Opinion
G059583 G059609
08-30-2021
NEW PRIDE CORPORATION et al., Plaintiffs and Respondents, v. HEESUNG LEE, Defendant and Appellant. HEESUNG LEE, Petitioner, v. THE SUPERIOR COURT OF ORANGE COUNTY, Respondent NEW PRIDE CORPORATION et al., Real Parties in Interest.
Jeong and Likens and Chan Yong Jeong for Defendant, Appellant and Petitioner. JKLAWUSA and Jong K. Lee for Plaintiffs, Respondents and Real Parties in Interest.
NOT TO BE PUBLISHED
Appeal from an order of the Superior Court of Orange County, No. 30-2019-01096633 James L. Crandall, Judge. Reversed with directions. Original proceedings; petition for a writ of mandate to challenge an order of the Superior Court of Orange County, James L. Crandall, Judge. Petition granted.
Jeong and Likens and Chan Yong Jeong for Defendant, Appellant and Petitioner.
JKLAWUSA and Jong K. Lee for Plaintiffs, Respondents and Real Parties in Interest.
OPINION
FYBEL, J.
INTRODUCTION
Defendant Heesung Lee filed a petition for writ of mandate to challenge an order denying his motion to dismiss or stay a lawsuit brought by plaintiffs New Pride Corporation (New Pride) and Kenneth K. Lee. Heesung's motion to dismiss or stay was based on two forum selection clauses, nonjoinder of indispensable parties, and forum non conveniens. The forum selection clauses specify Seoul, South Korea as the forum for any dispute that “arises out of the performance” of two contracts for accounting services. Heesung also filed a notice of appeal from an order denying his special motion to strike pursuant to Code of Civil Procedure section 425.16. The petition for writ of mandate and the appeal were ordered consolidated for all purposes.
To avoid confusion, we refer to Heesung Lee as Heesung and Kenneth K. Lee as Kenneth.
The anti SLAPP statute. “‘SLAPP' is an acronym for ‘strategic lawsuit against public participation.'” (Baral v. Schnitt (2016) 1 Cal.5th 376, 381, fn. 1.) We refer to the special motion to strike authorized by section 425.16, subdivision (b)(1) as an anti SLAPP motion.
We grant the petition for writ of mandate on the ground the forum selection clauses are enforceable by Heesung and applicable to the claims asserted against him. Although Heesung was not a party to the contracts with the forum selection clauses, we conclude he has standing to enforce them because he was closely related to the contractual relationships. The claims asserted by New Pride and Kenneth, though pleaded as torts, are subject to the forum selection clauses because those claims arise out of the two contracts for accounting services, in particular, their confidentiality provisions.
We shall order the issuance of a writ directing the respondent court to vacate its order denying Heesung's motion to dismiss or stay and to enter an order granting that motion. The trial court erred by reaching the merits of Heesung's anti SLAPP motion because that motion would have been moot had the trial court granted the motion to dismiss or stay. We therefore reverse the order denying Heesung's anti SLAPP motion with directions to order that motion off calendar as moot.
FACTS AND ALLEGATIONS
New Pride is a California corporation and is alleged to have its principal place of business in Orange County. New Pride's stock is publicly traded in South Korea. Plaintiff/respondent Kenneth is the chief executive officer (CEO) of New Pride and resides in Orange County. Defendant/appellant Heesung Lee is a citizen of South Korea and is a certified public accountant licensed in South Korea.
In 2017 and 2018, New Pride acquired several businesses, including a company called Aria Standard Holdings Limited (Aria). New Pride was required to submit to the Korean Financial Supervisory Service (FSS) valuation reports for the companies whose shares were to be acquired by New Pride. New Pride engaged Saesidae Accounting Firm (Saesidae), a South Korean firm, to appraise Aria and prepare the required report. Heesung was an employee of Saesidae.
On July 14, 2017, New Pride and Saesidae entered into a Service Agreement (the Saesidae Service Agreement) by which Saesidae agreed to appraise the fair value of Aria's stock. Section 10 of the Saesidae Service Agreement states: “If any dispute arises out of the performance[] of this Agreement between Party A [New Pride] and Party B [Saesidae], the court handling such a dispute shall be the Seoul Central District Court.”
The Saesidae Service Agreement is written in Korean. A certified translation was submitted with the motion to dismiss or stay.
Heesung was assigned the task of appraising Aria's stock pursuant to the Saesidae Service Agreement. On July 28, 2017, Heesung and another certified public accountant, Yongmuk Kim, visited New Pride's corporate office in Orange County in connection with preparing the Aria valuation report. According to the first amended complaint (the complaint) and Kenneth's declaration, Heesung and Yongmuk “stayed until August 4, 2017.”
On August 28, 2017, Heesung and Yongmuk again visited New Pride's corporate office while performing a valuation of the stock of a company called Light House. They stayed until August 31, 2017. From December 17 through 19, 2017, Heesung and Yongmuk were at New Pride's corporate office while drafting a purchase price allocation report for the Aria acquisition and the acquisition of a company called Samuel Yoon, Inc.
Sometime in 2017, Heesung left the employment of Saesidae and became an employee of Sejung Accounting Corporation (Sejung), a South Korean firm. Heesung and Yongmuk became directors of Sejung in June 2018.
In August 2018, Sejung and a company called New Pride Bio & Resources, Inc. (New Pride Bio) entered in a service agreement (the Sejung Service Agreement) by which Sejung agreed to assess the business feasibility of a company called Ben's Beauty Supply, Inc. (Ben's Beauty). Kenneth is the chief executive officer of New Pride Bio, which is related to New Pride. Section 10 of the Sejung Service Agreement states: “If any dispute arises out of the performance[] of this Agreement between Party A [New Pride Bio] and Party B [Sejung], the court handling such a dispute shall be the Seoul Central District Court.” Heesung was assigned the project of assessing the business feasibility of Ben's Beauty.
The Sejung Service Agreement is written in Korean. A certified translation was submitted with the motion to dismiss or stay.
Heesung arrived in Los Angeles on August 17, 2018 and, with Yongmuk, visited New Pride's corporate office in connection with preparing the business feasibility assessment of Ben's Beauty. The complaint alleges that, at a dinner with Kenneth on August 17, Heesung stated: “‘Even if I am performing the valuation work for you, I can give your company [a] hard time using the information that I heard and read here. So let our accounting firm take charge of future audit work and setting up internal control system. I have a strong relationship with FSS and my wife is [a] judge in Korea.'” On or about August 23, at New Pride's corporate office, Heesung said to Kenneth: “‘Do not hire Yong Muk Kim in the future. Hire Saesidae accounting firm for future audit work. If you do not hire us for the future audit work, I can report your weakness to the personnel in FSS and your company will be investigated and audited by FSS.'” Kenneth rejected Heesung's demand.
Kenneth declared: “After going back to Korea, [Heesung] sent the letter including false and bad news and rumors about New Pride Corporation to FSS several times.” Neither the complaint nor Kenneth's declaration provides any information about the contents of this letter. In April 2019, the FSS commenced an investigation of New Pride. The complaint alleges, “[t]his investigation was presumed to be ignited by [Heesung]'s malicious and false whistle blowing to FSS.”
The complaint alleges: “On [o]r about August 30, 2019, [Heesung] sent the defamatory information including confidential information to the reporter Min Jae Lee of Korea Economic Newspaper and Min Jae Lee wrote this defamatory article [i]n the Korea Economic newspaper.” The complaint alleges that the newspaper article asserted that New Pride and its affiliates (including New Pride Bio) had made an insufficient allowance for bad debt and were “‘in capital impairment status'” and that Heesung posted defamatory comments about New Pride on its stock discussion website.
The Korean Financial Services Commission (FSC) imposed sanctions against New Pride, but for reasons other than those asserted by Heesung. The FSC prohibited New Pride from increasing its “capital amount.”
In February 2020, New Pride reported Heesung to the South Korean prosecutor's office for violating the Certified Public Accountant Act. The Korean Anti corruption and Civil Rights Commission, which is in charge of protecting whistleblowers, issued a notice in March 2020 that Heesung was a whistleblower and entitled to exemption from liability under the Whistleblower Protection Act. In July 2020, the South Korean prosecutor's office issued a disposition that Heesung's conduct was not a crime.
PROCEDURAL HISTORY
In the complaint, New Pride and Kenneth asserted causes of action for slander per se, defamation, intentional infliction of emotional distress, intentional interference with economic advantage, and breach of duty of confidentiality. In response to the complaint, Heesung filed a motion to quash service of summons based on lack of personal jurisdiction and a motion to dismiss or stay the case based on the forum selection clauses of the Saesidae Service Agreement and the Sejung Service Agreement, nonjoinder of indispensable parties, and forum non conveniens. At the same time, Heesung filed an anti SLAPP motion to strike all causes of action. New Pride and Kenneth filed opposition to all motions.
A motion to dismiss or stay the case under Code of Civil Procedure sections 410.30 and 418.10 was the correct way to enforce the forum selection clauses. (Korman v. Princess Cruise Lines, Ltd. (2019) 32 Cal.App.5th 206, 214.)
After hearing oral argument, the trial court issued an order ruling on the motions as follows:
Motion to Quash: Denied. Heesung waived objection to personal jurisdiction by filing a motion to transfer venue, which constituted a general appearance in the action.
Motion to Dismiss or Stay: Denied. The forum selection clause did not apply because Heesung was not a party to the Saesidae Service Agreement, and the only claim made under that agreement was that Heesung personally breached his professional duties. Heesung failed to meet his burden in a forum non conveniens analysis of establishing South Korea was a suitable forum for the litigation. The news reporter was not an indispensable party because without her joinder, plaintiffs could be accorded complete relief.
Anti SLAPP Motion: Denied. Heesung never submitted evidence to establish the content of the statements he allegedly made to the FSS and, therefore, the court could not determine whether the claims in the first amended complaint arose out of acts in furtherance of protected activity. Heesung failed to submit evidence to show that the website on which he allegedly posted defamatory statements satisfied the criteria for a public forum.
Heesung filed a petition for writ of mandate to challenge the order denying his motion to dismiss or stay the case and filed a notice of appeal from the order denying his anti SLAPP motion. We issued an order to show cause and ordered the petition for writ of mandate and the appeal consolidated for all purposes.
DISCUSSION
I. Heesung Has Standing to Enforce the Forum Selection Clauses
California policy favors enforcement of forum selection clauses. (Smith, Valentino & Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491, 495 (Smith).) A trial court's decision to enforce or decline to enforce a forum selection clause is reviewed under the abuse of discretion standard. (Bancomer, S.A. v. Superior Court (1996) 44 Cal.App.4th 1450, 1457.)
The trial court in the present case found that the forum selection clause in the Saesidae Service Agreement applied only to disputes between New Pride and Saesidae. The trial court did not consider whether a nonsignatory has standing to enforce a forum selection clause. The court erred as a matter of law.
Under certain circumstances, noncontracting parties do have standing to enforce a forum selection clause. (Berclain America Latina v. Baan Co. (1999) 74 Cal.App.4th 401, 405 408.) “‘A range of transaction participants, parties and non parties, should benefit from and be subject to forum selection clauses.'” (Lu v. Dryclean-U.S.A. of California, Inc. (1992) 11 Cal.App.4th 1490, 1494 (Lu).) The question is “one of standing to assert the forum selection clause.” (Bugna v. Fike (2000) 80 Cal.App.4th 229, 233 (Bugna).)
A nonparty who is “closely related to the contractual relationship” has standing to enforce a forum selection clause. (Lu, supra, at p. 1494; see Manetti Farrow, Inc. v. Gucci America, Inc. (9th Cir. 1988) 858 F.2d 509, 514, fn. 5.) “To hold otherwise would be to permit a plaintiff to sidestep a valid forum selection clause simply by naming a closely related party who did not sign the clause as a defendant.” (Lu, supra, at p. 1494.) “‘For [defendant] to demonstrate that it was “so closely related to the contractual relationship” that it is entitled to enforce the forum selection clause, it must show by specific conduct or express agreement that (1) it agreed to be bound by the terms of the... agreement, (2) the contracting parties intended [defendant] to benefit from the... agreement, or (3) there was sufficient evidence of a defined and intertwining business relationship with a contracting party.'” (Bugna, supra, 80 Cal.App.4th at p. 233.) “The key to the closely related test is whether the nonsignatories were close to the contractual relationship, not whether they were close to the third party signator. This makes sense because the forum selection clause is part of the underlying contract, and it is the contractual relationship gone awry that presumably spawns litigation and activates the clause. Giving standing to all closely related entities honors general principles of judicial economy by making all parties closely allied to the contractual relationship accountable in the same forum, thereby abating a proliferation of actions and inconsistent rulings.” (Bugna, supra, at p. 235.)
In Lu, the nonsignatory defendant had standing to enforce the forum selection clause because the nonsignatory was alleged to be the alter ego of the signing defendant and to have participated directly in the tortious behavior alleged in the complaint. (Lu, supra, 11 Cal.App.4th at p. 1494.) In Bugna, the nonsignatory defendants were “key” participants in the transactions at issue in the lawsuit and so they could enforce the forum selection clause. (Bugna, supra, 80 Cal.App.4th at p. 235.)
New Pride sued Heesung, not Saesidae or Sejung, and Heesung was not a party to the Saesidae Service Agreement or the Sejung Service Agreement. In support of his motion to dismiss or stay, Heesung submitted his own declaration with attached exhibits, of which he requested the trial court take judicial notice. While the evidence does not suggest that Heesung expressly agreed to be bound by the terms of the service agreements, it can be inferred from the undisputed evidence that the contracting parties intended Heesung to benefit from those agreements, including their forum selection clauses. It is undisputed that Heesung was assigned the task of appraising the value of Aria's stock, which was the subject of the Saesidae Service Agreement, and was assigned the task of preparing a feasibility report on Ben's Beauty, which was the subject of the Sejung Service Agreement. Heesung traveled to California to engage in those tasks, and thereby created the contacts which New Pride and Kenneth contend subject him to personal jurisdiction in this state.
It appears that New Pride and Kenneth made the decision not to sue Saesidae or Sejung in order to avoid the forum selection clauses. In the preliminary opposition to Heesung's petition for writ of mandate, New Pride and Kenneth argue that, “after careful consideration, ” they decided to pursue the case directly against Heesung rather than under a vicarious liability theory and, “as a result, the forum selection clause became irrelevant to this instant case.”
There was strong and undisputed evidence of a “defined and intertwining business relationship” (Bugna, supra, 80 Cal.App.4th at p. 233) between Heesung and the contracting parties, Saesidae and Sejung. Heesung was an employee of Saesidae (until sometime in 2017) and became a director of Sejung in June 2018. New Pride alleges that Heesung disclosed confidential information obtained from New Pride during the course of conducting the stock appraisal and feasibility evaluation that were the subjects, respectively, of the Saesidae Service Agreement and the Sejung Service Agreement. When Heesung allegedly made the disclosures, he was a director of Sejung.
The allegations of the complaint and the evidence establish that Heesung was sufficiently close to the contractual relationships created by the Saesidae Service Agreement and the Sejung Service Agreement to give him standing to enforce the forum selection clauses. Although Kenneth is not a party to either service agreement, he has never contended that the forum selection clauses cannot be enforced against him.
Kenneth filed a lawsuit against Heesung in South Korea in December 2019. He withdrew the lawsuit in January 2020.
II. The Claims Asserted in the Complaint Are Subject to the Forum Selection Clauses
The trial court concluded the forum selection clause of the Saesidae Service Agreement did not apply because New Pride did not allege any claim under that agreement and Heesung had submitted no evidence that the forum selection clause covered the dispute between New Pride and Heesung. The trial court misinterpreted the scope of the forum selection clauses.
The scope of a forum selection clause is a matter of contract interpretation. (Cal-State Business Products & Services, Inc. v. Ricoh (1993) 12 Cal.App.4th 1666, 1677.) The interpretation of a forum selection clause is a legal question subject to de novo review if, as in this case, no conflicting extrinsic evidence has been presented. (Bushansky v. Soon Shiong (2018) 23 Cal.App.5th 1000, 1006; Animal Film, LLC v. D.E.J. Productions, Inc. (2011) 193 Cal.App.4th 466, 471.) Forum selection clauses can apply equally to contractual and tort causes of action. Whether a forum selection clause applies to a tort claim depends on whether resolution of the tort claim relates to interpretation of the contract containing the forum selection clause. (Bancomer, S.A. v. Superior Court, supra, 44 Cal.App.4th at p. 1461.)
A cause of action against Heesung would be covered by the forum selection clauses if it “arises out of the performance” of the Saesidae Service Agreement or the Sejung Service Agreement. “‘“The phrase ‘arising out of' is equated with origination, growth or flow from the event.”'” (Central Pathology Service Medical Clinic, Inc. v. Superior Court (1992) 3 Cal.4th 181, 187; see Palmer v. Agee (1978) 87 Cal.App.3d 377, 386 [“‘arise'” means “‘to originate from a specified source'” or to come into being].) Intentional tort causes of action can “‘arise out of' contractual relationships.” (Central Pathology Service Medical Clinic, Inc. v. Superior Court, supra, at p. 188.)
In Smith, supra, 17 Cal.3d 491, a forum selection clause applied to any matter “‘arising under or growing out of'” the corporate parties' contract. (Id. at p. 497, italics omitted.) Under that contract, one corporation was appointed as the agent to represent the other corporation in soliciting group insurance policies in several states. (Id. at pp. 493-494.) The California Supreme Court rejected the contention that the forum selection clause only applied to contract claims and did not extend to tort claims. The court concluded that tort claims for unfair competition and intentional interference with advantageous business relationships “arose directly out of [one party's] contractual relationship with [the other party] and reasonably may be interpreted as falling within” the forum selection clause. (Id. at p. 497.)
In Olinick v. BMG Entertainment (2006) 138 Cal.App.4th 1286, 1291, the plaintiff's employment agreement had a forum selection clause specifying New York as the forum for all disputes “‘arising under'” the agreement. Based on the forum selection clause, the trial court granted the defendant employer's motion to stay the action in California pending the plaintiff filing suit in New York. (Id. at pp. 1289, 1293.) The Court of Appeal affirmed. It rejected the plaintiff's contentions that the forum selection clause was limited to contractual disputes and that the plaintiff's age discrimination claim and tort claim for wrongful discharge in violation of public policy were not within the clause's scope. (Id. at pp. 1296-1297.) The court concluded the forum selection clause encompassed “‘all causes of action arising from or related to [the] [A]greement, regardless of how they are characterized.'” (Id. at pp. 1300-1301, italics omitted.) The court explained that, although the statutory and tort claims were “not predicated on the existence” of the employment agreement, “the legal relationship between these parties emanates from [the employment agreement] and the interpretation of the [a]greement will be a central issue in the discrimination case.” (Id. at pp. 1299, 1300.)
The Saesidae Service Agreement includes a confidentiality clause which states, “[Saesidae] shall not divulge or provide any third party with the information it obtained in connection with rendering this service and/or any information it received (‘Confidential Information') without a written consent of [New Pride] while rendering service or even after completion thereof.” (Italics added.) The Sejung Service Agreement has the same confidentiality provision. Each of New Pride's causes of action is predicated on the allegation that Heesung wrongfully divulged to third parties confidential information he had obtained in connection with rendering the services contemplated by the Saesidae Service Agreement and the Sejung Service Agreement. Although pleaded as torts rather than as a breach of contract, New Pride's causes of action arose, originated, and grew directly out of performance of the Saesidae Service Agreement and the Sejung Service Agreement. In performance of those agreements, Heesung obtained the confidential information that he allegedly divulged, and divulging the information could be in contravention of the confidentiality clauses. For that reason, interpretation of the scope and meaning of the confidentiality clause likely will be an important issue in the litigation.
New Pride and Kenneth so much as admit this. In the preliminary opposition to Heesung's petition for writ of mandate, New Pride and Kenneth assert the evidence proves that the confidential information allegedly disclosed by Heesung was acquired in the course of performing the Saesidae Service Agreement and the Sejung Service Agreement.
New Pride freely contracted and agreed to South Korea as the forum for any disputes arising out of the Saesidae Service Agreement and the Sejung Service Agreement. “Given the importance of forum selection clauses, both the United States Supreme Court and the California Supreme Court have placed a heavy burden on a plaintiff seeking to defeat such a clause, requiring it to demonstrate that enforcement of the clause would be unreasonable under the circumstances of the case.” (Lu, supra, 11 Cal.App.4th at p. 1493, citing The Bremen v. Zapata Off-Shore Co. (1972) 407 U.S. 1, 10, 15 and Smith, supra, 17 Cal.3d at p. 496.) New Pride has not even attempted to demonstrate that enforcement of the forum selection clauses would be unreasonable.
Thus, the trial court erred by denying Heesung's motion to dismiss or stay based on the forum selection clauses. The trial court should have granted the motion and, had it done so, Heesung's anti SLAPP motion would have been rendered moot. The trial court should have ordered the anti SLAPP motion off calendar and erred by making a ruling on the motion.
DISPOSITION AND ORDER
The petition for writ of mandate is granted. Let a writ of mandate issue directing the trial court to (1) vacate its order entered on October 22, 2020 denying Heesung's motion to dismiss or stay and (2) enter an order granting the motion to dismiss or stay and staying the case. The order denying Heesung's anti SLAPP motion is reversed with directions to the trial court to order that motion off calendar as moot. Heesung Lee to recover costs on appeal and in the writ petition proceedings.
WE CONCUR: MOORE, ACTING P. J., ZELON, J. [*]
[*] Retired Justice of the Court of Appeal, Second Appellate District, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.