Two-Layer Test for Choice of Law and Forum

Schmidt v. Trinut Farm Mgmt., Inc., No F083763 (D5 Jun. 27, 2023)

The published part of this opinion explains that when you have a contract that chooses both foreign law and a foreign forum, do decide whether the forum selection is valid, you need to first do the Nedlloyd/Restatement contractual choice of law analysis. There, the foreign law will be respected, so long as there’s either some connection between the chosen law and the parties or the transaction or some other rational reason to chose the foreign state’s law and the choice of law doesn’t violate some fundamental policy of California with a materially greater interest. And if that results in the application of the chosen law, it is that state’s law that determines the enforceability of the choice of forum. 

The parties here chose both Illinois law and forum. The Court does the Nedlloyd analysis, which comes out with Illinois law applying. California law on forum selection clauses asks primarily: (1) whether the chosen forum is “suitable”—whether some form of relief is available there; and (2) whether upholding the choice would impinge on some unwaivable benefit of California law. Illinois law, on the other hand, also considers typical common-law convenience factors like the location of the parties and access to the evidence. Those considerations have been largely rejected in California cases with a written forum selection because they are inconsistent with the agreement of the parties. And since the parties in this case didn’t really address those factors on appeal, the will need to do so on remand.

Reversed and remanded.