Bechtel Corp. v. Industrial Indem. Co.

• Decision Date: 02 November 1978
• Citation: 86 Cal.App.3d 45,150 Cal.Rptr. 29
• Parties: BECHTEL CORPORATION, Bechtel, Incorporated and Bechtel Power Corp., Plaintiffs and Appellants, v. INDUSTRIAL INDEMNITY COMPANY, Defendant and Respondent. Civ. 42339.
• Court: California Court of Appeals Court of Appeals

Page 29

150 Cal.Rptr. 29

86 Cal.App.3d 45

BECHTEL CORPORATION, Bechtel, Incorporated and Bechtel Power Corp., Plaintiffs and Appellants, v. INDUSTRIAL INDEMNITY COMPANY, Defendant and Respondent.

Civ. 42339.

Court of Appeal, First District, Division 1, California.

Nov. 2, 1978.

Sedgwick, Detert, Moran & Arnold, George E. Sayre, David E. Bordon, Cyril Viadro, San Francisco, for plaintiffs and appellants.

Farella, Braun & Martel, Richard M. Bryan, San Francisco, Smith, Somerville & Case, Wm. B. Somerville, Howard G. Goldberg, Baltimore, Md., for defendant and respondent.

ELKINGTON, Associate Justice.

The San Francisco, California, superior court on the motion of defendant Industrial Indemnity Company entered its order staying an action brought by the several plaintiff corporations to which we shall refer collectively as Bechtel, thus to allow the dispute to be tried in Maryland, a state found by the court to be a more convenient forum. Bechtel has appealed from the order.

We have read and considered the record and briefs of the respective parties. Our conclusion is that the trial court's order must be reversed. Our "reasons," as required by article VI, section 14, of the state's Constitution, follow.

We are, of course, concerned with the equitable doctrine of Forum non conveniens which was recently (1969) codified in this state as Code of Civil Procedure section 410.30. The doctrine embraces "the discretionary power of a court to decline to exercise the jurisdiction it has over a transitory cause of action when it believes that the action before it may be more appropriately and justly tried elsewhere." (Leet v. Union Pac. R. R. Co., 25 Cal.2d 605, 609, 155 P.2d 42, 44 (cert. den. 325 U.S. 866, 65 S.Ct. 1403, 89 L.Ed. 1986); Hadler v. Western Greyhound Racing Circuit, 34 Cal.App.3d 1, 5, 109 Cal.Rptr. 502.)

The question of the appeal is whether the trial court's order constituted an abuse of judicial discretion. (Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508, 67 S.Ct. 839, 91 L.Ed. 1055; Price v. Atchison, T. & S. F. Ry. Co., 42 Cal.2d 577, 584, 268 P.2d 457 (cert. den. 348 U.S. 839, 75 S.Ct. 44, 99 L.Ed. 661); Gould, Inc. v. Health Sciences, Inc., 54 Cal.App.3d 687, 692, 126 Cal.Rptr. 726.) Such an abuse of discretion appears when the order is unsupported by substantial evidence under apposite law. (See Brown v. Clorox Co., 56 Cal.App.3d 306, 310-311, 128 Cal.Rptr. 385.)

Uncontroverted evidence in the trial court established the following facts.

Bechtel is an engineering and contracting firm which undertakes large construction contracts throughout the nation and the world. Its principal place of business is in California, at San Francisco. Defendant is an insurance company whose principal place of business is also in California, at San Francisco.

(It is significant, as will later appear, that each of the litigants is thus a California resident. See Galveston, etc. Railway Company v. Gonzales, 151 U.S. 496, 504, 14 S.Ct. 401, 38 L.Ed. 248; Hale v. Bohannon, 38 Cal.2d 458, 472-473, 241 P.2d 4; McClung v. Watt, 190 Cal. 155, 158-159, 211 P. 17; Gallup v. Sacramento etc. Drainage Dist., 171 Cal. 71, 74, 151 P. 1142; Waechter v. Atchison etc. Ry. Co., 10 Cal.App. 70, 72-73, 101 P. 41.)

Defendant had written insurance and employee fidelity bonds for Bechtel for many years. Each of the many such agreements had been entered into at San Francisco, California. In 1969, Bechtel undertook construction, in Maryland, of a nuclear power plant for Baltimore Gas and Electric Company. During the project's work progress employees of Bechtel corruptly connived with subcontractors in such a manner as to defraud Bechtel, or Baltimore Gas and Electric Company, or both of them, of large amounts of money. (Several of the participants have since been convicted of related crimes in Maryland.)

On July 26, 1976, Bechtel commenced a superior court action in San Francisco, California, against defendant on an employee fidelity bond written by it for Bechtel. It sought a judicial declaration that defendant was "obligated to reimburse (Bechtel) as respects sums which (it) may in the future pay to (Baltimore Gas and Electric Company) as a result of the wrongful, dishonest, and fraudulent acts of (its) employees."

Several months later, and during pendency of Bechtel's California action, defendant commenced an action in Maryland, seeking there to have it adjudged that it was Not liable under its employee fidelity bond in respect of the subject matter of the California action.

Defendant thereafter moved the superior court of the California action to dismiss, or stay, the action in order that, under the doctrine of Forum non conveniens, its dispute with Bechtel might be litigated in the Maryland court. The motion was granted and the California action was, and is now, stayed pending a decision of the Maryland court.

The instant appeal is from the order of the San Francisco, California, superior court granting defendant's motion.

At the threshold of our discussion it is proper to note that defendant does not contend, nor would the record support a contention, that Bechtel's commencement of the action in California was "vexatious," ¹ or "oppressive," ² or "harassing." ³

It will be observed that an action may be removed to another state for trial under the principle of Forum non conveniens only where the law of the first state has authorized its venue there. (Gulf Oil Corp. v. Gilbert, supra, 330 U.S. 501, 504, 67 S.Ct. 839, 91 L.Ed. 1055; Great Northern Ry. Co. v. Superior Court, 12 Cal.App.3d 105, 112, 90 Cal.Rptr. 461 (cert. den., 401 U.S. 1013, 91 S.Ct. 1254, 28 L.Ed.2d 550).) It is thus by its nature a drastic remedy to be exercised, as we shall see, with caution and restraint.

Historically the doctrine was applied in the interest of justice, Only "where the suit is between aliens or non-residents" of the state or federal judicial district, or when for some similarly persuasive reason "the litigation can more appropriately be conducted in a foreign tribunal." (Canada Malting Co. v. Paterson Co., 285 U.S. 413, 423, 52 S.Ct. 413, 415, 76 L.Ed. 837; Price v. Atchison T. & S. F. Ry. Co., supra, 42 Cal.2d 577, 580, 268 P.2d 457.) Frequent applications of this strict rule have been pointed out, as follows: "Courts which have emphasized convenience to the court as a basis for the doctrine have usually held that the bona fide residence of either the plaintiff or the defendant in the forum state at the time the cause of action arose is enough to compel the trial court to assume jurisdiction. When the plaintiff is a resident the courts of some states indicate the trial court has no discretion to refuse jurisdiction; others treat the plaintiff's residence as such a strong factor in favor of exercising jurisdiction that it will usually be decisive. Here arguments of convenience to the court are said to be counterbalanced by the court's duty to citizens of the state who pay taxes and contribute to the upkeep of the courts. . . . (P) These courts also reject the plea of Forum non conveniens when the defendant is a resident of the state of suit. A recent . . . case said that the plea can never be presented by a resident of the forum. Other cases have suggested that when the defendant is a foreign corporation doing a substantial amount of business in the state jurisdiction should be assumed. And when the plea is presented by a nonresident defendant, the fact that a codefendant is a resident has been held sufficient to justify a court in hearing the case." (35 Cal.L.Rev. (1947) Forum Non Conveniens, pp. 413-414, fns. omitted.)

California and some other jurisdictions have adopted a more flexible rule. In a proper case, despite the residence of one, or some, of the parties the doctrine will sometimes be applied. Illustrations: where plaintiff seeks to " 'vex', 'harass', or 'oppress' the defendant by inflicting upon him expense or trouble not necessary to his own right to pursue his remedy" (Gulf Oil Corp. v. Gilbert, supra, 330 U.S. 501, 508, 67 S.Ct. 839, 91 L.Ed. 1055); where plaintiff's purpose and conduct are "vexatious or oppressive" (Williams v. Green Bay & W.R. Co., 326 U.S. 549, 554, 66 S.Ct. 284, 90 L.Ed. 31); or where there is "harassment of the defendant" (Goodwine v. Superior Court, 63 Cal.2d 481, 485, 47 Cal.Rptr. 201, 407 P.2d 1). Even in such situations however, it is held that ". . . unless the balance Is strongly in favor of the defendant, (emphasis added) the plaintiff's choice of forum should rarely be disturbed." (Gulf Oil Corp. v. Gilbert, supra, 330 U.S. 501, 508, 67 S.Ct. 839, 843, 91 L.Ed. 1055; Price v. Atchison, T. & S. F. Ry. Co., supra, 42 Cal.2d 577, 585, 268 P.2d 457; Great Northern Ry. Co. v. Superior Court, supra, 12 Cal.App.3d 105, 110, 90 Cal.Rptr. 461.)

In passing upon a defendant's application designed to obtain trial of a dispute in a more convenient forum, California's trial courts will be guided by the following authority.

"(The) limitation of the Forum non conveniens doctrine does not rest on any conclusion derived from a balancing of conveniences; it reflects an overriding state policy of assuring California residents an adequate forum for the redress of grievances." (Archibald v. Cinerama Hotels, 15 Cal.3d 853, 859, 126 Cal.Rptr. 811, 815, 544 P.2d 947, 951.) The test is not hardship to the defendant, for: "Suit in . . . (California) may involve hardship to the defendant, but the obvious convenience to the plaintiff in bringing suit there, together with the clear interest of this state in plaintiff's welfare, will make this state an appropriate forum except in unusual circumstances." (Thomson v. Continental Ins. Co., 66 Cal.2d 738, 745, 59 Cal.Rptr. 101, 106, 427 P.2d 765, 770.)

It has variously been held that: "Where there are only two parties to a dispute, there is good reason why it should be tried in plaintiff's home forum if that has been his choice" (Koster v. (American) Lumbermens...