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New York Court Refuses to Enforce Forum Selection Clause in Website Agreement
In Scarcella v. America Online , the New York Civil Court refused to enforce the forum-selection clause in AOL's terms of service. The defendant, AOL, had brought a motion to dismiss the action, arguing that the Court lacked subject-matter jurisdiction. The defendant's argument was based on the selection clause, which provides that the exclusive jurisdiction for any claim or dispute involving AOL resides in the Virginia courts. The Court denied the defendant's motion.
In its determination of the enforceability of the forum-selection clause, the court first considered the rule set out in British West Indies Guaranty Trust Co., Ltd. v. Banque Internationale A Luxembourg, in which forum-selection clauses are considered to be prima facie valid and in order to set aside such a clause, it must be shown that "enforcement would be unreasonable and unjust or that the clause is invalid because of fraud or overreaching, such that a trial in the contractual forum would be so gravely difficult and inconvenient that the challenging party would, for all practical purposes, be deprived of his or her day in court." The plaintiff, Russell Scarcella, argued that since the sign-up process involved viewing a long series of screens which induced a "trance of lethargy and inattentiveness," it was unreasonable to infer his actual consent from the fact that he "checked" the box saying that he accepted the terms of the Member Agreement.
The plaintiff also alleged that his consent was procured by deceit, as the screen on which the prospective subscriber is first invited to agree to the terms of the Member Agreement appears before the actual Member Agreement. However, the Court declined to decide on these arguments and instead focused on the rule set down by the U.S. Supreme Court in The Bremen v. Zapata Off-shore Co., which states that "a contractual choice-of-forum clause should be held unenforceable if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision." The Court held that the enforcement of the forum-selection clause in AOL's agreement would contravene the strong public policy embodied in the small-claims provisions of the Civil Court Act (the "Act"). It pointed to low costs, increased accessibility and informal procedures as examples of the public policy features of the Act's Small Claims section. In specific reference to the plaintiff, the Court noted that he had availed himself of the low cost, relaxed pleading requirements and nighttime proceedings provided by the Legislature for small claims and, in order to obtain these benefits, he had waived both his right to sue for more than $3,000 and his right to a jury trial. In light of these considerations and the expense the plaintiff would incur if forced to travel to Virginia, the court concluded that "the general policy of giving effect to forum-selection clauses must yield to the scheme enacted by the Legislature specifically to ensure that civil justice is meaningfully accessible to those seeking the adjudication of the small claims."
For copy of the decision, visit:
http://www.courts.state.ny.us/reporter/3dseries/2004/2004_51021.htm