iNearly four years ago, I wrote asking whether California’s anti-waiver statute voids choice of forum agreements. The statute in question was California Corporations Code Section 25701 which provides:
Any condition, stipulation or provision purporting to bind any person acquiring any security to waive compliance with any provision of this law or any rule or order hereunder is void.
Recently, the Franchise Law Committee of the Business Law Section of the California State Bar issued this e-Bulletin discussing the Court of Appeal’s recent opinion in Verdugo v. Alliantgroup, L.P., 2015 Cal. App. LEXIS 466 (May 28, 2015). In that case, the Court of Appeal reversed the trial court’s decision to enforce a forum selection clause in an employment agreement. The Court of Appeal summarized California’s approach as follows:
Although a party opposing enforcement of a forum selection clause ordinarily bears the burden to show enforcement would be unreasonable or unfair, the burden is reversed when the underlying claims are based on statutory rights the Legislature has declared to be unwaivable. In that instance, the party seeking to enforce the forum selection clause has the burden to show enforcement would not diminish unwaivable California statutory rights, otherwise a forum selection clause could be used to force a plaintiff to litigate in another forum that may not apply California law.
The Court of Appeal found that the employer’s speculation that the designated forum court would “most likely” apply California law was insufficient to meet this burden. It also suggested that it could have met this burden by stipulating to the application of California law.
As the Franchise Law Committee points out, “Although Verdugo is an employment law matter, the same rationale and analysis should apply to any dispute involving a non-waivable California statute . . .”.
