23 Cal. App. 5th 1000
Cal. Ct. App. 5th2018Background
- Plaintiff Stephen Bushansky filed a shareholder derivative suit in San Diego on behalf of NantKwest (a Delaware corporation headquartered in California) against NantKwest officers/directors and the Auditor (a Missouri professional corporation with California offices).
- NantKwest moved to dismiss under forum non conveniens based on a forum-selection provision in its certificate of incorporation designating the Delaware Court of Chancery as the "sole and exclusive forum" for derivative actions "in all cases subject to the court's having personal jurisdiction over the indispensable parties named as defendants."
- At filing, Delaware lacked personal jurisdiction over the Auditor; the Auditor later filed a demurrer consenting to jurisdiction in Delaware and requesting its demurrer be heard after the forum-selection motion.
- Trial court treated the provision as mandatory, found the Auditor’s postfiling consent satisfied the condition, and dismissed the California action; Bushansky appealed arguing the condition precedent required jurisdiction at filing and that the clause was permissive.
- The court of appeal interpreted the certificate as a contract, concluded the clause created a condition precedent but was silent as to timing, applied the contract-law presumption of a "reasonable time," and held the Auditor’s postfiling consent (about six weeks after filing) satisfied the condition without evidence of gamesmanship.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the clause's requirement that Delaware have personal jurisdiction over "all indispensable parties" must be satisfied at the time of filing | Bushansky: condition precedent requires jurisdiction at filing; postfiling consent insufficient | NantKwest/Auditor: clause silent as to timing; consent can establish jurisdiction postfiling within a reasonable time | Held: Clause is silent as to timing; apply reasonable-time presumption; Auditor's postfiling consent satisfied the condition |
| Whether forum-selection clause is mandatory or permissive | Bushansky: clause is permissive, so California court must apply forum non conveniens balancing | Defendants: language makes the Delaware forum "sole and exclusive," so clause is mandatory | Held: Clause is mandatory; enforcement ordinarily upheld absent unreasonableness |
| Whether postfiling consent constitutes improper gamesmanship to invoke the clause | Bushansky: tactical timing can be unfair; here consent came after filing | Defendants: no gamesmanship shown; consent was timely and explicit | Held: No gamesmanship here; timing (filed Sept; consent Nov) was reasonable; clause triggered |
| Standard of review for contract-interpretation question | Bushansky: (implicitly) deferential? | Defendants: argued substantial evidence where clause is contractual | Held: De novo review of contract interpretation (no extrinsic evidence); reasonableness of timing decided as a question of law on undisputed facts |
Key Cases Cited
- Airgas, Inc. v. Air Products & Chemicals, Inc., 8 A.3d 1182 (Del. 2010) (corporate charters/bylaws are contracts among shareholders)
- Stangvik v. Shiley, Inc., 54 Cal.3d 744 (Cal. 1991) (consent can establish personal jurisdiction; burden principles on forum-selection enforcement)
- Smith, Valentino & Smith, Inc. v. Superior Court, 17 Cal.3d 491 (Cal. 1976) (enforcement of forum-selection clauses based on court discretion to decline jurisdiction)
- Berg v. MTC Electronic Techs. Co., 61 Cal.App.4th 349 (Cal. Ct. App. 1998) (motions to dismiss based on contractual forum-selection clauses as a special form of forum non conveniens)
- Wagner Construction Co. v. Pacific Mechanical Corp., 41 Cal.4th 19 (Cal. 2007) (if no time specified for performance of a condition precedent, a reasonable time is implied)
- The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (U.S. 1972) (forum-selection clauses generally enforced; they operate through courts' discretion to decline jurisdiction rather than oust jurisdiction)