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.