QUANTA COMPUTER INC., Plaintiff and Appellant, v. JAPAN COMMUNICATIONS INC., Defendant and Respondent.
B280042
Court of Appeal of the State of California, Second Appellate District, Division Five
March 16, 2018
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FIVE
QUANTA COMPUTER INC.,
Plaintiff and Appellant,
v.
JAPAN COMMUNICATIONS INC.,
Defendant and Respondent.
B280042
(Los Angeles County
Super. Ct. No. BC629858)
APPEAL from order of the Superior Court of Los Angeles County, Gregory Keosian, Judge. Affirmed.
Loeb & Loeb, Terry D. Garnett and Donald A. Miller, for Plaintiff and Appellant.
Sheppard, Mullin, Richter & Hampton, Andre J. Cronthall and Sarah A. K. Blitz, for Defendant and Respondent.
FACTUAL AND PROCEDURAL HISTORY
Complaint
Plaintiff and appellant Quanta Computer Inc., a Taiwanese corporation, filed a breach of contract lawsuit in the Los Angeles Superior Court against defendant and respondent Japanese Communications Inc. (JCI). Quanta alleged causes of action against JCI for breach of oral contract, breach of written contract, breach of the covenant of good faith and fair dealing, and quantum meruit. Quanta
In March 2015, Quanta entered into a written agreement to manufacture smart phone devices for JCI. JCI ordered 70,000 devices under the contract. The agreement contains a choice of law and forum selection clause:
“27.1 This Agreement shall in all respects be governed by and construed in accordance with the laws of the State of California, without regards to its choice of law rules.
“27.2 Both parties agree to submit all disputes arising out of or in connection with this Agreement to the exclusive jurisdiction of the courts in the State of California.”
In the agreement, Quanta warranted that each device would not be defective under “relevant Japanese laws to market the [devices] in Japan,” and that it would “assist JCI to ensure that JCI can import the [devices] into Japan in accordance with all customs laws, statutes, and regulations . . . .” The agreement provides for primary and delivery locations at airports in Tokyo. Notice of any breach or termination of the contract was to be addressed to Quanta in Taiwan and JCI in Japan.
Following negotiations, the parties orally agreed that (1) Quanta would repair any quality issues that were actually detectable by JCI or one of its end users; (2) JCI would pay Quanta $1 million by the end of June 2016 as partial payment for the devices; and (3) JCI would pay Quanta the remaining balance owed for the devices by July 31, 2016. The oral agreement was memorialized in a June 2016 memorandum of understanding (MOU). A provision in the MOU states that “[b]oth parties agree to submit all disputes arising out of or in connection with this MOU to the exclusive jurisdiction of the courts in the State of California.” The complaint alleges that JCI failed to reimburse Quanta under the MOU.
JCI’s Japanese Action
On September 26, 2016, JCI filed a lawsuit in Japan against Quanta for breach of the agreement. In the lawsuit, JCI seeks ¥630,462,963 (approximately $6.28 million) in damages for defective devices and resulting harm for selling defective smart phones. The complaint also sought declaratory relief that it did not owe Quanta $2.17 million claimed in damages.
On the same day it filed a lawsuit in Japan, JCI filed a motion to dismiss or stay for forum non conveniens, contending that section 27.2 of the agreement should not be enforced because the lawsuit “lacks any nexus to California.” JCI argued that enforcement of the clause would be unreasonable, and that the traditional forum non conveniens factors under California Code of Civil Procedure sections 410.30 and 418.10 warranted dismissal.
In an attached declaration, JCI’s President and Chief Operating Officer stated that Quanta manufactured the smart phone devices in China. No discussions, meetings, or telephone calls regarding the agreement involved individuals located in California or the United States. All negotiations took place in Japan or Taiwan. Every employee of Quanta and JCI resides in Asia, except corporate counsel for JCI, who does not reside in California. No aspect of JCI’s performance took place in or impacted markets in the United States or California. The devices at issue were delivered, stored, and sold in Japan to Japanese end users. Some users returned the phones after complaining of defects. Any repairs made to the devices were made by Quanta subsidiaries in China. The dispute relates to workmanship and performance by businesses manufacturing products for Japan, so the outcome of the case could influence Japanese businesses’ ability to demand standards of quality and
In opposition to JCI’s motion to dismiss or stay the action, Quanta submitted a declaration of its Senior Director of Sales. During negotiations, JCI initially proposed Japan as the choice of law and forum. Quanta rejected Japan and instead “proposed a neutral forum to settle disputes, Singapore.” JCI, through its U.S. in-house attorney, rejected Singapore and proposed “the State of California” as the choice of law and forum. Quanta agreed to California because it was a neutral location.
The opposition was also supported by JCI’s discovery responses. In the responses, JCI agreed that it rejected Singapore as the choice of law and jurisdiction under sections 27.1 and 27.2. Although California was proposed in oral discussions, JCI did not “specifically recall choosing or agreeing to California in section 27.”
Trial Court’s Ruling
At the hearing on JCI’s motion to stay or dismiss the action, the parties agreed the clause “was freely and voluntarily entered into” between the two corporations. After questioning the applicability of The Bremen v. Zapata Off–Shore Co. (1972) 407 U.S. 1 (The Bremen), a case relied
Following oral argument, the trial court adopted its tentative ruling granting JCI’s motion and dismissed the case without prejudice. The written tentative ruling addressed the forum non conveniens and mandatory forum selection issues separately. In first discussing traditional forum non conveniens considerations, the court noted that “[t]here are no contacts to California. California courts have no expertise to determine whether Quanta failed to meet quality standards tied to the Japanese, not the California, market.” In the second portion of its analysis, addressing the forum selection clauses, the court “in its discretion [found] that California has no logical nexus to the parties or
DISCUSSION
Quanta contends the trial court abused its discretion by refusing to enforce the mandatory forum selection clause and granting JCI’s motion to dismiss under the traditional forum non conveniens doctrine. We conclude that JCI’s forum non conveniens arguments are without merit, because JCI agreed to (and most likely proposed) California as a forum. This conclusion does not end our inquiry, because the trial court also ruled that despite the forum selection clause, it would decline to exercise its jurisdiction over the case as a matter of discretion. We conclude the court had statutory authority to decline to exercise its jurisdiction, and it did not abuse its discretion by ordering the case dismissed without prejudice.
JCI’s Forum Non Conveniens Motion
JCI moved to dismiss or stay the action by filing a forum non conveniens motion under Code of Civil Procedure
California law is “in accord with the modern trend which favors enforceability of such [mandatory] forum selection clauses. (See The Bremen v. Zapata Off-Shore Co., supra, 407 U.S. 1; Central Contracting Co. v. Maryland Casualty Co. (3d Cir. 1966) 367 F.2d 341, 344–345; Reeves v. Chem Industrial Company (1972) 262 Ore. 95; Rest.2d Conflict of Laws, § 80; Annot. 56 A.L.R.2d 300.) [¶] No satisfying reason of public policy has been suggested why enforcement should be denied a forum selection clause appearing in a contract entered into freely and voluntarily by parties who have negotiated at arm’s length. For the
JCI is in no position to claim the forum selection clause is unenforceable under traditional forum non conveniens grounds. “The factors that apply generally to a forum non conveniens motion do not control in a case involving a mandatory forum selection clause. (See, e.g., Great Northern Ry. Co. v. Superior Court (1970) 12 Cal.App.3d 105 [collecting generally applicable factors]; Cal-State, supra, 12 Cal.App.4th 1666, 1683 [declining to apply ‘Great Northern factors’ in light of forum selection clause].)” (Berg v. MTC Electronics Technologies (1998) 61 Cal.App.4th 349, 358.) Where there is a mandatory forum selection clause, “the test is simply whether application of the clause is unfair or unreasonable, and the clause is usually given effect. Claims that the previously chosen forum is unfair or inconvenient are generally rejected. (See, e.g., Appalachian Ins. Co. v. Superior Court (1984) 162 Cal.App.3d 427.) A court will usually honor a mandatory forum selection clause without extensive analysis of factors relating to convenience. (See Furda v. Superior Court (1984) 161 Cal.App.3d 418.)” (Id. at pp. 358–359.)
JCI’s traditional forum non conveniens arguments offer nothing to warrant ignoring its own negotiated agreement to litigate in California. As the party who most likely
The Trial Court’s Decision Not to Provide a California Forum
As noted above, the trial court found no connection between the parties, their dispute, and California. Based on the lack of any “logical nexus to the parties or the case,” the court elected to “refrain[] from exercising its jurisdiction.” In doing so, the court balanced the private interests of the litigants against the interests of the public in “retaining the action in California, and as Japan is a suitable forum, this court declines to burden the already overburdened court system in Los Angeles with this litigation.” The questions presented by the court’s ruling are whether a trial court may take this action on its own motion, and if so, whether the trial court acted within its discretion. We conclude the trial court could act sua sponte, and in doing so, the court acted within the bounds of reason and did not abuse its discretion.
Authority of the Trial Court to Act on Its Own Motion
The issue of a trial court’s sua sponte authority to raise forum non conveniens issues is resolved by the plain
We emphasize that the trial court’s ruling does not rest on a finding that the court lacked jurisdiction. It is often stated that a California court has the authority to determine its own jurisdiction. (Barry v. State of California (2017) 2 Cal.5th 318, 326; Walker v. Superior Court (1991) 53 Cal.3d 257, 267.) The trial court here recognized its jurisdiction based on the forum selection clause and Quanta’s complaint. The trial court correctly analyzed the issue in terms of whether that jurisdiction should be exercised.
Standard of Review
There is a split of authority regarding the appropriate standard of review on whether a forum selection clause should be enforced through a motion to dismiss for forum non conveniens. In Cal-State, supra, 39 Cal.App.4th at p. 1680, the court applied a substantial evidence standard of review. More recent cases have utilized an abuse of
An abuse of discretion standard of review “scrutinizes lower court decisions to determine if the ruling made ‘“exceed[s] the bounds of reason,”’ all circumstances before it being considered. [Citation.] If not, the ruling will be affirmed regardless of whether the appellate court might have decided the issue differently.” (AOL, supra, 90 Cal.App.4th at pp. 7–8.) We presume that orders and judgments of the trial court are correct and we indulge all intendments and presumptions in favor of the correctness of the order or judgment. (Winograd v. American Broadcasting Co. (1998) 68 Cal.App.4th 624, 631.) “We review the trial court’s action, not its precise reasoning, and especially not a few of its words taken out of context.” (National Football League v. Fireman’s Fund Ins. Co. (2013) 216 Cal.App.4th
The Trial Court Did Not Abuse Its Discretion
The trial court concluded Japan (as well as China, Taiwan, and Singapore) is a suitable forum to hear the dispute. There is nothing in the record to suggest these locations are not suitable alternatives, and the parties do not dispute there is a pending Japanese action. “An alternative forum is suitable if the defendant is subject to its jurisdiction and the cause of action is not barred by the statute of limitations. [Citations.] ‘[S]o long as there is jurisdiction and no statute of limitations bar, a forum is suitable where an action “can be brought,” although not necessarily won.’ [Citation.]” (Aghaian v. Minassian (2015) 234 Cal.App.4th 427, 431; accord, Stangvik v. Shiley Inc. (1991) 54 Cal.3d 744, 752 (Stangvik).) Quanta does not challenge jurisdiction in Japan or Article 522 of the Commercial Code of Japan, which provides a five-year statute of limitations on commercial transactions, and presumably both agreements.
“We proceed, then, to the second and more difficult question, whether” the trial court erred in concluding that dismissal was appropriate. (Stangvik, supra, 54 Cal.3d at p. 752.)
Where, as here, “the plaintiff resides in a foreign country, . . . the plaintiff’s choice of forum is much less
“Piper held that the jurisdiction with the greater interest should bear the burden of entertaining the litigation. (Piper, supra, 454 U.S. at pp. 260–261.)” (Stangvik, supra, 54 Cal.3d at p. 757.) California’s public interest certainly is less than that of the Asian countries directly related to the dispute.
The trial court declined “to burden the already overburdened court system in Los Angeles with this litigation.” Applying the deferential abuse of discretion standard of review, we see no error in the trial court’s conclusion. The trial court could reasonably conclude that the logistics involved in litigating a dispute in which most or all witnesses are from Asia, many of whom may require the assistance of an interpreter, would place an unnecessary burden on the California courts. The parties do not dispute that issues relating to the quality of Quanta’s product would be addressed through “relevant Japanese laws.” Although California may have been freely chosen given its neutrality, this does not establish that California is a reasonable forum.
In light of all these considerations, the trial court did not abuse its discretion in declining to provide a forum for the action. This case comes within the jurisdiction of a California court only due to the forum selection clause. Because there is a suitable alternative forum and the parties to the dispute have no connection to California, the trial court could conclude that it is unreasonable to require California courts to accept the burden of the litigation. California has no public interest in providing a forum for resolution of a dispute between two Asian companies, involving a contract formed and executed in Asian countries, where there are suitable alternatives. The determination not to burden our courts with this purely foreign litigation was well within the court’s considerable discretion.
Section 410.40 Does Not Preclude a Court from Exercising its Discretion in Dismissing a Purely Foreign Dispute
Although not directly raised by Quanta as an issue on appeal, we briefly address the interplay between
This creation of subdivision (b) to
Commentary leading up to the Legislature’s refusal to extend the life of subdivision (b) of
As presently written,
The Decision in The Bremen Is Not Controlling
Finally, we reject Quanta’s argument that the trial court’s ruling is inconsistent with the reasoning in The Bremen, supra, 407 U.S. 1. In our view, The Bremen court did not address the issue presented here. In The Bremen, a Houston-based corporation contracted to have its oil rig towed by a German company to the Adriatic Sea. (Id. at p. 2.) The contract specified that any dispute must be resolved before the London Court of Justice. (Ibid.) The oil rig was damaged during transport, and the Houston corporation filed suit in federal court in Florida where the damaged rig had been towed, instead of in London as mandated by the contract. (Id. at pp. 3–4.) The German company sought to enforce the forum selection clause but was unsuccessful in the district and circuit courts. In reversing, the Supreme Court reasoned that “[t]here are compelling reason why a freely negotiated private international agreement, unaffected by fraud, undue influence, or overweening bargaining power, such as that involved here, should be given full effect.” (Id. at p. 12, fn. omitted.) Observing that an accident to the rig might occur in any one of several jurisdiction through which the rig might travel, the court reasoned that “selection of a London
What The Bremen decision did not address is what would happen if the London-based court refused to exercise jurisdiction on the basis that the contract and accident had no connection to England, and England had no interest in providing a forum for such foreign litigation. This eventuality is what happened in instant case—the trial court concluded, correctly, that the pending action had absolutely no connection to California and that California had no interest in provide a forum for the uniquely foreign dispute.
The order of dismissal is affirmed. No costs are awarded on appeal.
KRIEGLER, Acting P.J.
I concur:
KIM, J.
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.
B280042
BAKER, J., Dissenting
I reluctantly dissent. The experienced trial judge and a majority of this court are understandably reluctant to hold that California courts with already bulging dockets must make room to decide a dispute with no connection to this State or its residents. But I believe our Legislature, in enacting
The majority opinion presents a quite plausible argument that trial judges nevertheless retain some measure of discretion to decline to entertain a case that meets the
BAKER, J.
Notes
“(b) The provisions of Section 418.10 do not apply to a motion to stay or dismiss the action by a defendant who has made a general appearance.” (Code Civ. Proc., § 410.30.)