Corporations Code Section 25701 is California’s anti-waiver statute. It provides that “Any condition, stipulation or provision purporting to bind any person acquiring any security to waive compliance with any provision of this law or any rule or order hereunder is void.” What impact, if any, does this have on a forum selection agreement? Three decades ago, the California Court of Appeal reached the following conclusion:
California’s policy to protect securities investors, without more, would probably justify denial of enforcement of the choice of forum provision, although a failure to do so might not constitute an abuse of discretion; but section 25701, which renders void any provision purporting to waive or evade the Corporate Securities Law, removes that discretion and compels denial of enforcement.
Hall v. Superior Court, 150 Cal.App.3d 411, 418 (1983).
Recently, the issue arose again, but this time in U.S. District Court Judge Lucy H. Koh’s courtroom. She didn’t mention Section 25701 in her ruling and didn’t find Justice Crosby’s opinion in Hall to be controlling:
That case [Hall] does not determine the result here for several reasons. First, the parties agree that federal law, not California law, controls the question of enforceability of this forum selection clause. See Opp’n at 18; Reply at 8-9. Thus, California law on the applicability of a forum selection clause does not determine the result here. Second, under Ninth Circuit law, it is AJZN’s burden to establish that public policy requires the Court to set aside the forum selection clause. But AJZN has not even argued, let alone proven, that a Delaware court will be unable to protect the interests of California citizens. For instance, a Delaware court might apply California law to AJZN’s claims, and unlike in Hall, no party here has argued against such an outcome. A Delaware court might also apply some other law that would be equally protective of the interests of California citizens. Thus, AJZN has not met its burden to show that enforcing the forum selection clause here would contravene a strong California public policy.
AJZN, Inc. v. Yu, 2013 U.S. Dist. LEXIS 2943 (Jan. 7, 2013).