Court Opinion

ID: 9495340
Source: CourtListenerOpinion
Date Created: 2023-08-05 16:00:24.670299+00
Date Added: 2024-06-11T17:56:57.665817
License: Public Domain

CLEVENGER, Circuit Judge,
dissenting.
I respectfully dissent. It is an elementary principle of constitutional law that no court may render judgment upon one over whom the court lacks personal jurisdiction. The requirement that a court must have personal jurisdiction to render a valid judgment arises, in the case of a federal question, from the Due Process Clause of the Fifth Amendment and represents a restriction on judicial power as a matter of personal liberty. Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guibnee, 456 U.S. 694, 702, 102 S.Ct. 2099, 72 L.Ed.2d 492 (1982). Like other individual liberties, the right to due process may be waived, and a defendant by contract may consent to the jurisdiction of a court which otherwise would have no power over him. Nat’l Equip. Rental, Ltd. v. Szukhent, 375 U.S. 311, 315-16, 84 S.Ct. 411, 11 L.Ed.2d 354 (1964).
However, the conclusion that a defendant has surrendered his right to due process of law is not one that a court should reach casually. “In the civil area, the Court has said that ‘[w]e do not presume acquiescence in the loss of fundamental rights.’ Indeed, in the civil no less than the criminal area, ‘courts indulge every reasonable presumption against waiver.’ ” Fuentes v. Shevin, 407 U.S. 67, 94 n. 31, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972) (citation omitted) (quoting Ohio Bell Tel. Co. v. Pub. Util. Comm’n, 301 U.S. 292, 307, 57 S.Ct. 724, 81 L.Ed. 1093 (1937) and Aetna Ins. Co. v. Kennedy, 301 U.S. 389, 393, 57 S.Ct. 809, 81 L.Ed. 1177 (1937)). Let us be clear what we hold by enforcing Monsanto’s forum selection clause against McFarling: we hold that an accused in-fringer may surrender his right to due process in advance by signing a contract of adhesion — regardless of whether that accused infringer knew that by so doing he abandoned his constitutional rights.
It cannot seriously be disputed that by signing the Technology Agreement McFarling became attached to a contract of adhesion. Although the definition of an adhesive contract varies, Monsanto’s own state of Missouri has defined an adhesive contract as. “one in which the parties have unequal standing in terms of bargaining power (usually a large corporation versus an individual) and often involve take-it-or-leave-it provisions in printed form contracts.” High Life Sales Co. v. Brown-Forman Corp., 823 S.W.2d 493, 497 (Mo.1992) (en banc). The Technology Agreement certainly meets these criteria: the terms printed on the reverse of the Technology Agreement are not subject to negotiation and Monsanto’s billions of dollars in assets far exceed McFarling’s alleged net worth of $75,000.
But the relative bargaining power of Monsanto and McFarling is not the only indicium of a contract of adhesion here. Courts are more likely to label a contract adhesive when its terms are lopsided in favor of the drafter and when the purchaser has no other practical source to turn for necessary goods, for these factors tend to erode the premise that the rights given up by the lesser party were surrendered freely and fairly. No one perusing the Technology Agreement can doubt that its *1301terms are decidedly one-sided in Monsanto’s favor. A farmer signing the 1998 Technology Agreement did not merely agree to submit to the jurisdiction of the Eastern District of Missouri and to refrain from saving and replanting seed. Sale of Roundup Ready seed to the farmer was made on the condition that the farmer shall not use on that crop the glyphosate herbicides of any of Monsanto’s competitors. The farmer further agreed that Monsanto’s damages for saving and replanting seed shall include, in addition to Monsanto’s other remedies, liquidated damages based on 120 times the applicable Technology Fee. The farmer further agreed to bear the costs of Monsanto’s suit against him by paying all of Monsanto’s legal fees and costs. By the terms of the Technology Agreement, all that the farmer received in exchange for these promises was the “opportunity” to purchase and plant Roundup Ready seed and the “opportunity” to participate in Monsanto’s crop insurance programs. Should the farmer violate the terms of the Technology Agreement, these rights (which are not transferable without Monsanto’s consent) terminate immediately and permanently, although the farmer’s obligations to Monsanto do not. I do not mean to suggest that the substantive terms of the Technology Agreement are unenforceable. A patentee has every right to license its technology on only the most favorable terms possible and Monsanto is no exception. But the one-sidedness of the Technology Agreement’s substantive terms provides strong evidence that the forum selection clause was imposed, rather than (even in the abstract sense) bargained for.
Another hallmark of the adhesion contract is that the purchaser cannot reasonably obtain the necessary goods or services on alternative terms from any other source. Monsanto widely licenses its patents on glyphosate resistance technology, and over 200 seed companies offer Roundup Ready soybean seed. But each and every one of those licenses requires that the ultimate consumer (the farmer) sign Monsanto’s own Technology Agreement. While Monsanto’s monopoly on glyphosate resistance technology may be an entirely lawful one, Monsanto’s control of the market means that farmers have no place else to turn for glyphosate-resistant seed. Farmers may certainly obtain ordinary soybean seed without acceding to the terms of the Technology Agreement. However, in only a few short years since their introduction, Roundup Ready seeds now account for at least 66 percent of soybean acreage planted in the United States, testifying that despite the substantial added cost of the Technology Fee most farmers find glyphosate-resistant soybeans far more competitive than ordinary seed. Testimony adduced at the preliminary injunction hearing indicated that glyphosate-resistant soybeans are especially important to farmers like McFarling, because northeastern Mississippi harbors particular weeds that are difficult to control without glyphosate-based herbicides. Taken together, these facts indicate that farmers like McFarling have little choice but to sign the Technology Agreement if they wish to remain competitive in the soybean market.
I reiterate that the commercial terms of adhesion contracts are generally enforceable absent a showing of substantive un-conseionability. But whether such a contract should be effective to extinguish those rights guaranteed by the Due Process Clause of the Constitution is another matter altogether. As the highest court of Monsanto’s own state of Missouri has noted: “Many courts have refused to enforce *1302a forum selection clause on the grounds of unfairness if the contract was entered into under circumstances that caused it to be adhesive.” High Life Sales, 823 S.W.2d at 497.1 This reluctance is especially appropriate when, as here, the drafter of an adhesion contract wields the forum selection clause “offensively,” seeking to deprive a defendant of the protection afforded by the courts to those who are not otherwise subject to their jurisdiction.
To be sure, the Supreme Court has yet to hold that adhesion contracts are ineffective to surrender rights granted by the Due Process Clause. But the Court’s assessment of such surrenders has hardly been favorable. In Fuentes v. Shevin, 407 U.S. 67, 92 S.Ct. 1983, 32 L.Ed.2d 556 (1972), the Court considered an alleged waiver by an adhesion contract of the right to a prior hearing, another aspect of the personal liberty conferred by the Due Process Clause. The Court at length contrasted the alleged waiver of due process rights by an adhesion contract with the freely negotiated waiver in an earlier case, Overmyer v. Frick:
In D.H. Overmyer Co. v. Frick Co., the Court recently outlined the considerations relevant to determination of a contractual waiver of due process rights. Applying the standards governing waiver of constitutional rights in a criminal proceeding — although not holding that such standards must necessarily apply— the Court held that, on the particular facts of that case, the contractual waiver of due process rights was “voluntarily, intelligently, and knowingly” made. The contract in Overmyer was negotiated between two corporations; the waiver provision was specifically bargained for and drafted by their lawyers in the process of these negotiations. As the Court noted, it was “not a case of unequal bargaining power or overreaching. The Overmyer-Frick agreement, from the start, was not a contract of adhesion.” Both parties were “aware of the significance” of the waiver provision.
The facts of the present case are a far cry from those of Overmyer. There was no bargaining over contractual terms between the parties who, in any event, were far from equal in bargaining power. The purported waiver provision was a printed part of a form sales contract and a necessary condition of the sale. The appellees made no showing whatever that the appellants were actually aware or made aware of the significance of the fine print now relied upon as a waiver of constitutional rights.
The Court in Overmyer observed that “where the contract is one of adhesion, where there is great disparity in bargaining power, and where the debtor receives nothing for the (waiver) provision, other legal consequences may ensue.”
407 U.S. at 94-95, 92 S.Ct. 1983 (citations omitted) (quoting D.H. Overmyer Co., Inc. v. Frick Co., 405 U.S. 174, 186-88, 92 S.Ct. 775, 31 L.Ed.2d 124 (1972)). The Court’s words need no complex exegesis, and no reader could fail to recognize Monsanto’s Technology Agreement in the Court’s description of Mrs. Fuentes’s onerous contract. True, the Fuentes Court found no need to determine whether due process *1303rights could be voluntarily and intelligently waived by an adhesion contract, because the contractual language in question was not specific enough to waive the rights at issue. Id. at 95-96, 92 S.Ct. 1983. Monsanto’s Technology Agreement states clearly that the licensee consents to jurisdiction in the Eastern District of Missouri. Nonetheless, the Court’s analysis in Fuentes, in every respect pertinent to the facts of this case, should make clear that McFarling’s alleged waiver of the defense of personal jurisdiction falls far short of that required for a contractual waiver of due process rights. I cannot accept that McFarling’s signature on the face of the Technology Agreement was a voluntary, intelligent, and knowing acceptance of the constitutional surrender lurking on its back.2
The majority bases its conclusion on well-established contract principles maintaining that failure to read a contract will not excuse one from the contract’s obligations. I agree, but “these principles have been modified when contract terms appear on the back of a contract.” Advance Elevator Co., Inc. v. Four State Supply Co., 572 N.W.2d 186, 188 (Iowa Ct.App.1997). Where the front of a contract makes no reference to terms on its reverse, and the drafter of the contract does not bring the language on the reverse side of the contract to the attention of the other party, terms on the reverse are without legal effect. Id. at 189.
It is instructive to compare the Technology Agreement to the cruise ship ticket of Carnival Cruise Lines v. Shute, in which the Supreme Court found enforceable a defensive forum selection clause printed on the back of the ticket. The face of Mrs. Shute’s ticket prominéntly advertised the existence of additional terms in no less than three separate places:
SUBJECT TO CONDITIONS OF CONTRACT ON LAST PAGES
and:
IMPORTANT! PLEASE READ CONTRACT ON LAST PAGES 1, 2, 3
and:
The provisions on the reverse hereof are incorporated as though fully rewritten.
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 605, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991).
In contrast, the face of Monsanto’s 1998 Technology Agreement has no reference at all to its reverse, and the signature block merely states that the customer has read, understood, and accedes to “the terms and conditions of this Agreement,” without any indication at all that some terms might be found on the Agreement’s other side. Furthermore, Mrs. Shute conceded that she had notice of the forum selection clause, see Carnival Cruise Lines, 499 U.S. at 590, 111 S.Ct. 1522, and thereby satisfied Fuentes’s criterion that a surrender of due process rights should be made knowingly. McFarling, on the other hand, specifically testified that he was unaware of the existence of the . forum selection clause when he signed the Technology *1304Agreement. Under penalty of perjury, McFarling swore as follows: “I did not know what was contained on the reverse side of the form was an agreement submitting myself to jurisdiction in Missouri. At the time I purchased the soybean seeds I had no idea that Missouri had any involvement in this matter whatsoever.” Other courts confronted with similar circumstances have not hesitated to find that the forum selection clause was not reasonably communicated to the signer and was thereby rendered void. See, e.g., O’Brien v. Okemo Mountain, Inc., 17 F.Supp.2d 98, 103 (D.Conn.1998) (refusing to enforce forum selection clause on reverse of ski lift ticket).
Monsanto’s argument for the enforceability of its forum selection clause relies heavily on the Supreme Court’s opinion in Carnival Cruise Lines. But Carnival Cruise Lines provides neither precedent nor rationale for the substantial expansion of the law imposed by the court in this case at Monsanto’s request. First and perhaps foremost, Carnival Cruise Lines, like The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972), approved of a defensive forum selection clause enforced against a plaintiff and did not address the surrender of constitutional rights. Although the Due Process Clause does protect a plaintiffs property interest in his or her claim, see Logan v. Zimmerman Brush Co., 455 U.S. 422, 428-31, 102 S.Ct. 1148, 71 L.Ed.2d 265 (1982); Mullane v. Cent. Hanover Bank & Trust Co., 339 U.S. 306, 313-14, 70 S.Ct. 652, 94 L.Ed. 865 (1950), a plaintiff forfeits no interest in life, liberty, or property to the state by agreeing that a future claim may be brought only in a forum of the defendant’s choice. In contrast, the interests protected by the Due Process Clause are at their zenith when the machinery of the legal system is invoked against a defendant who has no traffic with the forum in question:
An out-of-state defendant summoned by a plaintiff is faced with the full powers of the forum State to render judgment against it. The defendant must generally hire counsel and travel to the forum to defend itself from the plaintiffs claim, or suffer a default judgment. The defendant may be forced to participate in extended and often costly discovery, and will be forced to respond in damages or to comply with some other form of remedy imposed by the court should it lose the suit. The defendant may also face liability for court costs and attorney’s fees. These burdens are substantial, and the minimum contacts requirement of the Due Process Clause prevents the forum State from unfairly imposing them upon the defendant.
Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 808, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985).3 To be sure, litigation is frequently costly and inconvenient for plaintiffs as well. But a plaintiff takes on its burdens only by choice. A plaintiff like Monsanto may be faced with the unpleasant alternatives of prosecuting suspected infringers like McFarling or forfeiting its valuable proprietary position, but heretofore the burden of initiating infringement litigation where the infringer resides has been accepted as another cost attendant to enjoyment of the patent right. McFarling here has admitted the acts that would constitute *1305infringement; in cases where the factual predicate for infringement is not so clear, it may seem less wise to grant patentees the unrestricted power to drag accused infringers off to distant courts.
Nor did Carnival Cruise Lines approve of enforcing a forum selection clause found in a contract of adhesion. Although Carnival Cndse Lines referred to the disparity of bargaining power between the cruise line and the passenger, and recognized that under such circumstances the forum selection clause was not subject to negotiation, the Court did not describe the contract for passage on a cruise line as a contract of adhesion. Indeed, by some definitions, a contract for passage on a cruise line could never be a contract of adhesion, because passage on a cruise line is a discretionary purchase and is available from many competing sellers. Some courts would exclude contracts for such goods and services from the definition of adhesion contract altogether. See, e.g., Jones v. Dressel, 623 P.2d 370, 374 (Colo.1981). Thus, the Court in Carnival Cruise Lines had no occasion to pass upon the validity of a forum selection clause — even a defensive one — imposed by a contract of adhesion.
Monsanto in this ease, and patentees in general, can lay claim to few or none of the policy rationales advanced by the Supreme Court to justify enforcement of the forum selection clause in Carnival Cruise Lines. There, the Supreme Court identified three such concerns. First, cruise lines, which by definition carry passengers resident in various fora between several ports, and possibly through international waters, have a special interest in limiting the fora in which they are subject to suit. Carnival Cruise Lines, 499 U.S. at 593, 111 S.Ct. 1522. But cruise lines rarely sue their passengers. While Carnival Cruise Lines had a strong interest in not being carried off to the myriad home fora of its passengers as the defendant in tort suits, Monsanto may pick and choose where and when it brings a patent infringement suit. Moreover, unlike contract or tort, there is one patent law in the land, and a paten-tee’s substantive rights and burdens depend not at all on where its infringement suit is brought. Cf. The Bremen, 407 U.S. at 13 n. 15, 92 S.Ct. 1907 (explaining that forum selection clauses may be reasonable because they can provide certainty in the choice of substantive law).
The Supreme Court’s second rationale in Carnival Cruise Lines was that forum selection clauses have the salutary effect of dispelling confusion about where suits must be brought. 499 U.S. at 593-94, 111 S.Ct. 1522. Defensive forum selection clauses usually achieve this certainty by limiting suit to the defendant’s home forum, thereby avoiding a minimum contacts analysis. But offensive forum selection clauses provide little additional certainty because they interfere with basic notions that infringers are sued in fora in which they reside or to which they have directed infringing conduct. Absent the forum selection clause, there would be no question at all that this suit ought to be brought in Mississippi, where the defendant may be found and the allegedly infringing acts transpired. And unlike cruise ship passengers, patent infringers — particularly farmers — tend to stay put, and determining the situs of patent infringement is generally a simple matter.
Carnival Cruise Lines’s final rationale for enforcing forum selection clauses in form contracts, and the one relied upon most heavily by Monsanto, is that purchasers benefit from such clauses in the form *1306of lower prices, because a seller will pass on to purchasers the savings it realizes by limiting the fora in which it may be sued. Id. at 594, 111 S.Ct. 1522. However much weight this argument based on elementary economics may carry in other contexts, it carries little or none in patent infringement suits. Elementary economics also teaches that a patentee, like any monopolist, sets prices based on consumer demand and not on the cost of production. There is, of course, nothing objectionable about a patentee pricing his product so, but a rational patentee will not pass on cost savings to consumers unless he is receiving no rent, i.e., unless the patent is worthless. Minimizing litigation costs may raise Monsanto’s profits, but it is unlikely to benefit farmers.
In sum, the Supreme Court in Carnival Cruise Lines did not establish a per se rule that forum selection clauses are enforceable. Although the Court reaffirmed The Bremen’s presumption in favor of enforcement, it also maintained The Bremen’s requirement that enforcement of the clause be reasonable, and emphasized that “forum-selection clauses contained in form passage contracts are subject to judicial scrutiny for fundamental fairness.” Carnival Cruise Lines, 499 U.S. at 595, 111 S.Ct. 1522. But here, the district court seems to have abstained from any scrutiny of the forum selection clause at all, concluding that the clause was valid and enforceable simply because McFarling signed it. This is not the sort of inquiry contemplated by Carnival Cruise Lines. The circumstances of this case, in nearly every instance opposite from those that led the Supreme Court to find enforcement of the forum selection clause fair and reasonable in Carnival Cruise Lines, ought to compel a more meaningful inquiry if the guarantees of the Fifth Amendment are to be given their proper due.
I can find no reported case in the thirty years since Fuentes and The Bremen were decided in which a court has enforced a forum selection clause against a defendant who has acceded to an adhesion contract.4 Certainly there is no shortage of cases in which a defensive forum selection clause controls, most notably Carnival Cruise Lines. Far fewer are cases in the ordinary commercial context in which a plaintiff brings suit on the basis of a forum selection clause signed by the defendant, and at best courts are divided on how to approach such cases. Compare Mellon First United Leasing v. Hansen, 301 Ill. App.3d 1041, 235 Ill.Dec. 508, 705 N.E.2d 121 (1998) (refusing to exercise jurisdiction over out-of-state defendant based on forum selection clause in mailing equipment lease) with Chase Third Century Leasing Co. v. Williams, 782 S.W.2d 408 (Mo.Ct. App.1989) (exercising jurisdiction over out-of-state defendant based on forum selec*1307tion clause in copier lease).5 But no court has gone so far as to hold that a true contract of adhesion can subject a defendant to litigation in a court that would otherwise have no power over him. If any court goes so far, it should be the Supreme Court, not this court.

. The High Life court found no unfairness in the forum selection clause under consideration because the clause was part of a negotiated agreement, and because the clause was reciprocal, providing for litigation in the defendant’s home forum instead of any one particular venue. High Life Sales, 823 S.W.2d at 497.

. Indeed, even an attorney reading the Technology Agreement might not understand that it purports to subject one to liability for patent infringement in Missouri, for the contract's forum selection clause by its terms applies only "for all disputes arising under this agreement.” Case law of this court supports the proposition that a patent infringement suit "arises under” a license agreement, see Texas Instruments, Inc. v. Tessera, Inc., 231 F.3d 1325, 1331 (Fed.Cir.2000), but we may presume that few feed stores stock the Federal Reporter on their shelves.

. Phillips Petroleum compared the burdens placed by a State upon an absent class-action plaintiff and upon an absent defendant.

. My colleagues in the majority bicker over whether any court has enforced against a defendant a forum selection clause in a contract of adhesion. I stand by my research. Carnival Cruise Lines did not involve a contract of adhesion, and neither did Northwestern National Insurance Co. v. Donovan, 916 F.2d 372 (7th Cir.1990). In Donovan, the court characterized some contracts, but not the contract in suit, as “adhesion'' contracts. None of the indicia of an adhesive contract (disparity of bargaining power, practical necessity for the defendant to yield to the form contract demand of the plaintiff, unusual market power of the party imposing the form contract, etc.) was present in Donovan.
My colleagues have the honor of making this court the first to enforce a forum selection clause in a contract of adhesion against a defendant in derogation of his constitutional rights.

. Any lessee, of course, signs a lease knowing with near-absolute certainty that the lessor will ultimately commence legal action should the lessee default on the lease payments. To sign a lease is to invite a lawsuit. Likewise, a franchisee signs a franchise agreement knowing that he or she assumes particular obligations to the franchisor. The same may not be true for a farmer purchasing a bag of soybean seed. Nor, like a cruise ship passenger, does a farmer buying seed intentionally expose himself to the law of another jurisdiction. Cf. Hodes v. S.N.C. Achille Lauro ed Altri-Gestione, 858 F.2d 905, 913 (3d Cir.1988) (“We note that this is not a case in which a consumer contracted to have a service rendered or buy a product in his/her home jurisdiction only to later learn of the existence of a forum selection clause.").