Case Number: BC540283    Hearing Date: July 18, 2014    Dept: 56

Case Name: Crane, et al. v. Frank Crystal & Co., et al.
Case No.: BC540283
Matter: (1) Motion to Dismiss/Stay; (2) Demurrer
Moving Party: Defendants
Responding Party: Plaintiffs

Tentative Ruling: Motion to dismiss is granted; Demurrer is moot.

Plaintiffs Richard Crane and Richard Crane & Associates Inc. (“RCA”) filed this action against Defendants Frank Crystal & Co. Inc. and Frank Crystal & Co. of California Inc., alleging causes of action for declaratory relief and unfair competition. Defendants move to dismiss or stay the action, and they demur to the complaint.

The complaint alleges that Plaintiffs are insurance brokers (¶¶ 18-19) and Defendants are insurance brokerage companies (¶ 20); in August 2011 RCA and Defendants entered into a “Producer Independent Contractor Agreement” (¶ 2, Ex. A) in which RCA would refer prospective insurance customers to Defendants in exchange for commissions (¶ 22); on 1/29/14 RCA terminated its contractual business relationship with Defendants (¶¶ 4, 27); on 1/30/14 Crane became an employee of Willis Insurance Services of California Inc. (¶¶ 5, 28); on 2/26/14 Defendants filed an action against Plaintiffs in the US District Court for the Southern District of New York, alleging a violation of the non-competition and non-solicitation provisions of the Producer Agreement (¶ 25); the Producer Agreement contains a forum selection provision designating New York (¶ 26).

Defendants move to dismiss this action on the ground that the forum selection clause of the Producer Agreement requires Plaintiffs’ claims to be heard in New York. Defendants’ motion is made under CCP §410.30(a), which permits the court to stay or dismiss an action if the court finds “that in the interest of substantial justice an action should be heard in a forum outside this state”.

The Producer Agreement states in relevant part that “Each party hereto expressly consents to the personal and exclusive jurisdiction of, and Party agrees that the venue for any dispute under this Agreement will be, in the State and Federal courts located in New York City, New York” (§10). This provision expressly requires venue for any dispute under the agreement to be in New York, and it is therefore a mandatory forum selection clause. See Cal-State Business Products v. Ricoh (1993) 12 Cal.App.4th 1666, 1680; Lu v. Dryclean-USA (1992) 11 Cal.App.4th 1490, 1492.

Contractual forum selection clauses are favored so long as they are entered into freely and voluntarily and their enforcement would not be unreasonable. America Online v. Superior Court (2001) 90 Cal.App.4th 1, 11. The party opposing the operation of a forum selection clause bears the burden of proof in challenging its enforcement. Smith, Valentino & Smith v. Superior Court (1976) 17 Cal.3d 491, 496; Cal-State Business Products, supra 12 Cal.App.4th at 1680.

Plaintiffs argue that the forum selection clause should not be enforced because it was offered on a “take it or leave it” basis and they had no choice but to accept it. The fact that a forum selection clause is contained in an adhesion contract is not alone sufficient to defeat its enforcement. See Cal-State Business Products, supra 12 Cal.App.4th at 1679. And in any event, Plaintiffs’ argument is not supported by the evidence. The evidence shows that the parties discussed the forum selection clause before the Producer Agreement was executed; Plaintiffs asked for a California forum, and Defendants rejected their position and insisted upon New York. The Producer Agreement was the product of negotiation between the parties, and there is no evidence of unfair use of superior power to impose the agreement upon Plaintiffs or that the forum selection clause was not within Plaintiffs’ reasonable expectations. See Cal-State Business Products, supra 12 Cal.App.4th at 1679; Bos Material Handling v. Crown Controls (1982) 137 Cal.App.3d 90, 108.

Plaintiffs also argue that the forum selection clause should not be enforced because Richard Crane is not a party to the Producer Agreement. But it is clear from the evidence that he was closely related to RCA and the contractual relationship. See Net2Phone v. Superior Court (2003) 109 Cal.App.4th 583, 588. Indeed Plaintiffs’ filings in the New York action concede a close relationship between Crane and RCA with respect to the agreement.

Plaintiffs also argue that enforcement of the forum selection clause would violate California’s public policy against enforcement of non-competition agreements. But the US District Court in New York will apply the governing law to resolve the parties’ disputes; and if California law governs, then BPC §16600 and other California law will be applied by that court.

In sum, Plaintiffs have not carried their burden to establish grounds for not enforcing the mandatory forum selection clause. In addition, it is appropriate to defer to the earlier-filed New York action under the principle of comity. See Caiafa Professional Law Corp. v. State Farm (1993) 15 Cal.App.4th 800, 804.

Defendants’ motion is granted, and this action is dismissed. The demurrer is moot.