95 Cal.App.5th 890
Cal. Ct. App.2023Background
- EpicentRx is a Delaware corporation with headquarters in California; EpiRx, L.P. is a minority shareholder that sued EpicentRx, its major shareholder, officers, and others in San Diego Superior Court alleging fraud, breach of contract, breach of fiduciary duty, and UCL violations. EpiRx demanded a jury trial on claims carrying that right.
- EpicentRx’s certificate of incorporation and bylaws contain mandatory forum-selection clauses designating the Delaware Court of Chancery as the exclusive forum for shareholder/internal-affairs disputes.
- Defendants moved to dismiss under Code Civ. Proc. § 418.10 (forum non conveniens) to enforce the Delaware-Chancery forum clauses; the trial court denied the motion.
- The trial court found enforcement would operate as an implied predispute jury-waiver because the Delaware Court of Chancery is an equity court that does not provide a (binding) civil jury trial, and thus enforcement could contravene California public policy protecting the inviolate right to jury trial.
- The trial court placed the burden on defendants to show enforcement would not diminish EpiRx’s substantive California rights; defendants failed to meet that burden and sought writ relief in the Court of Appeal.
- The Court of Appeal denied the writ, holding (1) Delaware law governs validity of the charter provisions (internal affairs doctrine) but California law governs enforceability; (2) forum clauses that would implicitly waive California’s unwaivable jury right are unenforceable unless the proponent proves no diminution of California rights. Defendants did not meet their burden.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Choice of law for validity/enforceability of charter forum clauses | EpiRx: California law may determine enforceability and protections | Defs: Delaware law governs validity under internal affairs doctrine, so clauses valid | Court: Delaware law governs facial validity; California law governs enforceability (internal affairs/doctrine distinction). |
| Allocation of burden when forum clause may impair unwaivable California rights | EpiRx: Because jury right is inviolate, burden should be on party seeking enforcement to prove no diminution | Defs: Ordinary rule places heavy burden on opposing plaintiff to show clause is unreasonable; no special burden here | Held: Where enforcement may undermine California's unwaivable rights (e.g., jury trial), the proponent bears burden to show no diminution (applying Wimsatt/Handoush framework). |
| Whether Delaware Chancery forum-selection clause effectively waives jury right and is enforceable | EpiRx: Clause operates as implied predispute jury waiver (Chancery provides no binding jury) and is unenforceable under Grafton and related cases | Defs: Any waiver is merely implied; forum clause serves legitimate corporate-policy goals and is not an unenforceable waiver; arbitration-distinguishing policy should apply | Held: Clause functions as an implied predispute jury-waiver; such waivers are unenforceable under Grafton unless proponent proves enforcement will not diminish California rights; defendants failed to do so. |
| Partial enforcement (dismiss some claims to Delaware but keep others in California) | EpiRx: Partial dismissal would cause inefficiency and inconsistent adjudications; trial court may deny full dismissal | Defs: At minimum, equitable claims should be sent to Chancery where appropriate | Held: Court affirmed trial court's denial of partial dismissal as well—practical considerations and risk of inconsistent rulings justified denying forum non conveniens in full. |
Key Cases Cited
- Grafton Partners v. Superior Court, 36 Cal.4th 944 (Cal. 2005) (California Supreme Court: predispute civil jury-waiver agreements unenforceable; statutory waiver methods in §631 are exclusive)
- Handoush v. Lease Finance Group, LLC, 41 Cal.App.5th 729 (Cal. Ct. App. 2019) (placing burden on proponent of forum clause when clause would operate as a predispute jury waiver)
- Wimsatt v. Beverly Hills Weight etc. Internat., Inc., 32 Cal.App.4th 1511 (Cal. Ct. App. 1995) (burden-shifting when forum clause may contravene antiwaiver statutes protecting substantive rights)
- America Online, Inc. v. Superior Court, 90 Cal.App.4th 1 (Cal. Ct. App. 2001) (forum clause unenforceable where enforcement would strip California consumers of nonwaivable CLRA remedies; burden on proponent)
- Verdugo v. Alliantgroup, L.P., 237 Cal.App.4th 141 (Cal. Ct. App. 2015) (forum clause will not be enforced if it could diminish unwaivable California statutory rights)
- Salzberg v. Sciabacucchi, 227 A.3d 102 (Del. 2020) (Delaware Supreme Court: distinguishes charter provision validity under Delaware law from enforceability; examines role of Delaware courts in initial validity review)
- Boilermakers Local 154 Retirement Fund v. Chevron Corp., 73 A.3d 934 (Del. Ch. 2013) (Del. Chancery: forum-selection bylaws are statutorily valid under Delaware law)