Dix v. Ict Group, Inc.

• Decision Date: 12 July 2007
• Docket Number: No. 77101-4.,77101-4.
• Citation: 161 P.3d 1016,160 Wn.2d 826
• Parties: Suzy DIX and Jeffrey R. Smith, on behalf of themselves and all others similarly situated, Respondents, v. ICT GROUP, INC., a Pennsylvania corporation; and America Online, Inc., a Delaware corporation, Petitioners.
• Court: Washington Supreme Court

161 P.3d 1016

160 Wn.2d 826

Suzy DIX and Jeffrey R. Smith, on behalf of themselves and all others similarly situated, Respondents, v. ICT GROUP, INC., a Pennsylvania corporation; and America Online, Inc., a Delaware corporation, Petitioners.

No. 77101-4.

Supreme Court of Washington, En Banc.

Argued February 28, 2006.

Decided July 12, 2007.

Appeal from the Superior Court, Spokane County, Salvatore F. Cozza, J James B. King, Spokane, WA, Daniel T. Donovan, John C. O'Quinn, Eugene F. Assaf, Kirkland & Ellis, Washington, DC, Counsel for Petitioners.

Richard W. Kuhling, David Laurence Broom, William John Schroeder, Gregory C. Hesler, Paine Hamblen, Coffin, Brooke, & Miller, Michael David Kinkley, Michael D. Kinkley PS, Spokane, WA, for Respondents.

Shannon E. Smith, Office of the Attorney General, Seattle, WA, Amicus Curiae on behalf of Attorney General of Washington.

Bryan Patrick Harnetiaux, Spokane, WA, Kelby Dahmer Fletcher, Peterson Young Putra et al., Seattle, WA, Amicus Curiae on behalf of Washington State Trial Lawyers Association.

MADSEN, J.

¶ 1 The plaintiffs in this case allege that America Online, Inc. (AOL), unilaterally and wrongfully created and charged them for secondary membership accounts. The plaintiffs brought a putative class suit in Washington courts, alleging, among other things, violations of the Washington Consumer Protection Act, chapter 19.86 RCW (CPA). However, the Terms of Service (TOS) agreement between the plaintiffs and AOL contains a forum selection clause specifying Virginia as the forum for any suits relating to the membership services. Virginia does not allow class actions for suits like plaintiffs' suit. The trial court dismissed the action on the basis that the forum selection clause requires suit to be brought in Virginia. On appeal, the Court of Appeals reversed, holding that the forum selection clause is unenforceable because the selected forum does not permit class suits, thus violating public policy underlying the CPA. We affirm the Court of Appeals, but on narrower grounds.

FACTS

¶ 2 Suzy Dix and Jeffrey R. Smith (the plaintiffs) chose AOL as their Internet service provider. To obtain AOL membership, each selected a master, or primary, screen name for the membership, designated a method of payment (credit card, debit card, electronic fund transfer, or automatic billing to a telephone number), and consented to an online contract, the TOS agreement. The monthly charge under the pricing plan then in effect was $23.90 for unlimited access, with an additional $5.00 charge for plans paid for through electronic transfer or telephone billing. Under plaintiffs' plan, a primary account holder can select up to six "secondary screen names," permitting, for example, separate e-mail accounts that the primary account holder or another person (such as a family member or roommate) can use. An AOL member can also convert a secondary screen name into a separate AOL account, which is a new membership account subject to a separate monthly charge.

¶ 3 The TOS agreement covering the primary account contains a forum selection clause:

You expressly agree that exclusive jurisdiction for any claim or dispute with AOL or relating in any way to your membership or your use of the AOL Services resides in the courts of Virginia and you further agree and expressly consent to the exercise of personal jurisdiction in the courts of Virginia in connection with any such dispute including any claim involving AOL or AOL Services. The foregoing provision may not apply to you depending on the laws of your jurisdiction.

Clerk's Papers (CP) at 57.

¶ 4 The plaintiffs allege that AOL randomly used secondary screen names in "pop-up" advertisement screens inviting the user to create a new membership using the secondary screen name for the new account, i.e., to "spin off" the secondary screen name into a new AOL membership. The plaintiffs assert that most users do not want to create a new account and, when presented with the pop-up, users simply want to get rid of it. They say that the pop-up often has an "I agree" or a "Tell me more" button, but has no button to decline. Plaintiffs maintain that users who do not want a secondary account could choose the "x" in the upper right hand corner of the pop-up, attempt to close the AOL program completely, or shut down the computer. The plaintiffs allege that AOL nevertheless unilaterally and automatically "spins off" the advertised secondary name into a new AOL membership. Plaintiffs assert that once a member realizes that he or she is being billed for two accounts, the member calls AOL using a 1-800 telephone number provided by AOL, which actually connects to an employee of defendant ICT Group, Inc. (ICT) at a center in eastern Washington.

¶ 5 Plaintiffs claim that ICT is an agent of AOL hired to handle customer service inquiries. Plaintiffs allege that ICT's employees are trained to engage in deceptive practices, specifically, to recognize calls relating to spun-off secondary accounts, to provide no meaningful assistance, to convince the caller that he or she or someone in the household created the secondary account, and to offer relief in the case of only the most insistent customers and then only in the form of free future AOL service for a short period of time.

¶ 6 In support of their allegations, Dix and Smith have submitted their declarations and declarations of other members of the putative class, and declarations of former ICT employees.

¶ 7 On July 29, 2003, Dix and Smith filed a class suit against AOL and ICT on behalf of themselves and all others similarly situated, alleging conversion, unjust enrichment, and violation of the CPA.¹ As to the latter, they alleged in their complaint that ICT as agent and AOL as principal engaged in unfair and deceptive acts and practices by creating unauthorized spun-off accounts, charging customers for them, and failing to fully credit customers for the improperly spun-off accounts; that these unfair and deceptive acts and practices occurred in trade or commerce in the course of AOL's business and impacted the public interest; and that plaintiffs Dix and Smith and other members of the putative class were damaged as a direct result of AOL's and ICT's unfair and deceptive acts and practices. They alleged that "[t]he amount of damages suffered by each individual class member is relatively small, generally ranging from $23.90 to less than $250.00, such that it is impracticable and inefficient for each class member to maintain a separate action." CP at 13. In their declarations, Dix and Smith each claim damages under $100.00.²

¶ 8 AOL and ICT moved for dismissal under CR 12(b) based on the forum selection clause or the doctrine of forum non conveniens. The trial court granted the motion to dismiss the action against AOL on the basis that the forum selection clause is valid and enforceable. The court also dismissed the claims against ICT on the ground that as an agent of AOL, ICT was entitled to the same defenses as AOL.³

¶ 9 Dix and Smith sought direct review by this court, which instead transferred the case to the Court of Appeals. The Court of Appeals reversed, holding that the forum selection clause is not enforceable because the selected forum does not permit class suits and thus the clause violates public policy underlying the CPA. Dix v. ICT Group, Inc., 125 Wash.App. 929, 106 P.3d 841 (2005).

¶ 10 The day after the Court of Appeals' decision was filed, the Class Action Fairness Act of 2005 (CAFA) was signed into law. Pub.L. No. 109-2, 119 Stat. 4 (2005). CAFA amended 28 U.S.C. § 1332 and expanded provisions for class suits in federal courts. AOL and ICT moved for reconsideration of the Court of Appeals' decision on the basis that a class suit in federal court was now possible in Virginia. The motion for reconsideration was denied.

¶ 11 AOL and ICT then sought discretionary review in this court; their petition for review was granted. The Attorney General of Washington and the Washington State Trial Lawyers Association Foundation have filed amicus curiae briefs.

ANALYSIS

¶ 12 The Court of Appeals applied an abuse of discretion standard of review in this case on the basis that it is the only standard expressly applied in any previous Washington decision assessing the validity of forum selection clauses. Dix, 125 Wash.App. at 933-34, ¶ 8, 106 P.3d 841; see Exum v. Vantage Press, Inc., 17 Wash.App. 477, 479, 563 P.2d 1314 (1977) (applying abuse of discretion standard). As the court noted, in other cases the Court of Appeals had reasoned that under either a de novo standard or an abuse of discretion standard the trial court correctly determined that the party challenging a forum selection clause had not met the burden of establishing its unenforceability. Bank of Am., N.A. v. Miller, 108 Wash.App. 745, 748, 33 P.3d 91 (2001); Voicelink Data Servs., Inc. v. Datapulse, Inc., 86 Wash.App. 613, 617, 937 P.2d 1158 (1997).

¶ 13 Other jurisdictions are split over whether a de novo or abuse of discretion standard applies when reviewing decisions on enforceability of forum selection clauses.⁴ Some courts applying a de novo review standard explain that they do so because forum selection clauses often require contract interpretation and analysis of fundamental fairness and public policy. E.g., Lipcon v. Underwriters at Lloyd's, London, 148 F.3d 1285, 1290-91 (11th Cir.1998). Some courts applying an abuse of discretion standard explain that disposition of such cases is highly fact specific. E.g., Cox v. Dine-A-Mate, Inc., 129 N.C.App. 773, 776, 501 S.E.2d 353 (1998). Courts are also split over the appropriate method of pleading a motion for dismissal under a forum selection clause.⁵

¶ 14 We conclude that generally the abuse of discretion standard applies. Under this standard of review, a trial court abuses its discretion if its decision is manifestly unreasonable or based on untenable grounds. Wash. State Physicians...