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Relying on a little-known, 74-year-old opinion, the Sixth District Court of Appeal recently held that contractual venue-selection clauses cannot be enforced to the extent that they conflict with California’s venue statutes. On Dec. 19, in Alexander v. Superior Court , 03 C.D.O.S. 11056, the court declined to enforce the venue-selection clause in a contract between a cellular service retailer and its sales representatives. The plaintiff, the Brix Group Inc., was an agent for various national cellular service providers with its headquarters in Santa Clara County. The defendants were sales representatives for Brix in Fresno County. Each signed an “agency agreement” with Brix, setting forth the terms of their relationship. The agreement provided, among other things, that “the construction, interpretation and performance of this agreement shall be governed by the laws of the State of California and each party specifically stipulates to venue in Santa Clara County, California.” Brix filed separate suits against the sales representatives for breach of contract in Santa Clara County, alleging that the venue was proper there pursuant to the parties’ written agreements. The sales representatives moved to transfer the venue. The trial courts denied the motions, each holding that the agreements’ venue-selection clauses were “valid and binding.” The sales representatives petitioned for writs of mandate, which the court of appeal considered together. On review, the court of appeals held that the trial courts wrongly relied on the venue-selection clauses in deciding the motions to transfer venue. The court issued peremptory writs of mandate ordering the trial courts to reconsider the motions according to California’s venue rules. The court began its opinion by noting the distinction between venue and forum. The venue is the county in which a case will be heard; the forum is a court or place of jurisdiction. Thus, a venue-selection clause “is purely an intrastate issue involving the selection of a county in which to hold trial,” whereas “a forum selection clause usually chooses a court from among different states or nations.” This distinction provides an important basis for the court’s analysis. After distinguishing venue from forum, the court turned its analysis to a 1929 California Supreme Court case rejecting venue-selection clauses, General Acceptance Corp. v. Robinson , 207 Cal. 285. The General Acceptance court stated two grounds for its holding. First, the court noted the then-prevalent concern with parties creating jurisdiction by consent through forum-selection clauses, which it analogized to agreements regarding venue. Second, the court feared that venue-selection clauses would inject confusion into the “legislature’s statutory venue scheme” and raise the specter of judge-shopping. Despite the jurisprudential evolution of the 74 years since General Acceptance , the Alexander court held that each of GeneralAcceptance‘s two grounds still support rejecting venue-selection grounds. First, recent cases upholding forum-selection clauses do not suggest that venue-selection clauses are similarly enforceable. The Alexander court recognized that the U.S. Supreme Court and the California Supreme Court have long enforced forum-selection clauses, as in Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), and Smith, Valentino & Smith, Inc. v. Superior Court , 17 Cal.3d 491 (1976). But the Alexander court found that the reasoning behind these decisions does not apply with equal force to venue-selection clauses. These cases were decided after the right for parties to freely contract began to eclipse the historical prohibition against parties attempting to “oust” courts of jurisdiction. In contrast, “venue” is distinct from “forum” and thus the decreased concerns over ousting a court of jurisdiction do not imply a lessened concern over upsetting the statutory venue scheme. Bremen and Smith also relied on the utility of forum-selection clauses in facilitating national and international business transactions. But “the commercial considerations supporting national and international forum selection clauses do not apply with equal force to an intrastate venue selection clause.” The court noted that, “although convenience may be an issue when selecting a venue, it is much less of a concern than it is in interstate and international disputes.” Second, deference to the legislature’s venue scheme is still a compelling basis for rejecting venue-selection clauses. The court observed that setting the venue “is the role of the legislature,” who “declared the public policy of this state with respect to the proper court for an action” in the venue statutes, California Code of Civil Procedure �392 et seq. Thus, the fear remains that enforcing venue-selection clauses will allow parties to “disrupt the statutory scheme and bring the administration of justice into disrepute in order to have their cause heard where they believe it will be received most sympathetically.” After addressing both of GeneralAcceptance‘s grounds, the Alexander court acknowledged that in 74 years, no court has “relied on General Acceptance to strike down a venue selection clause.” But the court also noted that no court had expressly overruled General Acceptance and no case has held a venue-selection clause (as opposed to a forum-selection clause) to be enforceable. Because ” General Acceptance has survived this 74-year gap in the law,” the court was “bound to follow it.” In reaching its surprising decision, the Alexander court overplays the distinction between venue and forum. That a distinction exists is evident. But the reasoning behind the “modern trend” enforcing forum-selection clauses equally supports enforcing venue-selection clauses. First, the same concern for convenience and desire to allow parties to structure their affairs that encourages courts to enforce forum-selection clauses should encourage courts to enforce venue-selection clauses. A venue-selection clause provides more certainty to the contracting parties about the location of any ensuing litigation that the procedure that Alexander mandates — whichever party that files suit chooses the initial venue, then the other party moves to transfer venue (citing the applicable civil procedure sections), leading to an eventual judicial determination about which venue is proper and most “convenient.” Under Alexander , venue selection regresses from the certainty of clear contract language to the uncertainty of an outdated “race to the courthouse” and accompanying motion practice. Second, any concern about parties contracting to have disputes heard before sympathetic judges looms just as large with enforcing forum-selection agreements as it is with enforcing venue-selection agreements. It makes little sense to say, for example, that a Fremont corporation may include a clause in its contracts with customers nationwide setting the forum for any resulting disputes before the (presumably sympathetic) courts in California, but that the same company suddenly “brings the administration of justice into disrepute” by asking its customers to agree to a venue in Alameda County. Forum-selection clauses (and choice of law provisions, for that matter) can be just as favorable to a party as venue-selection clauses — perhaps much more so. And yet they are generally enforced. The counter-intuitive effect of Alexander is that parties are permitted to eliminate uncertainties by consenting to have their disputes resolved by a California court applying California law, but are forbidden from eliminating the uncertainty about which California court will do so. Rather than seeing Alexander as based on the distinction between venue and forum, it should be seen as another sign of California’s growing reticence to respect agreements regarding dispute resolution. In the past few years, California has set itself apart from other states in its growing reluctance to enforce parties’ agreements tailoring the litigation process to fit their needs. Courts have refused to enforce certain contract provisions calling for judicial review of arbitration decisions ( Crowell v. Downey Cmty. Hosp. Found., 95 Cal.App.4th 730 (2002); resolution by individual, not classwide, arbitration ( Szetla v. Discover Bank , 97 Cal.App.4th 1094 (2002)); resolution by a contractually designated dispute resolution board ( Sehulster Tunnels/ Pre-Con v. Traylor Bros, Inc., 111 Cal.App.4th 1328 (2003)); resolution by judicial reference ( Pardee Constr. Corp. v. Superior Court , 100 Cal.App.4th 1081 (2002)); resolution by arbitration under AAA Commercial Arbitration rules ( Gutierrez v. Autowest, Inc., 03 C.D.O.S. 10633 (Cal.App. Dec. 9, 2003)); and resolution by arbitration under Better Business Bureau rules ( Harper v. Ultimo , 03 C.D.O.S. 10501 (Cal.App. Dec. 5, 2003)). Courts have even struck down forum-selection clauses when certain consumer rights are at stake. ( America Online, Inc. v. Superior Court , 90 Cal.App. 1 (2001)). This philosophical trend better explains the result of Alexander — in which a corporation with offices nationwide attempted to enforce the dispute resolutions procedures in its contracts with its individual sales representatives — than does any distinction between venue and forum or the court’s unforeseeable deference to obscure 1920s jurisprudence. The Alexander opinion does not have to invoke phrases like “contract of adhesion” or “unconscionability” to reveal its philosophical underpinnings. Nathan R. Scottis a litigator at Cox, Castle & Nicholson in Irvine. He represents clients in complex civil litigation at the trial and appellate levels. He can be reached at [email protected]. • Practice Center articles inform readers on developments in substantive law, practice issues or law firm management. Contact News Editor Candice McFarland with submissions or questions at [email protected]or go to www.therecorder.com/submissions.html.

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