Class Action

AOL Class Action Defense Cases–Doe 1 v. AOL: Ninth Circuit Reverses Dismissal Of Class Action Holding Forum Selection Clause Unenforceable In CLRA/UCL Class Action Because Virginia State Courts Would Not Provide Class Action Relief

By Michael J. Hassen

District Court Erred in Dismissing Class Action under Rule 23(b)(3) for Improper Venue because Forum Selection Clause in Internet Member Agreement Effectively Precluded Class Action Relief Ninth Circuit Holds

Plaintiffs filed a nationwide class action against AOL alleging violations of the federal electronic privacy law; the class action complaint asserted that AOL “made publicly available the internet search records of more than 650,000 of its members” that “contained personal and sometimes embarrassing information about the members.” Doe 1 v. AOL LLC, ___ F.3d ___ (9th Cir. January 16, 2009) [Slip Opn., at 686]. The class action also defined a subclass of California residents and asserted separately claims for violations of various California state laws, including California’s Consumers Legal Remedies Act (CLRA). Id. Plaintiffs filed their class action complaint after AOL accidentally made publicly available, for 10 days, “roughly twenty million AOL Internet search records”; the class action complaint alleged that the data disclosed by AOL included “addresses, phone numbers, credit card numbers, social security numbers, passwords and other personal information of AOL members.” Id., at 688. In addition to asserting claims for relief under the federal Electronic Communications Privacy Act and California’s CLRA, the class action additionally asserted claims under California’s Customer Records Act, False Advertising Law, and Unfair Competition Law. Id., at 688-89. Plaintiffs filed the class action in the Northern District of California, id., at 687-88; however, the Member Agreement governing plaintiffs’ use of AOL included both a choice of law clause, which stated that Virginia law governed any disputes between AOL and its members, and a forum selection clause, which designated Virginia as the fora for disputes between AOL and its members. Id., at 687. Defense attorneys moved to dismiss the class action under Rule 12(b)(3) on the grounds of improper venue given the forum selection clause; plaintiffs argued that class action relief would not be available to them in Virginia and, accordingly, “violates California public policy favoring consumer class actions and renders the forum selection clause unenforceable.” Id. The district court granted AOL’s motion and dismissed the class action without prejudice, id.; the Ninth Circuit reversed.

AOL is headquartered in Dulles, Virginia. AOL, at 689. As a prerequisite to using AOL’s online services, each member must agree to the terms of the AOL Member Agreement, and must manifest their agreement by clicking a box that “states the member has agreed to the terms of the Member Agreement,” id., at 689-90. As noted above, the Member Agreement contains both a choice of law clause and a forum selection clause, which declare that Virginia law governs disputes and that disputes must be brought in Virginia state or federal courts. Id., at 690. The district court granted AOL’s Rule 12( b)(3) motion holding that the forum selection clause “expressly requires that this controversy be adjudicated in a court in Virginia” and that “[p]laintiffs agreed the courts of Virginia have ‘exclusive jurisdiction’ over any claims or disputes with AOL” thus rendering venue in California improper. Id., at 691. The Ninth Circuit reversed, concluding that the forum selection clause was unenforceable.

Full post as published by Class Action Defense Blog on January 26, 2009 (boomark / email).