More good news for companies. The California Supreme Court decided a case late last month – EpicentRx, Inc. v. Superior Court – that gives more comfort about forum selection clauses. As described in this Gibson Dunn memo, the case centered on the enforceability of a company’s mandatory forum selection clauses in its charter and bylaws. This excerpt summarizes the holding:

The California Supreme Court unanimously reaffirmed that forum-selection clauses are presumptively enforceable and rejected the argument that courts may refuse to enforce them when they would deprive plaintiffs of the right to a jury trial.

The memo explains that this decision may make parallel litigation less likely – and shares these takeaways:

• The Court explained that forum-selection clauses are presumptively enforceable, but made clear that there can be reasons of public policy to refuse to enforce them. The Court left for another day the question what those public-policy grounds for refusing enforcement might be; it decided only that the loss of a jury-trial right alone is not enough to invalidate a forum-selection clause.

• The Court suggested that the fundamental nature of a policy may be revealed by the Legislature’s inclusion of an antiwaiver provision in a statute. If a statute itself makes clear that the rights it conveys cannot be contracted away, the forum-selection clause may not be enforceable.

• The combination of forum-selection clauses and the perception that California law is more favorable to plaintiffs in certain types of cases has often resulted in parallel litigation, with one party suing in the forum chosen in an agreement and the other party suing in California. The Court’s decision may discourage the filing of California complaints where the only policy supposedly standing in the way of enforcing a forum-selection clause is the potential loss of the right to a jury trial.

• In cases where plaintiffs continue to sue in California notwithstanding a forum-selection clause pointing to another state, defendants may continue (1) filing motions to dismiss on grounds of forum non conveniens and (if unsuccessful) petitions for a writ of mandate challenging orders refusing to enforce forum-selection clauses; and (2) filing and litigating responsive suits in the forum chosen by the parties. In those cases, the parties will race in different jurisdictions to a final judgment that may have preclusive effect in the other case.

As Meredith enthusiastically noted last week, we’ll be discussing the practical impact of various “Delaware Hot Topics” at our upcoming “Proxy Disclosure & Executive Compensation” Conferences happening in Las Vegas and virtually on October 21-22. Here’s the agenda – and all the speakers. You can sign up online or reach out to our team to register by emailing info@ccrcorp.com or calling 1.800.737.1271. Hope to see you all there!

– Liz Dunshee