18 Cal.5th 58
Cal.2025Background
- EpiRx, L.P. (plaintiff), a minority stockholder, sued EpicentRx, Inc., its controlling stockholder, and related individuals in California, alleging breach of contract, fraud, and other claims.
- The corporation is a Delaware entity with its main place of business in California; most alleged misconduct and parties are California-based.
- Defendants moved to dismiss based on forum selection clauses in the corporate charter/bylaws, which required most stockholder claims to be brought in Delaware Chancery Court.
- The trial court and Court of Appeal refused to enforce the clauses, citing California's public policy protecting the right to a civil jury trial (which is not available in Delaware Chancery Court).
- California Supreme Court granted review; the central issue was whether a forum selection clause can be invalidated solely for depriving plaintiff of a California jury trial.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of forum selection clause when alternate forum has no civil jury trials | Clause is unenforceable because it operates as a predispute jury trial waiver, which is against California public policy | Clause simply chooses forum, not mode of trial; California’s policy on jury trials applies only in California courts | Clause enforceable; absence of jury right elsewhere does not violate California public policy |
| Application of public policy to interstate/forum selection agreements | California’s public policy on jury trials should invalidate forum selection clauses sending cases to non-jury jurisdictions | Strong commercial policy favors enforcement of forum selection clauses, especially in sophisticated, arms-length transactions | Forum selection clauses generally enforced absent a statute or strong policy to the contrary |
| Burden of proof for unenforceability based on public policy | Defendants must show out-of-state forum doesn’t diminish any substantive rights (including jury trial right) | Plaintiff bears burden to show enforcement is unfair/unreasonable or violates strong California policy | Plaintiff's loss of California jury right by itself is not enough to shift burden or preclude enforcement |
| Effect of manner of adoption of forum selection clause | Clause was not freely/voluntarily negotiated at arm's length so should be unenforceable | Clause included in corporate documents is valid under Delaware law regardless of negotiation | Remanded for Court of Appeal to address remaining arguments regarding adoption/mutuality |
Key Cases Cited
- Smith, Valentino & Smith, Inc. v. Superior Court, 17 Cal.3d 491 (Cal. 1976) (California policy generally favors enforcement of forum selection clauses unless enforcement is unreasonable)
- Stangvik v. Shiley Inc., 54 Cal.3d 744 (Cal. 1991) (states parameters of forum non conveniens and weighs public/private interests)
- Grafton Partners v. Superior Court, 36 Cal.4th 944 (Cal. 2005) (predispute civil jury trial waivers are unenforceable in California courts)
- Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459 (Cal. 1992) (addresses enforcement of contractual choice-of-law, applying fundamental California policy exception)