## Facts

- Omni Loan Company, Ltd. was a Nevada corporation headquartered in Nevada that made short-term consumer loans, primarily to military members.
- Omni made loans in California through California offices to military borrowers present in California, commonly repaid through military paycheck deductions and secured by personal property.
- Omni’s loan contracts included Nevada choice-of-law provisions that, if enforced, would avoid application of the California Finance Lenders Law (CFLL).
- Joshua W. Brack obtained an Omni loan at an Omni office in California and filed a putative class action alleging Omni’s California lending violated the CFLL.
- The trial court enforced the Nevada choice-of-law clause, applied Nevada law, and entered judgment for Omni.
- Brack appealed.

## Issues

1. Whether a Nevada choice-of-law clause in consumer loan agreements for loans made in California is enforceable under California’s conflict-of-laws rules.
2. Whether applying Nevada law would conflict with a fundamental California policy expressed in the CFLL.
3. Whether California has a materially greater interest than Nevada in applying its lending regulations to these transactions.

## Decision

- The Court of Appeal reversed.
- Nevada had a sufficient relationship to the parties because Omni was incorporated and headquartered there.
- Applying Nevada law would conflict with a fundamental California policy embodied in the CFLL’s comprehensive regulation of consumer lending in California.
- California had a materially greater interest than Nevada because the loans were made in California to borrowers located in California and directly implicated California’s borrower-protection regime.
- The choice-of-law provisions were unenforceable, and California law (including the CFLL) governed; the matter was remanded for further proceedings.

## Legal Principles

- California generally enforces contractual choice-of-law clauses when the chosen state has an interest in the controversy.
- Under Restatement (Second) of Conflict of Laws § 187 as applied in California, a choice-of-law clause will not be enforced if:
  - application of the chosen law conflicts with a fundamental policy of California, and
  - California has a materially greater interest than the chosen state in the determination of the issue.
- A comprehensive California regulatory statute protecting borrowers and regulating in-state lending may constitute a fundamental California policy that cannot be avoided by contract for transactions centered in California.

## Conclusion

The court refused to enforce Omni’s Nevada choice-of-law clause because it would defeat California’s CFLL protections for loans made in California, and California’s interest in regulating in-state consumer lending outweighed Nevada’s interest based on Omni’s incorporation and headquarters.


Brack v. Omni Loan Co., 164 Cal. App. 4th 1312, 80 Cal. Rptr. 3d 275 (Cal. Ct. App. 2008)