Last week, the Court of Appeal of California affirmed an order staying a forum non conveniens action arising from a purchase agreement for a $20 million beach lot in Cancun, Mexico. The purchase agreement entered into by and between two Mexican corporations, contained a forum selection clause waiving the right to any jurisdiction except Mexican courts.
Plaintiff sued on various theories of fraud, contract and fiduciary duty breach, common counts and for other equitable forms of relief. In the complaint, plaintiff alleged conducting significant business in Los Angeles County; that the property was owned by a subsidiary of co-defendant, a California corporation; that plaintiff was induced to deposit $2 million in escrow in Los Angeles, California; that Chicago Title Company was supposed to act as both escrow agent and title insurer, even though Chicago Title Company is not licensed to provide the type of title insurance required under Mexican law; that, because no title insurance was provided, plaintiff was prevented from closing escrow despite having secured a funding commitment; and that Defendant subsequently sold the Mexican property to a third party for $17 million. Defendants moved to dismiss or alternatively to stay the action on forum non conveniens grounds, arguing the lawsuit should be heard in a Mexican court based on the forum selection clause.
Forum non conveniens is an equitable doctrine invoking the discretionary power of a court to decline to exercise the jurisdiction it has over a transitory cause of action when it believes that the action may be more appropriately and justly tried elsewhere. An exercise of that discretion requires a determination that the alternate forum is a suitable place for trial. If it is, then the trial court shall consider (a) the private interests of the litigants, such as such as the ease of access to sources of proof, the cost of obtaining attendance of witnesses, and the availability of compulsory process for attendance of unwilling witnesses, and (b) the public's concerns in retaining California jurisdiction, which include avoidance of overburdening local courts with congested calendars, protecting the interests of potential jurors so that they are not called upon to decide cases in which the local community has little concern, and weighing the competing interests of California and the alternate jurisdiction in the litigation.
However, the analysis for a forum non conveniens motion differs when there is a forum selection clause. In such cases, there is a threshold issue of whether the clause is permissive or mandatory. When the foreign selection clause is mandatory, the traditional forum non conveniens analysis does not apply. A mandatory forum selection clause is presumed to be valid and is enforced unless to do so would be unreasonable under the circumstances. But the mere inconvenience of suing in Mexico is insufficient to meet plaintiff's burden of showing unreasonableness. Furthermore, it was of no consequence that there were nonparties to the purchase agreement named in California action, as California law allows for a nonparty to rely on the forum selection clause if the litigant is closely related to the contractual relationship.
As a result, the order staying a forum non conveniens action arising from a purchase agreement for a $20 million beach lot in Cancun, Mexico, was affirmed.
FOR FURTHER REFERENCE, SEE: IMMOBILIARIA BUENAVENTURAS, S.A. de C.V., Plaintiff and Appellant, v. KOR HOTEL GROUP et al., Defendants and Respondents. NOTICE: NOT TO BE PUBLISHED IN OFFICIAL REPORTS. CALIFORNIA RULES OF COURT, RULE 8.1115(a), PROHIBITS COURTS AND PARTIES FROM CITING OR RELYING ON OPINIONS NOT CERTIFIED FOR PUBLICATION OR ORDERED PUBLISHED, EXCEPT AS SPECIFIED BY RULE 8.1115(b). THIS OPINION HAS NOT BEEN CERTIFIED FOR PUBLICATION OR ORDERED PUBLISHED FOR THE PURPOSES OF RULE 8.1115.
Mauricio Leon de la Barra is an international law attorney licensed to practice law in Mexico and California, and has more than 15 years of experience representing clients in cross-border business and real estate transactions and litigation involving international, U.S. and Mexican laws.