The Choice of Law Issue
27 The allegations made by the Applicants are made under Pt IV of the CCA and s 21 of the ACL. Both are 'mandatory laws of the forum' in the sense that the parties are unable to contract out of their application either directly or indirectly by means of a choice of law clause. For present purposes, this is relevant because, unless this Court can be satisfied that the mandatory law of the forum will be applied by a foreign court in the event that a stay is granted, this will generally be a strong reason not to stay the local proceeding: Akai Pty Ltd v People's Insurance Co Ltd (1996) 188 CLR 418 ('Akai'); Full Court Apple Decision at [87].
28 In this case, cl 16.8 contains a choice of law clause in which the parties have indicated that the disputes covered by the clause should 'be governed by the laws of the State of California, excluding California's conflict of laws provisions'. If Epic now commenced a suit in Santa Clara County, it is possible (although unclear) that under Californian conflict of laws principles a state or federal court sitting in that place might apply Australian law, including Pt IV of the CCA and s 21 of the ACL. However, the explicit exclusion by cl 16.8 of those conflict of laws principles means that, on the face of things, Pt IV of the CCA and s 21 of ACL could not be applied. If that be so, the suit before this Court cannot be brought in Santa Clara County because cl 16.8 will prevent the Australian laws invoked by Epic being applied to the dispute.
29 It becomes necessary, therefore, to be precise about the operation of the choice of law clause in any such proceeding. There was agreement on both sides that a state or federal court sitting in Santa Clara County would have jurisdiction to entertain Epic's suit so any concerns about want of jurisdiction may be put aside. The evidence about how the choice of law clause would be applied under the law applying in California was as follows:
30 First, in the first of his reports, Judge Fogel gave evidence on behalf of Google that a US court would apply the substantive provisions of the CCA and ACL which Epic claims have been violated although it would apply the lex fori to the question of remedies: First Report of Judge Fogel at s78. In reaching this conclusion, however, Judge Fogel did not address the fact that cl 16.8 excludes Californian conflict of laws principles. In that circumstance, I do not regard this aspect of Judge Fogel's evidence as compelling. I should say in Judge Fogel's defence that he was not asked by Google's solicitors to express a view on the choice of law clause.
31 Secondly, Judge Larson, who gave evidence on behalf of the Applicants, addressed the issue in more detail. He thought that Judge Fogel's failure to address the conflict of laws clause was a critical gap in his analysis: Report of Judge Larson at s81. Subject to my previous observation that Judge Fogel is not responsible for this critical gap, I agree with Judge Larson - the operation of the choice of law clause is central to understanding whether a court sitting in Santa Clara County would apply Australian law to the present dispute.
32 Judge Larson gave evidence of three different approaches which a court sitting in California might take to cl 16.8. The first was that it might give effect to the clause and not engage in any conflict of laws analysis: ss73-74. If this approach were adopted it would lead the court to apply cl 16.8 on its own terms. I would infer from this that the effect would be that the dispute would fall to be determined under the substantive law applying in California which would not include Pt IV of the CCA or s 21 of the ACL.
33 A second approach would involve the court in engaging in a conflict of laws analysis prior to enforcing the choice of law clause: s75. In doing so it would ask whether California had a substantial relationship with the parties or their transaction or whether there was any other reasonable basis for the parties' designated forum: Nedlloyd Lines B.V v The Superior Court of San Mateo County 3 Cal4th 459 (Cal 1992) ('Nedlloyd') at 464-465. In Nedlloyd the Court observed that 'if one of the parties resides in the chosen state, the parties have a reasonable basis for their choice' (at 467). In this case, Google LLC has its principal place of business at 1600 Amphitheatre Parkway, Mountain View in California.
34 As part of this second approach, however, Judge Larson also opined that the court would additionally ask whether there was a conflict between the law required by the choice of law clause to be applied and a fundamental policy of the local forum. In the present case, that situation does not arise because the law sought to be applied by cl 16.8 is the law of the local forum. Consequently, if this second approach were taken it would lead a court sitting in California to apply the substantive law applying in California to the dispute which would not include Pt IV of the CCA or s 21 of the ACL.
35 Judge Larson thought that a third approach could be taken which would involve asking whether Epic's claims under Pt IV of the CCA or s 21 of the ACL involved non-waivable rights. If any claim did then the court 'may shift the burden to the party trying to enforce the choice of law clause to demonstrate that applying California law would not diminish the non-waivable rights under Australian law': s79. If this burden was not met or there was a risk that applying California law may not protect the non-waivable rights under Australian law 'the court may decline to enforce the choice of law clause and apply Australian law even without a conflict of laws analysis': s79; see also s47.
36 Judge Larson did not express a view on which of these three approaches was the most likely to be adopted (although he did venture into that territory in parts of his report which were not read by agreement between the parties: see for example, s72). The first two approaches both lead to cl 16.8 being applied on its own terms and to the exclusion of Pt IV of the CCA and s 21 of the ACL. As to the third approach, making the assumption that a court sitting in California would conclude that Epic's claims involved non-waivable rights under Australian law, it would appear to follow that this would shift the burden to Google to prove that a court sitting in California would be satisfied that the application of Californian law would not diminish Epic's Australian law claims.
37 In his reply evidence, Judge Fogel did not take issue with Judge Larson's analysis because, by the time his reply evidence was prepared, Google's solicitors had instructed him to proceed on the basis that Google would undertake not to rely on the choice of law clause. The evidence of Judge Larson therefore stands uncontradicted on this point, at least by Judge Fogel.
38 There is, however, a wrinkle. The cases cited by Judge Larson at ss79-80 for the third approach are Hall v The Superior Court of Orange County 150 CalApp3d 411 (Cal 1983) ('Hall') and Verdugo v Alliantgroup, L.P 237 CalApp4th 141 (Cal 2015) ('Verdugo'). It is not self-evident to me that those decisions establish that a Californian court would decline to enforce a choice of law clause selecting Californian law as the applicable law where to do so would diminish the non-waivable rights of another jurisdiction. Both decisions appear to involve situations where non-waivable rights under Californian law would be lost if the plaintiff was forced to litigate in the jurisdiction selected by the choice of law clause. The principle in play in Hall and Verdugo appears similar to that established in this country by Akai.
39 In my view, it would be unwise to embark on an inquiry into the correctness of Judge Larson's views on the third approach. Although Mr Hutley did take issue at T15.5-11 with Judge Larson's views about non-waivable rights, this was on a different branch of the argument, specifically that concerned with the forum selection clause rather than the choice of law clause. At ss47-48 Judge Larson had expressed the view that a court sitting in California might decline to enforce the forum selection clause because of the presence of non-waivable rights citing Wimsatt v Beverley Hills Weight etc International, Inc 32 CalApp4th 1511 (Cal 1995) ('Wimsatt'). Mr Hutley submitted that Wimsatt did not establish that proposition. However, Mr Hutley left untouched Judge Larson's parallel opinion about non-waivable rights and choice of law clauses appearing at ss79-80. There the focus was on Hall and Verdugo which Mr Hutley did not criticise.
40 If I were to reject Judge Larson's views about Hall and Verdugo on the basis of my own reading, this would be procedurally unfair to Epic. For example, Mr Hutley's remarks about Wimsatt were made in chief and Epic was afforded an opportunity to respond to them. My untested views about Hall and Verdugo have not been exposed to that rigour. Further, even assuming that Hall and Verdugo do not go as far as Judge Larson suggests, it does not follow that his opinion is incorrect, just that the decisions cited do not seem to support it.
41 In that circumstance, I will proceed on the basis that I should accept Judge Larson's opinion and conclude that a court sitting in California might ask whether: (a) Epic's rights were non-waivable; (b) whether, if so, the burden ought to shift to Google to show that those non-waivable rights would not be diminished by the application of California law; and (c) if it did, whether Google could discharge that burden.
42 As to question (a), I conclude that a court sitting in California would find that Epic's claims in this proceeding are non-waivable in the relevant sense.
43 As to question (b), I am unclear what the position of a court sitting in California would be. Judge Larson said that the court 'may' shift the burden but did not say when this would occur.
44 As to question (c), as I explain later in these reasons, I am satisfied that Epic's rights under Californian law in relation to this dispute are significantly less than they are under Australian law. As to the substantive rights, the need to bring this suit under statutes such as the Sherman Act is encumbered by the need to prove an impact on United States commerce and the need to show monopolisation of the relevant markets. No such impact need be proven in this proceeding and it will suffice to demonstrate a substantial lessening of competition in the relevant markets which falls well short of the monopolisation requirement under the Sherman Act. So far as remedies are concerned, as I discuss later at [115]-[146], the remedies available in this Court are more generous to Epic than the corresponding remedies that could be granted by a court sitting in California.
45 In that circumstance, the evidence does not permit me to make a finding as to what a court sitting in California would do if confronted with the choice of law clause. I do not know which of the three approaches adumbrated by Judge Larson would in fact be applied by a court sitting in California. Two of the approaches would certainly lead to Pt IV of the CCA and s 21 of the ACL not being applied in the proceeding. Whilst it is possible that the third approach might lead to Pt IV of the CCA and s 21 of the ACL being applied, I have no metric to measure when the burden shifting referred to by Judge Larson would take place.
46 The evidence therefore does not establish how a court sitting in California would approach cl 16.8 and, in particular, it does not establish on the balance of probabilities that if this suit were pursued before a court sitting in California that that court would apply Pt IV of the CCA and s 21 of the ACL.
47 As foreshadowed in Judge Fogel's reply evidence, Google sought to outflank this conclusion by relying upon an undertaking it proffered to this Court not to rely upon the choice of law clause in any proceedings brought by Epic in Santa Clara County. The undertaking (Exhibit 1) was in these terms:
Respondents' undertaking to the Court
Each of the respondents, Google LLC, Google Asia Pacific Pte. Ltd. and Google Payment Australia Pty Ltd, undertake to the Court as follows:
For the strictly limited purpose of responding to the claims advanced by the applicants pursuant to the Competition and Consumer Act 2010 (Cth) in Federal Court of Australia proceeding NSD 190 of 2021 as presently pleaded in the Amended Concise Statement filed 26 July 2021 (Claims), the respondents undertake that they will neither:
(a) oppose the federal or state courts located within the county of Santa Clara, California hearing and determining the Claims; nor
(b) rely on the Choice of Law clause contained in cl 16.8 of the Google Play Developer Distribution Agreement as having the effect of excluding the Claims.
48 Mr Young submitted that the Court could not accept this undertaking citing Australian Competition and Consumer Commission v Pacific National Pty Ltd [2020] FCAFC 77; 277 FCR 49 ('Pacific National'). He submitted that that case established that there were very limited circumstances in which this Court could accept an undertaking and referred me to [326]-[327] and [334] (per Middleton and O'Bryan JJ). I do not accept this submission. Pacific National was concerned with the grant of substantive remedies. It says nothing about the ability of the Court to accept undertakings in relation to interlocutory matters.
49 There is no direct evidence of how a court sitting in California might respond to the existence of such an undertaking to this Court. There is, however, evidence of how such a court might approach an inter partes undertaking. At the time that Judge Fogel prepared his report, it is apparent that the undertaking which Google then had in mind took only the form of an undertaking by Google to Epic. Judge Fogel's evidence, whilst admittedly very brief and contained in an en passant footnote in his reply report, is to the effect that Google would be bound by such an inter partes undertaking. Because this evidence appeared in Judge Fogel's evidence in reply, Judge Larson was not afforded an opportunity to respond to it although I do not propose to discount Judge Fogel's evidence on that basis since Epic did not submit that I should.
50 This situation then brought forth from Epic a written submission that Google could not unilaterally alter the bargain embodied in cl 16.8 by proffering an inter partes undertaking of the kind mentioned by Judge Fogel: Applicants' Submissions at ss44-50. However, that debate has become irrelevant since the undertaking now proffered is one which is proffered to the Court and not to Epic. In that circumstance, the relevance of the earlier inter partes undertaking under Californian law has receded. The fact that the undertaking to this Court is not an inter partes undertaking also appears to remove the facts upon which Judge Fogel's footnote opinion was based.
51 It may be that a Californian court would approach an undertaking to this Court in the same way as it would approach an inter partes undertaking but whether that is so would be speculation on my part. I do not find that it has been proved that a Californian court would enforce such an undertaking.
52 This is not the end of the matter, however. If in any proceeding commenced by Epic in Santa Clara County Google were now to seek to rely upon the choice of law clause in cl 16.8, this would be, on the face of it, a contempt of this Court. I do not agree with Epic's submission that no contempt proceeding could in that circumstance be commenced because these proceedings would by then have been stayed. I do not think that a stay of this proceeding would be any impediment to the pursuit of a contempt charge since it would not involve the prosecution of this proceeding. If that were wrong, I think it likely that the stay would be lifted sufficiently to permit the prosecution of the contempt. If that too were wrong, there is no reason why a fresh contempt proceeding could not be started. Regardless of the means by which this was achieved, if Google procured a stay of proceedings in this Court by proffering an undertaking which it then breached it would face contempt proceedings.
53 On the other hand, neither Google LLC nor Google Asia is resident in Australia and Google did not point me to any evidence that either had assets in the jurisdiction. Accordingly, it is possible that Google LLC and Google Asia could seek to rely on the choice of law clause in any proceeding in California whilst GPAL (which is resident here) might remain silent. In that case, there would be no means of enforcing any fine imposed for the contempt. Google LLC and Google Asia would lie beyond the reach of this Court's contempt remedies and GPAL would not have committed contempt. I accept that in that scenario, the contempt remedy would be ineffective to secure compliance with the undertaking. I am unable to be precise about the probability of Google acting in this way but I do not think I can disregard it as trivial.
54 The Google parties submitted that an obvious step which could be taken if they breached the undertaking would be for Epic to apply to lift the stay of this proceeding. I accept this is possible. But it would then leave on foot two parallel and identical proceedings, one in this Court and one in Santa Clara. The existence of such twin identical suits in New South Wales and California is undesirable. Indeed, it would give rise to procedural possibilities the precise outcome of which I do not feel can be confidently assessed in advance. For example, Epic might choose to seek to discontinue the proceeding in California. However, it is not clear to me what the terms (if any) which might be applied to such a discontinuance would be. It is also unclear to me how doctrines such as lis alibi pendens or forum non conveniens might apply or whether the spectre of anti-suit injunctions might intrude. On balance, I am not sufficiently confident that the lifting of the stay would be something which would compel Google to cease its reliance upon the choice of law clause in the Californian proceeding.
55 There is an additional reason I do not think the undertaking is sufficient. As Epic correctly submitted, the Respondents in terms only undertake not to raise cl 16.8 against the claims 'presently pleaded in the Amended Concise Statement filed 26 July 2021'. This does not extend to any other Australian law allegations which may be made subsequently. Indeed, at the end of these reasons I conclude that Epic should be granted leave to amend the Amended Concise Statement. This new pleading raises a distinct challenge under Pt IV to the choice of law clause. The undertaking in Exhibit 1 does not extend to this allegation. Further, if a proceeding is now commenced in Santa Clara County with the same content as the Amended Concise Statement I think it very likely that there will be future amendments to it as the litigation progresses to trial. In complex competition cases such as the present, frequent amendments are the norm. It is likely that the market definition allegations will be amended as the evidence for both parties is filed. I think it is also likely that the case on substantial lessening of competition and Google's purpose will be heavily influenced by the filing of evidence on both sides. Google's undertaking will not extend to any such allegations.
56 This problem with the undertaking will leave it open to Google to rely upon the choice of law clause in relation to all allegations freshly raised after the Amended Concise Statement. There are obvious practical difficulties with that course. Although Epic raised this problem at the hearing, Google did not seek to prepare an undertaking that would address the problem but made its stand on Exhibit 1. In particular, it did not seek to proffer an undertaking not to rely upon cl 16.8 as an answer to the allegations made in the Amended Concise Statement or to any other allegations reasonably relating to those allegations or arising out of the same subject matter.
57 In that circumstance, I reach two conclusions: first, that I am not satisfied on the balance of probabilities that a court sitting in California would apply Pt IV of the CCA and s 21 of the ACL in any proceeding commenced by Epic there; and second, that Google's undertaking to this Court is insufficient to dispel that uncertainty.