Judge: Walter P. Schwarm, Case: 30-2022-01272033, Date: 2022-10-25 Tentative Ruling

Defendants’ (Wide Business Systems, Inc. and Wide Industry Solutions) Motion to Dismiss, or Stay, the Case on the Ground of Forum Non Conveniens (Motion), filed on 9-13-22 under ROA No. 64, is GRANTED.

The court DENIES Defendants’ Request for Judicial Notice, filed on 9-13-22 under ROA No. 62, as immaterial to the court’s ruling. (Silverado Modjeska Recreation & Parks District v. County of Orange (2011) 197 Cal.App.4th 282, 307, fn. 18.)  

Jay v. Mahaffey (2013) 218 Cal.App.4th 1522, 1537-1538 (Jay), states, “The general rule of motion practice, which applies here, is that new evidence is not permitted with reply papers. This principle is most prominent in the context of summary judgment motions, which is not surprising, given that it is a common evidentiary motion. ‘[T]he inclusion of additional evidentiary matter with the reply should only be allowed in the exceptional case . . .’ and if permitted, the other party should be given the opportunity to respond. [Citations.] The same rule has been noted in other contexts as well. [¶] This rule is based on the same solid logic applied in the appellate courts, specifically, that ‘[p]oints raised for the first time in a reply brief will ordinarily not be considered, because such consideration would deprive the respondent of an opportunity to counter the argument.’ [Citations.] [¶] To the extent defendants argue they had the right to file any reply declarations at all, they are not wrong. Such declarations, however, should not have addressed the substantive issues in the first instance but only filled gaps in the evidence created by the limited partners' opposition.”

Here, Defendants have submitted the declaration of Gabriel J. Green in support of their Reply to Plaintiffs’ Opposition to the Motion to Dismiss, or Stay, the Case on the Ground of Forum Non Conveniens (Reply) filed on 10-18-22 under ROA No. 94.  This declaration states in part, “Defendants agree that they will not enforce the jury trial waiver in the Agreement and agree to stipulate to the preservation of Plaintiffs’ right to a jury trial in Harris County, Texas. . . . Since Plaintiffs’ Opposition is the first time that Plaintiffs have raised any issue with regard to the jury trial waiver, this Reply is the first opportunity that Defendants have to agree to not enforce that jury trial waiver.” (Green Decl., ¶ 4.)  Since this declaration addresses a gap created in Plaintiff’s (Shahram Badiian) Opposition to Defendants’ Motion to Dismiss (Opposition), filed on 10-11-22 under ROA No. 90, the court will consider the declaration of Gabriel J. Green. (See Opposition at 3:25-5:3.)

Law:

Code of Civil Procedure Section 418.10, subdivision (a) provides in part, “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: . . . [¶] (2) To stay or dismiss the action on the ground of inconvenient forum. . . .” Code of Civil Procedure Section 410.30(a) 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.”

Animal Film, LLC v. D.E.J. Prods., Inc. (2011) 193 Cal.App.4th 466, 471 (Animal Film) state, “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. [Citation.] The inquiry is whether ‘in the interest of substantial justice an action should be heard in a forum outside this state.” [Citation.] [¶] 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.’ 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.]’ [Citations.] The existence of a permissive forum selection clause is one factor considered along with the other forum non conveniens factors in applying the traditional analysis. [Citation.]”

Intershop Communications v. Superior Court (2002) 104 Cal.App.4th 191, 198 (Intershop) states, “In contrast, in cases with a contractual forum selection clause, the burden of proof is on the plaintiff, the party resisting the motion. [Citations.] The various factors involved in the 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. [Citation.]

Verdugo v. Alliantgroup, L.P. (2015) 237 Cal.App.4th 141, 146–148 (Verdugo) explains, “ ‘California favors contractual forum selection clauses so long as they are entered into freely and voluntarily, and their enforcement would not be unreasonable. [Citation.] This favorable treatment is attributed to our law's devotion to the concept of one's free right to contract, and flows from the important practical effect such contractual rights have on commerce generally.’ [Citation.] Indeed, ‘ “[f]orum selection clauses are important in facilitating national and international commerce, and as a general rule should be welcomed.” [Citation.]’ [Citation.] [¶] A mandatory forum selection clause such as the one included in Verdugo's Employment Agreement is generally given effect unless enforcement would be unreasonable or unfair. [Citations.] ‘ “ ‘Mere inconvenience or additional expense is not the test of unreasonableness . . .’ ” for a mandatory forum selection clause. [Citation.]’ [Citation.] A clause is reasonable if it has a logical connection with at least one of the parties or their transaction. [Citations.] [¶] Nonetheless, ‘California 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.’ [Citations.] [¶] The party opposing enforcement of a forum selection clause ordinarily ‘bears the “substantial” burden of proving why it should not be enforced.’ [Citations.] 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.’ [Citations.]” (Italics in Verdugo; Footnote 2 omitted.) “Alliantgroup could have eliminated any doubt about which law would apply to Verdugo's claims by stipulating to have the Texas courts apply California law, but it did not do so. Instead, Alliantgroup acknowledged Texas might apply California law while simultaneously minimizing the significance of the California statutory rights on which Verdugo bases her claims. Alliantgroup therefore has not shown Verdugo's unwaivable statutory rights will not be diminished.” (Id., at p. 145.)

Handoush v. Lease Finance Group, LLC (2019) 41 Cal.App.5th 729, 739 (Handoush), states, “Here, we are not concerned with an Erie question, but we find the Ninth Circuit's discussion of the substantive nature of the Grafton rule instructive, and we agree that even if this rule is considered procedural, it is ‘ “intimately bound up with the state's substantive decision making” ’ and it ‘ “serve[s] substantive state policies” ’ of preserving the ‘ “right to a jury trial in the strongest possible terms” [citation], an interest the California Constitution zealously guards [citation].’ [Citation.] We hold 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, LFG bears the burden of showing that litigation in New York ‘will not diminish in any way [Handoush's] substantive rights . . . under California law.’ [Citation.]” “In conclusion, we find the trial court erred in enforcing the forum selection clause in favor of a New York forum where the clause includes a predispute jury trial waiver, which Grafton instructs is unenforceable under California law. LFG failed to show that enforcement of the forum selection clause would not substantially diminish the rights of California residents in a way that violates our state's public policy. [Citation.]” (Id., at p. 741.)

Merits:

Defendants’ have provided evidence that Plaintiff—U.S. Technology Solutions, Inc. and Wide Business Systems entered into a “Purchase and Sale of Future Receivables Agreement” (Agreement) on 6-24-22. (Abascal Decl., ¶ 7; Complaint; ¶ 9 and Exhibit A.)  Based on the Agreement, Defendant—Wide Business Systems, Inc. agreed to buy Plaintiff—U.S. Technology Solutions, Inc.’s future receivables up to the amount of $109,500.00 for $75,000.00. (Abascal Decl., ¶ 7; Complaint; ¶ 9 and Exhibit A.)  The Agreement contains a forum selection provision which states, “Governing Law and Application. The validity, interpretation, construction, performance, enforcement, and remedies of or relating to this Agreement, and the rights and obligations of the Parties to this Agreement, shall be governed and construed in all respects by the substantive laws of the State of Texas (without regard to the conflict of laws rules or statutes of Texas or any other jurisdiction that might result in the application of other law). All disputes arising under or related to this Agreement shall be commenced and maintained exclusively in the federal and state courts situated in the County of Harris, State of Texas, and all Parties hereby irrevocably submit to the jurisdiction and venue of any such court.” (Abascal Decl., ¶ 7; Complaint; ¶ 9 and Exhibit A at Section VI (l) of the Agreement (Emphasis in Agreement.).)  Under Animal Film, the court find that this provision is a mandatory forum selection provision because it uses the word “shall” as to the governing law and the commencement of actions “. . . arising under or related to this Agreement . . . .” (Abascal Decl., ¶ 7; Complaint; ¶ 9 and Exhibit A at Section VI (l) of the Agreement.)

Citing Handoush, the Opposition states, “Thus, the forum selection clause contained in the agreement is invalid because it conflicts with the fundamental California policy of zealously guarding the inviolate right to a jury trial, which is unwaivable by predispute agreements.”  The Agreement states, “Jury Trial Waiver. The Parties hereto waive trial by jury in any court in any suit, which this Agreement is a part or the enforcement hereof, except where such waiver is prohibited by law or deemed by a court of law to be against public policy. The parties hereto acknowledge that each makes this waiver knowingly, willingly, and voluntarily, and without duress, and only after extensive consideration of the ramifications of this waiver with their attorneys.” (Abascal Decl., ¶ 7; Complaint; ¶ 9 and Exhibit A at Section VI (m) of the Agreement.)  Plaintiff has shown that under Texas state law, contract provisions waiving a jury trial are valid and enforceable. In re Bank of America., N.A. (Tex. 2009) 278 S.W. 3d 342, 346, states, “As a general matter, the court of appeals misinterprets our decision in Prudential as imposing a presumption against contractual jury waivers. In Prudential, we held that contractual jury waivers do not violate public policy and are enforceable. [Citation.]”  Based on Handoush, the Agreement’s predispute jury trial waiver is unenforceable under California law.  As a result, the forum selection provision in the Agreement is unenforceable in California.  Thus, Plaintiff has carried Plaintiff’s burden of demonstrating why the court should not enforce the forum selection provisions in the agreement.

Based on Verdugo, however, the court finds that Defendants have carried their burden of demonstrating that litigating the claims in Harris County, Texas will not diminish in any way the substantive rights afforded to Plaintiff in California.  ““Defendants agree that they will not enforce the jury trial waiver in the Agreement and agree to stipulate to the preservation of Plaintiffs’ right to a jury trial in Harris County, Texas. . . .” (Green Decl., ¶ 4.)  Based on the reasoning in Verdugo, supra, 237 Cal.App.4th 145, Defendants have eliminated any doubt as whether they will seek to enforce the predispute jury trial waiver by stipulating that to preserve Plaintiff’s right to a jury trial in Texas.  This stipulation maintains Plaintiff’s right to a jury trial in Texas.

The Opposition also states, “. . . Plaintiffs assert that no substantial relationship exists with respect to the state of Texas, and there is not reasonable basis for the parties [sic] selection of Texas as the forum state.” (Opposition; 6:11-13.) CQL Original Products, Inc. v. National Hockey League Players' Association. (1995) 39 Cal.App.4th 1347, 1355 (CQL), provides, “The choice of forum provision is rationally related to the licensing agreement and designed to protect NHLPA, which conducts business internationally, from being confronted by a myriad of different state, provincial and national forums. By selecting Ontario as the forum, NHLPA endeavors to obtain a uniform interpretation of the terms of its license agreement. The reasonableness of this provision is thus furthered by the rational relationship it has to the parties' business relationship.”

The Motion states, “Because Defendants conduct business throughout the Country and purchase future receivables through the United States, WBS conditions every offer to purchase future receivables on a merchant’s agreement to the same forum selection clause that Plaintiffs promised to abide by in their Agreement.”  (Motion; 4:5-8.), Abascal Decl. ¶5.) The Reply asserts, “Because WBS conducts business throughout the country, it is imperative for its business model that it does not litigate throughout the United States. (Reply; 4:12-14.)  One of the declarations in support of the Motion states, “Wide Business Solution, Inc. consistently uses Harris County, Texas as the chosen forum for all of its agreements because that is a neutral location where any merchant with whom Wide Business Solutions, Inc. does business can bring an lawsuit and/or be required to litigate any issues related to a transaction with Wide Business Solutions, Inc. Again, because Wide Business Solutions, Inc. does business throughout the Country it is crucial for Wide Business Solutions, Inc.’s business model that it not have to litigate cases all throughout the Country but rather can rest assured that any disputes will be litigated in a single forum. . . .” (Abascal Decl., ¶ 6.)  Under CQL,

 The reason for the forum selection clause is not to cause hardship on any party. (See Abascal Decl. ¶¶3-6.) To the contrary, it is to ensure that there is a single neutral location at which any dispute concerns any of WBS’ agreements can be freely litigated. (Abascal Decl. ¶6.) Without such a forum selection clause, Defendants would be a risk of having to litigate disputes all over the United States, which would severely hamper business operations and substantially increase the costs of doing business. (Abascal Decl. ¶¶3-6.)” (Motion, p. 4, lns. 5-13.) Thus, Defendants have shown that Texas has a rational relationship to the parties’ business relationship and this this dispute.

Plaintiff requests leave to amend pursuant to Von Batsch v. American (1985) 175 Cal.App.3d 1111, 1119 (Von Batsch) and Goodman v. Kennedy (1976) 18 Cal.3d 335 (Goodman).  Von Batsch and Goodman, however, discussed leave to amend in the context of demurrers. (Von Batsch, supra, 175 Cal.App.3d at p. 1119; Goodman, supra, 18 Cal.3d at p. 349.)  Plaintiff does not provide authority for leave to amend in the context of a motion pursuant to Code of Civil Procedure sections 418.10, subdivision (a), or 410.30, subdivision (a).

Based on the above, the court GRANTS Defendants’ (Wide Business Systems, Inc. and Wide Industry Solutions) Motion to Dismiss, or Stay, the Case on the Ground of Forum Non Conveniens filed on 9-13-22 under ROA No. 64.  The court DISMISSES this action, without prejudice, on the condition that Defendants have stipulated that they will not seek to enforce the predispute jury trial waiver provision in the Agreement in Texas.

Defendants are to give notice.