Koresko v. Realnetworks, Inc.

• Decision Date: 05 August 2003
• Docket Number: No. CIV.F 03-5512 OWW DLB.,CIV.F 03-5512 OWW DLB.
• Citation: 291 F.Supp.2d 1157
• Parties: John KORESKO, Plaintiff, v. REALNETWORKS, INC., Defendant.
• Court: U.S. District Court — Eastern District of California

291 F.Supp.2d 1157

John KORESKO, Plaintiff, v. REALNETWORKS, INC., Defendant.

No. CIV.F 03-5512 OWW DLB.

United States District Court, E.D. California.

August 5, 2003.

John J Koresko, Tehachapi, CA, pro se.

John Edwin Peterson, Jory, Peterson, Watkins and Smith, Fresno, CA, Gary M. Miller, Pro Hac Vice, Todd C. Jacobs, Pro Hac Vice, John C. Bucheit, Pro Hac Vice, Grippo and Elden, Chicago, IL, for defendants.

MEMORANDUM AND ORDER RE: DEFENDANT'S MOTION TO DISMISS FOR IMPROPER VENUE PURSUANT TO FED. R. CIV. P. 12(b)(3) AND 28 U.S.C. § 1406(a)

WANGER, District Judge.

I. INTRODUCTION

Before the Court is Defendant RealNetworks, Inc.'s ("Defendant" or "RealNetworks") motion to dismiss for improper venue, based on a forum selection clause contained in its contract with plaintiff, pursuant to Fed.R.Civ.P. 12(b)(3) and 28 U.S.C. § 1406(a). See Doc. 21, Defendant's Motion to Dismiss Plaintiff's First Amended Complaint ("Defendant's Motion to Dismiss"), filed May 30, 2003. Defendant argues that the forum selection clause in the contract controls venue. See Doc. 22, Defendant's Memorandum of Points and Authorities in Support of Motion to Dismiss ("Defendant's P & As in Support of Motion to Dismiss"), filed May 30, 2002. Plaintiff John Koresko ("Plaintiff" or "Koresko") moved to remand the case to Kern County Superior Court for lack of diversity jurisdiction. See Doc. 16, filed May 14, 2003. Plaintiff argues the proper venue is Kern County Superior Court the site of the original suit that was removed pursuant to 28 U.S.C. § 1441. See id.

II. BACKGROUND

On August 17, 2001, Plaintiff entered into a contract with Defendant RealNetworks to purchase computer software over the Internet. See Doc. 12, First Amended Complaint ("FAC"), at ¶ 5, filed May 12, 2003. Plaintiff entered his credit card information and agreed to the contract on the screen created by Defendant entitled "End User License Agreement" ("License Agreement") by entering "Accept." See FAC at ¶ 5. The License Agreement states that it "shall be governed by the laws of the State of Washington, without regard to conflicts of law provisions, and [Plaintiff] hereby consent[s] to the exclusive jurisdiction of the state and federal courts sitting in the State of Washington." See FAC, Exh. A, RealNetworks, Inc. End User License Agreement ("License Agreement") at 22.

In his initial Complaint filed in Kern County Superior Court, Plaintiff sought $150,000 damages. See Doc. 1, Notice of Removal, at 19:9-17. The Complaint contained nine claims for breach of contract based upon electronic correspondence, tortious breach of the covenant of good faith and fair dealing, fraud and deceit, conversion, unjust enrichment, money had and received, statutory violations, unfair business practices, and a declaratory judgment. See id. However, after Defendant removed the case, Plaintiff amended the Complaint to eliminate several claims, lowering the jurisdictional amount to only $50,000 damages in his FAC.¹ See FAC at 15:25.²

The FAC alleges four claims for fraud and deceit, conversion, statutory violations, unfair business practices, and declaratory judgment. See FAC at 1. Plaintiff alleges that Defendant charged his credit card for a service entitled "Gold Pass" that he did not intend to buy. See id. at ¶ 5. Plaintiff alleges that this service was "tied-in" with "Real Player 8 Plus," the software he actually intended to buy for $19.99.³ See id. at ¶ 7. Plaintiff asserts Defendant ignored his pleas to stop charging him for Gold Pass at a premium of $9.99 per month and continued to charge him from November 2001 until the present.⁴

On April 24, 2003, Defendant removed the action to this Court on diversity grounds pursuant to 28 U.S.C. § 1441(b) because Plaintiff is a citizen of California and Defendant is a Washington corporation and the amount in controversy was $150,000 alleged in the Complaint. See Notice of Removal at 2:11-16. Plaintiff amended the Complaint to lower the amount of damages sought to $50,000. See FAC at 15:25. On May 14, 2003, Plaintiff moved to remand the case to Kern County Superior Court based on the reduced prayer of $50,000, arguing "complete diversity was destroyed." See Doc. 16 at 6:24-25. Defendant argues that Plaintiff's FAC still seeks more than the $75,000 jurisdictional minimum since he seeks the same categories of damages (including treble damages). See Defendant's P & As in Support of Motion to Dismiss at 5:12-14. Defendant argues that Plaintiffs lowered the jurisdictional amount only to defeat removal. See id.

Defendant moves to dismiss Plaintiff's FAC for improper venue pursuant to 28 U.S.C. § 1406(a) and Fed.R.Civ.P. 12(b)(3). See Defendant's Motion to Dismiss. Defendant argues that Plaintiff validly agreed to the forum selection clause, which exclusively mandates arbitration in the State of Washington for grievances suffered due to Defendant's products. See Doc. 27 at 2:24-28, filed July 7, 2003. Defendant argues that motions to dismiss based on contractual forum selection clauses are properly decided under Fed.R.Civ.P. 12(b)(3) and that the appropriate remedy for breach of the clause is dismissal not transfer. See Defendant's P & As in Support of Motion to Dismiss at 6:7-16; see also Kukje Hwajae Insur. Co., Ltd. v. M/V Hyundai Liberty, 294 F.3d 1171, 1174 (9th Cir.2002); Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 324 (9th Cir.1996). Defendant also argues that enforcement of the clause is reasonable here, as it meets the standard established in Carnival Cruise Lines v. Shute, 499 U.S. 585, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991). Plaintiff does not oppose Defendant's Motion to Dismiss.

III. LEGAL STANDARD

A. Motion to Dismiss pursuant to Fed.R.Civ.P. 12(b)(3) and 28 U.S.C. § 1406(a)

Fed.R.Civ.P. 12(b)(3) governs a motion to dismiss premised on the enforcement of a forum selection clause. Argueta, 87 F.3d at 324; see also Offshore Sportswear, Inc. v. Vuarnet Int'l, B.V., 114 F.3d 848, 851 (9th Cir.1997) ("We treat dismissal based on a forum selection clause like a dismissal for improper venue under Rule 12(b)(3)").

28 U.S.C. § 1406(a) states: "The district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such a case to any district or division in which it could have been brought." "Once venue is challenged, the burden is on the plaintiff to show that venue is proper." Whiteman v. Resort, 1999 WL 163044, at *1 (N.D.Cal. 1999) (citing Piedmont Label Co. v. Sun Garden Packing Co., 598 F.2d 491, 496 (9th Cir.1979)); Nissan Motor Co. v. Nissan Computer Corp., 89 F.Supp.2d 1154, 1161 (C.D.Cal.2000) ("Although there is some disagreement, most courts hold that the plaintiff bears the burden of establishing proper venue.")

A wrongly venued case may also be transferred at the discretion of the court based on convenience of the parties. Section 1404(a) states: "For the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." "The defendant must make a strong showing of inconvenience to warrant upsetting the plaintiff's choice of forum." Miracle v. N.Y.P. Holdings, Inc., 87 F.Supp.2d 1060, 1073 (D.Haw.2000) (citing Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 843 (9th Cir.1986)). Defendant has not moved for a forum conveniens transfer.

B. Forum Selection Clause

Parties may use a forum selection clause in a contract to designate the forum where litigation is to take place and litigation commenced in a forum other than that selected may be subject to dismissal for improper venue. See, e.g., Carnival Cruise Lines v. Shute, 499 U.S. 585, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991); Spradlin v. Lear Siegler Mgt. Services, 926 F.2d 865, 866 (9th Cir.1991); TAAG Linhas Aereas de Angola v. Transamerica Airlines, 915 F.2d 1351 (9th Cir.1990). A forum selection clause is "prima facie valid" and should not be set aside unless the party challenging enforcement demonstrates that the clause is "invalid" or that its enforcement would be "unreasonable." M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972); see also Carnival Cruise Lines, 499 U.S. at 589, 111 S.Ct. 1522. In 1996, the Ninth Circuit followed M/S Bremen, supra, enforcing a forum selection clause absent evidence establishing:

fraud, undue influence, overweening bargaining power, or such serious inconvenience in litigating in the selected forum so as to deprive that party of a meaningful day in court.

See Argueta v. Banco Mexicano, 87 F.3d 320, 324 (9th Cir.1996) (citing Pelleport Investors, Inc. v. Budco Quality Theatres, Inc., 741 F.2d 273, 280 (9th Cir.1984) (and

The Bremen, 407 U.S. at 12-19, 92 S.Ct. 1907)).

A forum selection clause will be enforced where venue is specified with mandatory language. Docksider, Ltd. v. Sea Technology, Ltd., 875 F.2d 762, 764 (9th Cir.1989). However, if the language of the forum selection clause is non-mandatory, the forum selection clause will not preclude suit elsewhere. Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75, 77 (9th Cir.1987). When a mandatory forum selection clause clearly designates the forum chosen as the exclusive forum, it is enforceable. Northern California Dist. Council of Laborers v. Pittsburg-Des Moines Steel Co., 69 F.3d 1034, 1037 (9th Cir.1995). "When only jurisdiction is specified the clause will generally not be enforced without some further language indicating the parties' intent to make jurisdiction exclusive." Docksider, 875 F.2d at 764.

In Pelleport Investors, the forum selection clause expressly mandated a particular forum:

Exhibitor [Budco] expressly agrees that any and all disputes arising out of or in connection with this Agreement shall be litigated only in the Superior Court for Los Angeles, California (and in no other), and...