Am. Online, Inc. v. Superior Court - 90 Cal. App. 4th 1, 108 Cal. Rptr. 2d 699 (2001)

Rule:

The California Consumers Legal Remedies Act (CLRA), Cal. Civ. Code § 1750 et seq., contains a provision that voids any purported waiver of rights under the CLRA as being contrary to California public policy. Enforcement of contractual forum selection and choice of law clauses resulting in the functional equivalent of a contractual waiver of the consumer protections under the CLRA is prohibited under California law.

Facts:

An Internet subscriber brought a class action for himself and others against an Internet service provider seeking compensatory and punitive damages, injunctive relief, and restitution based on allegations that defendant continued to debit plaintiffs' credit cards for monthly service fees after plaintiffs had terminated their subscriptions. Among other causes, plaintiffs alleged that defendant had violated the California Consumers Legal Remedies Act (CLRA) (Civ. Code, § 1750 et seq.). The trial court denied defendant's motion to stay or dismiss the action on the ground of inconvenient forum, which motion was based on a forum selection clause in its service agreement with plaintiffs designating Virginia as the chosen forum and requiring that Virginia law be applied to any dispute.

Issue:

Should the court have relied on the parties’ contractual forum selection clause, which designated Virginia as the jurisdiction in which all disputes arising out of the relationship would be litigated? 

Answer:

No.

Conclusion:

The Court of Appeal denied defendant's petition for a writ of mandate, holding that the trial court properly denied defendant's motion. The CLRA contains a provision that voids any purported waiver of rights under the CLRA as being contrary to California public policy. The court held that enforcement of the contractual forum selection and choice of law clauses in defendant's service agreements would be the functional equivalent of a contractual waiver of the consumer protections under the CLRA and, thus, was prohibited under California law. The court further held that, since 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, plaintiffs' rights would be substantially diminished if they were required to litigate their dispute in Virginia, thereby violating an important public policy underlying California's consumer protection law. For this second, independent reason as well, the court held that the forum selection clause was unenforceable.