California Supreme Court

Where Can I Sue?

 

When Rachel Verdugo began working for Alliantgroup, L.P., she signed an employment agreement agreeing to file any employment-related lawsuits in Harris County, Texas, and agreeing that Texas law governed all disputes. Verdugo had to first address the question, Where Can I Sue? When Verdugo tried to sue in California, the trial court said she had to file in Texas.  Verdugo appealed contending the trial court erred because enforcing the forum selection clause and related choice-of-law clause violated California’s public policy on employee compensation.  The California court of appeal agreed and reversed the trial court’s order.

Where Can I Sue? Enforcing Forum Selection Clauses

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.

Verdugo based all her claims on Labor Code provisions that not only establish when and how employers must pay overtime and other forms of compensation, provide meal and rest breaks, and provide accurate wage statements to all California employees, but also establish specific remedies for an employer’s violation of these provisions, including recovery of unpaid wages, interest, civil penalties, and attorney fees.  To protect these important rights and remedies, the Labor Code declares they cannot be waived by agreement.

Alliantgroup failed to show enforcing the forum selection clause and related choice-of-law clause in Verdugo’s employment agreement would not diminish her statutory rights by requiring her to litigate her claims in Texas under Texas law.  Alliantgroup contended Verdugo’s statutory rights would not be affected by enforcing the forum selection clause because a Texas court “most likely” would reject the parties’ choice-of-law clause and apply California law.  Alliantgroup’s supposition about what a Texas court is likely to do was not sufficient to meet its burden because Alliantgroup’s arguments on appeal suggested it would argue against applying California law if the case was litigated in Texas, and Alliantgroup did not cite any authority that convinced the court that a Texas court would necessarily apply California law.

The few cases Alliantgroup cited did not address how a Texas court would view a choice-of-law clause in the context of a wage and hour dispute between a Texas employer and a California employee.  Alliantgroup did not address the competing policies of the two states.  Alliantgroup could have eliminated any doubt about which law would apply to Verdugo’s claims by stipulating to have the Texas courts apply California law, but failed to do so.  Instead, Alliantgroup carefully phrased its arguments in terms of vague possibilities while simultaneously seeking to minimize the significance of the California statutory rights on which Verdugo bases her claims.  Alliantgroup therefore did not show Verdugo’s unwaivable statutory rights would not be diminished.

Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.

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