92 Cal.App.5th 997
Cal. Ct. App.2023Background
- Plaintiff Jon Schmidt sued Trinut Farm Management, Inc. (TFMI) alleging unpaid management and consulting contracts (Arizona/New Mexico management; California consulting) and asserting assigned claims from Summit Gold for unpaid invoices.
- Summit Gold’s invoices contained a choice-of-law clause selecting Illinois law and a forum-selection clause naming Peoria, Illinois as the exclusive forum for disputes “hereunder.”
- TFMI moved to quash service under Code Civ. Proc. § 418.10, arguing the forum-selection clause required claims based on the Summit Gold invoices to be litigated in Illinois; the motion did not seek dismissal of Schmidt’s separate TFMI service-contract claims.
- The trial court granted the motion, quashed service, and entered a dismissal without prejudice; Schmidt appealed.
- The Court of Appeal held the invoice forum clause applied only to disputes arising from the Summit Gold invoices (not Schmidt’s in‑state consulting or out‑of‑state management claims), concluded the trial court applied California rather than the parties’ chosen Illinois law in evaluating enforceability, reversed, and remanded for reconsideration under Illinois law (ordering reinstatement of the California-based claims in the interim).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of forum-selection clause | Clause applies only to Summit Gold invoice-based claims; Schmidt’s TFMI contract claims are unrelated | Clause governs all claims premised in whole or in part on the invoices; some causes rely on Summit Gold assignments | The clause unambiguously applies only to disputes “hereunder” (the invoices). Schmidt’s first and fourth claims (TFMI contracts) and parts of the third and fifth survive in California. |
| Relief sought and dismissal | TFMI sought only quash; dismissal of entire complaint was improper and Schmidt lacked notice | Motion sought enforcement of forum clause and quash; enforcing clause may require stay/dismissal of invoice-based claims | The trial court could stay or dismiss claims subject to the forum clause, but dismissing the entire complaint was error because TFMI did not seek relief as to the TFMI contract claims. |
| Choice of law governing enforceability | California law should govern enforceability of the forum clause | The invoices expressly select Illinois law; Illinois law should decide enforceability | Under Nedlloyd and Smith, the parties’ choice-of-law (Illinois) governs whether the forum clause is enforceable because Illinois has a substantial relationship to the transaction. The matter was remanded for application of Illinois law. |
| Standard of review / trial court error | Trial court abused discretion by enforcing the clause | Deferential review is appropriate | Abuse of discretion is the applicable standard; the court erred by applying California law and not considering Illinois-specific factors. Remand for further briefing/evidence and for the court to stay (not dismiss) the invoice claims if it declines jurisdiction. |
Key Cases Cited
- Smith, Valentino & Smith, Inc. v. Superior Court, 17 Cal.3d 491 (Cal. 1976) (California Supreme Court endorsing enforcement of forum-selection clauses absent unreasonableness)
- Nedlloyd Lines B.V. v. Superior Court, 3 Cal.4th 459 (Cal. 1992) (adopting Restatement §187 approach to enforcement of contractual choice-of-law clauses)
- Global Packaging, Inc. v. Superior Court, 196 Cal.App.4th 1623 (Cal. Ct. App. 2011) (survey of federal and state treatment of forum-selection clauses and modern enforcement principles)
- The Bremen v. Zapata Off–Shore Co., 407 U.S. 1 (U.S. 1972) (U.S. Supreme Court establishing modern pro-enforcement approach to forum-selection clauses)
- Verdugo v. Alliantgroup, L.P., 237 Cal.App.4th 141 (Cal. Ct. App. 2015) (discussing standard of review and burden on party opposing enforcement)
- Compass Environmental, Inc. v. Polu Kai Services, L.L.C., 379 Ill.App.3d 549 (Ill. App. Ct. 2008) (listing Illinois factors to assess reasonableness of forum-selection clauses)