Cap Call, LLC v. Superior Court
| Decision Date | 11 May 2020 |
| Docket Number | C090215 |
| Parties | CAP CALL, LLC, Petitioner, v. THE SUPERIOR COURT OF SACRAMENTO COUNTY, Respondent; FREDERICK SAUL et al., Real Parties in Interest. |
| Court | California Court of Appeals Court of Appeals |
NOT TO BE PUBLISHED
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
Real Parties in Interest Frederick Saul and Phoenix Logistics Supply Chain Solutions, Inc. (collectively, PLSCS), filed a lawsuit in California against petitioner Cap Call, LLC (Cap Call), alleging they were the victims of unlawful, unfair, and fraudulent business lending activities. Cap Call moved to dismiss the action on forum non conveniens grounds, citing a contractual forum selection clause requiring any lawsuit to be instituted in New York. The trial court denied the motion, concluding the forum selection clause is permissive, not mandatory. Cap Call filed a petition for writ of mandate challenging the trial court's order. We issued an alternative writ of mandate and now grant the petition. We conclude the forum selection clause is mandatory and must be given effect absent a determination on remand that enforcement of the clause would be unreasonable under the circumstances of this case.
Cap Call is a financial services company incorporated in Delaware and headquartered in New York which provides financing to businesses. PLSCS is a freight forwarding company with its principal place of business in Dublin, California.
Beginning in 2015 and continuing through 2016, Cap Call extended financing to PLSCS through a series of five "merchant agreements." By the terms of the merchant agreements, Cap Call agreed to advance money to PLSCS in exchange for the sale and assignment of PLSCS's future accounts receivable.1 In total, Cap Call agreed to purchase $1,648,900 in future receivables for $1,100,000 (or about 67 percent of their face value).
Each merchant agreement states, in relevant part:
PLSCS successfully paid the amounts owed under the first four merchant agreements, but ultimately missed payments and defaulted under the fifth and final agreement.
Relying on a confession of judgment signed by PLSCS in connection with the merchant agreement, Cap Call obtained a judgment against PLSCS in New York. Cap Call then filed an action to domesticate the New York judgment in Contra Costa County Superior Court. The Contra Costa court entered a sister-state judgment against PLSCS in the amount of $436,343.67 on March 1, 2018.2
On February 7, 2018, PLSCS filed a lawsuit against Cap Call in Sacramento County Superior Court. In its second amended complaint, PLSCS alleges that despite Cap Call characterizing its financing as "merchant cash advances," the agreements were in fact secured loans. PLSCS alleges that Cap Call intentionally made false representations to induce PLSCS to accept loans made in violation of the state's finance lending laws. PLSCS asserts three causes of action against Cap Call, alleging (1) violation of state usury laws, (2) fraud and deceit, and (3) violation of Business and Professions Code section 17200.
Cap Call filed a motion to dismiss the action on forum non conveniens grounds, arguing that the forum selection clause contained in the merchant agreements requires the action be litigated in New York rather than California. The trial court denied the motion. The court ruled that the forum selection clause contained in the merchant agreements is permissive, not mandatory. Applying the traditional forum non conveniens analysis, the trial court ruled that Cap Call failed to meet its burden to show that the action should be tried elsewhere.
Cap Call filed a petition for writ of mandate challenging the trial court's order denying its motion. We issued an alternative writ of mandate ordering the parties to show cause why a peremptory writ of mandate should not issue. PLSCS filed a return to the alternative writ, to which Cap Call filed a reply.
Cap Call claims the trial court misconstrued the parties' forum selection clause as merely permissive, not mandatory, and therefore erroneously placed the burden of proof on Cap Call instead of PLSCS. We agree.
Forum non conveniens is an equitable doctrine under which a trial court has discretion to decline to exercise jurisdiction over a transitory cause of action that it believes may be more appropriately and justly tried elsewhere. (Stangvik v. Shiley Inc. (1991) 54 Cal.3d 744, 751 (Stangvik).) California has codified this principle in section 410.30, which provides: "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." (§ 410.30, subd. (a), see also § 418.10.)
In determining whether to grant a motion based on forum non conveniens, courts usually apply a two-step process. (Stangvik, supra, 54 Cal.3d at p. 751.) In the first step,the court must determine whether the alternate forum is a suitable place for trial. (Ibid.) If it is, the next step is to decide whether the private and public interests, on balance, favor retaining the action in California. (Ibid.; Animal Film, LLC v. D.E.J. Productions, Inc. (2011) 193 Cal.App.4th 466, 473 (Animal Film).) The motion is addressed to the trial court's discretion and the court retains a " 'flexible power' to consider and weigh all the factors." (Intershop Communications AG v. Superior Court (2002) 104 Cal.App.4th 191, 198 (Intershop).) The moving party bears the burden of proof. (Stangvik, at p. 751.)
A motion based on a forum selection clause, however, is a special type of forum non conveniens motion. (Berg v. MTC Electronics Technologies Co. (1998) 61 Cal.App.4th 349, 358.) Consistent with the modern trend, California favors enforcement of a forum selection clause appearing in a contract entered into freely and voluntarily by parties negotiating at arm's length. (Cal-State Business Products & Services, Inc. v. Ricoh (1993) 12 Cal.App.4th 1666, 1679 (Cal-State Business Products).) When a case involves a mandatory forum selection clause, the traditional forum non conveniens analysis does not apply. (Intershop, supra, 104 Cal.App.4th at p. 198; Cal-State Business Products, supra, at pp. 1679, 1682-1683.) Instead, a mandatory forum selection clause is presumed valid and will be enforced unless enforcement of the clause would be unreasonable under the circumstances of the case.3 (Smith, supra, 17 Cal.3d at p. 496;Intershop, at p. 198.) In contrast to a motion on traditional grounds of forum non conveniens, the burden of proof is on the party challenging enforcement of the forum selection clause. (Intershop, at p. 198.)
Thus, the threshold question in a case involving a forum selection clause is whether the clause is mandatory or permissive.4 (Animal Film, supra, 193 Cal.App.4th at p. 471.) If the clause is mandatory, it is presumed valid and will be enforced unless the party opposing the motion proves enforcement of the clause would be unreasonable. (Intershop, supra, 104 Cal.App.4th at p. 198.) In contrast, if the clause is permissive, the traditional forum non conveniens analysis applies and the existence of the clause is merely one factor to be considered in determining whether the action should be heard in a different forum. (Animal Film, at p. 471.)
Here, the trial court decided this threshold issue in favor of PLSCS. It ruled that the forum selection clause in the merchant agreement was permissive, and therefore placed the burden on Cap Call to show that a stay or dismissal was appropriate under the traditional forum non conveniens factors. Finding that Cap Call failed to meet that burden, the court denied the motion.
The controlling issue here is the trial court's construction of the terms of a written contract, without any assessment of conflicting extrinsic evidence. This is a legalquestion which we review de novo. (Bushansky v. Soon-Shiong (2018) 23 Cal.App.5th 1000, 1006.)
The relevant contract language states: "Any suit, action or proceeding arising hereunder, or the interpretation, performance or breach hereof, shall, if [Cap Call] so elects, be instituted in any court sitting in New York, (the 'Acceptable Forums')." It further provides that PLSCS agrees to submit to "the jurisdiction of the Acceptable Forums" and, should a proceeding be initiated in any other forum, PLSCS "waives any right to oppose any motion or application . . . to transfer such proceeding to an Acceptable Forum."5
PLSCS argues that this language is permissive because it (1) does not limit where PLSCS may file suit, and (2) is nonmutual, placing no restrictions of any kind on the location in which Cap Call could file suit. The trial court was persuaded by PLSCS's arguments. We are not.
Taking the phrase "if [Cap Call] so elects" out of the...
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