ANYTIME RENT A CAR, INC. VS NEXTGEAR CAPITAL, INC., ET AL.

Tentative Rulings

Case Number: 19STLC09088    Hearing Date: October 15, 2020    Dept: 26

Anytime Rent a Car, Inc. v. Nextgear Capital, Inc., et al.

MOTION TO STAY OR DISMISS [FORUM SELECTION CLAUSE]

(CCP §§ 410.30, 418.10(b))

TENTATIVE RULING:

Motion of Defendant Nextgear Capital, Inc., joined by Defendants Arrowhead General Insurance Agency Holding Corp. and YouZoom Insurance Services, Inc., to Stay or Dismiss Action Based on Forum Selection Clause is GRANTED. PLAINTIFF ANYTIME RENT A CAR, INC.’S COMPLAINT IS DISMISSED.

ANALYSIS:

On October 1, 2019, Plaintiff Anytime Rent A Car, Inc. filed the instant action against Defendants Nextgear Capital, Inc. (“Defendant NextGear”) Arrowhead General Insurance Agency Holding Corp. (“Defendant Arrowhead”) and YouZoom Insurance Services, Inc. (“Defendant YouZoom”). The Complaint alleges a single cause of action for breach of contract against Defendant NextGear and breach of implied-in-fact contract against Defendants Arrowhead and YouZoom. (Compl., pp. 3, 6.)

On November 20, 2019, Defendant NextGear filed the instant Motion to Stay or Dismiss Action Based on Forum Selection Clause (“the Motion”). Defendants Arrowhead and YouZoom filed a Notice of Joinder in the Motion on December 5, 2019. Plaintiff filed an opposition on October 1, 2020 and Defendant NextGear replied on October 8, 20202.

Discussion

Defendants move to stay or dismiss the action on the grounds that the contract between Plaintiff and Defendant NextGear includes a forum selection clause that provides for venue in Indiana. It is undisputed that the agreement contains such a clause:

As evidenced by Borrower’s signature below, Borrower submits to the personal jurisdiction and venue of the state and federal courts of Marion County and Hamilton County, Indiana, and agrees that any and all claims or disputes pertaining to this Note or any other Loan Document, or to any matter arising out of or related to this Note or any other Loan Document, initiated by Borrower against Lender, shall be brought in the state or federal courts of Marion County or Hamilton County, Indiana. Further, Borrower expressly consents to the jurisdiction and venue of the state and federal courts of Marion County and Hamilton County, Indiana, as to any legal or equitable action that may be brought in such court by Lender, and waives any objection based upon lack of personal jurisdiction, improper venue, or forum non conveniens with respect to any such action.

(Compl., Exh. 1, ¶21.) The Courts favor giving effect to contractual forum selection clauses. As explained by the California Supreme Court:

No satisfying reason of public policy has been suggested why enforcement should be denied a forum selection clause appearing in a contract entered into freely and voluntarily by parties who have negotiated at arm's length. For the foregoing reasons, we conclude that forum selection clauses are valid and may be given effect, in the court’s discretion and in the absence of a showing that enforcement of such a clause would be unreasonable.

(Smith, Valentino & Smith, Inc. v. Superior Court (1976) 17 Cal.3d 491, 495-496.) “Unreasonable” means the “forum selected would be unavailable or unable to accomplish substantial justice.” (Id. at 494.) Importantly, “neither inconvenience nor additional expense in litigating in the selected forum is part of the test of unreasonability.” (Id. at 496.)

Plaintiff initially argues that Defendants Arrowhead and YouZoom are also parties to this action and did not consent to the forum selection clause. (Opp., p. 3:3-5.) Defendants Arrowhead and YouZoom, however, have joined in the Motion and clearly do not oppose application of the forum selection clause. Additionally, Defendants Arrowhead and YouZoom are so closely related to the contractual relationship between Plaintiff and Defendant NextGear that it is reasonable for them to be subjected to the forum selection clause. This concern was addressed by the Court of Appeal:

The key to the closely related test is whether the nonsignatories were close to the contractual relationship, not whether they were close to the third party signator. This makes sense because the forum selection clause is part of the underlying contract, and it is the contractual relationship gone awry that presumably spawns litigation and activates the clause. Giving standing to all closely related entities honors general principles of judicial economy by making all parties closely allied to the contractual relationship accountable in the same forum, thereby abating a proliferation of actions and inconsistent rulings.

(Bugna v. Fike (2000) 80 Cal.App.4th 229, 235 (citing Ford Motor Co. v. Insurance Co. of North America (1995) 35 Cal.App.4th 604, 614).) This case law also addresses Plaintiff’s concerns about inconsistent adjudications by demonstrating that the forum selection clause at issue here makes it possible to bring an action against all three Defendants in the same forum.

Plaintiff’s opposition itself demonstrates that Defendants Arrowhead and YouZoom pass the closely related test. Plaintiff alleges that it entered into a Demand Promissory Note and Loan and Security Agreement with Defendant NextGear under which Plaintiff was required to obtain insurance for certain inventory and provide Defendant NextGear with the certificate(s) of insurance. (Opp., p. 3:3-5; Exh. 1, § 4(c).) Plaintiff allegedly complied with its obligations by obtaining insurance from Defendant Arrowhead’s subsidiary, Universal Underwriters Insurance Company. (Id. at p. 3:5-7.) Defendant YouZoom was the agent of record on the certificate of insurance. (Id. at p. 3:8.) Defendants Arrowhead or YouZoom was obligated to provide Defendant NextGear with proof of the certificate of insurance so that Plaintiff would not be enrolled and charged for Defendant NextGear’s Collateral Protection Program. (Id. at p. 3:8-11.) Despite having obtained insurance as required, Plaintiff was enrolled in Defendant NextGear’s Collateral Protection Program and charged $11,982.95. (Id. at p. 3:12-17.)

Plaintiff claims against Defendants Arrowhead and YouZoom are based on their obligations to ensure Plaintiff demonstrated compliance with its contractual obligations to Defendant NextGear. Without the loan agreement with Defendant NextGear, there would no basis for Plaintiff’s relationship with Defendants Arrowhead and YouZoom. Therefore, Defendants Arrowhead and YouZoom are closely related to the contractual relationship between Plaintiff and Defendant NextGear and equally subject to the forum selection clause. With all three Defendants subject to the forum selection clause, Plaintiff has not shown that enforcement of the clause would be unreasonable.

Conclusion

Motion of Defendant Nextgear Capital, Inc., joined by Defendants Arrowhead General Insurance Agency Holding Corp. and YouZoom Insurance Services, Inc., to Stay or Dismiss Action Based on Forum Selection Clause is GRANTED. PLAINTIFF ANYTIME RENT A CAR, INC.’S COMPLAINT IS DISMISSED.

Court clerk to give notice.