UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA
July 9, 2010
HANS MEIER AND SUSAN MEIER, PLAINTIFFS,
MIDWEST RECREATIONAL CLEARINGHOUSE, LLC, AND DOES 1 THROUGH 20, INCLUSIVE, DEFENDANTS.
The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge
MEMORANDUM AND ORDER
Through the present action, Hans and Susan Meier ("Plaintiffs") seek damages for violations of California law arising out of their online purchase of a recreational vehicle ("RV") from Midwest Recreational Clearinghouse ("Defendant"). Presently before the Court is Defendant's Motion to Dismiss for improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3).*fn1 For the reasons set forth below, Defendant's Motion to Dismiss for improper venue will be granted.
Defendant, a Minnesota company, runs an online auction site called www.crankyape.com. In February, 2009, Plaintiffs accessed said website and submitted the winning bid for a 2005 National Tropical T399 recreational vehicle ("RV").
In order to bid on a vehicle through crankyape.com, a user must agree to specified terms and conditions. (Decl. Susan Meier No. 4.) Contained within those terms and conditions is a forum selection clause, pursuant to which the user consents to "the exclusive jurisdiction and venue of courts in Washington County, Minnesota, U.S.A., in all disputes arising out of or related to the use of CrankyApe.com." (Def.'s Mot. Dismiss 2.) By checking the required box and using the site, Plaintiffs agreed to this forum selection clause, although Plaintiff contends that she did not notice or understand the import of the clause. (Decl. Susan Meier No. 4.)
According to Plaintiffs, the RV they purchased was advertised as having a "few small scratches on the exterior" in addition to a broken passenger headlight. After picking up the RV, Plaintiffs claim they discovered more significant problems. The RV shook persistently, and when Plaintiffs took the RV to a service center, they were told that the engine needed to be replaced. Plaintiffs and Defendant have settled as to the replacement of the engine.
Plaintiffs nonetheless seek compensation through the present lawsuit for other defects to the RV as well as damages for, inter alia, fraud and breach of contract.*fn3
Defendant does not confirm or deny these facts. Rather, Defendant seeks to dismiss the present action pursuant to Rule 12(b)(3) because Plaintiffs have filed suit in California, not Minnesota, contrary to the forum selection clause. Plaintiffs argue that the agreement containing the forum selection clause is a contract of adhesion and as such is unenforceable.
Rule 12(b)(3) and 28 U.S.C. § 1406(a) authorize the Court to dismiss an action on grounds that venue is improper. Plaintiffs have the burden of proof to show that venue is proper in this district. Piedmont Label Co. v. Sun Garden Packing Co., 598 F.2d 491, 496 (9th Cir. 1979); Hope v. Otis Elevator Co., 389 F. Supp. 2d 1235, 1243 (E.D. Cal. 2005). A motion to dismiss under Rule 12(b)(3) is the proper means to enforce a contractual forum-selection clause. Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996).
Unlike a motion to dismiss for failure to state a viable claim under Rule 12(b)(6), on a motion for improper venue under Rule 12(b)(3) "the pleadings need not be accepted as true and the court may consider supplemental written materials and consider facts outside the pleadings" in its adjudication. Kelly v. Qualitest Pharm, Inc., 2006 WL 2536627 at *7 (E.D. Cal. 2006) (citing Murphy v. Scheider Nat'l, Inc., 362 F.3d 1133, 1137 (9th Cir. 2004).
The decision to dismiss for improper venue, or alternatively to transfer venue to a proper court, is a matter within the sound discretion of the district court. Cook v. Fox, 537 F.2d 370, 371 (9th Cir. 1976).
Forum-selection clauses are "prima facie valid" and will be enforced unless shown to be "unreasonable under the circumstances. Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972) (internal quotation omitted). This "unreasonable" exception should be narrowly construed. Argueta, 87 F.3d at 325. A forum-selection clause is unreasonable if "its incorporation into the contract was the result of fraud, undue influence, or overwhelming bargaining power." Id. at 325 (internal citations omitted). The fact that a forum-selection clause is contained within a so-called "clickwrap agreement," whereby a user accepts a website's terms and conditions, does not in and of itself render the clause invalid. Such agreements "have routinely been upheld by circuit and district courts."
United States v. Drew, 259 F.R.D. 449, 462 (C.D. Cal. 2009) (citing Burcham v. Expedia, Inc., 2009 WL 586513, *2-3 (E.D. Mo. 2009).
In Bremen, the Supreme Court upheld a forum-selection clause that was the product of an arms-length negotiation between two commercial entities. Bremen, 407 U.S. at 2. The Court subsequently applied this analysis to form contracts between consumers and businesses in its seminal decision, Carnival Cruise Lines v. Shute, 499 U.S. 585 (1991). At issue in Carnival Cruise was a forum-selection clause on the back of a cruise ticket purchased by a consumer who was later injured onboard. Carnival Cruise, 499 U.S. at 587. The Carnival Cruise court considered several factors in weighing the legality of forum-selection clauses. First, it found that cruise companies have a "special interest" in limiting the fora where they could be subject to suit. Id. at 593. Second, forum-selection clauses eliminate the need for pretrial motions to determine venue and thereby limit costs and conserve judicial resources. Id. at 594. Third, customers presumably benefit from the reduced prices that a company can offer by limiting the fora in which it could be subjected to suit. Id. at 594.
The Supreme Court rejected the lower court's finding that the plaintiffs were "physically and financially incapable of pursuing [their] litigation in Florida." Id. at 594. The Court found that the plaintiffs had not met the "heavy burden of proof required to set aside the clause on grounds of inconvenience." Id. at 595 (internal citation omitted).
It further rejected the lower court's "determination that a nonnegotiated forum-selection clause in a form ticket contract is never enforceable simply because it is not the subject of bargaining." Id. at 593. Rather, according to the Court, such clauses "are subject to judicial scrutiny for fundamental fairness." Id. at 594. The Court found that a forum-selection clause could only be invalidated on a showing of a "bad faith motive" whereby the forum was chosen "as a means of discouraging [parties] from pursuing legitimate claims." Id. at 595. The Court determined that because the forum specified in the clause, Florida, was the principal place of business for the petitioner and that many cruises departed from that location, evidence of such bad-faith motive was lacking.
Plaintiffs in the present action argue that they are not bound by the forum-selection clause included in the terms and conditions of Defendant's website. They argue that the terms were not freely bargained for and that complying with the forum-selection clause would effectively deprive them of their day in court. Unfortunately for Plaintiffs, the weight of authority renders their position untenable.
Defendant operates a website accessible anywhere in the world, and like the defendant cruise company in Carnival Cruise, a dispute over any given transaction could pull Defendant into court in a multitude of potential fora. Both parties to the present action have an interest in limiting the costs associated with litigation, which forum-selection clauses help to do by reducing pretrial motions.
Finally, Defendant here, like Carnival Cruise Lines, is presumably able to pass on to its customers the reduction in costs the forum-selection clause provides, and Plaintiffs were the beneficiaries of this reduction in price.
The Court notes that neither Defendant nor Plaintiff has moved to transfer the present action to another venue. Accordingly, Defendant's Motion to Dismiss is granted without prejudice.
Based on the foregoing, Defendant's Motion to Dismiss for Improper Venue (Docket No. 12) is GRANTED.*fn4
IT IS SO ORDERED.