forum selection clause – Attorney Evan Brown

July 26, 2010 Contracts, Litigation

Forum selection clause in clickwrap agreement enforceable

Meier v. Midwest Recreational Clearninghouse, LLC, 2010 WL 2738921 (E.D. Cal. July 12, 2010)

Plaintiffs live in California and bought an RV online from a vendor in Minnesota. The vendor’s website terms of service had a provision requiring that all disputes “arising out of or related to the use” of the website be brought in state court in Minnesota.

When plaintiffs — who were unhappy about the RV — brought a lawsuit in federal court in California, defendants moved to dismiss for improper venue. The court granted the motion.

The court noted that under the Bremen case, forum selection clauses are prima facie enforceable. And the Carnival Cruise Lines case takes that notion even further, giving forum selection clauses this presumption of enforceability in preprinted agreements.

In this case, plaintiffs argued that the court shouldn’t enforce the forum selection clause because it wasn’t freely bargained for. And they claimed that enforcing it would effectively deny them their day in court.

But that did not sway the judge. The court found that there was no bad faith motive that put the forum selection clause in the clickwrap agreement. And even though litigating in Minnesota might be inconvenient for California residents, it was not enough to bar them from the judicial system.

Moreover, just like the Supreme Court noted in Carnival Cruise Lines, the presence of forum selection clauses can reduce the costs of litigation because they cut down on the number of pretrial motions arguing over venue. And they also help consumers — this cost savings should ostensibly be passed on.

Wait just a second . . . isn’t online gambling illegal?

Wong v. Partygaming Ltd., — F.3d —, 2009 WL 4893955 (6th Cir. December 21, 2009)

The Sixth Circuit’s recent opinion in the case of Wong v. Partygaming is interesting if you’re a civil procedure wonk and care about things like which law applies to determine the enforceability of forum selection clauses in website terms and conditions and what factors a court should consider when dismissing a case on the basis of forum non conveniens.

bling

The most intriguing part of the case, however, comes from Judge Merritt’s concurrence, in which he addresses the significance of the fact that the terms of service for an online gambling website are probably illegal.

The majority opinion painstakingly analyzed whether the district court abused its discretion in dismissing, of its own will (or “sua sponte” as stodgy lawyers like to say), the plaintiffs’ suit against an online gambling website. The plaintiffs had alleged that the site fraudulently misrepresented that there was no collusion among other online gamblers, and that the site did not target people with gambling problems. The website terms of service contained a forum selection clause naming Gibraltar as the jurisdiction in which disputes were to be heard.

The appellate court affirmed the lower court’s decision that the case should be dismissed and that Gibraltar (which follows English law) would be a suitable and not-too-inconvenient forum. But the majority opinion said nothing about the legality of online gaming.

That’s where Judge Merritt picked up in the concurrence. He agreed that the matter should have been dismissed in favor of it being heard in Gibraltar — that’s why he concurred and did not dissent. His reasoning differed from that of the majority.

View Larger Map

Judge Merritt observed that the plaintiffs’ logic was inconsistent. They had argued that Ohio law should apply to the terms of service. But under Ohio law (and federal statutes like RICO), the subject matter of the contract would probably have been illegal and therefore void. Not to mention the fact that the conduct could send the parties to jail.

The judge wrote that something analogous to the principle of lenity — and not necessarily a rigorous analysis of the forum selection clause and the doctrine of forum non conveniens — should underlie the dismissal of the lawsuit. Lenity requires that when the question of criminal liability is ambiguous, interpretation should be made in favor of the defendant (see McNally v. United States). Since online gambling presumably was not illegal under the law of Gibraltar, the more lenient stance would be to see the matter litigated there.

Bling photo courtesy Flickr user PhotoDu.de under this Creative Commons license.

February 23, 2009 Contracts, Litigation

Clickwrap binding despite claim of no opportunity to read terms

Via Viente Taiwan, L.P. v. United Parcel Service, Inc., 2009 WL 398729 (E.D. Tex. February 17, 2009)

A federal court in Texas held the clickwrap agreement between United Parcel Service and one of its customers was binding. After plaintiff Via Viente sued UPS in Texas, UPS moved to transfer venue to the Northern District of Georgia, citing to a forum selection clause in a license agreement governing Via Viente’s use of a UPS-provided software program that allowed Via Viente to print labels and manage product shipments.

Via Viente argued that the clickwrap agreement (and by extension the forum selection clause) was not binding because a UPS technician installed the application on a Via Viente computer, and therefore Via Viente never had a chance to agree to the terms. The court rejected that argument for the following three reasons:

Via Viente was a sophisticated company and “should have been aware that terms of service were forthcoming” after having signed the general Carrier Agreement with UPS that required the use of the software;
It was “difficult to believe” that Via Viente would have left the UPS technician installing the software unsupervised. Moreover, it was not UPS’s practice to install the software unsupervised;
Via Viente had kept the benefit of the bargain (convenience and “palatable” shipping costs) so it would have been inequitable to allow it to disavow provisions it did not like.

After finding the clickwrap agreement to be binding, the court went on to find the forum selection clause enforceable, and transferred the matter to the Northern District of Georgia.

EULA photo courtesy Flickr user johntrainor under this Creative Commons license.

November 24, 2008 Contracts, Litigation

Court enforces forum selection clause in web hosting agreement

Bennett v. Hosting.com, Inc., 2008 WL 4951020 (N.D. Cal. November 18, 2008)

Bennett filed an astounding 30-count complaint against defendant Hosting.com. Though the Managed Hosting Agreement designated Jefferson County, Kentucky to be the sole and exclusive venue for actions brought in connection with the agreement, Bennet brought the action in federal court in Northern California. Hosting.com moved to dismiss for improper venue. The court granted the motion.

Kentucky on a map

The court held that Bennett failed to prove that the forum selection clause in the hosting agreement was unreasonable. The fact that Hosting.com may have had superior bargaining power and the agreement appeared to be non-negotiable was not enough to render the agreement unconscionable. Moreover, Bennett failed to demonstrate how the forum selection clause was against any public policy of California. And the court rejected her argument that the case belonged in California because Kentucky does not recognize certain of the causes of actions in the complaint. After all, a Kentucky court could apply California law.

The court also rejected Bennett’s argument that the forum selection clause shouldn’t apply because a number of the claims arose from tort law and did not involve the agreement. This argument was rejected because many of the tort claims would require the same findings of fact as the contract-related claims. Moreover, and perhaps more importantly, the forum selection clause was broad. All the claims appeared to be “in connection with” the agreement. That was enough in this case to bring them in.

(Missing Kentucky image courtesy Flickr user dog_manor under this Creative Commons license.)

May 13, 2008 Contracts

Court upholds forum selection clause in YouTube’s terms of use

Bowen v. YouTube, Inc., No. 08-5050, 2008 WL 1757578 (W.D.Wash. April 15, 2008)

Plaintiff Bowen, a registered YouTube user, sued YouTube over some harassing comments others had posted about her on the site, as well as for some sort of dissatisfaction about misappropriation of her intellectual property rights. (The opinion is not clear about exactly what Bowen’s claims were.)

YouTube moved to dismiss the complaint for, among other things, improper venue, invoking a provision of the site’s Terms of Use which read:

You agree that: (i) the YouTube Website shall be deemed solely based in California; and (ii) the YouTube Website shall be deemed a passive website that does not give rise to personal jurisdiction over YouTube, either specific or general, in jurisdictions other than California. These Terms of Service shall be governed by the internal substantive laws of the State of California, without respect to its conflict of laws principles. Any claim or dispute between you and YouTube that arises in whole or in part from the YouTube Website shall be decided exclusively by a court of competent jurisdiction located in San Mateo County, California.

Looking to the cases of Pebble Beach Co. v. Caddy, 453 F.3d 1151 (9th Cir.2006), Rio Properties, Inc. v. Rio Int’l Interlink, 284 F.3d 1007, 1020 (9th Cir.2000) and Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 418-20 (9th Cir.1997), the court observed that “for the proposition that when a ‘website advertiser [does] nothing other than register a domain name and post an essentially passive website’ and nothing else is done ‘to encourage residents of the forum state,’ there is no personal jurisdiction.”

The court found that Bowen’s allegations arose from her use of YouTube, and no conduct was alleged to provide the “something more” necessary for rendering YouTube subject to jurisdiction in the Western District of Washington.

February 1, 2008 Contracts, Litigation

Network Solutions’s forum selection clause enforced

Doe v. Network Solutions, LLC, No. 07-5115, 2008 WL 191419 (N.D. Cal. January 22, 2008)

Plaintiff Doe alleged violations of the Electronic Communications Privacy Act and similar California statutes when he discovered that personal and financial information about him had allegedly been obtained from a webmail account he established with Network Solutions. Citing to the forum selection clause in the click-wrap agreement Doe had entered into several times, Network Solutions moved to dismiss the action under Fed. R. Civ. P. 12(b)(3) for improper venue.

The court granted the motion to dismiss, finding that the claims brought by plaintiff were within the scope of the clause, and that enforcement would not be unreasonable. The matter was dismissed without prejudice to refile in the Eastern District of Virginia.

The forum selection clause provided, in relevant part, that it governed “any disputes between [customer] and Network Solutions under, arising out of, or related in any way to this Agreement. . . .” In holding that the claims fell within the scope of the clause, the court observed that although there were no claims for breach of contract, the claims arose out of plaintiff’s status as a customer and related to the services, thus implicating the contractual relationship. Moreover, the language “under, arising out of, or related in any way to [the] agreement” led the court to conclude that the clause was to be construed broadly.

In determining that enforcement of the clause would not be unreasonable, the court rejected plaintiff’s argument that it would contravene public policy, as the choice of law provision (naming Virginia) would preclude recovery under various California statutes. The court noted that California law had not expressed any policy against enforcement of a forum selection clause in the context of the claims asserted, and that a clause providing a forum which permits different or less favorable remedies is not, alone, a basis for invalidating the clause.

Tag: forum selection clause