Intershop Communications v. Superior Court

• Decision Date: 10 December 2002
• Docket Number: No. A098878.,A098878.
• Citation: 104 Cal.App.4th 191,127 Cal.Rptr.2d 847
• Court: California Court of Appeals
• Parties: INTERSHOP COMMUNICATIONS, AG, et al., Petitioners, v. The SUPERIOR COURT of the City and County of San Francisco, Respondent; Frank R. Martinez, Real Party in Interest.

127 Cal.Rptr.2d 847

104 Cal.App.4th 191

INTERSHOP COMMUNICATIONS, AG, et al., Petitioners, v.The SUPERIOR COURT of the City and County of San Francisco, RespondentFrank R. Martinez, Real Party in Interest.

No. A098878.

Court of Appeal, First District, Division 5.

December 10, 2002.

Review Denied March 26, 2002.^*

Rehearing Denied Jan. 7, 2003.

Craig S. Ritchey, Karen E. Wentzel, Patricia A. Welch, Palo Alto, Ritchey, Fisher, Whitman & Klein Dennis M. Sullivan, San Francisco, Counsel for Petitioners and Defendants.

Robert D. Bjork, Jr., Oakland, David M. Poore, Bjork Lawrence, Counsel for Real Party in Interest and Plaintiff.

STEVENS, J.

This petition arises from a lawsuit for breach of a stock options exchange, agreement (hereafter, exchange agreement).The plaintiff in the action, Frank R. Martinez, is a California resident who was an employee of Intershop Communications, Inc., the U.S. subsidiary of Intershop Communications AG. Intershop the parent is a German corporation whose stock is publicly traded on the German stock exchange.By the terms of the exchange agreement, the employees of Intershop the subsidiary were allowed to exchange their stock options in the subsidiary for shares of stock in the parent.After plaintiffs employment was terminated, he sued Intershop subsidiary and parent, alleging that pursuant to the exchange agreement he was due 7,812 additional shares valued at more than $5 million.

The exchange agreement contained a choice-of-law and forum selection clause: "The conclusion and the performance of this Agreement is governed by and has to be construed in accordance with the laws of the Federal Republic of Germany.To the extent permitted by the applicable laws the parties elect Hamburg to be the place of jurisdiction."In accordance with that contractual provision, defendants Intershop subsidiary and parent (and defendantChristof Leiste, the contractually named fiduciary in the stock transfers) moved to stay the proceedings pursuant to the doctrine of forum non conveniens.The trial court denied the motion, and defendants now petition this court to compelthe trial court to enforce the forum selection clause.We conclude, for the reasons we explain, that the forum selection clause must be given effect on its terms.

I.DISCUSSION

A.MANDATORY FORUM SELECTION CLAUSE

The California Supreme Court has held that contractual forum selection clauses are valid and should be given effect unless enforcement of the clause would be unreasonable.(Smith, Valentino & Smith, Inc. v. Superior Court(1976)17 Cal.3d 491, 495-496, 131 Cal.Rptr. 374, 551 P.2d 1206(Smith);see alsoThe Bremen v. Zapata Off-Shore Co.(1972)407 U.S. 1, 10-12, 92 S.Ct. 1907, 32 L.Ed.2d 513.)However, a distinction has been drawn between a mandatory and a permissive forum selection clause for purposes of analyzing whether the clause should be enforced.A mandatory clause will ordinarily be given effect without any analysis of convenience; the only question is whether enforcement of the clause would be unreasonable.On the other hand, when 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.(Berg v. MTC Electronic Technologies Co.(1998)61 Cal. App.4th 349, 358-360, 71 Cal.Rptr.2d 523(Berg).)

Plaintiff argues, as he did below, that the forum selection clause within the exchange agreement was merely permissive and was not a mandatory selection of Hamburg as the place of trial.The trial court seems to have agreed.¹We decide this threshold issue de novo, independent of the trial court's ruling.An appellate court is not bound by the trial court's construction of a contract when, as here, the interpretation is based solely upon the terms of the written instrument without any assessment of conflicting extrinsic evidence.(Gribaldo, Jacobs, Jones & Associates v. Agrippina Versicherunges AG.(1970)3 Cal.3d 434, 445-446, 91 Cal.Rptr. 6, 476 P.2d 406;Parsons v. Bristol Development Co.(1965)62 Cal.2d 861, 865, 44 Cal.Rptr. 767, 402 P.2d 839.)

The forum selection clause within the exchange agreement states: "To the extent permitted by the applicable laws the parties elect Hamburg to be the place of jurisdiction."(Italics added.)In our view, that language plainly reflects the parties' agreement that Hamburg, Germany would be the forum.

We recognize that the language is not quite as emphatic as the language in other cases with mandatory clauses.(E.g., Lu v. Dryclean-U.S.A. of California, Inc.(1992)11 Cal.App.4th 1490, 1492, 14 Cal.Rptr.2d 906["`[a]ny and all litigation that may arise as a result of this Agreement shall be litigated in Dade County, Florida'"(italics added)];CQL Original Products, Inc. v. National Hockey League Players' Assn.(1995)39 Cal.App.4th 1347, 1352, 46 Cal. Rptr.2d 412["`any claims ... shall ... be prosecuted in the appropriate court of Ontario [Canada]'"(italics added)](CQL );Cal-State Business Products & Services, Inc. v. Ricoh(1993)12 Cal.App.4th 1666, 1672, fn. 4, 16 Cal.Rptr.2d 417["`[A]ny appropriate state or federal district court located in the Borough of Manhattan, New York City, New York shall have exclusive jurisdiction over any case of controversy arising under or in connection with this Agreement'"(italics added)](Cal-State Business).)

However, the language in the present case is obviously different from that in cases in which the courts found that the forum selection was merely permissive, i.e., that the parties had merely agreed to submit to the jurisdiction of the named court but had not ruled out other jurisdictions.(E.g., Berg, supra,61 Cal.App.4th at p. 357, 71 Cal.Rptr.2d 523["`The company has expressly submitted to the jurisdiction of the State of California and United States Federal courts sitting in the City of Los Angeles, California, for the purpose of any suit ... arising out of this Offering'"(italics added)];Hunt Wesson Foods, Inc. v. Supreme Oil Co.(9th Cir.1987)817 F.2d 75, 76["The courts of California, County of Orange, shall have jurisdiction over the parties in any action at law relating to the subject matter or the interpretation of this contract"(italics added)].)

Here, in contrast, the parties expressed their "election" that Hamburg, Germany would be "the place of jurisdiction."This clause is far more than an agreement to submit to the jurisdiction of Hamburg courts as one of several possible forums.Rather, the clause specifies Hamburg as "the" place where litigation should be conducted, indicating a single place.In fact, the forum selection becomes even clearer when introductory modifier is placed at the end of the sentence so that the clause reads as follows: "The parties elect Hamburg to be the place of jurisdiction to the extent permitted by the applicable laws."

Furthermore, when the sentence is so inverted, the term "applicable laws" is revealed as a reference to the laws of Hamburg, Germany.The record contains undisputed evidence that under German law the forum selection clause would be mandatory.Finally, we observe that the limiting phrase "[t]o the extent permitted by the applicable laws" would have no meaning unless Hamburg was the mandatory site.It would make no sense to "permit" Hamburg if it was already one of several permitted alternatives.(SeeFrietsch v. Refco, Inc.(7th Cir.1995)56 F.3d 825, 829.)

In summary, based upon the plain language of the contract, we conclude as a matter of law that the forum selection clause was mandatory.

B.BURDEN OF PROOF AND STANDARD OF REVIEW

Under a traditional forum non conveniens analysis, the trial court makes its determination on a motion to stay the action after balancing various factors related to the parties' private interests as well as the interest of the public in retaining the action for trial in California.(Stangvik v. Shiley Inc.(1991)54 Cal.3d 744, 751, 761, 1 Cal.Rptr.2d 556, 819 P.2d 14[Stangvik).)The defendant, as the moving party, has the burden of proof.(Id, at p. 751, 1 Cal.Rptr.2d 556, 819 P.2d 14;Century Indemnity Co. v. Bank of America(1997)58 Cal.App.4th 408, 411, 68 Cal.Rptr.2d 132(Century Indemnity Co.).)

Such a motion on traditional grounds of forum non conveniens is addressed to the discretion of the trial court to decline jurisdiction, and the trial court retains a "flexible power" to consider and weigh all the factors.(Archibald v. Cinerama Hotels(1976)15 Cal.3d 853, 860, 126 Cal.Rptr. 811, 544 P.2d 947;see alsoStangvik, supra, at pp. 751, 753, 1 Cal. Rptr.2d 556, 819 P.2d 14;Century Indemnity Co., supra,58 Cal.App.4th at p. 411, 68 Cal.Rptr.2d 132;Hansen v. Oivens-Corning Fiberglas Corp.(1996)51 Cal. App.4th 753, 758, 59 Cal.Rptr.2d 229.)The trial court's discretionary decision will be accorded substantial deference on appeal.(Stangvik, supra, at p. 751, 1 Cal. Rptr.2d 556, 819 P.2d 14;Century Indemnity Co., supra, at p. 411, 68 Cal.Rptr.2d 132.)

In contrast, in cases with a contractual forum selection clause, the burden of proof is on the plaintiff, the party resisting the motion.(Smith, supra,17 Cal.3d at pp. 496-497, 131 Cal.Rptr. 374, 551 P.2d 1206;CQL, supra,39 Cal. App.4th at p. 1354, 46 Cal.Rptr.2d 412;Benefit Assn. Internal, Inc. v. Superior Court(1996)46 Cal.App.4th 827, 835, 54 Cal.Rptr.2d 165(Benefit Assn.))The various factors involved in the traditional forum non conveniens analysis do not control.(Berg, supra,61 Cal.App.4th at p. 358, 71 Cal.Rptr.2d 523.)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.(Smith, supra, at pp. 496-497, 131 Cal.Rptr. 374, 551 P.2d 1206;see alsoBenefit Assn., supra, at p. 835, 54 Cal. Rptr.2d 165.)

The case law is in conflict on the standard of appellate review of a...