exclusive jurisdiction” is that only the courts specified, to the exclusion of all others, have authority to hear the dispute. This conclusion is not weakened by other provisions in the contract that reference a “court of competent jurisdiction” (e.g., § 12.2), as Plaintiff claims, because it is section 12.5 that defines which courts have competent jurisdiction. Plaintiff’s citation to Animal Film is entirely unavailing, as the forum selection clause in that case expressly did not include language selecting a forum to the exclusion of all others, but rather merely expressed consent to the jurisdiction of the chosen forum. (Animal Film, supra, 193 Cal.App.4th at 471.) The Court finds that section 12.5 is a mandatory forum selection clause that must be given effect unless enforcement is unfair or unreasonable.

            Plaintiff also argues that his fourth cause of action for slander per se is not subject to the forum selection clause because it does not concern the subject matter of the agreement. This argument is belied by the First Amended Complaint itself, however, which alleges that Defendants’ explanation for Plaintiff’s termination—i.e., negligence in performance of job duties and withholding material information from the Board of Directors—was slanderous. (FAC ¶ 25.) These allegations directly concern Plaintiff’s employment, and therefore the subject matter of the Employment Agreement.

Public Policy

            Plaintiff argues that the forum selection clause should not be enforced because doing so would substantially diminish his rights in a manner contrary to California public policy.

            California courts regularly refuse to enforce forum selection clauses where the rights of a party in the selected forum are weakened contrary to the State’s public policy. For example, in EpicentRx, Inc. v. Superior Court (2023) 95 Cal.App.5th 890, the Court of Appeal affirmed a trial court’s refusal to enforce a forum selection clause specifically designating the Delaware Court of Chancery as the exclusive forum because litigants do not have a right to a civil jury trial in that forum. (EpicentRx, Inc., supra, 95 Cal.App.5th at 899-900; see also G. Companies Management, LLC v. LREP Arizona, LLC (2023) 88 Cal.App.5th 342, 350 [transaction usurious under California law but not in chosen forum]; Verdugo v. Alliantgroup, L.P. (2015) 237 Cal.App.4th 141, 147 [California Labor Code claims prevent enforcement of Texas forum selection clause].)

            Plaintiff argues that enforcement of the forum selection clause would severely diminish his rights because section 8 of the agreement contains a non-competition and non-solicitation clause which is unenforceable under California law. (See RJN Exh. A. § 8.) The enforceability of this provision is the express subject of Plaintiff’s fifth cause of action for declaratory relief. (FAC ¶¶ 29-31.) Non-competition and non-solicitation clauses are, as a general rule, void under California law, subject to certain statutory exceptions not relevant here. (Bus & Prof. Code §§ 16600-16607; Lab. Code § 925; Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937, 948.) An agreement may not escape this rule by a choice of law provision, as the Court is not bound to enforce a choice of law provision contrary to California public policy. (Application Group, Inc. v. Hunter Group, Inc. (1998) 61 Cal.App.4th 881, 902.) In contrast to the California standard, Delaware law generally permits non-compete agreements which “(1) [are] reasonable in geographic scope and temporal duration, (2) advance a legitimate economic interest of the party seeking its enforcement, and (3) survive a balancing of the equities.” (FP UC Holdings, LLC v. Hamilton (Del. Ch. 2020) 2020 WL 1492783 at *7.)[1]

             In reply, Defendants assert that there is no conflict of laws here because subdivision (e) of Labor Code section 925 governs choice of law or forum provisions presented as a condition of employment. Under this section, such provisions are void except when the employee is in fact individually represented by counsel in negotiating the agreement. (Labor Code § 925(e).) Defendants provide no evidence, however, for the assertion that Plaintiff was represented by legal counsel in negotiating the agreement.

            Moreover, Defendants’ alternative argument that Delaware courts abide by the Restatement (Second) of Conflict of Laws, and, therefore, that Delaware courts have a process for addressing Plaintiff’s concerns, misses the forest for the trees. First, the plain language of the agreement also expressly disregards Delaware conflict of law provisions, which casts significant doubt on Defendants’ presumption that Delaware courts could chose to enforce California law in this instance. (RJN Exh. A. § 12.5.) Second, under California law, Plaintiff is entitled to maintain his declaratory relief claim challenging the noncompete clause, notwithstanding the choice of law provision. If the case were dismissed in California and brought in Delaware, Plaintiff would be deprived of that protection unless the Delaware Court of Chancery both declined to enforce the choice of law provision and determined that California law should govern the declaratory relief claim under Delaware choice of law principles. In the Court’s view, this scenario constitutes exactly the sort of weakening of Plaintiff’s rights which requires refusal to enforce a forum selection clause.

            In summary, although Defendants have demonstrated the presence of a mandatory forum selection clause in the underlying Employment Agreement, the Court declines to enforce that clause because doing so would substantially weaken Plaintiff’s rights vis a vis the non-compete provision in violation of California public policy.

            As to the alternative argument that the Court should stay the action pending resolution of Defendant’s subsequent Delaware action, Defendants cite no authority requiring the Court to do so, and Defendants’ arguments concerning duplication of discovery efforts and inconsistent rulings are not well-taken. The Delaware action was filed second in time after Defendants voluntarily dismissed their cross-complaint here. Any risks of inconsistent rulings or duplication of discovery are of Defendants’ own making.  

CONCLUSION:

            Accordingly, Defendants’ Motion to Dismiss for Forum Non Conveniens is DENIED.

            Moving Parties to give notice.

IT IS SO ORDERED.

Dated:  May 17, 2024                         ___________________________________

                                                                                    Theresa M. Traber

                                                                                    Judge of the Superior Court

            Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.