Vindicating Consumer Rights against Online Forum Selection Clauses
Businesses for decades have protected themselves from unlimited jurisdiction with forum selection clauses, a contractual provision that specifies the jurisdiction in the event of a dispute. Forum selection clauses give a company “contractual predictability,” thus have the potential to reduce the cost of doing business and theoretically passing savings onto consumers.[1]
Online businesses attempt to protect themselves against “world wide jurisdiction” with forum selection clauses. These online forum selection clauses walk a fine line between protecting legitimate business interests and subverting consumer rights.
The Washington Supreme Court recently struck down a forum selection clause in a dispute between consumers and their ISP. In Dix & Smith v. ICT Group, Inc., and AOL, two plaintiffs claimed secondary email accounts were activated via AOL’s pop-up ads. Both Plaintiffs damages only amounted to $100. The plaintiffs sought to bring a class action under the Washington Consumer Protection Act (CPA) for engaging in unfair and deceptive acts by creating unauthorized spin off accounts.[2] AOL sought removal to Virginia pursuant to the Forum Selection Clause in the user’s terms of service.[3]
It is well established that a forum selection clause is prima facie valid and is not a term that needs to be negotiated between parties.[4] A party challenging a forum selection clause has the burden of showing the clause is unreasonable. A party can show the clause unreasonableness if 1) it was induced by fraud or overreaching, (2) the forum is so unfair and inconvenient that it deprives the plaintiff of a remedy or of its day in court, or (3) enforcement would contravene a strong public policy of the State where the action is filed.[5]
The Washington Supreme Court denied enforcement of AOL’s forum selection clause. The Court held that a forum selection clause that seriously impairs a plaintiff’s ability to bring suit to enforce the CPA violates the state’s public policy, because of the importance of the private right of action under the Consumer Protection Act to vindicate the rights of the state’s citizens.[6] The Court stated, “…that a forum selection clause that seriously impairs the plaintiff’s ability to go forward on a claim of small value by eliminating class suits in circumstances where there is no feasible alternative for seeking relief violates public policy and is unenforceable.”
Courts will continue to grapple with the enforcement of online forum selection clauses.
[4] Dix, 1020, citing Kysar v. Lambert, 76 Wash.App. 470, 484-85, (1995); see The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, (1972); Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 589-95, (1991).
[5] Dix, 1020, citing Gilman v. Wheat, First Sec., Inc., 345 Md. 361, 378, (1997).
