Yei Sun v. Advanced China Healthcare , 901 F.3d 1081 ( 2018 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
YEI A. SUN; LIPING M. SUN, No. 16-35277
husband and wife; HAIMING
OWEN SUN, an individual, D.C. No.
Plaintiffs-Appellants, 2:15-cv-01385-JCC
v.
OPINION
ADVANCED CHINA HEALTHCARE,
INC., a Cayman Islands
company; ALICIA KAO, an
individual,
Defendants-Appellees.
Appeal from the United States District Court
for the Western District of Washington
John C. Coughenour, Senior District Judge, Presiding
Argued and Submitted May 10, 2018
Seattle, Washington
Filed August 22, 2018
Before: Ronald M. Gould and Sandra S. Ikuta, Circuit
Judges, and John R. Tunheim,* Chief District Judge.
Opinion by Judge Ikuta
*
The Honorable John R. Tunheim, Chief United States District Judge
for the District of Minnesota, sitting by designation.
2 SUN V. ADVANCED CHINA HEALTHCARE
SUMMARY**
Forum Selection
The panel affirmed the district court’s dismissal of a
diversity action that was filed in Washington district court,
based on a forum-selection clause in share purchase
agreements requiring that any disputes related to the parties’
agreements be adjudicated in California state court.
The panel held that the plaintiffs had not carried their
heavy burden of showing the sort of exceptional
circumstances that would justify disregarding a forum-
selection clause. The panel applied federal contract law to
interpret the scope of the clause, and concluded that because
the plaintiffs’ dispute was logically connected to the parties’
agreements, it was subject to the forum-selection clause. The
panel rejected plaintiffs’ argument that applying the forum-
selection clause would contravene a strong public policy of
Washington in preserving its citizens’ remedies under the
Washington State Securities Act. The panel also rejected
plaintiffs’ contention that they would be deprived of their day
in court if they had to bring their case in California court.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
SUN V. ADVANCED CHINA HEALTHCARE 3
COUNSEL
Stephen C. Willey (argued) and Matthew H. Rice, Savitt
Bruce & Willey LLP, Seattle, Washington, for Plaintiffs-
Appellants.
Darren A. Feider (argued) and M. Edward Taylor, Sebris
Busto James, Bellevue, Washington, for Defendants-
Appellees.
OPINION
IKUTA, Circuit Judge:
Yei Sun, Liping Sun, and Haiming Sun were persuaded
by Alicia Kao to invest $2.8 million in Advanced China
Healthcare. The Suns entered into two Share Purchase
Agreements, each of which contained a forum-selection
clause that required any disputes “arising out of or related to”
the agreements to be adjudicated in California state court.
Notwithstanding the forum-selection clause, the Suns brought
suit against Kao under Washington securities law in a
Washington district court. The district court concluded that
the Suns were bound by the forum-selection clause, and
dismissed the action. Because the Suns have not carried their
heavy burden of showing the sort of exceptional
circumstances that would justify disregarding a forum-
selection clause, we affirm the district court.
I
According to the Suns’ complaint, in December 2010,
Kao met with the Suns in Seattle, Washington. Kao told the
4 SUN V. ADVANCED CHINA HEALTHCARE
Suns that she was the President of Advanced China
Healthcare, a company formed to provide Western-style
medical services (such as sports medicine, pain management,
and physical therapy) in China. According to Kao, Advanced
China Healthcare had received substantial investor funding as
well as all necessary licenses from the Chinese government,
and intended to open its first medical center in Shanghai in
2011. Kao made a number of other representations about the
status of the project to induce the Suns to invest in Advance
China Healthcare’s Series B offering. She told the Suns that
“all funds would be used for the development of medical
centers in China,” and stated that a healthcare venture capital
fund in Alabama had conducted extensive due diligence on
the project and was investing in the Series B offering.
While investigating this potential investment, the Suns
contacted Robert Claassen, who was a partner in Paul
Hastings, LLP, and the head of the corporate department in its
Palo Alto, California office. Claassen informed the Suns that
Advanced China Healthcare was a good investment in which
his firm and he himself had invested, and confirmed that the
Alabama venture capital fund had performed extensive due
diligence before investing.
Following these representations, the Suns executed two
separate, but identical, Series B Preference Share Purchase
Agreements and invested a total of $2.8 million in Advanced
China Healthcare. Both agreements included a forum-
selection clause, entitled “Jurisdiction; Venue,” which stated:
With respect to any disputes arising out of or
related to this Agreement, the parties consent
to the exclusive jurisdiction of, and venue in,
the state courts in Santa Clara County in the
SUN V. ADVANCED CHINA HEALTHCARE 5
State of California (or in the event of
exclusive federal jurisdiction, the courts of the
Northern District of California).1
At the closing, which took place in Paul Hastings’s Palo Alto
office, the Suns sent their funds via a wire transfer to Paul
Hastings’s account in Los Angeles, California.
According to the Suns’ complaint, several years after
closing, the Suns discovered that Kao had misled them. The
Suns alleged that they had been shown fabricated financial
records of Advanced China Healthcare. They also alleged
that Kao had not used their $2.8 million investment for the
development and opening of medical centers, but had
converted and misappropriated it for her own use or to cover
up her prior misappropriation of other investments.
The Suns sued Kao and Advanced China Healthcare in
Washington district court under § 21.20.430(1) of the
Washington State Securities Act (WSSA), which imposes
liability on a person who “sells a security in violation of any
provision[] of RCW 21.20.010.” Wash. Rev. Code
§ 21.20.430(1). Section 21.20.010 makes it unlawful for a
person to take certain fraudulent actions in connection
with the offer or sale of a security. A “person who directly
1
The agreements also contained a choice-of-law provision, which
stated:
This Agreement shall be governed in all respects by the
internal laws of the State of California as applied to
agreements entered into among California residents to
be performed entirely within California, without regard
to principles of conflicts of law.
6 SUN V. ADVANCED CHINA HEALTHCARE
or indirectly controls” such a seller may also be held liable.
§ 21.20.430(3).
On Kao’s motion, the district court dismissed the
complaint because the Share Purchase Agreements contained
a forum-selection clause that applied to the dispute, was valid
and enforceable, and required the dispute to be resolved in
California. The court conditioned its dismissal on several
requirements: Kao had to “submit to the jurisdiction of the
California court in which Plaintiffs file suit, so long as the
court is proper under the forum selection clause”; the statutes
of limitations on the Suns’ California and Washington state-
law claims had to remain tolled for the pendency of the
current lawsuit; Kao could not “argue that California
securities laws do not apply to the disputed transaction
because it occurred in Washington State”; and Kao had to
waive service of process.
The Suns timely appealed, arguing that the forum-
selection clause in the Share Purchase Agreements was not
enforceable. First, they argue that, as a matter of contract, the
forum-selection clause does not apply to their action.
Alternatively, they argue that the clause is not valid and
enforceable because their action under the WSSA embodies
an important public policy that cannot be waived, and
California is not an adequate alternative forum because it
deprives them of any remedy.
We have jurisdiction under 28 U.S.C. § 1291. We review
a district court’s dismissal of a complaint for failure to
comply with a valid and enforceable forum-selection clause
for abuse of discretion. Doe 1 v. AOL LLC, 552 F.3d 1077,
1081 (9th Cir. 2009) (per curiam). We review the district
SUN V. ADVANCED CHINA HEALTHCARE 7
court’s “application of the principles of contract
interpretation” de novo. Id.II
We first address the Suns’ argument that the Share
Purchase Agreements’ forum-selection clause does not apply
to their complaint. We apply federal contract law to interpret
the scope of a forum-selection clause even in diversity
actions, such as this one. Doe 1, 552 F.3d at 1081; Manetti-
Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509, 512–13 (9th
Cir. 1988). In interpreting a forum-selection clause under
federal law, “we look for guidance ‘to general principles for
interpreting contracts.’” Doe 1, 552 F.3d at 1081 (quoting
Klamath Water Users Protective Ass’n v. Patterson, 204 F.3d
1206, 1210 (9th Cir. 1999)); see also Manetti-Farrow,
858 F.2d at 513–14.
By its terms, the forum-selection clause here applies to
“any disputes arising out of or related to” the Share Purchase
Agreements. Accordingly, we must determine whether the
Suns’ claim that Kao violated the WSSA constitutes such a
dispute. We have held that forum-selection clauses covering
disputes “arising out of” a particular agreement apply only to
disputes “relating to the interpretation and performance of the
contract itself.” Cape Flattery Ltd. v. Titan Mar., LLC,
647 F.3d 914, 922 (9th Cir. 2011) (quoting Mediterranean
Enters., Inc. v. Ssangyong Corp., 708 F.2d 1458, 1464 (9th
Cir. 1983)). By contrast, forum-selection clauses covering
disputes “relating to” a particular agreement apply to any
disputes that reference the agreement or have some “logical
or causal connection” to the agreement. See John Wyeth &
Bro. Ltd. v. CIGNA Int’l Corp., 119 F.3d 1070, 1074 (3d Cir.
1997) (Alito, J.) (quoting Webster’s Third New International
8 SUN V. ADVANCED CHINA HEALTHCARE
Dictionary 1916 (1971)). The dispute need not grow out of
the contract or require interpretation of the contract in order
to relate to the contract. See Cape Flattery, 647 F.3d at 922;
Huffington v. T.C. Grp., LLC, 637 F.3d 18, 22 & n.2 (1st Cir.
2011) (explaining that the phrase “relating to” is synonymous
with the phrases “with respect to,” “with reference to,” “in
connection with,” and “associated with”); Coregis Ins. Co. v.
Am. Health Found., Inc., 241 F.3d 123, 128–29 (2d Cir.
2001) (Sotomayor, J.) (same).
Applying this framework, the Share Purchase
Agreements’ forum-selection clause covers the present suit.
Because the clause covers “any disputes . . . related to this
Agreement,” it applies to any dispute that has some logical or
causal connection to the parties’ agreement. Here, the Suns’
claim that Kao engaged in various fraudulent practices to
induce them to invest $2.8 million in Advanced China
Healthcare relates to the Share Purchase Agreements because
the Suns invested pursuant to those agreements. See
Huffington, 637 F.3d at 22 (holding that a forum-selection
clause covered state-law securities claims because the
plaintiff’s purchase of privately offered securities “could not
have been made without the agreement”); Carter’s of New
Bedford, Inc. v. Nike, Inc., 790 F.3d 289, 293 (1st Cir. 2015)
(holding that a claim for unfair competition fell within scope
of “in connection with” clause). Indeed, the Suns’ complaint
itself alleges that they executed the Share Purchase
Agreements “in reasonable and justifiable reliance on the
representations of Kao.” The Suns argue that their claims do
not relate to the Share Purchase Agreements because they are
challenging fraudulent conduct that occurred before the
agreements were executed by the parties. This argument is
belied by the Suns’ complaint itself, which alleges that Kao
is liable under the WSSA as a seller of securities (or as a
SUN V. ADVANCED CHINA HEALTHCARE 9
person controlling such a seller), which occurred when the
Suns entered into the agreements. Because the Suns’ dispute
is logically connected to the parties’ agreements, it is subject
to the forum-selection clause.
III
We next consider whether the forum-selection clause is
enforceable. “[T]he appropriate way to enforce a forum-
selection clause pointing to a state or foreign forum is
through the doctrine of forum non conveniens.” Atl. Marine
Const. Co. v. U.S. Dist. Court for W. Dist. of Tex., 571 U.S.
49, 60 (2013). In conducting this analysis, we are bound by
the Supreme Court’s direction in Atlantic Marine. Although
Atlantic Marine considered the enforceability of a forum-
selection clause under 28 U.S.C. § 1404(a),2 the Court
explained that § 1404(a) merely codified the doctrine of
forum non conveniens “for the subset of cases in which the
transferee forum is within the federal court system.” Id.
“[B]ecause both § 1404(a) and the forum non conveniens
doctrine from which it derives entail the same balancing-of-
interests standard, courts should evaluate a forum-selection
clause pointing to a nonfederal forum in the same way that
they evaluate a forum-selection clause pointing to a federal
forum.” Id. at 61.
Atlantic Marine provided the following approach for
analyzing the enforceability of a forum-selection clause. As
a general rule, “[w]hen the parties have agreed to a valid
2
28 U.S.C. § 1404(a) provides: “For the convenience of parties and
witnesses, in the interest of justice, a district court may transfer any civil
action to any other district or division where it might have been brought
or to any district or division to which all parties have consented.”
10 SUN V. ADVANCED CHINA HEALTHCARE
forum-selection clause, a district court should ordinarily
transfer the case to the forum specified in that clause.” Id. at
62. Unlike the situation where there is no forum-selection
clause,3 the plaintiff “must bear the burden of showing why
the court should not transfer the case to the forum to which
the parties agreed.” Id. at 64. The plaintiff’s subsequent
choice of forum merits no weight. Id. at 63–64.
Second, a court must deem all factors relating to the
private interests of the parties (such as the “relative ease of
access to sources of proof; availability of compulsory process
for attendance of unwilling, and the cost of obtaining
attendance of willing, witnesses; possibility of view of
premises, if view would be appropriate to the action; and all
other practical problems that make trial of a case easy,
expeditious and inexpensive”) as weighing “entirely in favor
of the preselected forum.” Id. at 64, 62 n.6 (quoting Piper
Aircraft Co. v. Reyno, 454 U.S. 235, 241 n.6 (1981)). While
a court may consider factors relating to the public interest
(such as “the administrative difficulties flowing from court
congestion; the local interest in having localized
controversies decided at home; [and] the interest in having
the trial of a diversity case in a forum that is at home with the
law,” id. at 64, 62 n.6 (alteration in original) (quoting Piper
Aircraft, 454 U.S. at 241 n.6)), those factors will rarely defeat
a transfer motion. Id. at 64.
3
According to Atlantic Marine, when there is no forum-selection
clause, a court “must evaluate both the convenience of the parties and
various public-interest considerations.” 571 U.S. at 62. “Ordinarily, the
district court would weigh the relevant factors and decide whether, on
balance, a transfer would serve ‘the convenience of parties and witnesses’
and otherwise promote ‘the interest of justice.’” Id. at 62–63 (quoting
28 U.S.C. § 1404(a)).
SUN V. ADVANCED CHINA HEALTHCARE 11
The practical result is that a forum-selection clause
“should control except in unusual cases.” Id. at 64. This
result is required, according to Atlantic Marine, because a
forum-selection clause “represents the parties’ agreement as
to the most proper forum.” Id. at 63 (quoting Stewart Org.,
Inc. v. Ricoh Corp., 487 U.S. 22, 31 (1988)). It “may have
figured centrally in the parties’ negotiations and may have
affected how they set monetary and other contractual terms;
it may, in fact, have been a critical factor in their agreement
to do business together in the first place.” Id. at 66.
Therefore, the “enforcement of valid forum-selection clauses,
bargained for by the parties, protects their legitimate
expectations and furthers vital interests of the justice system.”
Id. at 63 (quoting Stewart, 487 U.S. at 33 (Kennedy, J.,
concurring)). In short, “[o]nly under extraordinary
circumstances unrelated to the convenience of the parties”
should a motion to enforce a forum-selection clause be
denied. Id. at 62.
Atlantic Marine provides little guidance, however,
regarding what constitutes an “exceptional reason” or
“extraordinary circumstances” in which courts should not
give controlling weight to a valid forum-selection clause.
Therefore, we turn to the Court’s prior guidance on this issue
in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972).
M/S Bremen held that a forum-selection clause was
controlling unless the plaintiff made a strong showing that:
(1) the clause is invalid due to “fraud or overreaching,”
(2) “enforcement would contravene a strong public policy of
the forum in which suit is brought, whether declared by
statute or by judicial decision,” or (3) “trial in the contractual
forum will be so gravely difficult and inconvenient that [the
litigant] will for all practical purposes be deprived of his day
in court.” 407 U.S. at 15, 18; see also Petersen v. Boeing
12 SUN V. ADVANCED CHINA HEALTHCARE
Co., 715 F.3d 276, 280 (9th Cir. 2013).4 Here, the Suns do
not contend that the forum-selection clause in their
agreements is the product of fraud or overreaching, so only
the latter two exceptions are at issue. We view these
exceptions through the lens provided by Atlantic Marine.
A
The Suns first argue that applying the forum-selection
clause would contravene a strong public policy of
Washington in preserving its citizens’ remedies under the
WSSA. According to the Suns, the Washington legislature
declared such a public policy by including the following
antiwaiver provision in the WSSA: “Any condition,
stipulation, or provision binding any person acquiring any
security to waive compliance with any provision of this
chapter or any rule or order hereunder is void.” Wash. Rev.
Code § 21.20.430(5).
We rejected a similar argument in Richards v. Lloyd’s of
London, 135 F.3d 1289 (9th Cir. 1998) (en banc). In
Richards, citizens or residents of the United States sued a
foreign firm in California district court under federal and state
securities laws. Id. at 1291–92. Their investment agreement
contained a forum-selection clause requiring the parties to
adjudicate any disputes in “the courts of England” and under
“the laws of England.” Id. at 1292. The plaintiffs argued that
4
Our analysis of the M/S Bremen exceptions does not change when
the agreement includes a choice-of-law clause in addition to a forum-
selection clause. We generally treat the analysis as coextensive and
consider the clauses’ impact together. See, e.g., Barnett v. DynCorp Int’l,
LLC., 831 F.3d 296, 308–09 (5th Cir. 2016); Huffington, 637 F.3d at21–22; Richards v. Lloyd’s of London, 135 F.3d 1289, 1293–97 (9th Cir.
1998) (en banc).
SUN V. ADVANCED CHINA HEALTHCARE 13
the forum-selection clause did not apply due to the antiwaiver
provisions of the federal securities laws and the strong public
policy of preserving investors’ remedies under federal and
state securities laws. Id. at 1293–94.5 We first rejected the
plaintiffs’ argument that the antiwaiver provisions barred
enforcement of the forum-selection clause, holding, in effect,
that the strong federal policy in favor of enforcement of such
clauses superseded the statutory antiwaiver provision. Id. at
1294–95; see also id. at 1298 (Thomas, J., dissenting). In
reaching this conclusion, we relied on the fact that plaintiffs
could still pursue relief for fraud, breach of fiduciary duty, or
negligent misrepresentation under British law. Richards,
135 F.3d at 1296; see also Simula, Inc. v. Autoliv, Inc.,
175 F.3d 716, 723 (9th Cir. 1999) (enforcing a forum-
selection clause because the plaintiffs would have some
“reasonable recourse” in the foreign forum, even though they
could not bring claims under United States antitrust laws).6
5
The plaintiffs referenced two antiwaiver provisions of the federal
securities laws. Under 15 U.S.C. § 78cc(a), “[a]ny condition, stipulation,
or provision binding any person to waive compliance with any provision
of this chapter or of any rule or regulation thereunder, or of any rule of a
self-regulatory organization, shall be void.” Under 15 U.S.C. § 77n,
“[a]ny condition, stipulation, or provision binding any person acquiring
any security to waive compliance with any provision of this subchapter or
of the rules and regulations of the Commission shall be void.”
6
We note that we would give more weight to Washington’s public
policy interests if plaintiffs would be denied any relief in a California
forum. See Richards, 135 F.3d at 1296 (stating that “were English law so
deficient that the [plaintiffs] would be deprived of any reasonable
recourse, we would have to subject the [forum-selection and choice-of-
law] clauses to another level of scrutiny”); cf. Doe 1, 552 F.3d at 1084(holding a forum-selection clause unenforceable when a state court held
that enforcement would deprive California consumers of any remedy in
Virginia courts). This factor tracks the third M/S Bremen exception, that
“trial in the contractual forum will be so gravely difficult and inconvenient
14 SUN V. ADVANCED CHINA HEALTHCARE
Although Richards involved a forum-selection clause that
pointed to a foreign forum, the conclusion is equally
applicable when a clause points to a state forum. Atlantic
Marine made clear that the analysis of forum non conveniens
“entail[s] the same balancing-of-interests standard” regardless
whether a court is considering transferring an action to
another federal forum or to a non-federal forum. 571 U.S. at
61. Therefore “courts should evaluate a forum-selection
clause pointing to a nonfederal forum in the same way that
they evaluate a forum-selection clause pointing to a federal
forum.” Id. In referring to a nonfederal forum, Atlantic
Marine did not differentiate between a state or a foreign
forum, but rather focused on ensuring that parties obtained
the benefit of their bargain. Accordingly, we conclude that
the strong federal policy in favor of enforcing forum-
selection clauses would supersede antiwaiver provisions in
state statutes as well as federal statutes, regardless whether
the clause points to a state court, a foreign court, or another
federal court. See Atl. Marine, 571 U.S. at 66; Huffington,
637 F.3d at 25; Richards, 135 F.3d at 1296.7
that [the litigant] will for all practical purposes be deprived of his day in
court.” 407 U.S. at 18. We discuss this exception in more detail below.
See infra at 17–21.
7
Given that many state and federal statutes include antiwaiver
provisions, a rule that such provisions preclude enforcement of a forum-
selection clause would contradict Atlantic Marine’s general rule that
forum-selection clauses are enforceable except in the exceptional case.
See, e.g., 15 U.S.C. § 78cc(a); 15 U.S.C. § 77n; Ariz. Rev. Stat. § 44-
2000; Cal. Civ. Code § 1751; Cal. Corp. Code § 25701; Haw. Rev. Stat.
§ 485A-509; Wash. Rev. Code § 19.120.130; Wash. Rev. Code
§ 19.100.220.
SUN V. ADVANCED CHINA HEALTHCARE 15
Because an antiwaiver provision by itself does not
supersede a forum-selection clause, in order to prove that
enforcement of such a clause “would contravene a strong
public policy of the forum in which suit is brought,” M/S
Bremen, 407 U.S. at 15, the plaintiff must point to a statute or
judicial decision that clearly states such a strong public
policy. See Doe 1, 552 F.3d at 1078–79, 1081. In Doe 1,
plaintiffs sued in California district court alleging a violation
of the California Consumers Legal Remedies Act, Cal. Civ.
Code § 1770, despite being bound by a forum-selection
clause requiring that any action be brought in Virginia state
courts. We determined that a California appellate court
decision, America Online, Inc. v. Superior Court of Alameda
Cty. (Mendoza), 90 Cal. App. 4th 1 (2001), had clearly held
that such a forum-selection clause “contravenes a strong
public policy of California,” namely to “protect consumers
against unfair and deceptive business practices.” Id. at
1083–84 (quoting Mendoza, 90 Cal. App. 4th at 15, 17).
Accordingly, we concluded that the forum-selection clause in
Doe 1 was “unenforceable as to California resident plaintiffs
bringing class action claims under California consumer law.”
Id. at 1084.
Applying these principles here, we first reject the Suns’
argument that the WSSA’s antiwaiver provision per se
precludes enforcement of the forum-selection clause. As we
explained in Richards, an antiwaiver provision, without more,
does not supersede the strong federal policy of enforcing
forum-selection clauses. See, e.g., Huffington, 637 F.3d at
25; Richards, 135 F.3d at 1295–96. We next turn to the
Suns’ argument that two Washington state-court decisions
establish that enforcement of the forum-selection clause
would contravene a strong public policy of the state. See
Acharya v. Microsoft Corp., 189 Wash. App. 243, 254–57
16 SUN V. ADVANCED CHINA HEALTHCARE
(2015); Ito Int’l Corp. v. Prescott, Inc., 83 Wash. App. 282,
287–90 (1996). Neither case is sufficiently on point.
Acharya held that it would contravene Washington’s public
policy to enforce a forum-selection clause that would prevent
a plaintiff from pursuing her discrimination claim under the
Washington Law Against Discrimination. 189 Wash. App. at
255–56. While this judicial decision may declare the state’s
strong public policy in the state’s anti-discrimination law, it
does not support the Suns’ claim that Washington has a
similar policy with respect to its securities law.
The Suns’ reliance on Ito International Corp. v. Prescott,
Inc., is also misplaced. In Ito, the state court considered a
contractual choice-of-law provision which required certain
issues to be interpreted in accordance with Japanese law.
83 Wash. App. at 287–88. When considering whether to
enforce this provision as to the plaintiffs’ WSSA claims, Ito
first explained that “Washington courts will not implement a
choice of law provision if [1] it conflicts with a fundamental
state policy or [2] if the state has a materially greater interest
than the other jurisdiction in the resolution of the issue.” Id.
at 288–89 (emphasis added) (citing Rutter v. BX of Tri-Cities,
Inc., 60 Wash. App. 743, 746 (1991)). The state court
concluded that the second condition applied: “Here, the State
has a strong interest in applying its securities act to a
partnership involving several Washington defendants,
Washington plaintiffs, and property located in Washington.”
Id. at 289. Accordingly, the state court declined to enforce
the contractual choice-of-law provision. Instead, after
conducting a state choice-of-law analysis, it concluded that
“public policy favors the application of Washington law”
SUN V. ADVANCED CHINA HEALTHCARE 17
under the circumstances of that case.8 Id. at 290. Because the
state court did not find that the WSSA was “a fundamental
state policy,” but only that public policy favored applying
Washington law in the context of that case, Ito does not
constitute a judicial decision that enforcement of a forum-
selection clause would contravene a strong public policy of
the forum in enforcing the WSSA. Id.B
We now turn to the third M/S Bremen exception, which
asks whether “trial in the contractual forum will be so gravely
difficult and inconvenient that [the litigant] will for all
practical purposes be deprived of his day in court,” 407 U.S.
at 18. Although the Supreme Court has not directly
interpreted this exception, Atlantic Marine suggests it is
difficult to satisfy. Where the parties have agreed to a forum-
8
Ito observed that Washington had numerous other significant
contacts with the transaction, including:
(1) Ito International is a Washington corporation
owning nearly one-third of the shares, (2) all defendants
reside or conduct business in Washington, (3) the
investment involves Washington property, (4) the
building is managed under agreements which each
contain a Washington choice-of-law clause,
(5) Washington individuals guaranteed the 6.4 percent
rate of return, (6) the offering materials emanated from
Seattle, (7) selling and marketing activity occurred in
Seattle, (8) a Seattle attorney was involved in preparing
and reviewing many transaction documents, (9) a
cocktail party soliciting investors occurred in Seattle,
and (10) many of the acts of alleged fraud occurred in
Washington.
83 Wash. App at 289–90.
18 SUN V. ADVANCED CHINA HEALTHCARE
selection clause, they “waive the right to challenge the
preselected forum as inconvenient or less convenient for
themselves or their witnesses, or for their pursuit of the
litigation.” Atl. Marine, 571 U.S. at 64. A court must dismiss
a suit filed “in a forum other than the one specified in a valid
forum-selection clause,” even if it “makes it possible for
[plaintiffs] to lose out completely, through the running of the
statute of limitations in the forum finally deemed
appropriate.” Id. at 66 n.8 (alteration in original) (quoting
Norwood v. Kirkpatrick, 349 U.S. 29, 31 (1955)). “[W]hen
the plaintiff has violated a contractual obligation by filing suit
in a forum other than the one specified in a valid forum-
selection clause . . . dismissal would work no injustice on the
plaintiff.”9 Id. As the Fifth Circuit explained it, under
Atlantic Marine, courts must enforce a forum-selection clause
unless the contractually selected forum affords the plaintiffs
no remedies whatsoever. Weber v. PACT XPP Techs., AG,
811 F.3d 758, 774 (5th Cir. 2016); see also Barnett v.
DynCorp Int’l, LLC., 831 F.3d 296, 308 n.14 (5th Cir. 2016).
“It is the availability of a remedy that matters, not predictions
of the likelihood of a win on the merits.” Weber, 811 F.3d at
774.
9
Prior to Atlantic Marine, we refused to enforce a forum-selection
clause when a plaintiff “provided specific evidence sufficient to
demonstrate that he would be wholly foreclosed from litigating his claims
against [defendants] in a Saudi forum,” because he “lacked the resources
to litigate in Saudi Arabia” and was afraid “about returning to Saudi
Arabia.” Petersen, 715 F.3d at 281. It is not clear whether opinions
declining to enforce forum-selection clauses because of the claimed
obstacles to litigating in the contractually selected forum survive Altantic
Marine. We need not address this issue, however, because the Suns do
not argue that litigation in California would be impossible as a practical
matter.
SUN V. ADVANCED CHINA HEALTHCARE 19
Our precedent is in accord with the Fifth Circuit. Prior to
Atlantic Marine, we held that a clause remains enforceable
even when the contractually selected forum may afford the
plaintiffs less effective remedies than they could receive in
the forum where they filed suit. Richards, 135 F.3d at 1296.
Atlantic Marine confirms this conclusion, and establishes that
“the fact that certain types of remedies are unavailable in the
foreign forum does not change the calculus if there exists a
basically fair court system in that forum that would allow the
plaintiff to seek some relief.” Weber, 811 F.3d at 774.
We now turn to the Suns’ argument. According to the
Suns, the third M/S Bremen exception applies here because:
(1) California courts will not consider their claim under the
WSSA due to the choice-of-law provision in their contract;
and (2) they will not be able to bring a claim under California
securities laws because those laws apply only to conduct
occurring within California.10 We disagree that the Suns
would be unable to obtain any relief in a California court.
10
The relevant provision of California law states:
It is unlawful for any person to offer or sell a security
in this state or buy or offer to buy a security in this state
by means of any written or oral communication that
includes an untrue statement of a material fact or omits
to state a material fact necessary in order to make the
statements made, in the light of the circumstances under
which the statements were made, not misleading.
Cal. Corp. Code § 25401 (1968) (emphasis added). Although the law has
since changed, see id. § 25401 (2016), the law in effect at the time of the
transaction applies to the Suns’ suit, Cal. Corp. Code § 25704(a) (“[P]rior
law exclusively governs all suits, actions, prosecutions or proceedings
which are pending or may be initiated on the basis of facts or
circumstances occurring before the effective date of this law.”).
20 SUN V. ADVANCED CHINA HEALTHCARE
First, the Suns will have an opportunity to pursue both their
Washington and California securities claims without
opposition from the defendant. At oral argument in this case,
Kao committed to refraining from raising any argument that
the WSSA was inapplicable in California state court.11
Moreover, the district court ordered Kao not to contest the
applicability of California securities laws to the transaction at
issue, and the Suns may pursue a remedy in district court if
Kao violates that condition of dismissal. See Cooter & Gell
v. Hartmarx Corp., 496 U.S. 384, 396 (1990) (“A court may
make an adjudication of contempt and impose a contempt
sanction even after the action in which the contempt arose has
been terminated.”); Chambers v. NASCO, Inc., 501 U.S. 32,
44 (1991) (“[T]he power to punish for contempts is inherent
in all courts. This power reaches both conduct before the
court and that beyond the court’s confines[.]” (citation and
quotations omitted)).
Not only do the district court’s conditions of dismissal
and Kao’s commitment at oral argument mean that the Suns
may pursue a remedy under California and Washington
securities laws, supra at 20, but (as in Richards) the Suns also
“have recourse” under California common-law theories, such
as fraud or negligent misrepresentation. 135 F.3d at 1296.
Unlike with securities fraud, California law does not limit
common-law fraud or negligent misrepresentation to conduct
occurring within California. See Cal. Civ. Code §§ 1709–10.
California courts regularly permit plaintiffs to bring such
claims for securities transactions. See Small v. Fritz Cos.,
Inc., 30 Cal. 4th 167, 174 (2003) (explaining that California
11
See U.S. Court of Appeals for the Ninth Circuit, 16-35277, Sun v.
Advanced China Healthcare, Inc., YouTube 15:40–17:13, (May 10,
2018), https://www.youtube.com/watch?v=650qohdOnI8&t=940s.
SUN V. ADVANCED CHINA HEALTHCARE 21
courts have “entertained common law actions for fraud or
negligent misrepresentation” when “misrepresentations have
occurred in connection with the sale of corporate stock”).
Finally, the Suns would be able to bring claims under
California law for any alleged misrepresentations that
originated in Palo Alto. See Hall v. Superior Court, 150 Cal.
App. 3d 411, 417 (1983) (concluding that an offer to buy or
sell securities was likely made in California when in-person
and telephone negotiations occurred in the state).
Given that the Suns retain remedies under Washington
securities law, California securities law, and California
common law, they have not carried their heavy burden to
show that enforcement of the forum-selection clause would
deprive them of their day in court. Nor does enforcement of
the forum-selection clause contravene Washington’s public
policy of protecting investors and deterring securities fraud.
See Richards, 135 F.3d at 1296. Therefore, we conclude that
the district court did not abuse its discretion in dismissing the
complaint.12
AFFIRMED.
12
The Suns do not identify any public interest factors, such as
administrative difficulties or local interest, that would make this an
exceptional case in which the court should decline to dismiss the case
despite the presence of a valid forum-selection clause. See Atl. Marine,
571 U.S. at 62 n.6, 64.