Wong v. Partygaming Ltd.

• Decision Date: 21 December 2009
• Docket Number: No. 08-4295.,08-4295.
• Citation: 589 F.3d 821
• Parties: Rose WONG; Patrick Gibson, Plaintiffs-Appellants, v. PARTYGAMING LTD.; Partygaming PLC, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

589 F.3d 821

Rose WONG; Patrick Gibson, Plaintiffs-Appellants, v. PARTYGAMING LTD.; Partygaming PLC, Defendants-Appellees.

No. 08-4295.

United States Court of Appeals, Sixth Circuit.

Argued: November 17, 2009.

Decided and Filed: December 21, 2009.

ARGUED:

Aparesh Paul, Levin & Associates Co., L.P.A., Cleveland, Ohio, for Appellants. Behnam Dayanim, Paul, Hastings, Janofsky & Walker LLP, Washington, D.C., for Appellees.

ON BRIEF:

Aparesh Paul, Joel Louis Levin, Christopher M. Vlasich, Levin & Associates Co., L.P.A., Cleveland, Ohio, Edward Willard Cochran, Cochran & Cochran, Shaker Heights, Ohio, for Appellants. Behnam Dayanim, Kelly A. DeMarchis, Jeremy P. Evans, Paul, Hastings, Janofsky & Walker LLP, Washington, D.C., for Appellees.

Before: MERRITT, GIBBONS, and McKEAGUE, Circuit Judges.

KEAGUE, J., delivered the opinion of the court, in which GIBBONS, J., joined. MERRITT, J. (pp. 834-35), delivered a separate concurring opinion.

OPINION

KEAGUE, Circuit Judge.

Rose Wong and Patrick Gibson (together "plaintiffs") filed a lawsuit on behalf of themselves and similarly situated Ohio residents against PartyGaming Ltd., a Gibraltar-based company which hosts online poker games. In the suit, plaintiffs alleged breach of contract, misrepresentation, and violation of Ohio consumer protection laws. PartyGaming moved to dismiss the suit pursuant to a forum selection clause in its terms and conditions, which plaintiffs had agreed to when they registered on the site. The forum selection clause specified that all disputes would be subject to the exclusive jurisdiction of the courts of Gibraltar. Plaintiffs appeal the district court's dismissal of the suit sua sponte for forum non conveniens. For the following reasons, we AFFIRM the decision of the district court.

I.

PartyGaming runs an online poker business, which plaintiffs actively participated in as players. It is a publicly owned Gibraltar company, with its shares traded on the London Stock Exchange. To participate in online poker games, customers must register on PartyGaming's website and agree to its "Terms and Conditions of Use." Two such terms and conditions are relevant to this suit. The first relevant term contains PartyGaming's anti-collusion policy, which states that customers are prohibited from holding more than one account and that PartyGaming is committed to preventing collusion and cheating. As part of its anti-collusion policy, PartyGaming also provides information on its website regarding a "Collusion Prevention System" used to identify and ban colluding players and detect multi-account players. The Terms and Conditions also provide that the agreement shall be governed by the laws of Gibraltar and any disputes shall be subject to the exclusive jurisdiction of the courts of Gibraltar. The first paragraph of the Terms and Conditions of Use contains the following warning: "IMPORTANT —PLEASE READ THESE TERMS AND CONDITIONS CAREFULLY BEFORE ACCEPTING THIS AGREEMENT, THEN PRINT THESE TERMS AND CONDITIONS AND STORE THEM."

Plaintiffs originally filed a diversity suit against PartyGaming in September 2006 in the Northern District of Ohio. The suit alleged that PartyGaming, through its anti-collusion policy, affirmatively represented that collusion and multi-account players did not occur on its website. The suit also claimed that PartyGaming affirmatively represented that it did not encourage gambling by minors or gambling addicts. Plaintiffs contended that these representations were false and, as such, violated Ohio consumer protection laws, breached the agreement, and negligently, recklessly, or intentionally induced plaintiffs to join the website. Plaintiffs sought certification of a class of all similarly situated individuals, which the district court provisionally certified, consisting of all persons in the state of Ohio who paid a registration fee on PartyGaming's website.¹

PartyGaming failed to respond to plaintiffs' first amended complaint, and default was entered in January 2008. PartyGaming then moved to set aside default and argued that the suit should be brought in Gibraltar due to the forum selection clause. It subsequently filed a motion to dismiss plaintiffs' third amended complaint. The motion claimed improper venue under Federal Rules of Civil Procedure ("FRCP") 12(b)(3), due to the Gibraltar forum selection clause, and failure to state a claim under FRCP 12(b)(6), due to plaintiffs' failure to plead the elements of the causes of action.² In ruling on the motion, the district court found the Gibraltar forum selection clause valid, denied PartyGaming's motions as moot, and dismissed the action sua sponte for forum non conveniens. Plaintiffs filed this timely appeal and seek a reversal of the district court's dismissal.

II.

To support its dismissal for forum non conveniens, the district court cited to the Gibraltar forum selection clause. Thus, as a threshold matter, we must determine whether the clause should be enforced.³ We review the enforceability of a forum selection clause de novo. Preferred Capital, Inc. v. Assocs. of Urology, 453 F.3d 718, 721 (6th Cir.2006). In deciding this matter, we confront a choice-of-law issue of whether Ohio or federal law governs the inquiry into the enforceability of a forum selection clause when a federal court exercises diversity jurisdiction.

1. Applicable Law

To resolve this issue, we first look to the binding law of the Supreme Court and the law of this Circuit. In the context of admiralty cases, the Supreme Court has announced a federal policy favoring enforcement of forum selection clauses and has held that such clauses "should control absent a strong showing that [they] should be set aside." Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 587, 591, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991); M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). The Court has also stated that federal law governs the inquiry when a federal court, sitting in diversity, evaluates a forum selection clause in the context of a 28 U.S.C. § 1404(a) motion to transfer venue or in the context of any federal statute. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29-30, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988). The Court has provided guidance in these two contexts, but it has declined to decide the Erie issue of which law governs when a federal court, sitting in diversity, evaluates a forum selection clause in the absence of a controlling federal statute. Id. at 25-26, 108 S.Ct. 2239.

The Sixth Circuit has also declined to answer this question. In the past, we have noted that we did not need to decide the issue because both federal and state law treat forum selection clauses similarly.⁴ While our past decisions have maintained harmony between federal and state courts on the issue, a review of recent state cases reveals the possible emergence of differences in how state and federal law treat the enforcement of forum selection clauses. Compare Assocs. of Urology, 453 F.3d at 723-24 (holding enforceable a forum selection clause that did not identify a particular jurisdiction), with Preferred Capital, Inc. v. Power Eng'g Group, 112 Ohio St.3d 429, 860 N.E.2d 741, 746 (2007) (holding void as against Ohio public policy a forum selection clause that did not identify a particular jurisdiction); see also Preferred Capital, Inc. v. Sarasota Kennel Club, Inc., 489 F.3d 303, 306 (6th Cir.2007) (noting that differences have emerged between Ohio and federal law). Specifically, Ohio courts have held that forum selection clauses are less readily enforceable against consumers, which is a distinction that federal courts do not recognize. Info. Leasing Corp. v. Jaskot, 151 Ohio App.3d 546, 784 N.E.2d 1192, 1195 (2003). Ohio state courts have also noted the differences between federal and state law on the enforceability of forum selection clauses. Id.

Because this Circuit has not affirmatively decided which law governs when a federal court sits in diversity, we look to the law of other Circuits for guidance. In deciding this issue, six Circuits have held that the enforceability of a forum selection clause implicates federal procedure and should therefore be governed by federal law.⁵ Both the Seventh and Tenth Circuits have held that the law which governs the contract as a whole also governs the enforceability of the forum selection clause. See, Abbott Labs. v. Takeda Pharms. Co., 476 F.3d 421, 423 (7th Cir. 2007) ("Simplicity argues for determining the validity . . . of a forum selection clause . . . by reference to the law of the jurisdiction whose law governs the rest of the contract. . . ."); Yavuz v. 61 MM, Ltd., 465 F.3d 418, 428 (10th Cir.2006) ("We see no particular reason . . . why a forum-selection clause . . . should be singled out as a provision not to be interpreted in accordance with the law chosen by the contracting parties."). The First Circuit has not affirmatively decided the issue. See Rivera v. Centro Medico de Turabo, Inc., 575 F.3d 10, 16 (1 st Cir.2009) ("[W]e need not reach the unsettled issue of whether `forum selection clauses are treated as substantive or procedural for Erie purposes.'"). Finally, different panels in the Fourth Circuit have reached different results on the issue. Compare Bryant Elec. Co. v. City of Fredericksburg, 762 F.2d 1192, 1196 (4th Cir.1985) ("[T]his Court has applied [The Bremen] reasoning in diversity cases not involving international contracts."), with Nutter v. New Rents, Inc., 1991 WL 193490 at *5 (4th Cir.1991) ("In this diversity action, we apply the conflicts of law rules of West Virginia, the state in which the district court sits.").

Given the possibility of diverging state and federal law on an issue of great economic consequence, the risk of inconsistent decisions in diversity cases, and the strong federal interest in procedural matters in federal court, we find persuasive the law used in the majority of circuits and now adopt it. As...