Reed Smith Client Alerts

A California appellate court recently held a contractual forum selection clause unenforceable where the non-California forum may enforce a California party’s contractual waiver of rights that California law deems unwaivable.

Authors: Craig R. Enochs Catherine Young Hagerty James M. Pappenfus

On October 31, 2019, a California appellate court (the Court) held that the parties’ choice of New York forum for dispute resolution was unenforceable when combined with a predispute waiver of a nonwaivable right guaranteed by the California constitution, statutes, and case law interpreting the same.1

Handoush operates a cigar store and sued Lease Finance Group, LLC (LFG) for fraud and alleged various equitable causes of action arising out of a lease agreement related to credit card processing equipment.2 The lease agreement included the following routine provisions: (1) a choice of law provision applying New York law to the agreement; (2) a forum selection clause exclusively selecting the state and federal courts in the County of New York for all disputes; and (3) a mutual waiver of trial by jury.3

LFG moved the trial court to dismiss the case based on the exclusive forum selection clause and the trial court granted dismissal. Handoush appealed the dismissal.4 Handoush’s primary argument on appeal was that enforcement of the forum selection clause, and subsequent suit in New York, would circumvent his California constitutional right to a trial by jury.5 The Court agreed, reversed the trial court’s dismissal, and remanded the case to the trial court with instructions to deny LFG’s motion to dismiss.6