Before analyzing the ultimate enforceability question, the Court first addressed a burden-shifting issue with respect to challenging a contract’s mandatory forum selection. Generally speaking, such a clause is given effect “unless enforcement would be unreasonable or unfair,” and the party opposing enforcement would have the burden of proving to the court why the provision should not be enforced.⁷ However, when the claims at issue relate to unwaivable rights under California law, the burden shifts to the party seeking to enforce the forum selection clause to show that the “foreign forum provides the same or greater rights than California, or the foreign forum will apply California law on the claims at issue.”⁸ The Court held that jury waivers constitute the type of unwaivable right that can trigger such a burden shift, and that LFG failed to satisfy that burden.

Ultimately, the Court held that:

1. The forum selection clause at issue here was unenforceable because enforcement of it had the “potential to contravene a fundamental California policy of zealously guarding the inviolate right to a jury trial, which is unwaivable by predispute agreements.”⁹
2. Enforcing the New York forum selection clause “will put the issue of enforceability of the jury trial waiver contained in the same agreement before a New York court … [and therefore] has the potential to operate as a waiver of a right the [California legislature and California Supreme Court] have declared unwaivable.”¹⁰
3. The forum selection clause is not enforceable “precisely because litigation in New York may diminish Handoush’s substantive right under California law.”¹¹

This case is of particular importance with regard to financing documents or industry-standard master agreements, which default to New York choice of law and forum paired with a waiver of jury trial. For these agreements, parties will need to consider whether a counterparty is a California resident and, if so, whether a choice of law and venue other than California and waiver of jury trial will diminish the counterparty’s substantive rights under California law. Further, this case could greatly reduce the ability to apply New York law and venue in commercial contracts if other jurisdictions follow the Court’s lead on this issue.

We note that the Handoush opinion is issued by an intermediate appellate court, and may or may not be appealed to the California Supreme Court.

1. Handoush v. Lease Fin. Group, LLC, No. A150863, 2019 WL 5615674 (Cal. Ct. App. Oct. 31, 2019).
2. Id. at *1. We note that the question of proper venue and jurisdiction in California was not raised on appeal and was not addressed by the Court. Handoush and his original co-plaintiffs asserted that they did business in Alameda County, California. Complaint at *1-*2, Handoush et. al v. Lease Fin. Group, LLC et. al., No. RG16800919 (Sup. Ct. – Alameda Jan 21, 2016).  While not strictly germane to the issue discussed in this client alert, we note this background and assume that jurisdiction and venue in California are otherwise appropriate in the underlying case.  
3. Handoush, supra note 1, at *1.
4. Id.
5. Id. Various California courts, including in cases cited in the Handoush opinion discussed here, have held that a predispute jury waiver is unenforceable under California law, and that the right to trial by jury is a fundamental right under California’s constitution. The enforceability of predispute jury waivers is not the subject of this client alert and so is not discussed at any length. Note that the parties did not contest, and the Court assumed that the jury waiver at issue would be enforced by a New York court under New York law.
6. Id. at *6.
7. Id. at *2.
8. See id. at *2-*3 (citing Verdugo v. Alliantgroup, L.P., 237 Cal.App.4th 141 (Cal. Ct. App. 2015)).
9. Id. at *5.
10. Id.
11. Id. at *6.