Yu v. Global Merchant Center



Filed 12/14/10 Yu v. Global Merchant Center CA2/1




NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS


California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.


IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

SOFIA LU YU et al., Plaintiffs and Appellants, v. GLOBAL MERCHANT CENTER, INC., et al., Defendants and Respondents.

B218388 (Los Angeles County Super. Ct. No. BC406339)

APPEAL from an order of the Superior Court of Los Angeles County. Luis A. Lavin, Judge. Affirmed.
James A. Shalvoy for Plaintiffs and Appellants.
Cotton & Gundzik, John W. Cotton and Lloyd Kadish for Defendant and Respondent FCStone and Spike Trading.
Severson & Werson, Jan T. Chilton and Daniel Shama for Defendant and Respondent Bank of America, N.A.
Brian Suelzer, in pro. per.; Frandzel, Robins, Bloom & Csato, Thomas M. Robins III and Tricia L. Legittino for Defendant and Respondent Brian Suelzer.
Gilchrist & Rutter, Christine A. Page and Yen M. Hope for Defendant and Respondent MF Global, Inc.
Sauer & Wagner, Eve H. Wagner, Vina Chin; Paul Weiss and Andrew Gordon for Defendant and Respondent Pioneer Futures, Inc.
Robert Hsu for Defendant and Respondent Stephanie Lin.
——————————
Plaintiffs Sofia Lu Yu, Candice Yu, Zhen Wang, and Jenny Jing Li Gong appeal an order staying this action on forum non conveniens grounds against defendants FCStone LLC (FCStone), Spike Trading, Inc. (Spike), MF Global, Inc., Pioneer Futures, Inc., Brian Suelzer and Bank of America pending resolution of a securities fraud action in the State of Illinois.^[1] Plaintiffs contend public policy prohibits the enforcement of the mandatory forum selection clause in their account agreements with defendants. We affirm.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Plaintiffs filed an action January 26, 2009 in Los Angeles County Superior Court stating claims against defendants for, among other things, securities fraud.^[2] On May 8, 2009, FCStone and Spike and the other defendants moved to dismiss or stay plaintiffs’ complaint against them on forum non conveniens grounds. The motion disclosed the following:^[3]
FCStone is a futures commission merchant registered pursuant to the Commodity Exchange Act (7 U.S.C. § 1 et seq.) and a member of the National Futures Association. FCStone’s center of operations is in Chicago, Illinois. FCStone conducts business worldwide. As a clearing firm, FCStone transacts (clears) trades on all United States exchanges for, among other things, brokers known as introducing brokers that cannot execute trades directly. Spike is a guaranteed introducing broker of FCStone. Chicago, Illinois is where all of the relevant business between FCStone and Spike was conducted; Spike’s only office is located in Chicago.
Between 2003 and 2005, Michael Chen, the principal of U Win Investment, Inc. (U Win) and Global Merchant Center, Inc. (GMC) convinced plaintiffs to invest sums of money with him in commodities futures and options transactions under Chen’s management. Plaintiffs, who are all California residents, signed agreements with Chen to manage their money. Chen could not execute commodities or options transactions directly on an exchange, and therefore opened accounts with brokers who could execute such transactions. Chen assisted plaintiffs in opening accounts with exchange brokers, and ultimately all of these accounts were opened with defendant FCStone. Plaintiffs all signed these agreements.
Chen told plaintiffs he had over 20 years investment experience and he would only use 20 percent of plaintiffs’ capital investment, plaintiffs would be charged $35 per transaction, and Chen would be responsible for losses in excess of 20 percent of plaintiffs’ investment. Although the plaintiffs all signed agreements with FCStone, they claimed they did not read or understand the agreements because they did not speak English. Plaintiffs also assert that each of them had several other FCStone accounts for which no agreement was executed. Plaintiffs never received any statements, but Chen assured them their accounts were profitable. However, plaintiffs’ accounts had lost substantial value.
In March 2008, Sofia Lu and Zhen Wang requested a partial withdrawal of funds on deposit. Chen promised he would do so, but in March 2008, Chen committed suicide. Jenny Gong subsequently learned her account was depleted. Plaintiffs learned that Chen had requested withdrawals from their accounts, received checks payable to each of the plaintiffs, endorsed those checks over to himself, and deposited them into an account at Bank of America.
Due to the worldwide scope of its business, FCStone did not want to be involved in disputes with its introducing brokers and their clients in remote jurisdictions where it has no presence. Therefore, FCStone’s Customer Account Agreement, executed by all plaintiffs, provides a forum selection clause:
“Customer hereby expressly acknowledges that this Agreement is made in the State of Illinois (upon acceptance by [FCStone]), and further, that by virtue of trading commodity futures or options in the account established hereby, Customer is transacting business in the State of Illinois; accordingly, Customer hereby submits and consents to jurisdiction of his person in the Courts of the State of Illinois and, shall be amenable to service of summons and other legal process of, and emanating from, the State of Illinois. This Agreement’s validity, construction, and enforcement shall be governed by the laws of the State of Illinois. Customer hereby submits to the exclusive jurisdiction of such courts, and expressly waives to right to the adjudication or enforcement of such controversies by any court or any other tribunal sitting in any other jurisdiction, and further expressly waives the provisions of any statute or administrative ruling defining a commodity or commodity contract to be a security. . . . CUSTOMER AGREES THAT ANY CONTROVERSY BETWEEN BROKER AND CUSTOMER ARISING OUT OF THIS AGREMENT, REGARDLESS OF THE MANNER OF RESOLUTION, SHALL BE ARBITRATED, LITIGATED (TRIED IN A COURT OF LAW), OR OTHERWISE RESOLVED BY A TRIBUNAL LOCATED IN CHICAGO, ILLINOIS.” In addition, the agreements provided that “[t]his agreement shall be continuous and shall cover, individually and collectively, all accounts of Customer at any time opened and/or accounts from time to time closed and then reopened with [FCStone] . . . .”
The agreements also contained a unilateral attorneys’ fees provision stating that “Customer agrees to pay all expenses, including attorneys’ fees, incurred by Broker: (a) to defend any unsuccessful claim Customer brings against Broker. . . .”
In support of their motion, defendants argued that under California law, the forum selection clause was valid, enforceable, and reasonable. The choice of forum, Illinois, had a rational basis because FCStone and Spike’s businesses were centered in Chicago, Illinois and Illinois law was fundamentally the same as California law on the issues raised in the complaint; there was no basis to reject the forum selection clause merely because it was contained in a form agreement because such a forum selection clause was within the reasonable expectations of the parties given the nature of the contract.
Plaintiffs opposed, arguing the agreements were invalid because their signatures were procured by Chen’s fraud because they did not speak English and did not read or understand the FCStone agreement, and he told him it was nothing more than a duplicate of their agreement with him. Further, enforcement of the agreements would be unreasonable because an Illinois forum would be unable to accomplish substantial justice for them because Illinois law did not mandate reciprocity of attorneys’ fees provisions; they could not waive by contract the provisions of Corporations Code section 25701 and therefore enforcement of the Illinois forum would violate California public policy. Lastly, they argued defendants had waived their right to enforce the forum selection clauses by making a general appearance.
In reply, defendants argued that plaintiffs could read English because they had communicated in English numerous times in writing and on the telephone with the defendants,^[4] and their negligence in failing to read the agreements themselves was not excused; enforcement of the forum selection clause would not be unreasonable because Illinois law governed under the agreement and therefore California law on attorneys’ fees was not applicable; plaintiffs are not entitled to protection of the California securities laws because commodities do not constitute a “security” under Corporations Code section 25019; and defendants could raise the forum selection clause at any time, and therefore did not waive it by their general appearance.
The trial court found that the FCStone forum selection clause was valid and had been agreed to by all plaintiffs.^[5] It found plaintiffs had not established the clause should not be enforced because they do not read, understand, or speak English, finding their purported lack of understanding not credible and given the extent of their knowledge of English, any reliance on Chen’s statements concerning the contents of the agreements was not reasonable. Further, the court found California securities laws did not apply to the commodity futures at issue. Finally, the court found defendants’ general appearance did not waive objections based on forum non conveniens. Accordingly, the court stayed the proceedings.^[6]
DISCUSSION
Plaintiffs argue that forum selection clauses are invalid in California where securities (which they traded in their accounts in addition to commodities) are involved (Hall v. Superior Court (1983) 150 Cal.App.3d 411, 417–418); an Illinois forum cannot accomplish substantial justice because Illinois law has no analog to Civil Code section 1717; and there are at least five accounts for which no FCStone agreements exist.
1. Forum Non Conveniens.
Forum non conveniens is an equitable doctrine that allows a trial court to decline to exercise jurisdiction if the action may be more appropriately and justly tried elsewhere. (Stangvik v. Shiley Inc. (1991) 54 Cal.3d 744, 751 (Stangvik); Code of Civ. Pro., § 410.30, subd. (a).)^[7])
A court ruling on a motion to stay or dismiss an action based on forum non conveniens engages in a two-step analysis. First, as a threshold matter, it must determine whether there is a suitable alternative forum. (Stangvik, supra, 54 Cal.3d at p. 752 & fn. 3.) A forum other than California is suitable if and only if the defendant is subject to jurisdiction in that forum, the statute of limitations in that forum would not bar the action, and the action would be adjudicated by an independent judiciary respecting due process of law. (Boaz v. Boyle & Co. (1995) 40 Cal.App.4th 700, 711 (Boaz).) The fact that the law of another forum is disadvantageous to the plaintiff or that the forum does not provide a remedy available in California does not make such a forum unsuitable. (Stangvik, at pp. 753–754 & fn. 5, 764; Boaz, at p. 711.)
The second step is to consider the private interests of the parties and the public interests in litigating the case in California. (Stangvik, supra, 54 Cal.3d at p. 751.) “The private interest factors are those that make trial and the enforceability of the ensuing judgment expeditious and relatively inexpensive, such as the ease of access to sources of proof, the cost of obtaining attendance of witnesses, and the availability of compulsory process for attendance of unwilling witnesses. The public interest factors include avoidance of overburdening local courts with congested calendars, protecting the interests of potential jurors so that they are not called upon to decide cases in which the local community has little concern, and weighing the competing interests of California and the alternate jurisdiction in the litigation. [Citations.]” (Ibid.; Smith, Valentino & Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491, 495–496 (Smith) [“No satisfying reason of public policy has been suggested why enforcement should be denied a forum selection clause appearing in a contract entered into freely and voluntarily by parties who have negotiated at arm’s length.”].) Smith further held that mere inconvenience and additional expense do not make a negotiated and voluntary choice of forum unreasonable. (Smith, Valentino & Smith, Inc., at p. 497.)
The plaintiff’s choice of a California forum is entitled to great weight, particularly if the plaintiff is a California resident. (Stangvik, supra, 54 Cal.3d at pp. 754–755.) The fact that the law of another forum is less favorable to a litigant than California law is not a valid consideration in balancing the private and public interests, and carries no weight. (Id. at pp. 754, fn. 5, 764.) The decision whether to grant the motion based on the balancing of private and public interests is a discretionary decision, subject to review for abuse of discretion.^[8] (Id. at p. 751.)
A trial court has the discretion to dismiss, rather than stay, an action by a California resident based on forum non conveniens only in extraordinary circumstances. (Archibald v. Cinerama Hotels (1976) 15 Cal.3d 853, 858 (Archibald).) Archibald rejected the argument that a trial court has the discretion to dismiss an action by a California resident based on forum non conveniens in any “case in which the foreign forum is very much more convenient.” (Ibid.) Instead, Archibald stated, an action by a California resident may be dismissed based on forum non conveniens only if “California cannot provide an adequate forum or has no interest in doing so.” (Id. at p. 859, fn. omitted.)
Here, under Stangvik, supra, 54 Cal.3d 744, Illinois is a suitable alternative forum. Plaintiffs’ action will be adjudicated by an independent judiciary—the state of Illinois—the courts of which indisputably will respect due process of law. (See Boaz, supra, 40 Cal.App.4th at p. 711.) Further, the private interests of the parties and the public interest in litigating in California do not require invalidation of the forum selection clause. The sources of proof and witnesses are in Illinois, where the offices of defendants are located and the transactions took place because plaintiffs’ claims against defendants are based upon the looting of their accounts by Chen and his fraudulent endorsement of their redemption checks, actions which took place in Illinois. Finally, the plaintiffs freely agreed to the forum selection clause in the contracts signed in an arm’s length transaction.^[9] Public policy alone does not justify denying enforcement to the FCStone forum selection clause, nor does the additional expense or inconvenience of requiring plaintiffs to litigate their claims against defendants in Illinois. (See Smith, supra, 17 Cal.3d at pp. 495–496.)
However, plaintiffs have asserted that the public policy embodied in Caifornia’s mutuality of attorneys’ fees clauses requires us to deny enforcement of the forum selection clause. Plaintiffs’ arguments are based upon choice of law issues that are separate and distinct from the issue of whether the forum selection clause may be enforced. Therefore, we do not consider them.
2. California Securities Laws.
Hall v. Superior Court, supra, 150 Cal.App.3d 411 does not apply to this dispute. In Hall, the court held that a forum selection clause could not be enforced so as to result in an evasion of the protections of California’s Corporate Securities Law of 1968 (Corp. Code, § 25000 et seq.). (Id. at p. 417.) Here, plaintiffs rely on Corporations Code section 25701, which applies when there is an offer to buy or sell securities in California, and provides that “[a]ny condition, stipulation, or provision purporting to bind any person acquiring any security to waive compliance with any provision of this law . . . is void.” However, the gravamen of plaintiffs’ claims against defendants is that they unwittingly aided and abetted Chen in his scheme to defraud them. Nothing in the record supports the conclusion that defendants engaged in the fraudulent purchase or sale of a security in California that caused plaintiffs’ losses; rather, Chen looted the accounts and forged the redemption checks, all without plaintiffs’ knowledge. Thus, the policy of protecting parties from fraud and deception in securities transactions in California would not be furthered by denying enforcement of the FCStone forum selection clause. (See Intershop Communications AG v. Superior Court (2002) 104 Cal.App.4th 191, 199–200 [finding no violation of public policy in enforcing forum selection clause in stock options exchange agreement where plaintiff had no claims based on California securities laws].)
3. Blanket Clause of FCStone Agreement Permits Enforcement of the Clause Against All Accounts.
Finally, plaintiffs’ argument that they opened accounts that were not covered by any FCStone agreement is without merit. The FCStone accounts for which plaintiffs signed an agreement contained a blanket provision providing that the agreement applied to any and all FCStone accounts they opened. Thus, the forum selection clause applies to all accounts plaintiffs had with FCStone.
DISPOSITION
The order of the superior court is affirmed. Respondents are to recover their costs on appeal.
NOT TO BE PUBLISHED.

JOHNSON, J.
We concur:

MALLANO, P. J.

ROTHSCHILD, J.
Publication Courtesy of California free legal resources.
Analysis and review provided by Spring Valley Property line Lawyers.
San Diego Case Information provided by www.fearnotlaw.com

---