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Court Of Appeal Upholds Dismissal Of Purely Foreign Dispute

Seven years ago, I wrote about California's "million dollar contract" statute - CCP § 410.40.  That statute permits any person to maintain an action against a foreign corporation or nonresident person when the action arises out of, or relates to, any contract "for which a choice of California law has been made in whole or in part by the parties thereto" and the contract involves an aggregate value of at least $1 million.  By expressly permitting a party to maintain these actions, did the legislature intend that California courts must hear them?

In Quanta Computer v. Japan Communications, Inc., 2018 Cal. App. LEXIS 211, the Second District Court of Appeal held that Section 410.40 does not entitle a party to have its dispute heard in California because Section 410.30 "continues to afford a trial court discretion to dismiss the case for 'legitimate and substantial interests'".  Thus, the Court of Appeal found that the trial court had not abused its discretion in finding that suitable alternative fora exist and that California has no public interest in burdening its courts with an action lacking identifiable connection to the state.

I am inclined, however, to agree with Justice Lamar W. Baker's dissent:

The majority opinion presents a quite plausible argument that trial judges nevertheless retain some measure of discretion to decline to entertain a case that meets the Code of Civil Procedure section 410.40 criteria. But I see no reason on which the trial judge here could rely to dismiss this case that would not equally apply to any garden-variety Code of Civil Procedure section 410.40 case.  If the exceptions are not to swallow the Legislature's chosen rule, I believe the order of dismissal must be reversed.

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...