Judges, by Themselves, Can Decide Your Lawsuit Was Filed in the Wrong Court

photo-forum-300x200Courts are like private clubs. They can decide whether you and your lawsuit belong there. If not, you have to go elsewhere. Just because you’d like to have a legal dispute resolved in a particular court in a particular jurisdiction doesn’t mean that will actually happen, even if the other party agrees with your choice.
A Taiwanese company (Quanta Computer, Inc.) entered a contract concerning supplying cell phones made in China to a Japanese company (Japan Communications, Inc., or JCI), which sold them in Japan. Japanese law would apply to warranties and defects of the phone. Quanta supplied the phones, 14,246 of which were defective. There was an oral agreement Quanta would fix the phones and that JCI would make payments over time. Quanta accused JCI of not making the payments.

As part of the agreement both parties agreed that if there was a dispute over the contract the courts of the State of California was the “exclusive jurisdiction” for them to be resolved. JCI filed a lawsuit in Japan, Quanta filed one in Los Angeles.

Though the contract spells out that California is the agreed upon place for this dispute, does that mean the court is required to be the place to litigate the issue, given the lack of any contacts or relevance to the state? JCI filed in California court a motion asking the court to dismiss the case because it’s the wrong forum (“forum non conveniens” in legal speak). That means that though the court has the ability to make a decision on the issue (jurisdiction) it shouldn’t do so because it’s not practical, it lacks any contacts with the parties or the disputed transaction and the parties can go elsewhere.

The trial court agreed. The judge stated given the lack of connection to California, the court and taxpayer dollars shouldn’t be used to resolve the dispute. Quanta appealed the decision and the Court of Appeal of the State of California, Second Appellate District, Division Five, agreed with the trial court.

During contract negotiations, according to the appellate decision, JCI proposed Japan as the choice of law and forum for any disputes. Quanta disagreed and proposed Singapore. JCI, through its U.S. in-house attorney, rejected Singapore and proposed California. Quanta agreed because it was a neutral location.

Normally a party that states a dispute should be resolved in a particular jurisdiction or forum can’t complain when that’s where the lawsuit’s filed. So the appellate court looked at whether the judge could decide the issue on his own, whether or not there was a motion asking for a decision on the issue.

The court stated he could, citing Code Civ. Proc., §430.10(a), “When a court upon motion of a party or its own motion finds that in the interest of substantial justice an action should be heard in a forum outside this state, the court shall stay or dismiss the action in whole or in part on any conditions that may be just.”

The appeals court also ruled the judge didn’t abuse his discretion by dismissing the case. “Here, neither Quanta nor JCI are California corporations, nor do they have any connection to the state other than the forum selection clause, and California has no meaningful public interest whatever in retaining the action.”

You can’t wish your way into a particular court system to litigate an issue, even when the other party agrees on your choice. If two California companies are in dispute over a problem that’s entirely contained in California and the parties have no contacts elsewhere, that’s where a lawsuit should be filed.

If you have any questions about contract law or where a breach of contract lawsuit should be filed, contact our office so we can talk about the issue, how the law may apply and what you can do to protect your legal rights.