Source: https://h2o.law.harvard.edu/cases/4059
Timestamp: 2019-04-26 05:43:31+00:00

Document:
Al Mendoza, Jr. et al., Real Parties in Interest.
Court of Appeal, First District, Division Two.
June 21, 2001.As Modified July 10, 2001.Review Denied October 17, 2001.
 Latham & Watkins, Everett C. Johnson, James K. Lynch, San Francisco, Randall T. Kim, for Petitioner.
Marion's Inn, Kennedy P. Richardson, Mark Palley, Sam Walker, Yvonne M. Pierrou, Oakland, for Real Parties in Interest.
This petition for writ of mandate was filed by petitioner America Online, Inc. (AOL) following the denial of its motion to stay or dismiss a putative consumer class-action lawsuit. The motion was based on a claim that California is an inconvenient forum in which to litigate the dispute concerning AOL's proprietary Internet service. In support of its motion, AOL exclusively relied on a forum selection clause in its contracts with real parties in interest, Al Mendoza, Jr. (Mendoza) and the potential class members, which designated Virginia as the jurisdiction in which all disputes arising out of the relationship would  be litigated. The agreement also included a choice of law provision requiring that Virginia law be applied to any such dispute.
We conclude the court properly denied AOL's motion. First, one of the causes of action seeks class action relief under the California Consumers Legal Remedies Act (CLRA) (Civ.Code, §§ 1750 et seq.). This act contains a provision that voids any purported waiver of rights under the CLRA as being contrary to California public policy. Enforcement of the contractual forum selection and choice of law clauses would be the functional equivalent of a contractual waiver of the consumer protections under the CLRA and, thus, is prohibited under California law.
Second, we conclude that Virginia law does not allow consumer lawsuits to be brought as class actions and the available remedies are more limited than those afforded by California law. Accordingly, the rights of Mendoza and the California consumer class members would be substantially diminished if they are required to litigate their dispute in Virginia, thereby violating an important public policy underlying California's consumer protection law. For this independent reason, the forum selection clause is unenforceable.
A class action was filed by Mendoza for himself and others against AOL seeking compensatory and punitive damages, injunctive relief, and restitution. The complaint alleges that real parties are former subscribers to AOL's Internet service who, over the past four years, paid between $5 and $22 each month for the service. Monthly payments were made by allowing AOL to debit automatically the credit cards of class members. The class members terminated their subscriptions to AOL but, without authorization, AOL continued to debit their credit cards for monthly service fees. Mendoza individually alleged that he gave AOL notice of the cancellation of his subscription in October 1999, but AOL continued to charge monthly fees against his credit card at least through February 2000, at which time Mendoza cancelled his credit card in order to stop the debits.
The complaint alleged separate causes of action including violations of California's Unfair Business Practices Act (First Cause of Action) (Bus. & Prof.Code, §§ 17200 et seq.), violations of California's CLRA (Second Cause of Action) (Civ. Code, § 1770, subd. (a)(14)), common law conversion/trespass (Third Cause of Action), and common law fraud (Fourth Cause of Action). The complaint also prayed that the action proceed as a class action under Code of Civil Procedure section 382, Civil Code section 1781, and Business and Professions Code section 17204, and that Mendoza and the class be awarded compensatory and punitive damages, restitution, prejudgment interest, attorney fees and costs, and a permanent injunction halting AOL's practice, and requiring it to disseminate corrective notices.
Shortly thereafter, AOL filed a motion to stay or dismiss the action on the ground of inconvenient forum. As noted, the motion was based on the forum selection clause contained in the "Terms of Service" (TOS) agreement entered into between Mendoza and AOL at the time he subscribed to AOL's proprietary Internet  service. The TOS, attached as Exhibit A in support of AOL's motion, is a 4½-page, single-spaced, unsigned document. Paragraph 8 of the TOS entitled "LAW AND LEGAL NOTICES" states in part the following: "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 AOL 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 its affiliates, subsidiaries, employees, contractors, officers, directors, telecommunications providers and content providers...." Additionally, paragraph 8 contained a choice of law provision designating Virginia law as being applicable to any dispute between the parties: "The laws of the Commonwealth of Virginia, excluding its conflicts-of-law rules, govern this Agreement and your membership."
In support of its motion, AOL contended the forum selection clause was presumptively valid under California law, was a rational, voluntary, and conscionable choice, and that its enforcement would not violate any strong public policy of this state. Among the legal authorities on which it relied, AOL referred to several unpublished out-of-state cases in which the clause had been previously enforced.
In response, Mendoza objected to Exhibit A, claiming that the document did not accurately reflect what was displayed to him when he commenced service with AOL. Instead, he described seeing displayed on his home computer monitor a "densely worded, small-size text that was hard to read on the computer screen." This objection formed the leitmotif for Mendoza's claim that the TOS was an unconscionable adhesion contract, and that under applicable rules of contract construction, the forum selection clause was unenforceable. In addition, Mendoza contended the TOS was unreasonable and unenforceable because it necessarily required him and the putative class members to relinquish legal rights in derogation of California public policy.
On September 25, 2000, the court entered its order denying AOL's motion. After discussing several of the pertinent cases bearing on the issue, the court denied the motion finding that: 1) the forum selection clause was unfair and unreasonable because it was not negotiated, it was contained in a standard form contract, and was in a format that was not readily identifiable by Mendoza; 2) AOL had failed to carry its burden of proving that the consumer rights afforded under California law would not be diminished by enforcement of the clause; and 3) the remedies available to consumers in Virginia were not comparable to those in California.
AOL filed a petition for writ of mandamus. On November 28, 2000, we issued an order to show cause why a peremptory writ of mandamus should not issue. Thereafter, on January 4, 2001, we discharged the order to show cause as improvidently granted, and denied the petition. AOL then petitioned the Supreme Court for review. On February 28, 2001, the high court granted the petition for review, and transferred the matter back to this court with directions to issue an order to show cause why the relief requested in  the petition should not be granted. On March 2, 2001, we issued a new order to show cause as directed by the Supreme Court.
Later, in Furda v. Superior Court (1984) 161 Cal.App.3d 418, 207 Cal.Rptr. 646 (Furda), the court began its analysis of the lower court's ruling denying the defendant's motion to stay or dismiss based on forum non conveniens with the following statement: "We next consider whether the superior court abused its discretion in denying Furda's motion to stay or dismiss real parties' action on the ground of forum non conveniens and the forum selection clause." (Id. at p. 424, 207 Cal.Rptr. 646.) Citing Furda, this division similarly began our uncharacteristically laconic opinion in Lu v. Dryclean-U.S.A. of California, Inc. (1992) 11 Cal.App.4th 1490, 14 Cal.Rptr.2d 906 (Lu), by saying "[w]e review a trial court's decision to enforce a forum selection clause for an abuse of discretion. [Citation.]" (Id. at p. 1493, 14 Cal.Rptr.2d 906.) Thus, all of these decisions, and we trust there may be more, performed the same review with which we are charged using the abuse of discretion standard of review.
This language from Lifeco was cited in Cal-State in support of the following proposition: "In contrast with the abuse-of-discretion standard of review applicable in a noncontractual forum non conveniens  motion, a substantial-evidence standard of review applies where a forum has been selected by contract...." (Cal-State, supra, 12 Cal.App.4th at p. 1680, 16 Cal. Rptr.2d 417, citing Lifeco, supra, 222 Cal. App.3d at p. 334, 271 Cal.Rptr. 385.) As we note, the Lifeco court did not make any distinction in the applicable standard of review based on whether the court was reviewing a contractual forum selection clause or applying traditional forum non conveniens doctrine.
While we understand the distinction intended by Cal-State, we are not persuaded that appellate review of a contract interpretation issue can be properly analogized to review of an unambiguous forum selection clause. Nor, in light of the language contained in Furda and Lu, as well as in Smith Valentino, do we see justification for the Cal-State court's conclusion that no cases have "explicitly stated" what standard of review is applicable. Instead, given existing guidance on this question from our Supreme Court, and the more consistent line of Court of Appeal decisions, which likewise apply the abuse of discretion standard, we disagree with Cal-State 's conclusion that the substantial evidence standard applies instead. Therefore, we review the lower court's decision using the abuse of discretion standard.
Turning to the question of which side has the burden of proof when a forum selection clause is challenged, as we have noted, the trial court in the case before us found: "[Defendant AOL did not meet its burden of showing that the substantive rights afforded California plaintiffs were not diminished by enforcement of the forum selection clause." (Italics added.) Normally, the burden of proof is on the party challenging the enforcement of a contractual forum selection clause. (Smith Valentino, supra, 17 Cal.3d at p. 496, 131 Cal.Rptr. 374, 551 P.2d 1206; see also Cal-State, supra, 12 Cal.App.4th at p. 1680, 16  Cal.Rptr.2d 417; Lu, supra, 11 Cal. App.4th at p. 1493, 14 Cal.Rptr.2d 906.) However, the lower court assigned the burden of proof to AOL based on its conclusion that Wimsatt v. Beverly Hills Weight Etc. Internal, Inc. (1995) 32 Cal. App.4th 1511, 38 Cal.Rptr.2d 612 (Wimsatt), controls this case.
The trial court in this case concluded that because Mendoza seeks recovery, in part, under the CLRA (Civ.Code, §§ 1750 et seq.), which contains a statutory antiwaiver provision like that involved in Wimsatt, the burden of proof was on AOL to prove that enforcement of the forum selection clause would not result in a significant diminution of rights to California consumers. We agree. In comparing the purpose and remedies afforded to California franchisees under the FIL to those afforded California consumers under the CLRA, we find identical policy considerations which command shifting the burden of proof here to AOL, the party seeking enforcement of the forum selection clause, as was done in Wimsatt.
Important to the trial court's finding is the fact that the CLRA, like the FIL, embeds in its statutory scheme a provision prohibiting waivers by consumers of any of these remedies. Civil Code section 1751 warns: "Any waiver by a consumer of the provisions of this title is contrary to public policy and shall be unenforceable and void."
While the remedial aspects of each statutory scheme are indigenous to the business practices regulated, in both cases the Legislature has ensured that the rights afforded to California citizens against unfair practices cannot be diminished or avoided by contract. Where the effect of transfer to a different forum has the potential of stripping California consumers of their legal rights deemed by the Legislature to be non-waivable, the burden must be placed on the party asserting the contractual forum selection clause to prove that the CLRA's anti-waiver provisions are not violated. For this reason we too embrace the rationale of the Wimsatt decision and conclude that the CLRA claim pleaded by Mendoza, like the FIL claims asserted in Wimsatt, mandates departure from the general rule which normally places the burden of proving unfairness or unreasonableness of the forum selection clause on the party opposed to its enforcement.
We agree with these sentiments, and view such clauses as likely to become even more ubiquitous as this state and nation become acculturated to electronic commerce. (See Carnival Cruise Lines, Inc. v. Shute (1991) 499 U.S. 585, 111 S.Ct. 1522, 1527, 113 L.Ed.2d 622.) Moreover, there are strong economic arguments in support of these agreements, favoring both merchants and consumers, including reduction in the costs of goods and services and the stimulation of e-commerce.
But this encomium is not boundless. Our law favors forum selection agreements only so long as they are procured freely and voluntarily, with the place chosen having some logical nexus to one of the parties or the dispute, and so long as California consumers will not find their substantial legal rights significantly impaired by their enforcement. Therefore, to be enforceable, the selected jurisdiction must be "suitable," "available," and able to "accomplish substantial justice." (The Bremen v. Zapata Off-Shore Co. (1972) 407 U.S. 1, 17, 92 S.Ct. 1907, 32 L.Ed.2d 513; Smith Valentino, supra, 17 Cal.3d at  p. 494, 131 Cal.Rptr. 374, 551 P.2d 1206.) The trial court determined that the circumstances of contract formation did not reflect Mendoza exercised free will, and that the effect of enforcing the forum selection clause here would violate California public policy by eviscerating important legal rights afforded to this state's consumers. Our task, then, is to review the record to determine if there was a rational basis for the court's findings and the choice it made not to enforce the forum selection clause in AOL's TOS agreement.
In Hall v. Superior Court (1983) 150 Cal.App.3d 411, 197 Cal.Rptr. 757 (Hall), two California investors exchanged their interests in an oil and gas limited partnership in return for stock in one of their co-investors, Imperial Petroleum, Inc., a Utah corporation. Closer to the facts of this case, the contract embodying their exchange agreement contained both forum selection and choice of law provisions identifying Nevada as the selected forum and governing law. A dispute arose, and the two investors sued Imperial in California. (Id. at pp. 413-15, 197 Cal.Rptr. 757.) Imperial asserted the forum selection clause, and the trial court found the forum selection clause was enforceable.
It is important to consider that the Hall court denied enforcement of the forum selection clause solely on the inevitability that doing so would eliminate the protections of California's Corporate Securities Law; a result prohibited by the anti-waiver feature of that law. However, it did not compare the California statutory scheme to that afforded by Nevada law to determine if the remedies provided by each were materially different.
Certainly, the CLRA provides remedial protections at least as important as those under the Corporate Securities Law of 1968. Therefore, by parity of reasoning, enforcement of AOL's forum selection clause, which is also accompanied by a choice of law provision favoring Virginia, would necessitate a waiver of the statutory remedies of the CLRA, in violation of that law's antiwaiver provision (Civ.Code, § 1751) and California public policy. For this reason alone, we affirm the trial court's ruling.
Of greater importance is the absence of any provision in the VCPA that allows suits under the Act to proceed as class actions. Unless specifically allowed by statute, class action relief is not generally available in Virginia in actions at law. (King v. Va. Birth-Related Neurological Injury Compensation Program (1990) 22 Va. Cir. 156); Kuhn v. West Alexandria Properties, Inc. (1980) 22 Va. Cir. 439.
That this view has endured over the last 30 years is of little surprise given the importance class action consumer litigation has come to play in this state. In light of that history, we cannot accept AOL's assertion that the elimination of class actions for consumer remedies if the forum selection clause is enforced is a matter of insubstantial moment. The unavailability of class action relief in this context is sufficient in and by itself to preclude enforcement of the TOS forum selection clause.
In addition to the unavailability of class actions and the apparent limitation in injunctive relief, neither punitive damages, nor enhanced remedies for disabled and senior citizens are recoverable under Virginia's law. More nuanced differences are the reduced recovery under the VCPA for "unintentional" acts, a shorter period of limitations, and Virginia's use of a Lodestar formula alone to calculate attorney fees recovery. (Holmes v. L.G. Marion Corp. (1999) 258 Va. 473, 521 S.E.2d 528,  533-534.) Quite apart from the remedial limitations under Virginia law relating to injunctive and class action relief, the cumulative importance of even these less significant differences is substantial. Enforcement of a forum selection clause, which would impair these aggregate rights, would itself violate important California public policy. For this additional reason the trial court was correct in denying AOL's motion to stay or to dismiss.
In so holding we reject Mendoza's contention that the clause should not be enforced simply because it would be patently unreasonable to require him or other AOL customers who form the putative class to travel to Virginia to litigate the relatively nominal individual sums at issue. He points out that in 1998 and 1999, not a single suit by a non-Virginia resident appears to have been filed in AOL's Virginia home county, a development Mendoza suggests is directly related to the fact that the cost of prosecuting a claim in Virginia vastly exceeds the amounts normally at issue in individual claims against AOL.
Yet Mendoza contends that Smith Valentino's admonition not to consider convenience and cost in evaluating the validity of forum selection clauses applies only where there remains a "practical option [of travel to the selected forum] in terms of the expense and value of the controversy." As we understand it, Mendoza is arguing that expense in litigating in the selected forum can be considered if it exceeds the amount in controversy or at least renders the choice to litigate "impractical."
Similarly, our holding is unaffected by the recent Supreme Court decision in Washington Mutual Bank v. Superior Court (2001) 24 Cal.4th 906, 103 Cal. Rptr.2d 320, 15 P.3d 1071 (Washington Mutual). That case concerns what procedurally must be done by trial courts considering whether to certify a national class action where the dispute arises out of a contract containing a foreign choice of law provision. Relying on its earlier opinion in Nedlloyd Lines B.V v. Superior Court, supra, 3 Cal.4th 459, 11 Cal.Rptr.2d 330, 834 P.2d 1148, the Supreme Court directed trial courts to perform a choice of law analysis as part of the national class certification process. (Washington Mutual, supra, 24 Cal.4th at pp. 915-916, 103 Cal. Rptr.2d 320, 15 P.3d 1071.) As part of that analysis, courts must determine if the substantive law of the selected forum is in conflict with a `"fundamental public policy of California.'" (Id. at p. 916, 103 Cal. Rptr.2d 320, 15 P.3d 1071, italics omitted.) If so, the choice of law provision is not to be enforced if California has an interest in having its own law applied to the dispute. (Id. at pp. 916-917, 103 Cal.Rptr.2d 320, 15 P.3d 1071.) If relevant at all, the legal principles underlying both Nedlloyd and Washington Mutual are entirely consistent with our opinion.
Lastly, we are also unpersuaded by AOL's contention that the trial court erred in not granting AOL's request for a stay of the California action to allow the Virginia court to determine whether the relief available to Mendoza is consistent with California consumer law. AOL  claims that if the Virginia court found inconsistency, the California court could then re-assert jurisdiction, deny enforcement of the forum selection clause, and allow Mendoza to proceed in the California forum. We reject this claim because: 1) it is unnecessary for us to defer our decision until a Virginia course clarifies its consumer law, for we do not find Virginia consumer law to be nearly as opaque as suggested by counsel for AOL; 2) AOL suggests no procedural device which would allow a California court to proceed with the underlying case after a Virginia court has ruled (see U.S. Const, art. IV, sec. 1); and 3) a stay would take an already financially impractical legal dispute and compound the expense to resolve it by necessitating perhaps two lawsuits.
The order to show cause is discharged and the petition for writ of mandate is denied. Costs are awarded to Mendoza.
HAERLE, Acting P.J., and LAMBDEN, J., concur.
 The "prayer" portion of the complaint does not specifically enumerate punitive damages as a specie of relief, however, the complaint makes it clear that punitive damages are sought.
 Both here and in the trial court, the parties cite unpublished out-of-state decisions favoring their respective positions. Rule 977 of the California Rules of Court prohibits citation to our own state's unpublished opinions, thus we are hardly inclined to consider those of the Massachusetts Superior Court, federal district courts in Illinois and New York, or Florida trial courts and its Court of Appeal.
 However, we note that while we adhere to the abuse of discretion standard, neither our conclusions, nor the result in this case, would change even were we to apply the less deferential substantial evidence standard.
 We admit to being mystified by AOL's characterization that Wimsatt "applies to choice-of-law issues, not forum selection issues." Clearly, it applies to the latter.
 "Suitability" and "availability" in this context mean that a valid judgment can be obtained in the selected forum. (Stangvik v. Shiley, Inc. (1991) 54 Cal.3d 744, 752, 1 Cal. Rptr.2d 556, 819 P.2d 14.) Normally, this is limited to a determination that there is jurisdiction over the dispute and the statute of limitations has not expired as of the time the motion is considered. (Chong v. Superior Court (1997) 58 Cal.App.4th 1032, 1036-1037, 68 Cal.Rptr.2d 427.) Also, the forum must have a reasonable connection to the parties or the dispute. (Cal-State, supra, 12 Cal.App.4th at pp. 1681-1682, 16 Cal.Rptr.2d 417.) Mendoza does not contest the attributes of Virginia as a proposed "suitable" and "available" forum.
 At oral argument, counsel for AOL suggested for the first time that a Virginia court might apply California's consumer protection law to resolve this dispute. Not only was this suggestion legally unsupported, but we find it counter-intuitive to believe that a Virginia court would invoke California law to resolve a contract-based consumer dispute against a Virginia domiciliary where the parties agreed to have Virginia law applied, and where Virginia has a statutory consumer protection law of its own.
 Unlike other provisions of the Civil Code (§ 1717), a defendant's right to recover attorney fees and costs is not reciprocal unless the court finds that the plaintiff did not prosecute the claim against the defendant in good faith (id. at § 1780, subd. (d)).
 Section 59.1-203 is comprised of four subdivisions, three of which clearly discuss and are limited to the rights of public entities, acting through public counsel, to seek orders restraining violations of the VCPA for the benefit of the public. However, subdivision C states without qualification "[t]he circuit courts are authorized to issue temporary or permanent injunctions to restrain and prevent violations of [section] 59.1-200." It would be needless duplication to recite the authority of the courts to enjoin misconduct in subdivision C if it were intended to apply only to public entities and not individual actions. However, we see nothing in the statute that allows private individuals to seek injunctive relief for the benefit of others. That authority appears to be reserved to the discretion of public officers under subdivisions A, B and D.
 Because we affirm on other grounds, we need not decide whether the trial court correctly concluded that the TOS was an unconscionable adhesion contract (Armendariz v. Foundation Health Psychcare Services, Inc. (2000) 24 Cal.4th 83, 99 Cal.Rptr.2d 745, 6 P.3d 669), or Mendoza's alternative contention that the forum selection clause is unenforceable because it was induced by fraud.

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