Trident Labs, Inc. v. Merrill Lynch Commercial Finance Corp.
132 Cal. Rptr. 3d 551
Cal. Ct. App.2011Background
- Loan agreement includes a forum selection clause permitting enforcement in Illinois or where the borrower or collateral is located; borrower sued in California where it is located.
- Borrower is Trident Labs, Inc., a California corporation, obligated under a term loan secured by an Illinois-governed agreement; Laurence Fishman personally guaranteed the loan.
- Clause requires action in Cook County, Illinois, but lender could enforce in Illinois or where collateral may be located; borrower sued California.
- Lender engaged in extensive California litigation for over 19 months, including removal to federal court, cross-claims, and substantial discovery.
- Lender later moved under Cal. Code Civ. Proc. § 410.30 to stay/dismiss for forum non conveniens based on the forum selection clause; trial court granted stay.
- Court reverses, holding § 410.30 cannot be used “at any time” and enforcement under these circumstances is unreasonable.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 410.30 allows a forum motion at any time | Trident argues § 410.30 may be invoked at any time | Merrill Lynch contends broad right to enforce exists | No; § 410.30 not permissive of “at any time” motions. |
| Whether enforcing the clause would be unreasonable given conduct | Enforcement would be unreasonable due to lender’s California litigation | Lender exercised its rights in good faith; reserved rights in pleadings | Enforcement unreasonable where lender litigated in California for 19+ months. |
| Whether the lender waived enforcement by litigating in California | Lender waived by extensive California litigation | Participation did not constitute waiver; rights preserved | No waiver; extensive litigation cannot justify later enforcement. |
| Whether the cross-claims/discovery affected enforceability | Cross-claims show purpose to litigate in California | Cross-claims are compulsory; litigation was ongoing | Enduring litigation in California negates enforceability of clause. |
Key Cases Cited
- Smith, Valentino & Smith, Inc. v. Superior Court, 17 Cal.3d 491 (Cal. 1976) (forum clauses enforceable in discretion; free choice favored)
- Intershop Communications AG v. Superior Court, 104 Cal.App.4th 191 (Cal. App. 2d 2002) (presumption of validity; enforcement unless unreasonable)
- Furda v. Superior Court, 161 Cal.App.3d 418 (Cal. App. 1984) (forum non conveniens doctrine origin; distinction from clause)
- IFC Credit Corp. v. Rieker Shoe Corp., 378 Ill.App.3d 77 (Ill. App. 2007) (forum clause prima facie valid; enforce unless unreasonable)
- Lifeco Services Corp. v. Superior Court, 222 Cal.App.3d 331 (Cal. App. 1990) (emergency use not waiver of forum rights)
- Britton v. Dallas Airmotive, Inc., 153 Cal.App.4th 127 (Cal. App. 2007) (appearing defendant may raise forum issue; not dispositive for clause)
- Cal-State Business Products & Services, Inc. v. Ricoh, 12 Cal.App.4th 1666 (Cal. App. 1993) (substantial evidence review of contract interpretation for forum)