The California Supreme Court's July 21 decision in EpicentRx, Inc. v. Superior Court resolves a longstanding uncertainty around enforcement of forum selection clauses under California law, holding that the absence of jury trial rights in the selected forum does not invalidate otherwise valid forum selection clauses. This ruling provides significant clarity for businesses by rejecting the approach taken in Handoush v. Lease Finance Group (2019), which had created confusion about whether forum selection clauses designating non-jury forums, such as Delaware's Court of Chancery, could be enforced against California parties, and thus, abrogating their right to a jury trial afforded to them under California law.
Background: When forum selection meets jury rights
The dispute arose from a corporate governance battle involving EpicentRx, Inc., a Delaware-incorporated biotechnology company with its principal operations in California. When a minority stockholder sued the company and its controlling interests for allegedly diverting funds for personal benefit, the defendants sought to enforce mandatory forum selection clauses in the company's governing documents that required disputes to be heard in Delaware's Court of Chancery.
The problem? Delaware's Court of Chancery, while recognized for its expertise in corporate law, operates as a court of equity without jury trials. The plaintiff (the company's minority stockholder) argued this would deprive it of jury trial rights it would otherwise enjoy in California courts, making the forum selection clause unenforceable under California's strong public policy favoring jury trials.
The lower courts' reasoning
Both the San Diego Superior Court and the California Court of Appeal sided with the plaintiff, relying heavily on two key precedents. First, Grafton Partners v. Superior Court (2005) established that pre-dispute jury trial waivers are unenforceable in California. Second, Handoush v. Lease Finance Group (2019) extended this principle to forum selection clauses, holding that defendants bear the burden of proving that litigation in the selected forum "will not diminish in any way the substantive rights afforded under California law." Under this framework, the lower courts treated the forum selection clause as essentially equivalent to a pre-dispute jury trial waiver—something California law prohibits, and ruled that the clause was unenforceable
The California Supreme Court's analysis
The California Supreme Court reversed, drawing a crucial distinction between jury trial waivers and forum selection clauses. Chief Justice Guerrero's opinion emphasized that the two serve fundamentally different purposes: "The former reflects where a dispute will be litigated, while the latter reflects how it will be litigated."
California's jury trial policy is forum-specific
The EpicentRx court clarified that California's strong public policy protecting jury trial rights applies specifically to California courts, not litigation in another forum, which in this case was Delaware's Court of Chancery. The constitutional and statutory provisions governing jury trials "concern the right to a jury trial in California courts, not elsewhere" and "do not reflect any public policy regarding the right to a civil jury trial in other forums."
The court reasoned: "When litigation proceeds in another forum, 'the jury trial right the parties enjoy in our courts would not travel with them.' Instead, '[t]he basic rule is well settled that matters of procedure are governed by the law of the forum,' including the right to trial by jury. Thus, 'the law of the forum determines whether an issue of fact shall be tried by the court or by a jury.' The California Constitution and related statutory provisions do not reflect any public policy regarding the right to a civil jury trial in other forums."
This geographic limitation makes sense from a practical standpoint. If California's jury trial policy prevented enforcement of any forum selection clause designating a non-jury forum (often Delaware), it would effectively invalidate most international commercial agreements and many domestic business contracts—a result that would harm California businesses and commerce.
The commercial importance of forum selection clauses
The court extensively discussed the vital role forum selection clauses play in modern commerce, particularly in international transactions. Citing the U.S. Supreme Court's landmark The Bremen v. Zapata Off-Shore Co. (1972) decision, the EpicentRx court noted that such clauses provide "vital certainty" to contracting parties and eliminate uncertainty about where disputes will be resolved.
The EpicentRx court's opinion illustrated this with a practical example: a California business contracting with a foreign company might agree to resolve disputes in the foreign company's home forum, even knowing that forum lacks jury trials, because the overall transaction benefits justify this trade-off. Under the lower courts' framework, such arrangements would be virtually unenforceable.
Distinguishing Handoush
The EpicentRx court disapproved Handoush entirely, explaining why jury trial rights differ fundamentally from the substantive statutory rights at issue in earlier appellate decisions. By contrast, California's jury trial provisions don't declare all pre-dispute jury waivers "void," they simply establish that California courts won't enforce them. This distinction matters because it means the policy is tied to California's court system rather than announcing a broader prohibition.
Practical implications for businesses
This decision provides significant benefits for California businesses and their counsel:
Greater certainty: Companies can now rely with confidence that properly drafted forum selection clauses will be enforced, even when they designate forums without jury trials like Delaware's Court of Chancery or emerging business courts in Texas and Nevada.
Delaware incorporation advantages: The decision particularly benefits Delaware corporations, as it removes a significant impediment to enforcing the forum selection clauses that are now standard in Delaware certificates of incorporation and bylaws.
International commerce: The ruling eliminates a barrier that could have made California businesses less attractive partners for international transactions requiring dispute resolution in foreign forums.
What the decision doesn't resolve
The Supreme Court deliberately limited its holding to the jury trial issue, leaving several questions for future litigation:
- Whether forum selection clauses were "freely and voluntarily negotiated at arm's length"
- The relevance of timing when clauses are adopted (here, apparently after the alleged misconduct)
- How jury trial considerations might factor into other public policy challenges to forum selection clauses
The court remanded these issues to the Court of Appeal, noting they weren't previously considered because the lower court found the jury trial issue dispositive.
Looking forward
EpicentRx represents a significant win for business certainty and contract enforcement in California. By clarifying that forum selection clauses shouldn't be invalidated solely because the selected forum lacks the right to a jury trial, the court has removed a major source of uncertainty that plagued commercial litigation.
For practitioners, the decision underscores the importance of carefully drafting forum selection clauses and considering potential challenges based on grounds other than jury trial availability. While this particular barrier has been removed, other avenues for challenging forum selection clauses—such as procedural unconscionability or fraud in the inducement—remain viable.
The decision also highlights California's continued commitment to enforcing commercial agreements while maintaining its strong protections for jury trial rights within its own court system, a balance that serves both business interests and individual rights.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
