Opinion
NOT TO BE PUBLISHED
APPEAL from an order of the Superior Court of San Diego County No. 37-2009-00081792- CU-BC-CTL, David B. Oberholtzer, Judge.
HUFFMAN, J.
Plaintiff Nautilus General Contractors, Inc. (Nautilus) appeals an order staying Nautilus's contract action against defendant Innovative Coatings of Reno, Inc. dba Diamond Coatings (Diamond), based on forum non conveniens. (Code Civ. Proc., § 410.30.) Nautilus filed its breach of contract claims in San Diego County after a dispute arose over Diamond's subcontracting work on a Nautilus construction project in Reno, Nevada. Nautilus contends the trial court erred when it disregarded paragraph 43 of the parties' contract, which designates "San Diego County, California" as the "proper venue" for any lawsuit arising out of the agreement. Nautilus asserts paragraph 43 is a valid and enforceable mandatory forum selection clause. We agree and conclude the trial court erred when it declined to enforce the disputed clause. Therefore, we reverse the order imposing the stay with directions to enter an order denying the motion to dismiss or stay the action in its entirety.
Statutory references are to the Code of Civil Procedure unless otherwise specified.
FACTUAL AND PROCEDURAL BACKGROUND
Nautilus is a California corporation with its principal office in San Diego. Nautilus is licensed in Nevada, although it performs the majority of its contracting work in California. Nautilus does not maintain employees in Nevada. Diamond is a Nevada corporation with its principal place of business in Reno, Nevada. Diamond became a registered foreign corporation in California about 18 months after Nautilus and Diamond entered into the January 2006 contract at issue here.
Nautilus was hired to perform repairs on several decks at an apartment complex in Reno, Nevada. About a month later, Nautilus entered into a written contract with Diamond in Reno under which Diamond agreed to install waterproof membranes and coatings on the decks at the project.
The parties' contract includes several paragraphs relevant to this case. Paragraph 41 of the parties' contract contains a choice of law provision that declares: "This Agreement shall be construed in accordance with, and governed by, the internal laws of the State of Nevada." Paragraph 33 provides that any controversy arising out of the construction project regarding interpretation of the agreement "is subject to arbitration." This arbitration provision also decrees that any arbitration "shall be held in Clark County." Finally, paragraph 43 of the contract states:
Paragraph 33 contains a number of other conditions regarding the arbitration of disputes, including complicated procedural requirements if the owner of the property is a party to the arbitration. However, these conditions and requirements are not relevant here because there is no indication any party ever moved to compel arbitration.
"VENUE: The proper venue for any lawsuit or arbitration arising out of or relating to this Agreement shall be San Diego County, California unless the Prime Contract requires another venue for such lawsuit or arbitration." (Italics added.)
About two years after Diamond completed its work on the project, Nautilus informed Diamond the decks were not draining properly and requested assistance to repair them. After the parties failed to agree on a remedy, Nautilus filed a complaint against Diamond in the Superior Court of San Diego County.
Diamond answered Nautilus's complaint and filed a motion to dismiss or stay the action on the grounds that California is an inconvenient forum and the action should be heard in Nevada. (§ 410.30.) Diamond argued the contract is inconsistent and ambiguous because of conflicts among paragraphs 41, 33, and 43. Diamond claimed the court must read paragraph 43 as merely a permissive forum selection clause, which does not mandate the parties to litigate their claims in San Diego County. Finally, Diamond argued the forum non conveniens analysis favors Nevada as the proper forum.
The trial court issued a tentative ruling granting Diamond's motion to stay the action pending initiation of another action in Nevada. After oral argument, the court issued a formal order confirming the tentative ruling and granting the stay, "[f]or the reasons stated at" the hearing.
At the hearing, the court gave several reasons for its decision and orally indicated it was directing "the venue jurisdiction changed to Nevada, the venue in Reno." However, that condition did not appear in the written order. We address the propriety of only the court's stay order and not its reasoning at oral argument. (Diaz v. Shultz (1947) 81 Cal.App.2d 328, 331-333.) Furthermore, the propriety of the court's alternative venue selection is irrelevant because we reverse the order entirely.
DISCUSSION
I
FORUM NON CONVENIENS GENERALLY
We review the trial court's order de novo because the court chose not to apply the forum selection clause based only on its interpretation of the parties' contract and there was no disputed extrinsic evidence bearing on the decision. (Intershop Communications AG v. Superior Court (2002) 104 Cal.App.4th 191, 199 (Intershop); California National Bank v. Woodbridge Plaza LLC (2008) 164 Cal.App.4th 137, 142.)
Under the equitable doctrine of forum non conveniens, a trial court may "decline to exercise jurisdiction over a cause and parties otherwise properly before it if it concludes the action may be more appropriately and justly tried elsewhere." (Cal-State Business Products & Services, Inc. v. Ricoh (1993) 12 Cal.App.4th 1666, 1675 (Cal-State), citing Stangvik v. Shiley, Inc. (1991) 54 Cal.3d 744, 751 (Stangvik).) The Legislature codified the concept of forum non conveniens in section 410.30, subdivision (a), which reads:
"When a court upon motion of a party or its own motion finds that in the interest of substantial justice an action should be heard in a forum outside this state, the court shall stay or dismiss the action in whole or in part on any conditions that may be just."
The doctrine typically applies when "the parties and the transaction underlying the litigation are foreign to the forum." (Cal-State, supra, 12 Cal.App.4th at p. 1675.) The defendant bears the burden of proof when attempting to override the plaintiff's forum choice of filing on forum non conveniens grounds. (Ibid.) In a standard forum non conveniens analysis, the court must first determine whether there is a suitable alternative forum. (Stangvik, supra, 54 Cal.3d at p. 751.) If there is, the court decides which forum is proper by balancing "the private interests of the litigants and the interests of the public in retaining the action for trial in California." (Ibid.) When considering these factors, California courts give substantial weight to a resident plaintiff's choice of forum because California has a "strong interest in assuring its own residents an adequate forum for the redress of grievances." (Id. at pp. 754-755.)
Courts analyze forum non conveniens motions differently if the parties have included a mandatory forum selection clause in their contract. (Berg v. MTC Electronics Technologies Co. (1998) 61 Cal.App.4th 349, 358 (Berg).) Courts will generally enforce a mandatory forum selection clause unless it is unfair or unreasonable. (Ibid.) However, if a clause "merely provides for submission to jurisdiction and does not expressly mandate litigation exclusively in a particular forum, " then courts simply carry out the standard forum non conveniens analysis. (Intershop, supra, 104 Cal.App.4th at p. 196.) Thus, the proper characterization of a forum selection clause in a parties' contract is essential to the outcome of a forum non conveniens motion.
Here, the trial court seemingly disregarded the forum selection clause in paragraph 43 of the parties' contract, because it referred to "venue" rather than forum, and also because of an apparent contradiction among three separate dispute resolution provisions of the contract. We first address the interpretation of these three provisions, in context of the contract as a whole, and then we analyze the proper interpretation of the clause contained in paragraph 43.
II
INTERPRETATION OF PARTIES' CONTRACT
Respondent Diamond argues the trial court correctly disregarded the forum selection clause in paragraph 43 because inconsistencies among several paragraphs created ambiguity in the contract. However, although the contract is perhaps uncertain as to the proper forum in the event of arbitration, there is no significant uncertainty regarding the selection of the proper forum for litigation.
Whenever possible, courts must interpret a contract in such a way as will make it "lawful, operative, definite, reasonable, and capable of being carried into effect" without violating the intention of the parties. (Civ. Code, § 1643.) Essentially, courts attempt to "give a ' "reasonable and commonsense interpretation" ' of a contract, consistent with the parties' apparent intent." (People ex rel. Lockyer v. R.J. Reynolds Tobacco Co. (2003) 107 Cal.App.4th 516, 526.) Courts must construe the language of a contract " 'in the context of that instrument as a whole, ' " giving effect to every provision of the contract if possible. (Ibid.)
Arguably, the parties' contract contains conflicts in the three dispute resolution provisions pertinent to this motion: paragraphs 41, 33, and 43. First, the parties' choice of Nevada law to control the agreement does not impact the forum selection clause analysis (para. 41). California courts generally respect such choice of law provisions if there is a reasonable basis for the parties' choice and if applying the chosen law would not violate public policy. (Applera Corp. v. MP Biomedicals, LLC (2009) 173 Cal.App.4th 769, 789-790.) However, the parties' choice of a governing law from another state does not mean a California court is unqualified or disfavored to hear the matter. (See, e.g., Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459 [court enforced parties' choice of Hong Kong law in California proceedings]; Applera, supra, at p. 793 [court enforced parties' choice of Swiss law in attorney fees motion in California action].) A California court can capably hear this action even if Nevada law applies.
Second, the paragraph 33 arbitration clause is only peripherally related to this case because the record does not show that any of the parties ever pursued or sought to compel arbitration. Thus, the provision in paragraph 33 declaring that "[a]rbitrations shall be held in Clark County" is essentially irrelevant here. It is only significant to the extent that Diamond argues the apparent contradiction between it and paragraph 43 makes the parties' contract ambiguous and inconsistent. Paragraph 43 does state, somewhat contradictorily to paragraph 33, that "San Diego County, California" is the "proper venue" for "any lawsuit or arbitration arising out of or relating to this Agreement." (Italics added.) Thus, a court could conceivably find the contract inconsistent with regard to the proper jurisdiction for arbitration. However, we are not called upon to determine the proper jurisdiction for arbitration here because, so far as the record shows, the parties chose to litigate their dispute. Even assuming the contract is ambiguous and inconsistent with regard to the proper location for arbitration, there is no justification for disregarding paragraph 43 in its entirety. Nothing in the contract contradicts the parties' choice of San Diego County, California as the proper jurisdiction for litigation. Therefore, we see no reason to completely disregard paragraph 43 as it relates to this lawsuit. We next turn to the interpretation of paragraph 43 itself.
III
INTERPRETATION OF PARAGRAPH 43: MANDATORY
FORUM SELECTION CLAUSE
As a threshold matter, we first address Diamond's argument that paragraph 43 contains a venue selection clause and not a forum selection clause. Unlike forum selection clauses, venue selection clauses are generally void "as against the legislatively declared public policy fixing the place for trial." (Alexander v. Superior Court (2003) 114 Cal.App.4th 723, 731-732 (Alexander).)
Forum means the place of jurisdiction, such as a court or other judicial body. (Alexander, supra, 114 Cal.App.4th at pp. 726-727.) Venue is the county or territory where the case will be heard and from which the jury is selected. (Id. at p. 727; § 392 et seq.) Forum selection clauses often designate both jurisdiction and venue. (See Smith, Valentino & Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491, 494 [contract included reciprocal forum selection clause that designated Philadelphia or Los Angeles as exclusive locations for litigation]; Olinick v. BMG Entertainment (2006) 138 Cal.App.4th 1286, 1291 [parties designated New York County and the United States District Court for the Southern District of New York as exclusive forums for litigation]; Cal-State, supra, 12 Cal.App.4th 1666, 1672 [parties designated Borough of Manhattan, New York City, New York as exclusive location for litigation].) "Under state law, therefore, a venue selection clause is purely an intrastate issue involving the selection of a county in which to hold the trial. By contrast, a forum selection clause usually chooses a court from among different states or nations." (Alexander, supra, 114 Cal.App.4th at p. 727, fn. omitted; italics added.)
In Alexander, the court analyzed a contract between parties who were all residents or domiciliaries of California. (Alexander, supra, 114 Cal.App.4th at p. 725.) The disputed provision read, " '[E]ach party specifically stipulates to venue in Santa Clara County, California.' " (Id. at p. 726.) The court held the clause was an invalid venue selection clause because the contracting parties attempted to fix the venue within the state, contrary to the scheme set up in the venue statutes. (Id. at p. 731.) The court concluded, "[I]t is not for the parties or the courts to set venue. That is the role of the Legislature." (Ibid.)
Here, we construe paragraph 43 as a forum selection clause and not a venue selection clause, even though it was written in terms of venue, like the clause in Alexander. (Alexander, supra, 114 Cal.App.4th at p. 726.) This matter involves a dispute between two parties from different states. Diamond, a Nevada corporation, signed a contract in Nevada with Nautilus, a California corporation, for work to be performed in Nevada. Diamond admits it did not register as a foreign corporation in California until 18 months after the parties entered into the contract. Thus, unlike the parties in Alexander, these parties were not all California residents at the time they entered into the contract. (Ibid.) Therefore, the suggestion that the parties only selected San Diego as the proper venue and did not also choose California as the proper forum is illogical and untenable. Rather, Nautilus and Diamond selected California as the proper forum for litigation, as between their respective states of residence, California and Nevada. The parties' forum selection clause, like many forum selection clauses, simply indicated the chosen venue within that forum as well.
We next determine the nature of the forum selection clause in paragraph 43; namely, whether it is a mandatory or permissive clause. A forum selection clause must provide "adequate notice to the defendant that he was agreeing to the jurisdiction cited in the contract." (Hunt v. Superior Court (2000) 81 Cal.App.4th 901, 908 (Hunt), citing Carnival Cruise Lines, Inc. v. Superior Court (1991) 234 Cal.App.3d 1019, 1026-1027.) A mandatory forum selection clause requires "clear language showing that jurisdiction is appropriate in the designated forum and none other." (Berg, supra, 61 Cal.App.4th 349, 360.) A clause that grants a court jurisdiction without clearly making that jurisdiction exclusive is a permissive, rather than mandatory clause. (Id. at p. 359.) "Additional language giving exclusive jurisdiction to the forum is required." (Id. at p. 360.)
In CQL Original Products, Inc. v. National Hockey League Players' Assn. (1995) 39 Cal.App.4th 1347 (CQL), this court analyzed a forum selection clause contained in a license agreement. The clause provided, " '[A]ny claims arising hereunder shall, at the Licensor's election, be prosecuted in the appropriate court of Ontario.' " (Id. at p. 1352.) We concluded the clause was unambiguous because it clearly and expressly designated a forum as exclusive and mandatory. (Id. at p. 1358.) We specifically noted the provision's "mandatory character is reflected by the use of the word 'shall, ' requiring prosecution of any claims in Ontario upon NHLPA's invoking the clause." (Ibid.)
In Intershop, supra, 104 Cal.App.4th 191, 197, the court analyzed a forum selection clause that read, " 'The parties elect Hamburg to be the place of jurisdiction to the extent permitted by the applicable laws.' " Although the court noted the language of the clause was "not quite as emphatic as the language in other cases with mandatory clauses" (id. at p. 196), it declared the clause mandatory because it was "far more than an agreement to submit to the jurisdiction of Hamburg courts as one of several possible forums. Rather, the clause specifies Hamburg as 'the' place where litigation should be conducted." (Id. at p. 197.)
In Berg, supra, 61 Cal.App.4th 349, 360, the court held a forum selection clause only provided for submission to jurisdiction and did not constitute a mandatory clause. The clause read, " 'The company [MTC] has expressly submitted to the jurisdiction of the State of California and United States Federal courts sitting in the City of Los Angeles, California, for the purpose of any suit, action or proceeding arising out of this Offering.' " (Id. at p. 357.) Unlike the clauses in CQL, supra, 39 Cal.App.4th 1347 and Intershop, supra, 104 Cal.App.4th 191, the clause did not contain "express language of exclusivity of jurisdiction or a mandatory place of litigation" because it "simply states that MTC submits to jurisdiction in Los Angeles." (Id. at p. 358.)
Here, paragraph 43 includes clear language indicating San Diego County, California is the exclusive jurisdiction for any lawsuit. Paragraph 43 reads, "The proper venue for any lawsuit or arbitration arising out of or relating to this Agreement shall be San Diego County, California unless the Prime Contract requires another venue for such lawsuit or arbitration." (Italics added.) Like the mandatory clause in CQL, the use of the word "shall" denotes the mandatory nature of paragraph 43. (CQL, supra, 39 Cal.App.4th 1347, 1358.) Furthermore, paragraph 43 selects San Diego County, California as "the" proper venue for any lawsuit, just as the mandatory clause in Intershop chose Hamburg as "the" place of jurisdiction. (Intershop, supra, 104 Cal.App.4th 191, 197.) The parties did not simply submit to jurisdiction; they agreed San Diego County would be the mandatory place of litigation. (See Berg, supra, 61 Cal.App.4th 349, 358.) Moreover, the language of paragraph 43 provided Diamond with ample notice it was agreeing to jurisdiction in San Diego County, California. (Hunt, supra, 81 Cal.App.4th 901, 908.)
Diamond argues the provision in paragraph 43 giving the prime contract priority over the contract's forum election renders the entire paragraph nonexclusive. However, the possibility that the prime contract's terms will prevail over those of the parties' contract does not give permissive characteristics to the otherwise mandatory language of paragraph 43. The provision does not compel us to read paragraph 43 as merely allowing California jurisdiction as one of several appropriate locations for trial. It simply provides guidance in the event the prime contract requires a different location than San Diego County for a lawsuit or arbitration. Because there is no indication here that the prime contract requires litigation in another location, paragraph 43's election of San Diego County, California as the proper place for any lawsuit is mandatory.
IV
ENFORCEMENT OF MANDATORY CLAUSE
Once a court determines a contract contains a mandatory forum selection clause, the court will give it effect unless application of the clause is unfair or unreasonable. (Berg, supra, 61 Cal.App.4th 349, 358-359.) The court will presume the forum selection clause is valid and enforceable, unless enforcement of the clause would be unreasonable under the circumstances of the case. (Intershop, supra, 104 Cal.App.4th 191, 198.) "Claims that the previously chosen forum is unfair or inconvenient are generally rejected. [Citation.] A court will usually honor a mandatory forum selection clause without extensive analysis of factors relating to convenience. [Citation.] ' "Mere inconvenience or additional expense is not the test of unreasonableness..." ' of a mandatory forum selection clause." (Berg, supra, 61 Cal.App.4th at pp. 358-359.) The party opposing the enforcement of a mandatory forum selection clause must show "the contractually selected forum would be unavailable or unable to accomplish substantial justice or that no rational basis exists for the choice of forum." (Intershop, supra, 104 Cal.App.4th at p. 199.)
The record adequately supports the reasonableness of the choice-of-forum provision in paragraph 43. California is an available forum where substantial justice could be achieved. (Intershop, supra, 104 Cal.App.4th at p. 200.) Nautilus's status as a California domiciliary provides a rational basis for the selection of San Diego County as the forum. (CQL, supra, 39 Cal.App.4th 1347, 1355.) Paragraph 43 is consistent with Diamond's reasonable expectations given that Nautilus is a California domiciliary and Diamond inferentially recognized the potential for a California lawsuit was part of the price of doing business with Nautilus. (Ibid.) Significantly, there is no evidence Diamond did not freely and voluntarily agree to the disputed provision. (Ibid.)
DISPOSITION
The order is reversed. The matter is remanded with directions to the trial court to vacate the order staying Nautilus's action and to issue a new order denying Diamond's motion in its entirety, and allowing further appropriate proceedings. Appellant Nautilus is entitled to costs on appeal.
WE CONCUR: McCONNELL, P. J., McINTYRE, J.