Caspi v. Microsoft Network, LLC

• Decision Date: 02 July 1999
• Citation: 732 A.2d 528,323 N.J. Super. 118
• Parties: 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.
• Court: New Jersey Superior Court

732 A.2d 528

323 N.J. Super. 118

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.

Superior Court of New Jersey, Appellate Division.

Argued January 5, 1999.

Decided July 2, 1999.

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 complaint¹ in eighteen counts sought divers relief against two related corporate entities, The Microsoft Network, L.L.C. and Microsoft Corporation (collectively, Microsoft).² Plaintiffs asserted various theories including breach of 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.

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 multistate 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' 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.

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 Supreme Court has held that a corporate 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.

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 parties is no greater in...