The Software IP Report
Enforceability of a Forum Selection Clause in a Clickwrap Agreement
By Charles Bieneman
Categories: Software Licenses, The Software IP Report
Here are two cases that provide a further reminder of the power of clickwrap agreements, and that a party offering a clickwrap agreement can avail itself of that power only by properly presenting essential clickwrap agreement terms. In Rassoli v. Intuit, Inc., Civil No. H-11-2827 (S.D. Tex. March 19, 2012), the court enforced a forum selection clause that was included in a scrollable clickwrap agreement accepted by the plaintiff. However, in Jerez v. JD Closeouts.com, No. CV-024727-11, 2012 NY Slip Op. 22070 (N.Y. Dist. Ct., Nassau Cty., March 20, 2012), the court declined to enforce a forum selection clause that was found on the defendant’s web site, but not in a clickwrap agreement.
Rassoli
After the the plaintiff, Rassoli, filed suit in Texas state court, Intuit removed the case to federal court, and then moved to dismiss or transfer venue based on a forum selection clause that specified California.
The plaintiff did not dispute that a valid contract existed between the parties; as the court noted, both Texas and California law (which governed the agreement) recognized the validity of clickwrap agreements. Further, the interpretation of a forum selection clause was a matter of federal, not state law. Under Fifth Circuit law, the plaintiff had a heavy burden of showing that the forum selection clause was unreasonable. The plaintiff did not meet that burden. Although an adhesion contract, the agreement was not the product of fraud or coercion. The plaintiff knowingly accepted the agreement, and would be able to seek the same remedies in California as in Texas.
The court dismissed the suit, rather than transferring it to the Northern District of California, so as not to “deprive the plaintiffs of their contractual right to choose between state or federal court.”
Jerez
The plaintiff, Jerez, brought suit in New York after allegedly receiving substandard goods from the defendants. The defendants moved to dismiss, citing a forum selection clause found on their web site. After establishing that the plaintiff’s complaint plead facts sufficient to establish long-arm jurisdiction over the defendants, the court turned to the question of the enforceability of the forum selection clause.
After analyzing a number of cases addressing whether parties had had proper opportunity to accept or reject provisions in adhesion contracts, including clickwrap agreements, the court found that “the existence of a forum selection clause was not reasonably communicated to plaintiff through a printed contract . . . , a confirming letter agreement incorporating the provisions by reference . . . , or a required ‘click-through’ acceptance of hyperlinked terms and conditions.” Instead, “the terms were ‘buried’ and ‘submerged’ on a webpage that could only be found by clicking on an inconspicuous link on the company’s ‘About Us’ page.”
In short, the defendants would not need to have done much to obtain the benefit of their forum selection clause. However, that little they did not do. Therefore, despite the burden to defendants of possibly being exposed to suits in many foreign jurisdictions, their motion to dismiss based on the forum selection clause was denied.