Forum Selection Clauses in California
April 22, 2025
In 2024, more than 1.2 million civil lawsuits were filed in California. While most of these suits were between U.S. residents, some of them grew out of international contracts. Some of these international contracts, in turn, contained forum selection clauses choosing the courts of a foreign country. In this post, I take a close look at when these forum selection clauses are enforceable as a matter of California state law.
I first review the common law test that California courts use to determine when such clauses should be given effect. I then discuss two different types of legislation—invalidating statutes and anti-waiver statutes—enacted by the California legislature directing courts not to enforce forum selection clauses. Finally, I consider the enforceability of forum selection clauses that choose the courts of California—rather than the courts of another jurisdiction—to resolve disputes.
Common Law
The California Supreme Court has long held, as a matter of state common law, that forum selection clauses are presumptively valid. The resisting party bears the burden of showing that a clause is unenforceable. A clause is unenforceable only if (1) enforcement would be unreasonable given the circumstances, or (2) enforcement is contrary to California public policy.
A survey of the relevant cases suggests that it is rare for California courts to conclude that a forum selection clause choosing the courts of another jurisdiction is unreasonable. California courts enforce forum selection clauses choosing the courts in a foreign country. They enforce clauses that are not reciprocal. And they enforce clauses in contracts of adhesion.
The caselaw tells a different story when it comes to public policy. California courts routinely conclude that forum selection clauses are unenforceable on this basis. In support of these decisions, the courts invariably cite laws enacted by the California legislature. To the extent that California has acquired a reputation for being hostile to forum selection clauses, this reputation is primarily attributable to these legislative actions.
Legislation
The California legislature has enacted many, many statutes that invalidate outbound forum selection clauses. These laws may be usefully sorted into two categories. Those in the first category prohibit the enforcement of outbound forum selection clauses in certain types of contracts. Those in the second category direct courts not to give effect to these clauses when enforcement will ultimately result in the waiver of non-waivable rights.
Invalidating Statutes
Under California state law, forum selection clauses choosing the courts of other jurisdictions are unenforceable when they appear in the following types of agreements:
- Beer Manufacturer/Wholesaler Agreements
- Equipment Dealer Contracts
- Franchise Agreements
- Child Support Contracts
- Construction Contracts
- Consumer Contracts
- Consumer Leases
- Consumer Credit Agreements
- Employment Agreements
On the one hand, these invalidating statutes eviscerate otherwise valid forum selection clauses. To the extent that these clauses were negotiated—and formed a part of the parties’ bargain—the statutes upend those deals. They introduce an unwelcome measure of uncertainty as to where disputes relating to the contract shall be resolved. Viewed through this lens, these invalidating statutes represent a heavy-handed attempt by the state to interfere with the ability of individuals to enter into private agreements.
On the other hand, these laws ensure that certain California-based plaintiffs can bring their claims in California courts even if an out-of-state counterparty insists on a forum selection clause choosing the courts of its home jurisdiction. The laws in the list above generally benefit franchisees, consumers, and employees—all of whom are said to have less bargaining power in contract negotiations. Viewed through this lens, these statutes represent a reasonable effort to protect California residents against one-sided contract terms.
Anti-Waiver Statutes
When the California legislature enacts a comprehensive statutory scheme conferring rights on in-state residents, it will sometimes specify that the rights so conferred are non-waivable. Here is an example of such an “anti-waiver” provision in the California Labor Code:
[N]o provision of this article can in any way be contravened or set aside by a private agreement, whether written, oral, or implied.
One can find similar language in state statutes relating to securities, consumer protection, jury trials, and franchise investments.
California courts have consistently refused to enforce outbound forum selection clauses when they believe that enforcement will ultimately lead to the waiver of a non-waivable right. The case of N.Z. et al. v. Fenix International Limited et al. nicely illustrates the logic of these decisions.
The plaintiffs, residents of California, brought a consumer class action against the company that operates the OnlyFans website. The company moved to dismiss the suit based on an exclusive English forum selection clause in its terms of service. The court held that the clause was unenforceable and denied the motion for two reasons.
First, the court noted that California public policy strongly favored consumer class actions. It observed that the law of England imposed limitations on class actions that would “substantially diminish” the rights of California residents to bring consumer class actions. It pointed out that an English court was likely to apply the less-protective English law because the terms of service contained an English choice-of-law clause. The court then concluded that the clause was unenforceable because requiring the plaintiffs to litigate in England would result in the waiver of a non-waivable right—the right to bring a consumer class action.
Second, the court held that the English forum selection clause was unenforceable because enforcement would deprive the California plaintiffs of the non-waivable right to a jury trial guaranteed by the California state constitution. It was uncontroverted that a civil jury trial would not occur in England if the case were to proceed there. Accordingly, the court held that the clause was also unenforceable on this basis.
It is important to note that an anti-waiver statute will not automatically result in the non-enforcement of a forum selection clause. If the law of the chosen jurisdiction provides protections that are equivalent to those conferred by California law, or if the court believes that courts in the chosen jurisdiction will apply California law, then the forum selection clause will be enforced. In cases where the law of the chosen jurisdiction is less protective, however, and where the courts in the chosen jurisdiction are unlikely to apply California law, the California courts will generally decline to enforce the clause because this will lead to the waiver of non-waivable rights.
State vs. Federal Practice
A recent empirical study found that state courts in California enforced outbound forum selection clauses in 80% of cases where the plaintiff challenged the validity of the clause. A different empirical study found that federal courts in California also enforced these clauses in 80% of similar cases. These studies suggest that there is no meaningful difference—at least in California—between state and federal practice when it comes to clause enforcement. The Ninth Circuit has repeatedly affirmed that federal courts sitting in diversity are obliged to enforce invalidating state statutes and to apply state anti-waiver statutes in the same manner as state courts. Other federal circuits, by comparison, have taken the position that federal courts may ignore these statutes, which has led to a sizable enforcement gap between state and federal courts outside California.
Inbound Clauses
The California legislature has made clear that forum selection clauses choosing the courts of other jurisdictions are not always enforceable. What happens, however, when the forum selection clause chooses the courts of California?
As a general rule, the enforceability of inbound forum selection clauses is assessed under the same common law test used for outbound clauses. The California legislature has, however, passed a law specifically directing the courts to enforce a clause choosing the courts of California when (1) the contract relates to a transaction involving at least a million dollars, and (2) the contract contains a California choice-of-law clause. The purpose of this law, at least in theory, is to attract high-dollar-value litigation business to California, thereby generating business for California lawyers, even when none of the litigants has any connection to the state.
Conclusion
It is entirely rational for the California legislature to enact laws that benefit in-state residents at the expense of their out-of-state counterparties. The only danger in pursuing this course of action is that it may make these counterparties hesitant to enter into contracts with California residents. To date, however, there is no evidence that the laws enacted by the California legislation have had that effect.
California is the largest U.S. state by population. If it were a country, it would rank as the fifth largest economy in the world, behind only the United States, China, Germany, and Japan. The notion that a foreign company would decline to do business in California because the state directs its courts to refuse to enforce forum selection clauses under certain circumstances is difficult to credit. The sheer size of the California marketplace, combined with the vanishingly small number of contracts that wind up in litigation, suggests that the state’s policies in this area are exceedingly unlikely to deter a foreign business from contracting with a California company.