Source: http://linksandlaw.com/decisions-54.htm
Timestamp: 2019-04-21 10:13:57+00:00

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In this mandamus proceeding, we hold that where a private plaintiff which has itself suffered no injury files a representative action under California’s unfair competition law (UCL) (Bus. & Prof. Code, § 17200 et seq.)1 alleging that certain of defendant’s contractual provisions subject its customers to an "unlawful, unfair or fraudulent business. . . practice" and the contract contains a forum selection provision, the plaintiff is bound by that provision just as defendant’s customers would be bound had they filed the action themselves.
We agree with respondent court that an unfair competition action brought by a public prosecutor would not be subject to the forum selection clause. This is because of the fundamentally different nature of an action brought by a prosecutor and privately pursued representative actions. (See Payne v. National Collection Systems, Inc. (2001) 91 Cal.App.4th 1037, 1045-1047.) Although the label "private attorney general" is often used (or misused) to describe a private plaintiff in a UCL action, respondent court construed the term too literally. The filing of a UCL action by a private plaintiff does not confer on that plaintiff the stature of a prosecuting officer, and the fact that the plaintiff may be acting as a so-called "private attorney general" is irrelevant for purposes of the issue presented here. The relevant inquiry in determining whether a plaintiff, not a party to a contract, is bound by the contract’s forum selection clause is whether (1) the third party is "closely related to the contractual relationship," and (2) the contractual forum state (in this case, New Jersey,) provides a "suitable alternative forum" for the lawsuit. Both requirements are met here.
In Lu, a franchisor’s corporate parent was found to be "closely related" to the contractual relationship between the franchisor and its franchisee, because the franchisor was alleged to have participated in the fraudulent misrepresentations that induced the plaintiff to enter into the franchise agreement. Consumer Cause correctly points out that the case is factually distinguishable on that basis. However, the plaintiff in Lu also alleged that the parent was the "alter ego" of the franchisor that signed the franchise agreement; in other words, for purposes of the lawsuit, the two were one and the same. The position of Consumer Cause, the representative plaintiff, is similar in that respect.
Bancomer, S.A. v. Superior Court (1996) 44 Cal.App.4th 1450, cited by Consumer Cause in its return to the petition, is distinguishable. That case involved a bank that had no relationship to the contractual dispute other than being thrust into a position as trustee, and which was attempting to enforce, not defeat, a forum selection clause. Unlike Consumer Cause, the bank in that case had nothing to gain from resolution of the contractual dispute. America Online, Inc. v. Superior Court (2001) 90 Cal.App.4th 1, cited by Consumer Cause, is also factually distinguishable. In that case, a class action filed pursuant to the California Consumers Legal Remedies Act (CRLA) (Civ. Code, § 1750 et seq.), the court held a forum selection clause invalid because the CRLA contains a provision that voids any purported waiver of rights as being contrary to California public policy. The UCL, under which Consumer Cause brought this action, contains no such limitation.
New Jersey is a suitable alternate forum.
The Consumer Fraud Act (CFA), N.J.S.A. 56:8-1 to 20, is similar in many ways to the UCL. However, it differs from the UCL in one crucial respect: an action under the CFA must be filed by either the Attorney General or "[a]ny person who suffers any ascertainable loss of moneys or property. . . ." Because Consumer Cause has itself suffered no ascertainable loss from Net2Phone’s alleged unlawful business practices, it argues that enforcement of the forum selection clause would be unreasonable because it would not have standing to bring this action in New Jersey. Although the New Jersey legislature has not seen fit to confer on private parties who are not injured the right to bring a representative action on behalf of those who are, this does not necessarily mean that New Jersey does not provide the means to protect injured consumers. Any customer of Net2Phone who claims to have been injured by Net2Phone’s billing practices may bring an action in New Jersey, or may prevail on the Attorney General of New Jersey to do so. Significantly, Consumer Cause does not claim Net2Phone’s customers would not be adequately protected were they required to pursue their claims in New Jersey. Instead, Consumer Cause has focused only in its own lack of standing. While it is true that Consumer Cause stands to lose the opportunity to recover attorney’s fees should it prevail in a California UCL action, our paramount consideration is the protection of consumers, not the enrichment of attorneys.
The petition for writ of mandate is granted. A peremptory writ shall issue directing respondent court to vacate its order of October 1, 2002, denying the motion of defendant Net2Phone to stay or dismiss the action, and enter a new and different order granting the motion to stay. Costs are awarded to Net2Phone.
A trial court’s decision to enforce or not enforce a forum selection clause is reviewed for an abuse of discretion. (Bancomer, S.A. v. Superior Court (1996) 44 Cal.App.4th 1450, 1457; but see Cal-State Business Products & Services, Inc. v. Ricoh (1993) 12 Cal.App.4th 1666, 1680-1681 [substantial-evidence test].) For the following reasons, I do not believe the trial court abused its discretion in refusing to enforce the forum selection clauses in this case. The New Jersey forum selection clause in the contracts between defendant Net2Phone, Inc. (Net2Phone) and various consumers is not applicable or enforceable as to claims brought by plaintiff Consumer Cause, Inc. (Consumer Cause) under California’s Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.) (UCL).3 The enforcement of such forum selection clauses to divest California of private attorney general cases under the UCL is contrary to California public policy. If such clauses are enforceable, private attorney general actions under California regulatory statutes could be frustrated. In addition, the plaintiff is not a party to any contract with Net2Phone; the claims are statutory, not contractual; and New Jersey is not a suitable alternative forum available to plaintiff.
Public policy precludes enforcement of forum selection clauses under these circumstances.
The "primary purpose" of the UCL "is to preserve fair business competition by extending protections traditionally available to business competitors to the consuming public." (Rothschild v. Tyco Internat. (US), Inc. (2000) 83 Cal.App.4th 488, 493.) The UCL reflects "‘[T]he tendency of the law, both legislative and common . . . in the direction of enforcing increasingly higher standards of fairness or commercial morality in trade.’" (People ex rel. Mosk v. National Research Co. (1962) 201 Cal.App.2d 765, 770.) Accordingly, the UCL constitutes an important public policy of the State of California, notwithstanding recent allegations of abuses in its use. (See Stern, Unfair Business Practices and False Advertising: Bus. & Prof. Code § 17200 (5th ed. 2000), p. 5 [referring to the UCL as "a sprawling oak" of consumer protection law].) That public prosecutors in California must by California law be notified of UCL appellate proceedings in California so that they may participate (§ 17209) is a further indication that the UCL reflects an important public policy of California. In order to implement the important public policies of the UCL, the Legislature provided that multiple parties had standing to sue to enforce the act. Thus, rather than limiting enforcement of the UCL to aggrieved parties, the Legislature specified that actions for relief under the UCL may be brought by state or local prosecutors "in the name of the People of the State of California" "or by any person acting for the interests of itself, its members or the general public." (§ 17204, italics added.) Accordingly, the UCL allows anyone to act as, in effect, a private attorney general to protect the public against certain commercial wrongs and deceptions. The UCL reflects the Legislature’s conclusion that individual claims or class actions in California courts or actions by California public officials are not adequate to protect California consumers. To allow private parties to restrict the availability of relief under the UCL to that offered by the courts or public officials of another state conflicts with the broad means of enforcement of the UCL established by the California Legislature. That restriction is precisely the effect of the majority’s opinion enforcing the forum selection clauses and sending this action to New Jersey. New Jersey’s Consumer Fraud Act, N.J.S.A. 56:8-1 to 20, does not allow private attorney general actions such as that brought by Consumer Cause here. The majority’s opinion eviscerates the UCL by ordering the dispute to a jurisdiction that does not permit private attorneys general to prosecute a statutory unfair competition action.
That another regulatory statute may have a specific provision preventing enforcement of a forum selection clause (see, e.g., the California Franchise Relations Act, § 20040.5; Jones v. GNC Franchising, Inc. (9th Cir. 2000) 211 F.3d 495; but see Bradley v. Harris Research (9th Cir. 2001) 275 F.3d 884 [§ 20040.5 preempted by the Federal Arbitration Act as to arbitrations]) does not suggest that absent such a provision, a court is precluded from enforcing a forum selection clause when such enforcement would contravene public policy reflected in a statute. It is established that forum selection clauses that violate public policy are not enforced, and statutes are a principal reflection of public policy.
Plaintiff’s consumer complaint contains allegations of false advertising and violations of section 17200. Consumer Cause contends that Net2Phone’s failure to disclose in its advertising and promotional materials its practice of "rounding up" the time elapsed for internet telephone calls to the nearest minute renders its promotional materials and advertising "false, misleading and fraudulent in violation of Title 15 U.S.C. section 45(a)(1) (unfair methods of competition and unfair or deceptive acts or practices affecting commerce) therefore of Business and Professions Code section 17200." Consumer Cause also alleges that Net2Phone’s practice of charging consumers for "ringing time"—the time elapsing once a call is placed and prior to connection with the recipient of the call—without disclosing the billing system in its promotional materials, usage instructions, or website constitutes false advertising and an unfair business practice. Finally, Consumer Cause alleges that Net2Phone’s practice of refusing to connect calls made on its prepaid calling cards when the balance on the cards is less than $1—also undisclosed in Net2Phone’s promotional materials—constitutes an unfair business practice and false advertising.
No such sidestepping is taking place here to justify departing from the general rule that parties are not bound by the provisions of contracts to which they are not parties. Although Consumer Cause purports to act on behalf of consumers, many of whom are parties to contracts containing the forum selection clause, it is not a party to such contracts. Moreover, Consumer Cause raises noncontractual claims, and it acts on behalf of the general public.
New Jersey is not a suitable alternative forum.
The California Supreme Court has stated that an action may not be dismissed for an alternative forum "unless a suitable alternative forum is available to the plaintiff [citations]." (Stangvik v. Shiley, Inc. (1991) 54 Cal.3d 744, 752.) New Jersey is not a suitable alternative forum for this action, an unfair business practices lawsuit brought by Consumer Cause on behalf of California consumers. As conceded by the majority, this lawsuit could not be brought in New Jersey, for New Jersey’s Consumer Fraud Act, N.J.S.A. 56:8-1 to 20, does not confer upon private parties who are not personally injured the ability to bring a representative action on behalf of others. As discussed above, this ability is an important component of the rights of the members of the public in California. Because Common Cause cannot bring this suit as a private attorney general in New Jersey, the trial court correctly ruled that New Jersey is not a suitable alternative forum and declined to enforce the forum selection clause.
For each of the reasons I have given, I would have affirmed the ruling of the trial court denying the motion to dismiss.
1 All further statutory references are to the Business and Professions Code unless otherwise indicated.
2 Code of Civil Procedure section 410.30, subdivision (a), provides: "When a court upon motion of a party or its own motion finds that in the interest of substantial justice an action should be heard in a forum outside this state, the court shall stay or dismiss the action in whole or in part on any conditions that may be just."
3 Undesignated statutory references shall be to the Business and Professions Code.
5 In Furda v. Superior Court (1984) 161 Cal.App.3d 418, 427, fn. 5, the court suggested that policies underlying statutes such as the UCL did not preclude enforcement of choice-of-forum clauses when the chosen state had a forum with "a strong interest in this transaction" andthe parties had a "substantial number of contacts" with that forum. That case involved breach of contract and fraud claims and was not brought under the UCL.
6 Payne v. National Collections Systems, Inc. (2001) 91 Cal.App.4th 1037, 1045-1047 does not suggest what the majority call a "fundamentally different nature of an action brought by a prosecutor and privately pursued representative actions" (maj. opn. ante, at p. 4) because that case distinguished actions brought by a prosecutor and private class actions.
7 Net2Phone stated that the provision has been in its contracts since before January, 1998, but customers billed during the last four years may have had contracts from an earlier period.

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