Court Opinion

ID: 6340729
Source: CourtListenerOpinion
Date Created: 2022-05-13 20:02:14.811455+00
Date Added: 2024-06-11T09:03:20.243430
License: Public Domain

Filed 5/13/22 Simonton v. Dropbox, Inc. CA1/4
                  NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or
ordered published for purposes of rule 8.1115.

          IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

                                      FIRST APPELLATE DISTRICT

                                                  DIVISION FOUR

 JON SIMONTON,
           Plaintiff and Appellant,
                                                                         A161603
 v.
 DROPBOX, INC.,                                                          (San Mateo County
                                                                         Super. Ct. No. 19-CIV-05089)
           Defendant and Respondent.

         Plaintiff Jon Simonton, individually and on behalf of others similarly
situated, appeals a judgment dismissing his action against Dropbox, Inc.
(Dropbox) alleging violations of the Securities Act of 1933, 15 United States
Code section 77k (hereafter the 1933 Act). He contends the court erred by
enforcing a provision in Dropbox’s bylaws that designates federal district
courts as the exclusive forum for claims under the 1933 Act. We find no error
and affirm the judgment.
                                                     Background
The 1933 Act
         The 1933 Act, which was enacted “[i]n the wake of the 1929 stock
market crash . . . to promote honest practices in the securities markets, . . .
require[s] companies offering securities to the public to make ‘full and fair
disclosure’ of relevant information.” (Cyan, Inc. v. Beaver County Employees
Ret. Fund (2018) 138 S.Ct. 1061, 1066.) To aid enforcement of those

                                                               1
obligations, the statute created private rights of action and authorized both
federal and state courts to exercise jurisdiction over those private suits.
(Ibid.; see 15 U.S.C. § 77v(a) [“The district courts of the United States . . .
shall have jurisdiction . . . concurrent with State and Territorial courts . . . of
all suits in equity and actions at law brought to enforce any liability or duty
created by this title.”].) “Congress also barred the removal of such actions
from state to federal court.” (Ibid. [“[N]o case arising under this title and
brought in any State court of competent jurisdiction shall be removed to any
court of the United States.”].) Finally, as relevant here, the 1933 Act contains
the following anti-waiver provision: “Any condition, stipulation, or provision
binding any person acquiring any security to waive compliance with any
provision of this title or of the rules and regulations of the Commission shall
be void.” (15 U.S.C. § 77n.)
      Dropbox
      Dropbox is a Delaware corporation headquartered in California that
specializes in digital file storage, such as cloud storage of documents and
photographs.
      In February 2018, in advance of its anticipated initial public offering
(IPO), Dropbox filed a public registration statement with the Securities
Exchange Commission.1 The statement advises, “Our amended and restated
bylaws will designate a state or federal court located within the State of
Delaware as the exclusive forum for substantially all disputes between us
and our stockholders, and also provide that the federal district courts will be
the exclusive forum for resolving any complaint asserting a cause of action

      1 Dropbox’s unopposed request for judicial notice of excerpts of the
registration statements it filed with the Securities Exchange Commission is
granted.

                                         2
arising under the Securities Act, each of which could limit our stockholders’
ability to choose the judicial forum for disputes with us or our directors,
officers, or employees.” (Italics omitted.)
      In March 2018, Dropbox filed an amended registration statement
advising potential purchasers that Dropbox had amended its bylaws to
include the following forum selection provision: “Unless the corporation
consents in writing to the selection of an alternative forum, the federal
district courts of the United States of America shall be the exclusive forum
for the resolution of any complaint asserting a cause of action arising under
the Securities Act of 1933.” The statement advises that the amended bylaws
would become effective immediately prior to completion of the IPO. The
registration statement also advised, “Any person or entity purchasing or
otherwise acquiring any interest in any security of the corporation shall be
deemed to have notice of and consented to [this] provision[].”
      Dropbox conducted its IPO on March 23, 2018.
      The Present Action
      Plaintiff’s complaint, filed in September 2019, alleges that the
registration statement issued in connection with the company’s March 2018
IPO was inaccurate and misleading and that plaintiff purchased Dropbox
Class A common stock “pursuant or traceable to” the registration statement.
The complaint alleges further that he sustained damages due to defendant’s
violation of the 1933 Act.2

      2 Plaintiff’s action was one of four filed in California state court that
were consolidated before the San Francisco County Superior Court. Although
plaintiffs in all of the proceedings appeared in the present appeal, plaintiffs
in three of the actions have been dismissed. In addition, two nearly identical
actions were filed in federal court by other stockholder plaintiffs and were
consolidated in the Northern District federal court. (Deinnocentis v. Dropbox

                                         3
      In May 2020, Dropbox filed a motion to dismiss based on the forum
selection provision included in its amended bylaws. Following briefing by the
parties, as well as by two amici curiae, and a hearing, the trial court granted
the motion to dismiss.
      Plaintiff timely filed a notice of appeal.
                                   Discussion
      “The proper procedure for enforcing a contractual forum selection
clause in California is a motion pursuant to [Code of Civil Procedure] section
410.30. [Citation.] That provision codifies the forum non conveniens doctrine,
under which a trial court has discretion to decline to exercise its jurisdiction
over a cause of action that it believes may be more appropriately and justly
tried elsewhere. [Citations.] Where a section 410.30 motion is ‘based on a
forum selection clause[,] . . . factors that apply generally to a forum non
conveniens motion do not control. . . .’ [Citation.] Instead, ‘the test is simply
whether application of the clause is unfair or unreasonable[; if not,] the
clause is usually given effect.’ ” (Drulias v. 1st Century Bancshares, Inc.
(2018) 30 Cal.App.5th 696, 703, fn. omitted (Drulias.).)
      Plaintiff challenges the trial court’s enforcement of the forum selection
provision on several grounds. Plaintiff argues: (1) the forum selection
provision is barred by the anti-removal and anti-waiver provisions of the
1933 Act; (2) Delaware’s statutory scheme, which permits a corporation to
adopt the forum selection provision, violates both the Supremacy and
Commerce Clauses of the United States Constitution; and (3) the forum
selection provision is not enforceable under California law.

Inc. (N.D.Cal., Jan. 16, 2020, No. 19-cv-06348-BLF) 2020 U.S. Dist. Lexis
8680 [consolidating Deinnocentis v. Dropbox Inc. (N.D.Cal., No. 3:19-cv-
06348-BLF) and Pikal v. Dropbox, Inc. (N.D.Cal., No. 3:19-cv-06360-BLF)].)

                                         4
      Plaintiff’s arguments regarding interpretation of the 1933 Act and the
constitutionality of the Delaware statutory scheme are reviewed de novo.
(Wunderlich v. County of Santa Cruz (2009) 178 Cal.App.4th 680, 694 [“The
interpretation of constitutional or statutory provisions presents a legal
question, which we decide de novo.”].) The court’s determination that the
forum selection provision is enforceable under California law is reviewed for
an abuse of discretion. (Drulias, supra, 30 Cal.App.5th at p. 704.)
      After this appeal was fully briefed and set for oral argument, Division
Two of this court issued its opinion in Wong v. Restoration Robotics, Inc. (Apr.
28, 2022, A161489) __ Cal.App.5th __ [2022 Cal.App. Lexis 366] (Restoration
Robotics). In that case, after the value of the plaintiff’s shares of stock in
defendant company dropped within months of the company’s initial public
stock offering, plaintiff brought an action alleging that the company’s offering
documents contained materially false and misleading statements in violation
of the 1933 Act. (Id. at p. __ [2022 Cal.App. Lexis 366 at p *1].) As in the
present case, defendant, a Delaware corporation, successfully moved to
dismiss plaintiff’s action based on a federal forum selection provision that
had been added to the company’s bylaws in advance of the public stock
offering. (Id. at p. __ [2022 Cal.App. Lexis 366 at p. *2].) In affirming the
judgment of dismissal, the court in Restoration Robotics rejected each of the
arguments raised by plaintiff in the present action. The parties were given
the opportunity to address Restoration Robotics in oral argument. As
discussed below, we agree with the reasoning set forth in Restoration
Robotics and accordingly shall affirm the judgment.

                                         5
1.    The 1933 Act does not bar enforcement of the forum selection
      provision.

      Plaintiff contends that enforcement of Dropbox’s forum selection
provision is barred by the anti-removal and anti-waiver provisions of the
1933 Act because the provision effectively waives a shareholder’s right to
bring an action in state court. Although the anti-waiver provision is worded
broadly, the United States Supreme Court has interpreted it as prohibiting
agreements to waive only substantive obligations imposed by the act.
(Rodriguez de Quijas v. Shearson/American Express, Inc. (1989) 490 U.S.
477, 481–482 (Rodriguez) [1933 Act’s provisions protecting plaintiff’s “right to
select the judicial forum” are “procedural provisions” not subject to the act’s
anti-waiver provision]; see also Shearson/American Express, Inc. v.
McMahon (1987) 482 U.S. 220, 227–228 (McMahon) [identical anti-waiver
provision in the Securities Exchange Act of 1934, 15 U.S.C. § 78a (Exchange
Act), “only prohibits waiver of the substantive obligations imposed by the
Exchange Act”].)3
      In McMahon, the court held that a predispute arbitration agreement
does not violate the anti-waiver provision of the Exchange Act. The court
explained, “What the antiwaiver provision . . . forbids is enforcement of
agreements to waive ‘compliance’ with the provisions of the statute. But [the
provision of the Exchange Act affording exclusive jurisdiction to the federal
courts] . . . does not impose any duty with which persons trading in securities
must ‘comply.’ ” (McMahon, supra, 482 U.S. at p. 228.) Accordingly, “its
waiver does not constitute a waiver of ‘compliance with any provision’ of the

      3 The anti-waiver provision of the Exchange Act reads, “Any condition,
stipulation, or provision binding any person to waive compliance with any
provision of this title . . . or of any rule or regulation thereunder, or of any
rule of a self-regulatory organization, shall be void.” (15 U.S.C. § 78cc(a).)

                                        6
Exchange Act.” (Ibid.) Two years later, relying largely on McMahon, the court
in Rodriguez held that a predispute agreement to arbitrate claims under the
Securities Act of 1933 was not barred by the anti-waiver provision of that act.
The court explained that “the right to select the judicial forum and the wider
choice of courts are not such essential features of the Securities Act that [the
anti-waiver provision] is properly construed to bar any waiver of these
provisions.” (Rodriguez, supra, 490 U.S. at p. 481.) The court differentiated
the substantive provisions of the 1933 Act from the procedural provisions,
including those that “grant . . . concurrent jurisdiction in the state and
federal courts without possibility of removal” and concluded that “[t]here is
no sound basis for construing the prohibition . . . on waiving ‘compliance with
any provision’ of the Securities Act to apply to these procedural provisions.”
(Id. at p. 482.)
      Although both McMahon and Rodriguez address enforceability of
arbitration agreements, the same analysis is applicable here.4 (See
Rodriguez, supra, 490 U.S. at p. 483 [describing arbitration agreements as
“ ‘in effect, a specialized kind of forum-selection clause’ ”].) Just as in those

      4 Contrary to plaintiff’s argument at oral argument, the absence of a
written agreement signed by plaintiff does not distinguish the agreement in
this case from the arbitration agreement in Rodriguez. It is well established
that a party purchasing stock in a Delaware company agrees to be bound by
the company’s bylaws. (See Drulias, supra, 30 Cal.App.5th at p. 708, citing
Roberts v. TriQuint Semiconductor, Inc. (2015) 364 P.3d 328, 337 [“When
purchasing stock in a Delaware corporation, shareholders buy into a legal
framework that allows corporate directors to unilaterally amend the
corporation’s bylaws and gives the shareholders the right to repeal those
bylaws.”]; North v. McNamara (S.D. Ohio 2014) 47 F.Supp.3d 635, 642,
fn. omitted [“shareholders . . . consented to the Delaware corporate
framework by buying shares in a Delaware corporation and agreeing to the
certificate of incorporation that allowed the board to unilaterally adopt
bylaws”].)

                                         7
cases, Dropbox’s forum selection provision displaces plaintiff’s procedural
right to bring an action in state court without fear of removal. It does not
waive Dropbox’s compliance with a substantive obligation under the act.
Accordingly, enforcement of the forum selection provision is not barred by the
anti-waiver provision of 1933 Act. (Restoration Robotics, supra, __
Cal.App.5th at pp. __ [2022 Cal.App. Lexis 366, at pp. *15–*18]; see also
Salzberg v. Sciabacucchi (Del. 2020) 227 A.3d 102, 132 (Salzberg) [noting
that the court in Rodriguez “held that federal law has no objection to
provisions that preclude state litigation of Securities Act claims”].)
      A different result would be reached if waiver of a procedural provision
resulted in the denial of a substantive right under the act. (See McMahon,
supra, 482 U.S. at p. 229 [waiver of a judicial forum may be barred where
arbitration is inadequate to protect the substantive rights]; see also Seafarers
Pension Plan v. Bradway (7th Cir. 2022) 23 F.4th 714, 724 [forum-selection
clause requiring that all derivative suits be brought in Delaware state court
was barred by anti-waiver provision where enforcement would foreclose
entirely plaintiff’s action under the Exchange Act].) However, requiring that
the action proceed in federal court does not interfere with any substantive
rights afforded plaintiff under the act.
      Finally, contrary to plaintiff’s suggestion, the forum selection provision
does not conflict with the anti-removal provision of the 1933 Act. (Restoration
Robotics, supra, __ Cal.App.5th at pp. __ [2022 Cal.App. Lexis 366, at
pp. *12–*15 ].) The anti-removal provision prohibits a seller of securities from
removing to federal court a 1933 Act action that a plaintiff has brought in
state court. The provision reflects the “long and unusually pronounced
tradition of according authority to state courts over 1933 Act litigation.”
(Cyan v. Beaver County Employees Ret. Fund, supra, 138 S.Ct. at p. 1073.) As

                                           8
Dropbox argues, however, it is not seeking to remove to federal court a case
properly filed in state court. It seeks to dismiss the action under Code of Civil
Procedure section 410.30 based on the validly adopted forum selection
provision. Moreover, just as the Supreme Court concluded in Rodriguez,
supra, 490 U.S. at page 483, that the concurrent jurisdiction authorized
under the 1933 Act can be waived in favor of arbitration, the anti-removal
provision can be deemed to have been waived by agreeing in advance to a
federal forum for all 1933 Act claims.
      Accordingly, the forum selection provision does not conflict with, and
thus is not barred by, either the anti-removal or anti-waiver provisions of the
1933 Act.

2.    Enforcement of the forum selection provision is not
      unconstitutional.

      Plaintiff contends the trial court should not have enforced the forum
selection provision because the Delaware statutory scheme under which the
forum selection provision was adopted is unconstitutional. He argues that
this court “should decline to prop up this unconstitutional scheme, and
should reverse the lower court.” He contends that section 102 of the Delaware
General Corporation Law (DGCL) violates the Supremacy Clause of the of
the United States Constitution by authorizing corporations to nullify the
state court jurisdiction authorized by the 1933 Act and that section 115 of the
DGCL discriminates against federal claims by prohibiting adoption of a
forum selection provision that eliminates state court jurisdiction for
securities claims under Delaware law but permits adoption of a forum
selection provision that eliminates state court jurisdiction for analogous
claims under the 1933 Act. He argues further that these provisions
impermissibly burden interstate commerce in violation of the commerce

                                         9
clause of the United States Constitution. Dropbox disputes plaintiff’s
arguments on the merits and argues further that neither adoption nor
enforcement of the forum selection provision involves “state action” necessary
to support plaintiff’s constitutional claims.
      Background
      Corporations incorporated in Delaware are governed by the DGCL.
Section 102 of the DGCL authorizes a corporation to include in its certificate
of incorporation “any provision for the management of the business and for
the conduct of the affairs of the corporation and any provision creating,
defining, limiting and regulating the powers of the corporation, the directors,
and the stockholders, or any class of the stockholders, . . . if such provisions
are not contrary to the laws of this State.” (Del. Code, tit. 8, § 102, subd.
(b)(1); Salzberg, supra, 227 A.3d at p. 113.) In Salzberg, supra, 227 A.3d at
page 132, the Delaware Supreme Court held that forum selection provisions
requiring that claims under the 1933 Act be brought in federal court, similar
to that at issue here, are valid and enforceable under Delaware law. The
court explained that “a bylaw that seeks to regulate the forum in which . . .
‘intra-corporate’ litigation can occur is a provision that addresses the
‘management of the business’ and the ‘conduct of the affairs of the
corporation,’ and is, thus, facially valid” under section 102, subdivision (b)(1)
of the DGCL. (Salzberg, supra, at p. 114.) In its decision, the court rejected
the argument that the federal forum selection provision violated section 115
of the DGCL.
      Section 115 of the DGCL provides: “The certificate of incorporation or
the bylaws may require, consistent with applicable jurisdictional
requirements, that any or all internal corporate claims shall be brought
solely and exclusively in any or all of the courts in this State, and no

                                        10
provision of the certificate of incorporation or the bylaws may prohibit
bringing such claims in the courts of this State. ‘Internal corporate claims’
means claims, including claims in the right of the corporation, (i) that are
based upon a violation of a duty by a current or former director or officer or
stockholder in such capacity, or (ii) as to which this title confers jurisdiction
upon the Court of Chancery.” (Del. Code, tit. 8, § 115.) In Salzberg, supra, 227
A.3d at page 109, the court explained, “Section 115 merely confirms
affirmatively . . . that a charter may specify that internal corporate claims
must be brought in ‘the courts in this State’ (presumably including the
federal court), while prohibiting provisions that would preclude bringing
internal corporate claims ‘in the courts of this State.’ Section 115, read fairly,
does not address the propriety of forum-selection provisions applicable to
other types of claims. If a forum-selection provision purports to govern intra-
corporate litigation of claims that do not fall within the definition of ‘internal
corporate claims,’ we must look elsewhere . . . to determine whether the
provision is permissible. This is because intra-corporate litigation relates to
the business of the corporation . . . , and such provision is authorized under
Delaware law and is facially valid.” (Id. at p. 119, italics added.)
      State Action
      Dropbox contends that plaintiff’s constitutional arguments must fail
because the allegedly unconstitutional conduct is not “fairly attributable” to
the state of Delaware. (See American Mfrs. Mut. Ins. Co. v. Sullivan (1999)
526 U.S. 40, 50 [“[S]tate action requires both an alleged constitutional
deprivation ‘caused by the exercise of some right or privilege created by the
State or by a rule of conduct imposed by the State or by a person for whom
the State is responsible,’ and that ‘the party charged with the deprivation
must be a person who may fairly be said to be a state actor.’ ”].) Dropbox

                                        11
characterizes the allegedly unconstitutional conduct as its adoption of the
forum selection provision, which it asserts Delaware allows but does not
require. Plaintiff asserts, however, that he is not suing Dropbox for adopting
the forum selection provision. He is challenging the dismissal of his state
court action based on the enforcement of a bylaw provision he asserts was
adopted pursuant to an unconstitutional state statute. The requisite state
action, according to plaintiff, is either the state legislature’s adoption of the
statute or, as asserted in plaintiff’s reply brief, the trial court’s dismissal of
this action in reliance on the unconstitutional bylaw. We need not address
this novel contention because, whether or not state action is involved,
plaintiff’s constitutional challenges to the Delaware General Corporate law
are clearly without merit. (But see Restoration Robotics, supra, __
Cal.App.5th at pp. __ [2022 Cal.App. Lexis 366, pp. *20–*23 ] [finding no
state action].)
      Supremacy Clause
      The Supremacy Clause (U.S. Const., art. VI, cl. 2) “invalidates state
laws that ‘interfere with, or are contrary to,’ federal law.”5 (Hillsborough
County v. Automated Medical Laboratories, Inc. (1985) 471 U.S. 707, 712.)
Plaintiff argues that the Delaware statutory scheme violates the Supremacy
Clause because it authorizes corporations to nullify the state court
jurisdiction authorized by the 1933 Act. But nothing in the Delaware
statutory scheme precludes a plaintiff from bringing a claim under the 1933

      5 The Supremacy Clause reads, “This Constitution, and the Laws of the
United States which shall be made in Pursuance thereof; and all Treaties
made, or which shall be made, under the Authority of the United States, shall
be the supreme Law of the Land; and the Judges in every State shall be
bound thereby, any Thing in the Constitution or Laws of any State to the
Contrary notwithstanding.” (U.S. Const., art. VI, cl. 2.)

                                         12
Act in state court. As discussed above, the forum selection provision does not
violate or conflict with the anti-waiver or anti-removal provisions of the 1933
Act. Accordingly, insofar as section 102 of the DCGL permits adoption of such
a bylaw provision, it does not violate or conflict with federal law.
      Plaintiff’s argument that the Delaware statutory scheme discriminates
against federal claims is similarly misplaced. (See Restoration Robotics,
supra, __ Cal.App.5th at pp. __ [2022 Cal.App. Lexis 366, at pp. *26–*35]
[holding that enforcement of the forum selection provision does not violate
the Supremacy Clause].) In Salzberg, supra, 227 A.3d 102, the court
concluded that claims under the 1933 Act do not “come under Section 115’s
definition of ‘internal corporate claims’ ” and, therefore, are not subject to the
limitation that section imposes on the adoption of forum selection bylaws. (Id.
at p. 133, fn. 146.) Plaintiff argues, however, that because section 115 applies
to purportedly analogous state law securities claims, Delaware is
discriminating against 1933 Act claims by not affording them the same
guarantee of state court jurisdiction. But the Supremacy Clause does not
prohibit a state from regulating claims asserted under its state laws that do
not interfere with or contravene federal law. (See Felder v. Casey (1988) 487
U.S. 131, 138 [“No one disputes the general and unassailable proposition . . .
that States may establish the rules of procedure governing litigation in their
own courts.”].)
      Plaintiff’s reliance on Haywood v. Drown (2009) 556 U.S. 729 and
Howlett v. Rose (1990) 496 U.S. 356 is misplaced. In both cases, the court held
unconstitutional a state statute that divested the state courts of jurisdiction
over claims seeking damages under 42 United States Code section 1983. In
Haywood, the court explained that “although States retain substantial
leeway to establish the contours of their judicial systems, they lack authority

                                        13
to nullify a federal right or cause of action they believe is inconsistent with
their local policies.” (556 U.S. at p. 736.) Nothing in the DCGL divests any
state court of jurisdiction over a 1933 Act claim. The law permits the parties
to agree that actions under the 1933 Act will be bought only in federal court,
but that is very different from divesting state courts of the jurisdiction to
hear such claims.
      Commerce Clause
      The Commerce Clause provides that “Congress shall have Power . . .
[t]o regulate Commerce . . . among the several States.” (U.S. Const., art. I,
§ 8, cl. 3.) The Commerce Clause prohibits direct regulation of interstate
commerce by the states but permits indirect regulation of interstate
commerce if the state statute “ ‘regulates evenhandedly to effectuate a
legitimate local public interest, and its effects on interstate commerce are
only incidental . . . unless the burden imposed on such commerce is clearly
excessive in relation to the putative local benefits.’ ” (Edgar v. MITE Corp.
(1982) 457 U.S. 624, 640, quoting Pike v. Bruce Church, Inc. (1970) 397 U.S.
137, 142.)
      Plaintiff acknowledges that the Delaware statutes do not purport to
directly regulate interstate commerce and that the state does not
discriminate against out-of-state actors. He contends, however, that the
Delaware statutes impermissibly burden interstate commerce.We disagree.
(See Restoration Robotics, supra, __ Cal.App.5th at pp. __ [2022 Cal.App.
Lexis 366, at pp. *23–*26] [holding that enforcement of the forum selection
provision does not violate the Commerce Clause].)
      Plaintiff argues that the “Delaware statutory scheme created a
corporate power to eliminate, as a forum, state courts for claims arising from
[an entirely out-of-state] transaction just because the company is

                                       14
incorporated in Delaware. Such a system indirectly burdens interstate
commerce by permitting corporations to unilaterally condition the interstate
sale of securities on the loss of the right to state court fora with no clear local
Delaware interest in doing so.” (Italics omitted.) Plaintiff fails to explain,
however, how the forum selection provision at issue, which permits a plaintiff
to file a 1933 Act claim in the federal courts of any state, would negatively
affect interstate commerce. (Compare, e.g., Edgar v. MITE Corp., supra, 457
U.S. 624, 643 [explaining that “[t]he effects of allowing the Illinois Secretary
of State to block a nationwide tender offer are substantial. Shareholders are
deprived of the opportunity to sell their shares at a premium. The
reallocation of economic resources to their highest valued use, a process
which can improve efficiency and competition, is hindered. The incentive the
tender offer mechanism provides incumbent management to perform well so
that stock prices remain high is reduced.”].) We fail to see how any indirect
impact on commerce that may result from the forum selection provision is
likely to affect the sales of securities. Moreover, even assuming that the
forum selection provision imposes some limited burden, plaintiff fails to
demonstrate that the burden outweighs Delaware’s interest in regulating the
corporations it charters.
      CTS Corp. v. Dynamics Corp. of America (1987) 481 U.S. 69 is
instructive. In that case, Indiana adopted statutes regulating corporate
takeovers by allowing independent shareholders to vote as a group to protect
themselves from the coercive aspects of tender offers. (Id. at pp. 74–75, 91–
92.) The court acknowledged that the statutes had the “potential to hinder
tender offers” but concluded that the limited effect of Indiana’s statute on
interstate commerce was justified by Indiana’s interests in defining
attributes of its corporations’ shares and in protecting shareholders. (Id. at

                                        15
pp. 89, 94.) The court explained, “Every State in this country has enacted
laws regulating corporate governance. By prohibiting certain transactions,
and regulating others, such laws necessarily affect certain aspects of
interstate commerce. This necessarily is true with respect to corporations
with shareholders in States other than the State of incorporation. Large
corporations that are listed on national exchanges, or even regional
exchanges, will have shareholders in many States and shares that are traded
frequently. The markets that facilitate this national and international
participation in ownership of corporations are essential for providing capital
not only for new enterprises but also for established companies that need to
expand their businesses. This beneficial free market system depends at its
core upon the fact that a corporation — except in the rarest situations — is
organized under, and governed by, the law of a single jurisdiction,
traditionally the corporate law of the State of its incorporation.” (Id. at
pp. 89–90.) The court continued, “It thus is an accepted part of the business
landscape in this country for States to create corporations, to prescribe their
powers, and to define the rights that are acquired by purchasing their shares.
A State has an interest in promoting stable relationships among parties
involved in the corporations it charters, as well as in ensuring that investors
in such corporations have an effective voice in corporate affairs.” (Id. at
p. 91.)
      As in CTS Corp. v. Dynamics Corp. of America, supra, 481 U.S. 69, the
Delaware statute governs only corporations chartered under Delaware law.
Plaintiff has offered nothing to show that the state’s interest in regulating
the corporations it charters does not outweigh any limited burden the
statutes in question may place on interstate commerce. For this reason,

                                        16
Edgar v. MITE Corp., supra, 457 U.S. 624, relied on by plaintiff, is
distinguishable.
      In Edgar v. MITE Corp., supra, 457 U.S. at pages 627 and 640, the
court found unconstitutional an Illinois law that regulated the takeover of
any corporation of which Illinois shareholders own 10 percent of the class of
securities subject to the takeover offer or for which any two of the following
conditions are met: the corporation has its principal office in Illinois, is
organized under Illinois laws, or has at least 10 percent of its stated capital
and paid-in surplus represented within the state. The court found that the
Illinois statute violated the commerce clause because “it directly regulates
and prevents, unless its terms are satisfied, interstate tender offers which in
turn would generate interstate transactions” and because “the burden the Act
imposes on interstate commerce is excessive in light of the local interests the
Act purports to further.” (Ibid.) And, as the court noted in CTS Corp. v.
Dynamics Corp. of America, supra, 481 U.S. at page 93, unlike the Indiana
law or the Delaware statutes at issue here, which govern only corporations
chartered by that state, the Illinois law applied broadly to out-of-state
corporations as well as to in-state corporations.

3.    The forum selection provision is enforceable.

      Initially, the parties dispute whether this court should apply California
or Delaware law to determine whether the forum selection provision is valid
and enforceable. Dropbox asserts that the provision was determined to be
valid under Delaware law in Salzberg, supra, 227 A.3d at page 116 and that
this court should follow that decision. Plaintiff does not dispute that the
provision is valid under Delaware law, but asserts that this court should
instead apply California law. The court concluded that it need not decide the
conflict of law question because the provision is valid and enforceable even if

                                        17
California law is applied. We agree. (But see, Restoration Robotics, supra, __
Cal.App.5th at pp. __ [2022 Cal.App. Lexis 366, at pp. *35–*37] [holding that
validity of forum selection provision determined under Delaware Law but
enforceability is determined under California law].)
      In Drulias, supra, 30 Cal.App.5th at pages 707–708, the court
explained, “A forum selection clause need not be subject to negotiation to be
enforceable. [Citations.] Rather, a forum selection clause contained in a
contract of adhesion, and thus not the subject of bargaining, is ‘enforceable
absent a showing that it was outside the reasonable expectations of the
weaker or adhering party or that enforcement would be unduly oppressive or
unconscionable.’ ” Plaintiff contends that he did not assent to the forum
selection provision and that purchasers were not given adequate notice of the
provision, which was “buried in exhibits among hundreds of pages of prolix.”
He argues, “No ordinary investor had any reason to expect to be bound by [a
forum selection provision] because concurrent state court jurisdiction without
the possibility of removal is explicitly provided for in the 1933 Act, as has
been the case for many, many decades.” However, the registration statements
filed by Dropbox gave notice of the forum selection provision in a separate
paragraph in bold, italic font and adequately advised prospective stock
purchasers that they would be bound by the forum selection provision upon
the purchase of stock in the IPO. On this evidence the trial court reasonably
found that when plaintiff purchased his shares, he and all other purchasers
necessarily agreed to the terms of the forum selection provision.6 (See

      6 For this reason, we reject plaintiff’s argument that the forum selection
provision is invalid under California contract law. Plaintiff’s additional
argument that the forum selection provision is not a “lawful object” is based
on the previously rejected arguments that the provision conflicts with the

                                       18
Restoration Robotics, supra, __ Cal.App.5th at pp. __ [2022 Cal.App. Lexis
366, at pp. *37-41].)
      Contrary to plaintiff’s argument, enforcement of the provision is not
unreasonable. “In the context of forum selection clauses, enforcement is
considered unreasonable where ‘the forum selected would be unavailable or
unable to accomplish substantial justice’ or there is no ‘rational basis’ for the
selected forum.” (Drulias, supra, 30 Cal.App.5th at p. 707.) As the trial court
observed, “There cannot be any doubt that federal courts have the expertise,
ability and excellent judges. . . . While plaintiffs point out differences between
federal and state courts, they cannot seriously be arguing that federal courts
cannot fairly and efficiently handle these cases or that they cannot obtain
justice in a federal court. The federal court can provide efficiencies of
coordination through the Panel on Multidistrict Litigation, which are not
possible if cases are filed in state court. Plaintiffs have failed to demonstrate
and could not demonstrate that they will lose substantive rights if these
federal claims are litigated in federal court.”
      Finally, we agree with the trial court’s conclusion that the forum
selection provision is not unconscionable. (See also Restoration Robotics,
supra, __ Cal.App.5th __ [2022 Cal.App. Lexis 366, at pp. *41-45 ] [holding
that forum selection provision is not unconscionable].) Unconscionability has
both procedural and substantive elements, and both must be found for the
court to refuse to enforce a contract or clause based on unconscionability.
(Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th
83.) Procedural unconscionability looks at the process surrounding the
contract formation, and focuses on “oppression” or “surprise” due to unequal

express provisions of the 1933 Act and is unconstitutional. We need not
revisit those arguments here.

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bargaining power. (Id. at p. 114.) Substantive unconscionability applies if the
contract or an essential provision of the contract is “overly harsh” or has “one-
sided” results. (Ibid.) Although both procedural and substantive
unconscionability must be found, they need not be present in the same
degree. (Ibid.) Unconscionability turns not only on one-sidedness, but also on
the absence of a reasonable justification. (Stirlen v. Supercuts, Inc. (1997) 51
Cal.App.4th 1519, 1532.)
      As the court acknowledged, the agreement has “some procedural
unconscionability” insofar as it was “drafted by Dropbox, presented on take it
or leave it basis, and only applies to Securities Act claims.” The trial court
correctly observed, however, that it was not particularly “unusual or
surprising that a federal Securities Act claim would be litigated in federal
court.”7 In finding a lack of substantive unconscionability, the trial court
correctly reasoned that given the limited jurisdiction of the federal courts,
application of the provision to only 1933 Act claims was not unreasonable,
and that the provision supported Dropbox’s legitimate business interest in
consolidating any litigation against it. Finally, as set forth above, the court
reasoned that the federal courts are fully equipped to fairly and efficiently
resolve plaintiff’s claims so that plaintiff will not be deprived of any
substantive rights if his claims are litigated in federal court.
                                  Disposition
      The judgment dismissing the action is affirmed.

                                             POLLAK, P. J.

      7The trial court also observed that plaintiff did not show that he did
not have “a meaningful choice of reasonable alternative investment.” We
express no opinion as to whether the existence of other stock options tends to
negate unconscionability.

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WE CONCUR:

STREETER, J.
BROWN, J.

               21