Quanta Computer Inc. v. Japan Commc'ns Inc.
| Decision Date | 16 March 2018 |
| Docket Number | B280042 |
| Citation | 21 Cal.App.5th 438,230 Cal.Rptr.3d 334 |
| Court | California Court of Appeals Court of Appeals |
| Parties | QUANTA COMPUTER INC., Plaintiff and Appellant, v. JAPAN COMMUNICATIONS INC., Defendant and Respondent. |
Loeb & Loeb, Terry D. Garnett and Donald A. Miller, Los Angeles, for Plaintiff and Appellant.
Sheppard, Mullin, Richter & Hampton, Andre J. Cronthall and Sarah A. K. Blitz, Los Angeles, for Defendant and Respondent.
A Taiwanese company entered into a contract to manufacture and sell cellular telephones to a Japanese company. The parties negotiated a forum selection clause mandating that any dispute be resolved in a California court under California law. Nothing in the creation, performance, or alleged breach of the contract has any connection to California. The Taiwanese company filed an action in the Los Angeles Superior Court alleging breach of contract by the Japanese entity. The trial court ordered the case dismissed on forum non conveniens grounds. We hold the trial court did not abuse its discretion in finding that suitable alternative forums exist and that California has no public interest in burdening its courts with an action lacking any identifiable connection to the state. The order of dismissal is affirmed.
Plaintiff and appellant Quanta Computer Inc., a Taiwanese corporation, filed a breach of contract lawsuit in the Los Angeles Superior Court against defendant and respondent Japanese Communications Inc. (JCI). Quanta alleged causes of action against JCI for breach of oral contract, breach of written contract, breach of the covenant of good faith and fair dealing, and quantum meruit. Quanta is a "original design manufacturer" of various hi-tech devices. Quanta's principal place of business is in Tao Yuan City, Taiwan. JCI is a Japanese corporation that sells technology devices to end users. JCI's principal place of business is in Tokyo, Japan.
In March 2015, Quanta entered into a written agreement to manufacture smart phone devices for JCI. JCI ordered 70,000 devices under the contract. The agreement contains a choice of law and forum selection clause:
In the agreement, Quanta warranted that each device would not be defective under "relevant Japanese laws to market the [devices] in Japan," and that it would "assist JCI to ensure that JCI can import the [devices] into Japan in accordance with all customs laws, statutes, and regulations ...." The agreement provides for primary and delivery locations at airports in Tokyo. Notice of any breach or termination of the contract was to be addressed to Quanta in Taiwan and JCI in Japan.
JCI accepted delivery under the contract but failed to pay for all of the devices within the terms of the agreement. JCI claimed that 14,246 devices had "quality issues."
Following negotiations, the parties orally agreed that (1) Quanta would repair any quality issues that were actually detectable by JCI or one of its end users; (2) JCI would pay Quanta $1 million by the end of June 2016 as partial payment for the devices; and (3) JCI would pay Quanta the remaining balance owed for the devices by July 31, 2016. The oral agreement was memorialized in a June 2016 memorandum of understanding (MOU). A provision in the MOU states that "[b]oth parties agree to submit all disputes arising out of or in connection with this MOU to the exclusive jurisdiction of the courts in the State of California." The complaint alleges that JCI failed to reimburse Quanta under the MOU.
On September 26, 2016, JCI filed a lawsuit in Japan against Quanta for breach of the agreement. In the lawsuit, JCI seeks ¥630,462,963 (approximately $6.28 million) in damages for defective devices and resulting harm for selling defective smart phones. The complaint also sought declaratory relief that it did not owe Quanta $2.17 million claimed in damages.
On the same day it filed a lawsuit in Japan, JCI filed a motion to dismiss or stay for forum non conveniens, contending that section 27.2 of the agreement should not be enforced because the lawsuit "lacks any nexus to California." JCI argued that enforcement of the clause would be unreasonable, and that the traditional forum non conveniens factors under California Code of Civil Procedure sections 410.30 and 418.10 warranted dismissal.
In an attached declaration, JCI's President and Chief Operating Officer stated that Quanta manufactured the smart phone devices in China. No discussions, meetings, or telephone calls regarding the agreement involved individuals located in California or the United States. All negotiations took place in Japan or Taiwan. Every employee of Quanta and JCI resides in Asia, except corporate counsel for JCI, who does not reside in California. No aspect of JCI's performance took place in or impacted markets in the United States or California. The devices at issue were delivered, stored, and sold in Japan to Japanese end users. Some users returned the phones after complaining of defects. Any repairs made to the devices were made by Quanta subsidiaries in China. The dispute relates to workmanship and performance by businesses manufacturing products for Japan, so the outcome of the case could influence Japanese businesses' ability to demand standards of quality and performance. Relevant witnesses, documents, and materials are located in Japan and China.
In opposition to JCI's motion to dismiss or stay the action, Quanta submitted a declaration of its Senior Director of Sales. During negotiations, JCI initially proposed Japan as the choice of law and forum. Quanta rejected Japan and instead "proposed a neutral forum to settle disputes, Singapore." JCI, through its U.S. in-house attorney, rejected Singapore and proposed "the State of California" as the choice of law and forum. Quanta agreed to California because it was a neutral location.
The opposition was also supported by JCI's discovery responses. In the responses, JCI agreed that it rejected Singapore as the choice of law and jurisdiction under sections 27.1 and 27.2. Although California was proposed in oral discussions, JCI did not "specifically recall choosing or agreeing to California in section 27."
At the hearing on JCI's motion to stay or dismiss the action, the parties agreed the clause "was freely and voluntarily entered into" between the two corporations. After questioning the applicability of TheBremen v. Zapata Off–Shore Co. (1972) 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 ( The Bremen ), a case relied upon by Quanta in its opposing papers,1 the trial court inquired whether it would have to balance the parties' reasons for litigating the case in California. Quanta's attorney argued against balancing interests, citing Cal-State Business Products & Services, Inc. v. Ricoh (1993) 12 Cal.App.4th 1666, 16 Cal.Rptr.2d 417 ( Cal-State ), for the proposition that only unreasonableness was determinative when deciding to enforce a forum selection clause.
Following oral argument, the trial court adopted its tentative ruling granting JCI's motion and dismissed the case without prejudice. The written tentative ruling addressed the forum non conveniens and mandatory forum selection issues separately. In first discussing traditional forum non conveniens considerations, the court noted that In the second portion of its analysis, addressing the forum selection clauses, the court Quanta filed a timely notice of appeal.
Quanta contends the trial court abused its discretion by refusing to enforce the mandatory forum selection clause and granting JCI's motion to dismiss under the traditional forum non conveniens doctrine. We conclude that JCI's forum non conveniens arguments are without merit, because JCI agreed to (and most likely proposed) California as a forum. This conclusion does not end our inquiry, because the trial court also ruled that despite the forum selection clause, it would decline to exercise its jurisdiction over the case as a matter of discretion. We conclude the court had statutory authority to decline to exercise its jurisdiction, and it did not abuse its discretion by ordering the case dismissed without prejudice.
JCI moved to dismiss or stay the action by filing a forum non conveniens motion under Code of Civil Procedure section 410.30.2 The parties in this case agree that section 27.2 constitutes a mandatory forum selection clause.3 We conclude JCI failed to carry its burden of showing the forum selection clause is unreasonable and should not be enforced.
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...which is usually, but not always, binding. And a 'he tong' which is a formal contract that is legally binding. (Id. at 124.)4. 21 Cal. App. 5th 438 (2018).5. ___ U.S. ___, 138 S. Ct. 1865, 201 L.Ed.2d 225 (2018).6. 890 F.3d 828 (9th Cir. May 16, 2018), modified, 897 F.3d 1224 (9th Cir. Aug.......