Will California Courts Enforce Your Choice of Law?
In Brack v. Omni Loan Company, Ltd., the Fourth District California Court of Appeal last week held that a Nevada choice of law provision in defendant's loan agreement was not enforceable, because "the application of Nevada law would conflict with fundamental California policy" and because "California had a greater interest in the parties' transaction than Nevada."
Defendant Omni, a Nevada corporation with its principal place of business in Nevada, provided a personal loan to plaintiff borrower Joshua Brack, a nonresident member of the military stationed at California's Camp Pendleton. Omni's loan agreement contained a choice of law provision in favor of Nevada law. Brack repaid the loan in full in 2002.
In 2003, Brack filed a class action against Omni, alleging violations of the California Finance Lenders Law (Fin.Code §22000 et seq.), the Consumers Legal Remedies Act ("CLRA") (Civ. Code §1750 et seq.) and California's Unfair Competition Law (Bus. and Prof. Code §17200). After a trial on Omni's Nevada choice of law defense, the trial court entered judgment in favor of Omni. Brack moved to set aside the judgment. The trial court denied the motion and Brack appealed.
The Court of Appeal reversed, holding that although the Nevada choice of law provision was reasonable, it was unenforceable because it conflicted with a fundamental public policy of California— the California Finance Lenders Law—in which California had a greater interest than Nevada.
The Court's conclusion that the Finance Lenders Law is "fundamental, unwaivable, and integrated," suggests that conflicting choice of law provisions will not be enforced by California courts. However, Brack also provides a factual backdrop for analyzing whether California has a greater interest than another state, which may be distinguished to save a choice of law provision.
Defendant Omni, a Nevada corporation with its principal place of business in Nevada, provided a personal loan to plaintiff borrower Joshua Brack, a nonresident member of the military stationed at California's Camp Pendleton. Omni's loan agreement contained a choice of law provision in favor of Nevada law. Brack repaid the loan in full in 2002.
In 2003, Brack filed a class action against Omni, alleging violations of the California Finance Lenders Law (Fin.Code §22000 et seq.), the Consumers Legal Remedies Act ("CLRA") (Civ. Code §1750 et seq.) and California's Unfair Competition Law (Bus. and Prof. Code §17200). After a trial on Omni's Nevada choice of law defense, the trial court entered judgment in favor of Omni. Brack moved to set aside the judgment. The trial court denied the motion and Brack appealed.
The Court of Appeal reversed, holding that although the Nevada choice of law provision was reasonable, it was unenforceable because it conflicted with a fundamental public policy of California— the California Finance Lenders Law—in which California had a greater interest than Nevada.
The Court's conclusion that the Finance Lenders Law is "fundamental, unwaivable, and integrated," suggests that conflicting choice of law provisions will not be enforced by California courts. However, Brack also provides a factual backdrop for analyzing whether California has a greater interest than another state, which may be distinguished to save a choice of law provision.
