IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

DAVID WEST et al, B095440

Plaintiffs and Appellants, (Super. Ct. No. BC 111 313)

v.

LLOYD'S et al.,

Defendants and Respondents.

________________________________

APPEAL from a judgment of the Superior Court of Los Angeles County. Dzintra Janavs, Judge. Reversed.

DeCastro, West & Chodorow, Inc., David T. Stowell and Richard S. Zeilenga for Plaintiffs and Appellants.

LeBoeuf, Lamb, Greene & MacRae, Dean Hansell, Aaron C. Gundzik, Allyson S. Taketa, Taylor R. Briggs, Sheila H. Marshall and Stephen Orel for Defendants and Respondents.

Appellants appeal after their action alleging securities violations under California law was dismissed upon respondents' motion to enforce a forum selection clause in the parties' contract. Appellants contend that the forum selection clause violates California's fundamental public policy against waivers of the protections afforded by its securities laws, and that the clause is therefore void. We agree, and reverse the judgment.

PROCEDURAL BACKGROUND

On August 23, 1994, appellants David, Deborah, and Susan West filed this action against "Lloyd's, also known as the Society of Lloyd's, also known as Lloyd's of London, a corporation, also known as the Corporation of Lloyd's, also known as the Society and Council of Lloyd's." The complaint alleged common-law fraud, as well as violations of provisions of the California Corporations and Insurance Codes relating to the offering for sale and sale of securities. The action was removed to federal court and remanded.

On November 30, 1994, respondents filed their "Motion to Dismiss for Improper Venue Based on Contractual Forum Selection Clauses and/or Forum Non Conveniens." Pending hearing on the motion, the trial court stayed all discovery. The motion was heard over three days, and on May 19, 1995, it was granted in open court, on grounds set forth orally by the court and on all the grounds stated in respondents' moving papers. Appellants brought a motion to reconsider, which was granted by the court, but after hearing, the court entered the same order, granting the motion anew.² Judgment was entered on July 27, 1995, dismissing the action, and appellants thereafter filed a timely notice of appeal.

FACTUAL SUMMARY

Appellants are California residents. Lloyd's operates an insurance business which has offices in London, England. Investors in Lloyd's, such as appellants, are referred to as "Names," and are members of syndicates organized by Lloyd's to underwrite insurance risks on which the Names are obligated. There are two types of Names: the "Working Names" are Names who take part in the day-to-day activities at Lloyd's; the "Passive" or "External Names" are passive investors, who take no part in directing affairs at Lloyd's, and who rely upon Lloyd's underwriting agents to manage their investment in the insurance issued by Lloyd's. Appellants are External Names. Names have unlimited potential liability, which is several, not joint. Appellants' potential liability was secured by letters of credit payable to Lloyd's. In addition, appellants were required to make periodic deposits to be held by Lloyd's.

Lloyd's has two types of agents: the "Managing Agent" employs an "active underwriter" who conducts the day-to-day business of accepting risks to insure, collecting premiums, and settling claims; the "Member's Agent" recruits Names for particular syndicates, solicits increased investment from them, and advises the Names with regard to their dealings with the Managing Agent.

Names remain potentially liable for losses for a particular underwriting year until it is closed. Closing is accomplished through reinsurance, at a time when the number and scope of potential claims is sufficiently certain. Some syndicates underwrite "short-tail" risks, which can usually be reinsured at the end of a three-year accounting period and others underwrite "long-tail" risks, which can result in claims which are too great to permit closing for a much longer period. A Name may not withdraw from a syndicate until its underwriting year is closed, and could therefore remain liable for that year's risks indefinitely.

In the late 1970's and early 1980's, Lloyd's sought to expand substantially the number of Names. At the same time, Working Names became increasingly aware of potentially huge, catastrophic claims for asbestos-related illnesses and deaths, and for environmental pollution and property damage related to the clean-up of contaminated real property. In spite of having substantial evidence that the asbestos claims would have an average impact on its syndicates, Lloyd's continued to form long-tail syndicates to underwrite the risks, without disclosing the information they had obtained. In addition, Lloyd's failed to obtain permits required by the California Insurance and Corporations Codes before soliciting investors and selling securities.

Appellant David West became a Name in 1973. His daughters, Susan and Deborah, became Names in 1983. Appellants' initial contact with Lloyd's was from their home: in California; Lloyd's mailed applications and other forms to them at their California homes, and appellants filled them out there and mailed them back. At the end of the application process, each of the appellants traveled to England for a five-minute interview, sometime after which they each signed an agreement ("undertaking"). At the time that appellants became Names, Lloyd's did not tell them that some syndicates could remain open after three years, exposing them to unlimited liability for an indefinite period, or that they could not resign so long as a syndicate remained open. Lloyd's assured appellants that the risk of unlimited liability was minimal. The undertaking that they initially signed did not contain a choice of law or forum selection provision.

In 1982, while soliciting more American investors, and knowing the long-tail syndicates were about to experience large numbers of asbestos and toxic clean-up claims, Lloyd's obtained the passage of a private bill in the British Parliament, excluding Lloyd's from certain regulatory laws relating to financial and insurance services and the raising of capital by British corporations. The bill also limited Lloyd's liability for damages. Lloyd's failed to tell the American Names, including appellants, about the anticipated claims or about the private bill.

Between 1982 and 1986, Lloyd's solicited many new Names and obtained increased participation from existing Names for the asbestos and toxic waste syndicates, without telling them of the increased risk. At the same time, without informing the External Names, the Working Names decreased their own participation in such syndicates, and increased their participation in more profitable syndicates which experienced few claims. Syndicates which should have been left open were closed by means of reinsurance underwritten by the new and increased participation of American Names. Appellants invested in several of these risky syndicates.

By 1986, Lloyd's knew that the asbestos claims were extensive enough to bankrupt most of the Names who were members of the syndicates which had underwritten them. Anticipating that American Names would file lawsuits, Lloyd's prepared a new form of undertaking, which it sent to all Member's Agents, instructing them that their Names were required to sign them in order to continue to be a Lloyd's underwriter. The new undertaking contained a choice of law and forum provision, providing that any action against Lloyd's must be brought in England under British law. In June, 1986, Lloyd's representatives met with appellants in Los Angeles, California, to solicit increased participation and to explain the new undertaking and other documents. Lloyd's did not reveal what it knew about the impending losses. Relying upon false representations that the undertaking merely confirmed the "existing situation," and faced with termination fees and potential liability with no right to share in profits if they did not sign, appellants signed the new undertaking. Appellants discovered the fraud in 1994.

In addition to a common-law cause of action for fraudulent concealment, appellants have alleged securities violations under the California Insurance Code (§§ 820-860) and the California Corporations Code (§ 25000, et seq.), and a violation of the Unfair Trade Practices Act (Civ. Code. § 1750 et seq.). In addition, appellants seek declaratory relief, finding the forum selection and choice of law provisions in the 1986 undertaking to be void.

A few days after respondents filed their motion to dismiss, appellants filed a First Amended Complaint, alleging essentially the same facts alleged in the original complaint.

Respondents' evidence in support of their motion to dismiss consisted of the declaration of their attorney, Dean Hansell, and four requests for judicial notice. The four requests for judicial notice attached copies of pleadings, exhibits, orders, judgments, and opinions excerpted from other actions involving respondents and parties other than appellants. Of these 450 pages of material, only Hansell's declaration contains facts which might be said to controvert any of the allegations of the complaint (although it consists mostly of argument and legal conclusions).³ The conflict relates mostly to the details of Lloyd's operations and organization. However, respondents' supporting evidence did not controvert appellants' allegations regarding fraudulent concealment, the sale of securities, or failure to comply with the license and permit provisions of the Insurance and Corporations Codes. Instead, respondents sought enforcement of the forum selection clause of the undertaking, relying by analogy on federal cases where violations of federal securities law were alleged, but forum selection contracts were enforced nevertheless. In the alternative, respondents' motion was made upon traditional forum non conveniens grounds of convenience of witnesses, cost, and availability of process.

Appellants' opposition to the motion to dismiss included certificates from the California Department of Corporations and the Department of Insurance stating that permits authorizing the offering or sale of securities had not been obtained by Lloyd's, Lloyd's of London, the Corporation of Lloyd's, The Society of Council of Lloyd's, or the Society of Lloyd's, and that there was no application pending for such permits. Attached to the declaration of Richard Zeilinga, appellants' counsel, were unauthenticated documents offered to show that once discovery is permitted, appellants will be able to prove the allegations of the complaint. Each of the appellants provided a declaration supporting various allegations of the complaint.⁴

The opposition to the motion also included the affidavit of Charles Anthony Hicks, a Solicitor of the Supreme Court of England and Wales, who has over 500 clients who are Lloyd's Names, and has ten years of experience in advising clients regarding their relationship with Lloyd's. Hicks stated that no Name has ever successfully sued Lloyd's for damages or rescission in England, and that under the Lloyd's Act of 1982, no cause of action against Lloyd's in tort is available, except personal injury, libel, or slander, unless the wrong was committed in bad faith, proof of which involves a very difficult burden. Fraudulent nondisclosure by Lloyd's is not an actionable wrong under English law because Lloyd's has been held to have no duty of disclosure to Names. Hicks further stated that it was his opinion that no English court would apply California securities law, whether or not it enforced the choice of law provision, and that appellants, as nonresidents of England, would be required to post a bond in the range of $1,000,000.

DISCUSSION

I

Respondents' motion was made on two grounds: enforcement of a contractual forum selection and choice of law provision; and noncontractual forum non conveniens, based upon the convenience of witnesses and other factors. The trial court granted the motion by enforcing the parties' contract, not on the noncontractual forum non conveniens ground.

The complaint and appellants' declaration state that appellants were California residents at all relevant times, a fact in no way disputed by respondents. It was therefore established that appellants were California residents, and the court had no power to dismiss the action on the noncontractual forum non conveniens ground. (See Beckman v. Thompson (1992) 4 Cal.App.4th 481, 487-488.) Respondents argue that now that it is shown that appellants are no longer residents of California, we should consider noncontractual forum non conveniens as an alternative ground for affirming the judgment.

In general, review of the correctness of a judgment granting a motion to change venue is made as of the time of its rendition. (Hansen v. Owens-Corning Fiberglas Corp. (1996) 51 Cal.App.4th 753, 761.) There is no indication that the evidence of appellants' changed residence, of which we previously agreed to take judicial notice, was presented to, passed on, or considered by the trial court. We therefore decline to give effect to such evidence. (See Noguchi v. Civil Service Commission (1986) 187 Cal.App.3d 1521, 1540.)

Even if we were to consider the evidence, we could not assume, as respondents suggest, that the court would have exercised its discretion by dismissing the action, rather than by staying it, or even that it would have done either. Respondent argues that the court's comments, made during the oral pronouncement of its ruling, indicates that it would have dismissed on the ground of forum non conveniens.⁵ We do not agree. (See Oldis v. La Societe Francaise de Bienfaisance Mutuelle (1955) 130 Cal.App.2d 461, 472.) "In considering whether to stay an action, in contrast to dismissing it, the plaintiff's residence is but one of many factors which the court may consider. The court can also take into account the amenability of the defendants to personal jurisdiction, the convenience of witnesses, the expense of trial, the choice of law, and indeed any consideration which legitimately bears upon the relative suitability or convenience of the alternative forums." (Archibald v. Cinerama Hotels (1976) 15 Cal.3d 853, 860.) There is no indication that the court considered any of these factors in relation to the propriety of dismissal, as opposed to a stay.

In any event, respondents bore the burden of proof on the noncontractual forum non conveniens motion (see Stangvik v. Shiley, Inc (1991) 54 Cal.3d 744, 751), and did not meet their burden. While respondents argue that most of the witnesses are in England, not subject to the jurisdiction of California courts, and they conjecture that many will no come to trial, they refer us to no evidence pertaining to who the witnesses are and why they will not or cannot testify in this state. Respondents rely upon the conclusions of several federal trial courts that the plaintiffs in those cases would not be deprived of all possible remedies, and that the trial would involve a "morass" of foreign regulatory law. But respondent has pointed out no evidence in this record to support its contentions, and certainly none upon which a court might exercise its discretion to dismiss, rather than stay the action. While it would not be reasonable to require detailed declarations at this stage of the litigation, the moving party must provide enough information to enable the court to balance the parties' interests. (See Piper Aircraft Co. v. Reyno (1981) 454 U.S. 235, 258.) Respondent did no do so.

II

Appellants contend, as they did in the trial court, that the forum selection and choice of law provisions in the Lloyd's undertaking are unreasonable and void as against public policy, because they violate Corporations Code section 25701, which provides, "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." Section 25701 has been held to invalidate a choice of foreign law and forum in a contract for the sale of securities. (Hall v. Superior Court (1983) 150 Cal.App.3d 411, 417.)

In general, contractual forum selection and choice of law provisions are upheld upon a defendant's motion absent a showing by the plaintiff that enforcement would be unreasonable, unless enforcement would contravene a fundamental policy of the state. (Nedlloyd Lines B.V. v. Superior Court (1992) 3 Cal.4th 459, 464; see also, Smith Valentino & Smith Inc. v. Superior Court (1976) 17 Cal.3d 491, 495-496.) When it is asserted that a statutory scheme prohibits the parties from choosing a non-California forum and waiving California law, the burden is on the defendant to show that litigation in the contract forum will not diminish any of the plaintiff's rights under California law. (See Wimsatt v. Beverly Hills Weight Loss Clinics International Inc. (1995) 32 Cal.App.4th 1511, 1532 [construing Corporation Code section 31512, a similar anti-waiver provision found in California's Franchise Investment Law])⁶ Respondents have not denied that membership in Lloyd's constitutes the sale of a security, or that the offer to sell and the delivery of the evidence of membership took place in California.⁷ Nor did respondents refute any of the allegations of the complaint to that effect, or contradict appellants' factual showing. Instead, they asserted, as they do here, that as a matter of law, the forum selection and choice of law provisions of the undertaking are valid and enforceable because of the international character of the transaction.

In Hall v. Superior Court, supra, 150 Cal.App.3d at page 418 (which did not involve an international contract), it was held that Corporations Code section 25701 renders void any contractual provision requiring the application of foreign law to a matter involving the violation of California securities law, and compels denial of enforcement of a concomitant choice of forum provision. The exact issue has not arisen in any subsequent published opinion, but the same court applied its rationale to a franchise investment contract. (Wimsatt v. Beverly Hills Weight Loss Clinics International Inc., supra, 32 Cal.App.4th at p. 1523) Respondents ask us to reject Hall and the analogy of Wimsatt, in favor of the reasoning of several federal decisions construing a similar anti-waiver statute under federal securities law to permit enforcement of the forum selection and choice of law provisions of the Lloyd's undertaking. (See, e.g., Allen v. Lloyd's of London (4th Cir. 1996) 94 F.3d 923; Shell v. R.W. Sturge, Ltd. (6th Cir. 1995) 55 F.3d 1227; Bonny v. Society of Lloyd's, supra, 3 F.3d 156; Roby v. Corporation of Lloyd's, supra 996 F.2d 1353; Riley v. Kingsley Underwriting Agencies, Ltds. (10th Cir. 1992) 969 F.2d 953, cert. denied, (1992) 506 U.S. 1021.)⁸

Respondents describe Hall and Wimsatt as departures from the holdings of the several federal courts, and suggest that they are outdated because Wimsatt relied upon Hall, and Hall relied upon Wilko v. Swan (1953) 346 U.S. 427, which was overruled by the Supreme Court in Rodriguez-De Quijas v. Shearson-American Express Inc. (1989) 490 U.S. 477, 484-485. However, Wilko and its subsequent history have no effect on the reasoning of Hall or Wimsatt. While Hall used Wilko and the similarity of federal securities law to illustrate its reasoning, it did not rely on it, as respondents contend. (See Hall v. Superior Court, supra, 150 Cal.App.3d at p. 418.) Wilko did not present choice of law issue, and the Supreme Court has not yet passed on the enforceability of a choice of foreign law in a securities contract. In overruling Wilko, the Court undertook the difficult task of reconciling two competing federal legislative policies, one embodied in the Arbitration Act, which strongly favors the enforcement of agreements to arbitrate, and the protections afforded by the Securities Exchange Act. (Rodriguez-De Quijas v. Shearson-American Express Inc., supra, 490 U.S. at pp. 479-480.) It held that a predispute agreement to arbitrate claims under the Securities Act was enforceable, but described its decision as requiring no more than submission to an arbitral, rather than a judicial forum, without requiring the parties to forgo the substantive rights afforded by the statute. (Id. at p. 481, citing Mitsubishi Motors Corp. v. Solar Chrysler-Plymouth, Inc., (1985) 473 U.S. 614, 628.)

Respondents contend that although no agreement to arbitrate is involved here, such agreements nevertheless provide an apt analogy, because they are "in effect, a specialized kind of forum-selection clause." (Scherk v. Alberto-Culver Co. (1974) 417 U.S. 506, 518.) Forum selection clauses in international contracts are generally upheld absent a competing strong public policy, since "agreeing in advance on a forum acceptable to both parties is an indispensable element in international trade, commerce, and contracting . . ." (M/S The Bremen v. Zapata Off-Shore Co. (1972) 407 U.S. 1, 15.) The federal policy in favor of arbitral dispute resolution applies with special force in the field of international commerce. (Mitsubishi Motors Corp. V. Soler Chrysler Plymouth Inc., supra, 473 U.S. at p. 615.)⁹ That important federal policy prevails over a state's interest in protecting investors, and prevents the state from applying Corporations Code section 31512 (the anti-waiver provision of the California Franchise Investment Law similar to Corporations Code section 25701) to invalidate an arbitration agreement in a contract affecting interstate commerce. (See Southland Corp. v. Keating (1984) 465 U.S. 1, 10.)

There is nothing in the reasoning of Rodriguez-De Quijas, Mitsubishi, Southland, Sherk, or The Bremen, to suggest that choice of law provisions in contracts with a foreign party involve a public policy akin to arbitration agreements, important enough to override the public policy of protecting investors. Indeed, the Supreme Court has given some indication that in a conflict between a choice of law provision and public policy favoring the application of federal law, the choice of law provision would not be enforced. Rodriguez-De Quijas was expressly limited to the selection of a forum, which was not anticipated to deprive the parties of any substantive rights afforded by the Securities Act, especially in light of the Securities and Exchange Commission's authority to oversee and to regulate arbitration procedures. (490 U.S. at pp. 481, 483; see also, Shearson American Express Inc. v. McMahon (1987) 482 U.S. 220, 231-234.) In Mitsubishi (which involved the application of federal anti-trust laws) the Court stated: "We . . ..note that in the event the choice of forum and choice of law clauses operated in tandem as a prospective waiver of the party's right to pursue statutory remedies for antitrust violations, we would have little hesitation in condemning the agreement as against public policy." (473 U.S. at p. 637, fn. 19.)

Our review of these Supreme Court cases compels the conclusion that under federal law, forum selection may prevail in a conflict between competing important public policies; both forum selection and choice of law may prevail when there is no conflict with public policy; but choice of law may not prevail in a conflict with a strong public policy favoring the application of a specific statutory scheme. Of the federal circuit cases construing the choice of law and forum selection clauses of the Lloyd's undertaking, the Ninth Circuit appears to be the only one which has recognized these principles. (See Richards v. Lloyd's of London, supra, 107 F.3d at pp. 1426-1428, recognizing a conflict with Allen v. Lloyd's of London, supra, 94 F.3d 923; Shell v. R.W. Sturge, Ltd., supra 55 F.3d 1227; Bonny v. Society of Lloyd's, supra, 3 F.3d 156; and Roby v. Corporation of Lloyd's, supra, 996 F.2d 1353.)

Drawing an analogy with forum selection agreements in cases arising under federal law thus fails to support the enforcement of the choice of law in the Lloyd's undertaking. In any event, appellants' cause of action is brought under California securities law, not federal law. In California, a choice of law clause will not be given effect where to do so would be contrary to a fundamental policy of a state, and where California has a materially greater interest than the chosen state in the determination of the particular issue. (Nedlloyd Lines B.V. v Superior Court, supra. 3 Cal.4th 459, 466.) The protection of its investors is a fundamental policy of this state, and by making the choice of foreign law void, the Legislature has deemed that California has a materially greater interest than other forums in the determination of issues involving the violation of its laws designed to protect its investors. (Hall v. Superior Court, supra, 150 Cal.App.3d 411, 418.)

Respondents suggest that the promotion of international commerce is a more important public policy than the protection of this state's investors, and that "[t]he expansion of American business and industry will hardly be encouraged if, notwithstanding solemn contracts, we insist on a parochial concept that all disputes must be resolved under our laws in our courts . . ." (See M/S The Bremen v. Zapata Off-Shore Co., supra, 407 U.S. at p. 9.)¹⁰ The general purpose of the Corporations Securities Act is to protect the public against fraudulent or unlawful stock and investment schemes and enterprises. (Daugherty v. Riley (1934) 1 Cal.2d 298, 305.) It is a "a bulwark against fraudulent practices of those who seek to gain from the ruin or expense of others," and must be enforceable against all businesses to be effective in its purpose. (People v. Hoshor (1949) 92 Cal.App.2d 250, 256.)

Respondents have not provided authority which suggests that the promotion of international commerce might outweigh the state's policy of protecting investors.¹¹ In essence, respondents desire that we enunciate an exception to the statute. However, the statute contains many specific exemptions. (Corp. Code, §§ 25100, 25102.) Additional exemptions may be made by rule promulgated by the Commissioner of Corporations (§25105) but respondents have not claimed any of them. Under the maxim of statutory construction, expressio unius est exclusio alterius, where exceptions to a general rule are specified by statute, other exceptions are not to be implied or presumed. (Wildlife Alive v. Chickering (1976) 18 Cal.3d 190, 195.) Any new exception, such as "promotion of international commerce," would have to come from the Legislature.

Respondents did not meet their burden to show that litigation in the contract forum would not diminish any of the plaintiff's rights under California securities law. (See Wimsatt, supra, 32 Cal.App.4th at p. 1523.) Indeed, it appears that California law would not be applied in England, and appellants would be deprived of all their rights under that statutory scheme, were this action to be tried there. Since the forum selection provision would result in the application of British law, it is therefore void, as well.

In general, a trial court's decision to enforce or not to enforce a forum selection clause is reviewed for an abuse of discretion (Bancomer v. Superior Court (1996) 44 Cal.App.4th 1450, 1457.)¹² However, since Corporations Code section 25701 renders void any provision purporting to waive or evade the Corporate Securities Law, the trial court's discretion is removed, and it must deny enforcement. (Hall v. Superior Court, supra, 150 Cal.App.3d at p. 418) Since we reserve on the ground that the choice of law and forum selection provisions are void, we do not reach appellants' other contentions.

DISPOSITION

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS

LILLIE, P.J.

We concur:

JOHNSON, J.

WOODS, J.

Footnotes:

Footnote 1: Each of the appellants also alleged causes of action in negligence and breach of fiduciary duty against the accountancy firm, Ernst & Young, which is not a party to this appeal.

Footnote 2. Although the declarant asserts that the declaration is made from his own knowledge, he states that it is a summary of materials he has reviewed relating to his representation of Lloyd's, including several federal-court opinions which set forth facts describing the structure of Lloyd's, most notably Roby v. Corporation of Lloyd's (2nd Cir. 1993) 996 F.2d 1353, 1357-1358 (cert. denied, (1993) 510 U.S. 945) and Bonny v. Society of Lloyd's (7th Cir. 1993) 3 F.3d 156, 158 (cert. denied (1994) 510 U.S. 1113). Appellants have not assigned the admission of the declaration as an error on appeal, although they objected to it in the trial court. We therefore assume, for purposes of this opinion, that the facts set forth in Hansell's declaration are true. However, disregarding his improper opinions and legal conclusions, we find no facts which are relevant to our discussions.

Footnote 3: It was not necessary to prove the truth of the allegations, or to establish that it is possible to prove them, as we will discuss within. We therefore do not summarize Zeilinga's declaration. Nor do we summarize those portions of appellants' declarations which support the allegations of the complaint.

Footnote 4: The court stated: "I do not think I need to really reach the question, the alternative grounds namely of forum non conveniens as to Lloyd's. I do think that the factors, or course, in my view, having reviewed -- if I had to reach it, I think that those factors, too, would be sufficient to grant either a stay or a dismissal based on that ground."

Footnote 5: A recent Ninth Circuit decision has rejected the reasoning of its sister circuits and has refused to enforce the Lloyd's choice of law and forum selection provisions as violative of the federal anti-waiver statute. (See Richards v. Lloyd's of London (9th Cir.1997) 107 F.3d 1422; 15 U.S.C. §§ 77n, 78cc.) Although we find Richards to be the better reasoned decision, as we will discuss within, we do not rely on any federal authority in coming to the conclusions set forth in this opinion.

We note that Riley, supra, involved only the enforcement of an arbitration agreement, and did not analyze the effect of the choice of British law.

Footnote 6: Respondents do not go so far as to argue that enforcement of its choice of law is required by the commerce clause of the United States Constitution. (U.S. Const., art. I. § 8, cl. 3.) The commerce clause prohibits local legislation which imposes a burden on foreign or interstate commerce which is clearly excessive in relation to the claimed local benefits. (Pacific Merchant Shipping Assn. v. Voss (1995) 12 Cal.4th 503, 517.) "State statutes, commonly known as "Blue Sky Laws," which prohibit the sale of stocks, bonds, notes, mortgages, and other securities, not only by corporations, but by all persons, partnerships, or aggregations of individuals, whether residents or nonresidents of the state, except on compliance with certain prescribed terms and conditions, are police regulations which affect interstate commerce only incidentally, and, in the absence of action by congress, are not invalid as contravening the commerce clause of the federal constitution." (Auslen v. Thomposn (1940) 38 Cal.App.2d 204, 212.) On several occasions, the United States Supreme Court has upheld the authority of States to enact "blue-sky" laws, (See e.g. Hall v. Geiger-Jones Co. (1917) 242 U.S. 539, 558; Coldwell v. Stoux Falls Stock yards Co. (1917) 242 U.S. 559, 567-568; Merrick v. N.W. Halsey & Co. (1917) 242 U.S. 568, 590.)

Footnote 7: Appellants contend that the appropriate standard of review is substantial evidence, as enunciated in the Third District Court of Appeal. (See Cal-State Business Products & Services, Inc v. Richo (1993) 12 Cal.App.4th 1666, 1680-1681.) However, the application of either standard would produce the same outcome in this case.

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