Superior Court of New Jersey,
Appellate Division.
Steven J. CASPI, Ronald W. Jonas, Arden Jeffrey Cone III, and Laurel Barrie, On
Behalf of Themselves and All Others Similarly Situated, Plaintiffs-Appellants,
v.
The MICROSOFT NETWORK, L.L.C., and Microsoft Corporation, Defendants-
Respondents.
Argued Jan. 5, 1999.
Decided July 2, 1999.
Subscribers to on-line computer service brought action against Internet service provider (ISP) to recover for the way it rolled over service into more expensive plans. The Superior Court, Law Division, Civil Part, Bergen County, Fitzpatrick, J., dismissed on basis of forum selection clause. Subscribers appealed. The Superior Court, Appellate Division, Kestin, J.A.D., held that the forum selection clause was enforceable.
Affirmed.
West Headnotes
[1] Contracts 
127(4)
As a
general matter, enforcement of forum selection clauses is not contrary to
public policy.
[2] Contracts 127(4)
Forum
selection clause stating that agreement for on-line computer service was
governed by the laws of Washington and subscribers consented to the exclusive
jurisdiction and venue of courts in a Washington county in all disputes arising
out of or relating to use of the network or membership was clear and prevented
the subscribers from suing the Internet service provider (ISP) outside of
Washington.
[3] Antitrust and Trade Regulation 224
(Formerly
92Hk4 Consumer Protection)
New
Jersey's interest in assuring consumer fraud protection would not be frustrated
by requiring subscribers to on-line computer service to proceed with a lawsuit
in Washington as prescribed by the plain language of the forum selection
clause.
[4] Antitrust and Trade Regulation 179
(Formerly 92Hk4 Consumer Protection)
As a
general matter, none of the inherent characteristics of forum selection clauses
implicate consumer fraud concepts in any special way.
[5] Antitrust and Trade Regulation 179
(Formerly 92Hk4 Consumer Protection)
If a forum
selection clause is clear in its purport and has been presented to the party to
be bound in a fair and forthright fashion, no consumer fraud policies or
principles have been violated.
[6] Contracts 127(4)
Membership
agreement for on-line computer service with Internet service provider (ISP)
provided adequate notice of the forum selection clause; potential subscribers
were free to scroll through the computer screens that presented the terms
before clicking agreement with mouse, the clause was presented in exactly the
same format as most other provisions and was not presented unfairly, and
invalidating it would mean that the subscribers were not bound by other
provisions.
[7] Contracts 142
The issue
of reasonable notice regarding a forum selection clause is a question of law
for the court to determine.
**529 *120 Steven
L. Wittels, Armonk, NY and Jeremy
Heisler of the
New York bar, Kew Gardens, NY, admitted pro hac vice, for
plaintiffs-appellants (Mr. Wittels and Mr. Heisler, on the brief).
Charles
B. Casper, Philadelphia, PA, for
defendants-respondents (Montgomery,
McCracken, Walker & Rhoads, and Connell, Foley & Geiser, Cherry Hill,
attorneys; Mr. Casper, Stacy
Alison Fols, Cherry Hill, and Richard
D. Catenacci, Ringoes, on the brief).
Before Judges LONG, KESTIN and WEFING.
The opinion of the court was delivered by
KESTIN, J.A.D.
We are here called upon to determine the
validity and enforceability of a forum selection clause contained in an on-line
subscriber agreement of the Microsoft Network (MSN), an on-line computer
service. The trial court granted
defendants' motion to dismiss the complaint on the ground that the forum
selection clause in the parties' contracts called for plaintiffs' claims to be
litigated in the State of Washington.
Plaintiffs appeal. We affirm.
The amended class action complaint [FN1] in eighteen counts sought divers relief against two
related corporate entities, The Microsoft Network, L.L.C. and Microsoft
Corporation (collectively, Microsoft). [FN2] Plaintiffs asserted various theories
including breach of *121 contract, common law fraud, and consumer fraud
in the way Microsoft had "rolled over" MSN membership into more expensive plans. Among the claims was an accusation that
Microsoft had engaged in "unilateral negative option billing," a
practice condemned by the attorneys general of twenty-one states, including New
Jersey's, with regard to a Microsoft competitor, America Online, Inc. Under the
practice as alleged, Microsoft, without notice to or permission from MSN
members, unilaterally charged them increased membership fees attributable to a
change in service plans.
FN1. The complaint
was initially filed on February 24, 1997.
The "first amended complaint" was filed on March 5, 1997.
FN2. Defendants'
March 26, 1997 petition to remove the matter to the U.S. District Court for the
District of New Jersey was withdrawn on April 24, 1997.
The four named plaintiffs are members of MSN.
Two reside in New Jersey; the others in
Ohio and New York. Purporting to represent a nationwide class of 1.5 million
similarly aggrieved MSN members, plaintiffs, in May 1997, moved for multi-state
class action certification. See R.
4:32.
Shortly thereafter, defendants moved to dismiss
the amended complaint for lack of jurisdiction and improper venue by reason of
the forum selection clause which, defendants
contended, was in every MSN membership agreement and bound all the named
plaintiffs and all members of the class they purported to represent. That clause, paragraph 15.1 of the MSN
membership agreement, provided:
This agreement is governed by the laws of the State of
Washington, USA, and you consent to the exclusive jurisdiction and venue of
courts in King County, Washington in all disputes arising out of or relating to
your use of MSN or your MSN membership.
Plaintiffs cross-moved, inter alia, to
strike a certification submitted in support of defendants' **530 motion
to dismiss and to compel the deposition of the certificant.
On November 13, 1997, Judge Fitzpatrick, in a
written opinion, expressed his reasons for dismissing the complaint based upon
the forum selection clause. Given that conclusion, plaintiffs' cross-motions
were denied perforce, and plaintiffs' motion to certify the class was denied as
moot. Conforming orders were entered on
the same date. On December 19, 1997,
Judge Fitzpatrick entered an order modifying a passage in his November 13
opinion.
*122 The background of the matter was
depicted in the amended opinion:
Before becoming an MSN member, a prospective subscriber is
prompted by MSN software to view multiple computer screens of information,
including a membership agreement which contains the above clause. MSN's membership agreement appears on the computer screen in a
scrollable window next to blocks providing the choices "I Agree" and
"I Don't Agree." Prospective
members assent to the terms of the agreement by clicking on "I Agree"
using a computer mouse. Prospective
members have the option to click "I Agree" or "I Don't
Agree" at any point while scrolling through the agreement. Registration may proceed only after the
potential subscriber has had the opportunity to view and has assented to the
membership agreement, including MSN's forum selection clause. No charges are incurred until after the
membership agreement review is completed and a subscriber has clicked on "I
Agree."
The trial court observed:
Generally, forum selection clauses are prima facie valid
and enforceable in New Jersey. See McNeill
v. Zoref,
297 N.J.Super.
213, 687 A.2d
1052 (App.Div.1997). New Jersey courts will decline to enforce a
clause only if it fits into one of three exceptions to the general rule: (1) the clause is a result of fraud or
"overweening" bargaining power;
(2) enforcement would violate the strong public policy of New
Jersey; or (3) enforcement would
seriously inconvenience trial. Wilfred
MacDonald, Inc. v. Cushman, Inc.,
256 N.J.Super.
58, 606 A.2d
407 (App.Div.), certif. denied, 130
N.J.
17, 611 A.2d
655 (1992).
The burden falls on the party objecting to enforcement to show that the
clause in question fits within one of these exceptions. Id. Plaintiffs have failed to meet
that burden here.
Judge Fitzpatrick correctly discerned that
New Jersey follows the logic of the United States Supreme
Court decision in Carnival
Cruise Lines v. Shute,
499 U.S.
585, 111 S.Ct.
1522, 113 L.Ed.2d
622 (1991).
* * * In Carnival, cruise ship passengers were held to a forum
selection clause which appeared in their travel contract. The clause enforced in Carnival was
very similar in nature to the clause in question here, the primary difference
being that the Carnival clause was placed in small print in a travel
contract while the clause in the case sub judice was placed on-line on
scrolled computer screens.
The trial court opinion went on to analyze
plaintiffs' contentions:
Plaintiffs' consent to MSN's clause does not appear to be
the result of fraud or overweening bargaining power. In New Jersey, fraud consists of (1)
material misrepresentation of a past or present fact; (2) knowledge or belief by the declarant of
its falsity; (3) an intention that the
recipient rely on it; (4) reasonable
reliance by the recipient; and (5)
resulting damages. Gennari
v. Weichert Co. Realtors,
148 N.J.
582, 691 A.2d
350 (1997). Plaintiffs have not shown that MSN's
forum selection clause constitutes fraud.
The clause is reasonable, clear and contains no material
misrepresentation.
Further, plaintiffs were not subjected to overweening
bargaining power in dealing with Microsoft and MSN. The **531 Supreme
Court has held that a corporate *123
vendor's inclusion of a forum selection clause in a consumer contract does not
in itself constitute overweening bargaining power. Carnival,
499 U.S.
585, 111 S.Ct.
1522, 113 L.Ed.2d
622. In
order to invalidate a forum selection clause, something more than merely size
difference must be shown. Id. A court's focus must be whether such an
imbalance in size resulted in an inequality of bargaining power that was
unfairly exploited by the more powerful party.
See, e.g., Hodes
v. S.N.C. Achille Lauro ed Altri-Gestione,
858 F.2d
905 (3d Cir.1988), cert. denied, 490
U.S.
1001, 109 S.Ct.
1633, 104 L.Ed.2d
149 (1989).
Plaintiffs have shown little more than a size difference
here. The on-line computer service
industry is not one without competition, and therefore consumers are left with
choices as to which service they select for Internet access, e-mail and other
information services. Plaintiffs were
not forced into a situation where MSN was the only available server. Additionally, plaintiffs and the class which
they purport to represent were given ample opportunity to affirmatively assent
to the forum selection clause. Like Carnival,
plaintiffs here "retained the option of rejecting the contract with
impunity." 499
U.S.
585, 111 S.Ct.
1522, 113 L.Ed.2d
622. In
such a case, this court finds it impossible to perceive an overwhelming
bargaining situation.
[1] Judge Fitzpatrick opined that application of MSN's forum
selection clause did not contravene public
policy. He distinguished three cases
cited by plaintiffs in support of the contrary proposition: Kubis
& Perszyk Assocs. Inc. v. Sun Microsystems, Inc.,
146 N.J.
176, 680 A.2d
618 (1996); McNeill
v. Zoref,
297 N.J.Super.
213, 687 A.2d
1052 (App.Div.1997); and Param
Petroleum Corp. v. Commerce and Indus. Ins. Co.,
296 N.J.Super.
164, 686 A.2d
377 (App.Div.1997). In each of these cases, a forum selection
clause was held to be invalid or unenforceable for particularized policy
reasons not applicable here. On the
other hand, Judge Fitzpatrick also noted our holding in Wilfred
MacDonald, Inc. v. Cushman,
256 N.J.Super.
58, 606 A.2d
407 (App.Div.), certif. denied, 130
N.J.
17, 611 A.2d
655 (1992), that, as a general matter,
enforcement of forum selection clauses is not contrary to public policy, a view
we now reaffirm.
Finally, Judge Fitzpatrick held that
enforcement of the forum selection clause would not inconvenience a trial. Given the fact that the named plaintiffs
reside in several jurisdictions and that, if the class were to be certified,
many different domestic and international domiciles would also be involved,
"the inconvenience to all *124 parties is no greater in Washington
than anywhere else in the country."
[2][3][4][5] After reviewing the record in the light of the arguments
advanced by the parties, we are in substantial agreement with the reasons for
decision articulated by Judge Fitzpatrick.
We reject as meritless plaintiffs'
arguments on appeal that the terms of the forum selection clause do not prevent
plaintiffs from suing Microsoft outside of Washington or, alternatively, that
the forum selection clause lacks adequate clarity. The meaning of the clause is plain and its
effect as a limiting provision is clear.
Furthermore, New Jersey's interest in assuring consumer fraud protection
will not be frustrated by requiring plaintiffs to proceed with a lawsuit in
Washington as prescribed by the plain language of the forum selection
clause. As a general matter, none of
the inherent characteristics of forum selection clauses implicate consumer
fraud concepts in any special way. If a
forum selection clause is clear in its purport and has been presented to the
party to be bound in a fair and forthright fashion, no consumer fraud policies
or principles have been violated. Cf.
id. at 63- 64, 606
A.2d
407.
Moreover, as a matter of policy interest and apart from considerations
bearing upon the choice-of-law provision in the forum selection clause, **532
plaintiffs have given us no reason to apprehend that the nature and scope of
consumer fraud protections afforded by the State of Washington are materially
different or less broad in scope than those available in this State.
[6] The only viable issues that remain bear upon the argument
that plaintiffs did not receive adequate notice of the forum selection clause,
and therefore that the clause never became part of the membership contract
which bound them. A related,
alternative argument is that the question of notice is a factual matter that should be submitted to a
jury. Defendants respond by arguing
that 1) in the absence of fraud, a contracting party is bound by the provisions
of a form contract even if he or she never reads them; 2) this clause met all reasonable standards
of conspicuousness; and 3) the sign-up
process gave plaintiffs ample opportunity to *125 review and reject the
agreement. Defendants also contend that
notice is a question of law, decidable by a court, not a jury.
The holding in Carnival
Cruise Lines v. Shute,
499 U.S.
585, 111 S.Ct.
1522, 113 L.Ed.2d
622 (1991), does not dispose of the notice
question because the plaintiffs there had "essentially ... conceded that
they had notice of the forum-selection provision[,]" by stating that they
" '[did] not contest ... that the forum selection clause was reasonably
communicated to [them], as much as three pages of fine print can be
communicated.' " Id.
at 590, 111 S.Ct.
at 1525, 113 L.Ed.2d
at 630.
The dissenting justices described the format in which the forum
selection clause had been presented as "in the fine print on the back of
the [cruise] ticket." Id.
at 597, 111 S.Ct.
at 1529, 113 L.Ed.2d
at 634 (Stevens, J., dissenting).
The scenario presented here is different
because of the medium used, electronic versus printed; but, in any sense that matters, there is no
significant distinction. The plaintiffs
in Carnival could have perused all the fine-print provisions of their
travel contract if they wished before accepting
the terms by purchasing their cruise ticket.
The plaintiffs in this case were free to scroll through the various
computer screens that presented the terms of their contracts before clicking
their agreement.
Also, it seems clear that there was nothing
extraordinary about the size or placement of the forum selection clause
text. By every indication we have, [FN3] the clause was presented in exactly the same format as
most other provisions of the contract.
It was the first item in the last paragraph of the electronic document. We note that a few paragraphs in the
contract were presented in upper case typeface, presumably for emphasis, but
most provisions, including the forum selection clause, were presented in lower
case typeface. We discern nothing about the style or mode of presentation, *126
or the placement of the provision, that can be taken as a basis for concluding
that the forum selection clause was proffered unfairly, or with a design to
conceal or de-emphasize its provisions.
To conclude that plaintiffs are not bound by that clause would be
equivalent to holding that they were bound by no other clause either, since all
provisions were identically presented.
Plaintiffs must be taken to have known that they were entering into a
contract; and no good purpose, consonant
with the dictates of reasonable reliability in commerce, would be served by
permitting them to disavow particular provisions or the contracts as a
whole. See Rudbart
v. North Jersey Dist. Water Supply Comm'n,
127 N.J.
344, 351-53, 605 A.2d
681 (referring to the principle that a contracting party may be bound by the
terms of a form contract even if he or she has never read them), cert.
denied, 506
U.S.
871, 113 S.Ct.
203, 121 L.Ed.2d
145 (1992).
FN3. We have not
considered the CD-ROM version of the contract, presented in the record on
appeal, since none of the present plaintiffs used that means in joining MSN.
[7] The issue of reasonable notice regarding a forum selection
clause is a question **533 of law for the court to determine. See Effron
v. Sun Line Cruises, Inc.,
67 F.3d
7, 9 (2d Cir.1995); Hodes
v. S.N.C. Achille Lauro ed Altri-Gestione,
858 F.2d
905, 908 (3d Cir.1988), petition for cert.
dismissed, 490
U.S.
1001, 109 S.Ct.
1633, 104 L.Ed.2d
149 (1989), abrogated on other grounds, Lauro
Lines, S.R.L. v. Chasser,
490 U.S.
495, 109 S.Ct.
1976, 104 L.Ed.2d
548 (1989).
We agree with the trial court that, in the absence of a better showing
than has been made, plaintiffs must be seen to have had adequate notice of the
forum selection clause. The resolution
of this notice issue, at this stage of the litigation between plaintiffs and
defendants must, of course, be seen to be without prejudice to any showing
either party may have the opportunity to make in another jurisdiction in a
plenary proceeding on the contract regarding issues apart from the validity and
enforceability of the forum selection
clause.
Affirmed.
323 N.J.Super. 118, 732 A.2d 528
END OF
DOCUMENT