Nedlloyd Lines B.v. v. The Superior Court Of San Mateo County (Seawinds Limited)

834 P.2d 1148 (1992)

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Nature of the Case

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Facts

P is a shipping company undergoing a reorganization under chapter 11 of the United States Bankruptcy Code. P operates three container ships. It was incorporated in Hong Kong in late 1982 and has its principal place of business in Redwood City, California. Nedlloyd (D) and KNSM Lines B.V. (collectively referred to as Ds) are interrelated shipping companies incorporated in the Netherlands with their principal place of business in Rotterdam. In March 1983, Ds and other parties (including an Oregon corporation, a Hong Kong corporation, a British corporation, three individual residents of California, and a resident of Singapore) entered into a contract with P to purchase shares of P's stock. The shareholders' agreement contained the following choice-of-law and forum selection provision: 'This agreement shall be governed by and construed in accordance with Hong Kong law and each party hereby irrevocably submits to the non-exclusive jurisdiction and service of process of the Hong Kong courts.' In January 1989, P sued Ds, alleging Ds breached express and implied obligations under the shareholders' agreement. The complaint included causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing (in both contract and tort), and breach of fiduciary duty. Ds demurred in part because the shareholders' agreement required the application of Hong Kong law. P argued that California law should be applied to its causes of action. The court expressly determined that California law applied to all of the causes of action. Ds sought a writ of mandate from the Court of Appeal directing the application of Hong Kong law. The Court of Appeal denied the initial writ. The State Supreme Court granted Ds' petition for review and transferred the case back to the Court of Appeal with instructions to issue an alternative writ. In a published opinion, the Court of Appeal upheld the application of California law to P's claims. Ds' petition for review was granted.