On April 11, 2013, the Court of Appeal for the Fourth Appellate District in California modified its prior opinion regarding Battaglia Enterprises, Inc. v. Superior Court of San Diego County. The modification specifically changes the judgment related to the award of costs, stating that each party is to bear its own costs on appeal. All other aspects of the disposition remain unchanged.
Battaglia Enterprises, Inc. filed a lawsuit against Yard House USA, Inc. and related entities for breach of contract in the San Diego Superior Court. Yard House moved to transfer the case to Orange County based on a venue selection clause in their contract, which the trial court granted. Battaglia subsequently sought a writ of mandate, claiming the trial court improperly enforced the venue selection clause, arguing that such clauses are inherently void under California law, referencing the case General Acceptance Corp. v. Robinson (1929). The court disagreed with Battaglia's interpretation and upheld the trial court's decision to transfer the venue to Orange County.
The factual background indicates that Battaglia is a wholesale food distributor based in San Diego, and in 2010, it entered into a Master Foodservice Distribution Agreement with Yard House, which included a minimum annual purchase requirement of $15 million and a venue selection clause specifying that litigation must occur in Orange County. In early 2011, Yard House expressed dissatisfaction with Battaglia's performance under this agreement and sought to renegotiate certain terms.
On February 18, 2011, Yard House emailed Battaglia to terminate the 2010 MFDA contract ahead of its March 31, 2012 expiration. In April 2011, Battaglia invoiced Yard House for $2,169,041.10, claiming it represented the minimum payment based on a contractual obligation of $15 million in purchase volume. Yard House did not pay this invoice.
Battaglia filed a breach of contract complaint against Yard House in San Diego County Superior Court on January 11, 2012. In April 2012, Yard House moved to transfer the case to Orange County, citing a venue selection clause in the MFDA. After a full briefing, the trial court tentatively ruled in favor of the transfer and affirmed this at a hearing on November 16, 2012. Battaglia subsequently sought a writ of mandate to challenge the transfer order.
Before the scheduled oral argument, the parties settled, rendering the appeal moot, but the court retained jurisdiction due to the public importance of the issues raised. Battaglia contended that the trial court erred in enforcing the venue clause, arguing that a California Supreme Court ruling had voided such clauses as contrary to public policy. The parties agreed that the issue was a legal question subject to de novo review. Under California law, venue can be proper in multiple counties for corporate defendants, allowing plaintiffs some choice in filing. The presumption favors the venue chosen by the plaintiff.
The party requesting a change of venue must overcome the plaintiff's presumptively correct choice of court. The trial court determined that both San Diego County and Orange County are proper venues for the lawsuit, as the contract was formed in San Diego, and Yard House’s principal place of business is in Orange County. Typically, the plaintiff's choice of venue prevails when multiple venues are available. However, the parties' 2010 agreement stipulates that any litigation must occur in Orange County, which Yard House argues should be enforced, requiring Battaglia's choice of San Diego to yield to the agreed-upon venue. Battaglia contends that venue selection clauses are unenforceable due to public policy, citing a 1929 California Supreme Court case, General Acceptance. In that case, the court allowed a venue transfer from San Francisco to Alameda County, rejecting the plaintiff's argument that the contract's venue clause mandated San Francisco as the site for the trial. The Supreme Court ruled that such clauses could not override statutory venue requirements, emphasizing that jurisdiction is not subject to party agreement. Thus, venue selection clauses are only valid if they align with the legislative venue scheme, meaning they cannot establish venue in a county that is not proper under the law.
Battaglia's interpretation of General Acceptance is rejected, as it does not broadly invalidate venue selection clauses; instead, the specific contract in question was void due to improper venue selection under legislative rules. For 74 years, no California court has invalidated a venue selection clause based on General Acceptance, nor upheld one during that period. In 2003, the Alexander court referenced General Acceptance while granting a writ of mandate to transfer venue from Santa Clara County to Fresno County, where the defendants resided. The plaintiff's breach of contract action was filed in Santa Clara County, based on a contractual venue clause designating that location. The trial court had deemed Santa Clara County proper and denied the defendants' motion to change venue. The Alexander court clarified that section 395 governs venue for contract actions, establishing that if a defendant has a contractual obligation in a specific county, that county is a proper venue unless a special written contract states otherwise. In this case, since the contracts were entered into and obligations incurred in Santa Clara County, it was a permissible venue under the statute. The court evaluated the implications of General Acceptance in light of Smith, Valentino, Smith, Inc. v. Superior Court, noting that while Smith distinguished between forum and venue selection clauses, it did not outright invalidate General Acceptance's holding. The Alexander court reaffirmed that General Acceptance asserts a venue selection clause is void only if it disrupts statutory venue provisions. It acknowledged the concerns behind General Acceptance regarding potential disruptions to the statutory scheme that could undermine the administration of justice.
The venue selection clause in this case aligns with the permissible counties designated under section 395.5, adhering to statutory requirements. It does not establish a venue outside those allowed by law, thus maintaining the integrity of the statutory venue scheme. The precedent set by the General Acceptance case, which refused to enforce a venue selection clause, is not applicable here since the parties have mutually agreed to litigate in a statutorily permissible county. There is no compelling public policy argument presented by Battaglia against enforcing this clause. Consequently, when two sophisticated parties negotiate at arm's length to select a valid venue, their agreement should be honored. The venue selection clause in the 2010 MFDA is deemed valid and enforceable, and the trial court's decision to transfer the case to the agreed-upon venue is upheld. The petition is denied, the stay from December 18, 2012, is vacated, and the real parties in interest are entitled to costs in this matter.
