Yei Sun v. Advanced China Healthcare, 901 F.3d 1081

Background

The Suns (investors) invested $2.8 million in Advanced China Healthcare after representations by Alicia Kao and executed two Series B Share Purchase Agreements containing an exclusive forum-selection clause calling for Santa Clara County, California (or ND. Cal. federal) jurisdiction.
Closing occurred in Palo Alto at Paul Hastings; funds were wired to the firm’s Los Angeles account.
Years later the Suns sued Kao in Washington federal court under the Washington State Securities Act (WSSA), alleging fraud and misappropriation in connection with the securities sale.
Kao moved to dismiss based on the agreements’ forum-selection clause; the district court dismissed the Washington action, conditioning dismissal on Kao’s consent to California jurisdiction and other limitations.
The Suns appealed, arguing the clause did not cover their WSSA claim, and that enforcement was barred by Washington public policy/antiwaiver provisions or would deprive them of any remedy in California.
The Ninth Circuit affirmed: the clause covered disputes “arising out of or related to” the agreements, and the Suns failed to show extraordinary circumstances to avoid enforcement.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does the forum‑selection clause cover the Suns’ WSSA securities claims?	The claims arise from pre‑contract fraud and thus are not governed by the contract clause.	Clause covers any dispute “arising out of or related to” the Agreements, including disputes logically connected to the purchase.	Held: Clause applies; the securities claims are logically connected because the Suns purchased under the Agreements.
Is the forum‑selection clause unenforceable because Washington’s WSSA antiwaiver provision reflects a strong public policy?	Wash. antiwaiver statute voids contract provisions that waive WSSA protections, so the clause should be unenforceable.	Federal policy and Atlantic Marine favor enforcing forum clauses; antiwaiver alone does not overcome the presumption.	Held: Antiwaiver statute alone does not defeat clause; plaintiffs must show a statute or judicial decision clearly declaring a strong public policy that forbids enforcement, which they did not.
Would enforcing the clause deprive the Suns of their day in court (i.e., no remedy in California)?	California forum would not allow Washington securities claims or provide equivalent remedies, effectively leaving Suns without relief.	Suns still retain remedies: California securities/common‑law fraud claims and the district court’s conditions (plus Kao’s representations) permit pursuit of relief in California.	Held: Suns retained adequate remedies in California; they failed to show grave deprivation of a day in court, so forum clause is enforceable.

Key Cases Cited

M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972) (forum‑selection clauses enforceable unless plaintiff makes a strong showing of invalidity, contravening public policy, or deprivation of day in court)
Atlantic Marine Constr. Co. v. U.S. Dist. Court for W.D. of Tex., 571 U.S. 49 (2013) (framework for enforcing forum‑selection clauses; plaintiff bears heavy burden to defeat clause)
Richards v. Lloyd’s of London, 135 F.3d 1289 (9th Cir. 1998) (antiwaiver securities provisions do not automatically invalidate forum‑selection clauses if adequate recourse exists in chosen forum)
Doe 1 v. AOL LLC, 552 F.3d 1077 (9th Cir. 2009) (requires clear state judicial decision to show enforcement would contravene strong public policy)
Cape Flattery Ltd. v. Titan Mar., LLC, 647 F.3d 914 (9th Cir. 2011) (distinguishes “arising out of” vs. broader “relating to” language in clause)