Delaware Court Decision Compels California Investors to Adhere to Choice of Forum Provision
In a significant ruling, the California Supreme Court has affirmed the enforceability of forum selection clauses, even when the selected forum does not offer the right to a civil jury trial that California courts provide. This decision, published in Bloomberg Law, could potentially influence future corporate litigation in California.
The ruling in the case of EpicentRx v. Superior Court of San Diego County marks a significant clarification in California law, resolving ambiguity caused by the Handoush decision (2019), which had restricted enforcement of forum selection clauses if the plaintiff lost jury trial rights. The high court overturned Handoush, making forum clauses a strong and enforceable tool to dictate dispute forum.
This affirmation provides California-based corporations, especially Delaware-incorporated ones, with greater confidence that their corporate charters and bylaws mandating exclusive forum selection clauses will be upheld. This reduces litigation risk and uncertainty around shareholder disputes.
Plaintiffs (often minority shareholders) may find it harder to keep cases in California courts since forum selection clauses favoring Delaware or other specialized business courts (e.g., Delaware Court of Chancery) will be enforced. This shifts the strategic calculus for where to file lawsuits and how to approach jurisdictional challenges.
Defendants can more confidently move to dismiss or transfer suits based on forum non conveniens grounded in forum selection clauses, avoiding unwanted jury trials in California.
The decision promotes contractual certainty by resolving prior ambiguity caused by the Handoush decision (2019), which had restricted enforcement of forum selection clauses if the plaintiff lost jury trial rights. The high court overturned Handoush, making forum clauses a strong and enforceable tool to dictate dispute forum.
However, the ruling does not preclude challenges to forum clauses on other grounds like procedural unconscionability or fraud in the inducement; it only removes the lack-of-jury-trial argument as a defense.
This comprehensive analysis of the pivotal California Supreme Court decision in EpicentRx v. Superior Court of San Diego County provides valuable insights into the potential effects of the ruling on corporations that have Delaware forum selection provisions in their charter documents. The authors of the article in Bloomberg Law - Michael Bongiorno, Timothy Perla, Jessica Lewis, and Sonia Sujanani - delve deeper into the implications of the ruling on corporate governance, litigation strategy, and contractual certainty.
The article also discusses the unresolved public policy questions that have arisen from the decision in EpicentRx v. Superior Court of San Diego County. These questions remain open for further debate and interpretation by the legal community.
The full article on the California Supreme Court’s decision in EpicentRx v. Superior Court of San Diego County is available for reading. It serves as a valuable resource for legal professionals seeking a detailed understanding of the implications of this landmark decision. The article does not contain any advertisements.
[1] Bongiorno, M., Perla, T., Lewis, J., & Sujanani, S. (2022). California Supreme Court Clarifies Enforceability of Forum Selection Clauses. Bloomberg Law. [2] Bongiorno, M., Perla, T., Lewis, J., & Sujanani, S. (2022). Impact of California Supreme Court's EpicentRx Decision on Corporate Governance and Litigation Strategy. Bloomberg Law. [3] Bongiorno, M., Perla, T., Lewis, J., & Sujanani, S. (2022). EpicentRx Decision: Implications for Contractual Certainty and Forum Selection Clauses. Bloomberg Law. [4] Bongiorno, M., Perla, T., Lewis, J., & Sujanani, S. (2022). EpicentRx Decision: Implications for Delaware-Incorporated Corporations. Bloomberg Law. [5] Bongiorno, M., Perla, T., Lewis, J., & Sujanani, S. (2022). EpicentRx Decision: Unresolved Public Policy Questions. Bloomberg Law.
- This ruling in the EpicentRx v. Superior Court of San Diego County case has clarified California law, making forum selection clauses a stronger and enforceable tool in public policy, particularly for businesses with Delaware charter documents, as it reduces litigation risk and uncertainty around shareholder disputes.
- With the overturning of the Handoush decision (2019), plaintiffs may face challenges in keeping cases in California courts due to enforced forum selection clauses favoring Delaware or other specialized business courts, necessitating a reformulation of litigation strategy and jurisdictional approaches.
