Mountain F. Enterprises, Inc. v. WiarCom, Inc. ( 2020 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 11 MOUNTAIN F. ENTERPRISES, No. 2:19-cv-02023-JAM-CKD INC., a California 12 corporation, 13 Plaintiff, ORDER DENYING WIARCOM’S MOTION TO TRANSFER VENUE AND GRANTING 14 v. WIARCOM’S MOTION TO DISMISS 15 WIARCOM, INC., a Texas corporation; and DOES 1 16 through 50, inclusive, 17 Defendants. 18 19 Mountain F. Enterprises, Inc. (“MFE”) brings this action 20 against WiarCom, Inc., alleging breach of contract and fraud. 21 Compl., ECF No. 1. In response, WiarCom filed a motion to 22 dismiss and a motion to transfer venue. Mot. to Dismiss, ECF No. 23 14; Mot. to Transfer, ECF No. 18.1 WiarCom argues the Court 24 should transfer this case because WiarCom’s contracts with MFE 25 designated the Southern District of Texas as the proper venue. 26 27 1 These motions were determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was 28 scheduled for February 25, 2020. 1 Mot. to Transfer at 6-8. Moreover, WireCom maintains whichever 2 court retains jurisdiction over the suit should dismiss MFE’s 3 fraud claim under Rule 12(b)(6). Mot. to Dismiss at 3-11. 4 MFE disagrees on both fronts. Opp’n, ECF No. 24. It 5 contends the parties’ contracts did not properly incorporate the 6 forum selection clause contained in WiarCom’s terms and 7 conditions. Id. at 17-23. MFE also argues it properly pled each 8 of the five elements of fraud. Id. at 14-17. 9 The Court agrees with MFE that the Service Rate Plans failed 10 to clearly and unequivocally incorporate WiarCom’s online terms 11 and conditions. The forum-selection clause contained in those 12 terms therefore does not apply; WiarCom’s motion to transfer 13 venue is denied. But the Court agrees with WiarCom that MFE’s 14 complaint fails to allege a claim of fraud. The Court dismisses 15 this claim without prejudice. 16 17 I. BACKGROUND 18 WiarCom and its sister company, Advanced Tracking 19 Technologies, Inc. (“Advanced Tracking”) supply their customers 20 with wireless GPS vehicle tracking units and provide related 21 services. Compl. ¶ 5. In 2009, Advanced Tracking first 22 contacted MFE to sell its GPS devices. Compl. ¶ 7. They reached 23 an agreement four years later. Compl. ¶ 8. In the six years 24 that followed, Advanced Tracking and MFE executed between 21 and 25 25 more “Service Rate Plans.” Id.; see also Gomez Decl. ¶ 4, ECF 26 No. 24-3. 27 In 2019, MFE became increasingly dissatisfied with the 28 tracking units Advanced Tracking Technologies provided. Compl. 1 ¶ 19. In March, MFE reported that, nearly 20% of the tracking 2 units were inoperable. Id. Replacing these units forced MFE to 3 incur additional expenses—specifically, the cost of removing non- 4 functioning units, returning those units, and installing 5 replacement units. Id. Moreover, MFE maintains it received two 6 charges for each of these expenses: one from Advanced Tracking 7 and one from WiarCom. Id. 8 Unable to resolve the issues surrounding the additional fees 9 and dysfunctional units, MFE returned all its units to Advanced 10 Tracking Technologies. Compl. ¶ 20. Advance Tracking 11 Technologies responded, directing MFE to contact WiarCom directly 12 if it wished to terminate its Service Rate Plans. Compl. ¶ 23. 13 WiarCom then emailed MFE, notifying the company that it would be 14 subject to the early termination fees and equipment return fees 15 contained in the contract’s terms and conditions. Compl. ¶ 24. 16 MFE filed suit, alleging WiarCom (1) breached the Services 17 Rate Plans by overcharging MFE and providing inoperable units, 18 and (2) committed fraud by intentionally obscuring material terms 19 of the Service Rate Plans. Compl. ¶¶ 26-29, 35-40. 20 21 II. OPINION 22 A. Evidentiary Objections 23 WiarCom argues MFE “inappropriately offers purported 24 factual evidence” in the declarations it filed alongside its 25 opposition. Reply at 5, ECF No. 27. It is true that, 26 generally, “a district court may not consider any material 27 beyond the pleadings in a ruling on a Rule 12(b)(6) motion.” 28 Lee v. City of Los Angeles, 250 F.3d 668, 688 (9th Cir. 2001). 1 The two exceptions to this rule are materials that a plaintiff 2 incorporates by reference into its complaint and those that are 3 proper subjects of judicial notice. Id. The declarations 4 included with MFE’s opposition do not fall under either 5 exception; the Court has not considered them in deciding 6 WiarCom’s motion to dismiss. 7 But Rule 12(b)(6)’s evidentiary restrictions do not apply 8 when a court adjudicates a motion to transfer venue. Cf. S & J 9 Rentals, Inc. v. Hilti, Inc., 294 F. Supp. 3d 978, 983 (E.D. 10 Cal. 2018); Anza Tech., Inc. v. Mushkin, Inc., No. 2:17-cv- 11 00656, 2017 WL 6538981, at *1 (E.D. Cal. Dec. 21, 2017). In 12 resolving motions for improper venue or motions to transfer 13 venue, “the court need not accept the pleadings as true and may 14 consider supplemental written materials and facts outside the 15 pleadings.” Anza Tech., Inc., 2017 WL 6538981, at *1. The 16 Court therefore has looked beyond the four corners of MFE’s 17 complaint in resolving WiarCom’s motion to transfer venue. 18 B. Request for Judicial Notice 19 WiarCom requests the Court take judicial notice of the 20 webpage containing its “General Terms and Conditions of 21 Services.” Def.’s RJN ISO Mot. to Dismiss, ECF No. 17; Def.’s 22 RJN ISO Mot. to Transfer, ECF No. 21. Federal Rule of Evidence 23 201 permits a court to “judicially notice a fact that is not 24 subject to reasonable dispute because it (1) is generally known 25 within the trial court’s territorial jurisdiction; or (2) can be 26 accurately and readily determined from sources whose accuracy 27 cannot reasonably be questioned.” FRE 201(b). Moreover, it is 28 well-established that courts may take judicial notice of matters 1 of public record. Finder v. Leprino Foods Co., No. 1:13-cv- 2 02059-AWI-BAM, 2019 WL 6894468, at *3 n.1 (E.D. Cal. Dec. 18, 3 2019). 4 The web page that lists WiarCom’s terms and conditions is a 5 matter of public record and, therefore, a proper subject of 6 judicial notice. See Trudeau v. Google LLC, 349 F. Supp. 3d 7 869, 876 (N.D. Cal. 2018). The page is not, however, found at 8 the hyperlink WiarCom includes in its request for judicial 9 notice. The Court, instead, takes judicial notice that 10 WiarCom’s terms and conditions web page is available at 11 https://www.wiarcom.com/TermsAndConditionsOfService.pdf. By 12 judicially noticing this page, the Court takes as true that the 13 web page exists and makes certain representations about the 14 company’s policies. The Court does not, however, presume that 15 all or any of MFE’s agreements with WiarCom properly 16 incorporated those terms. Subject to this caveat, Defendant’s 17 request is granted. 18 C. Motion to Transfer Venue 19 Venue is proper (1) in a judicial district in which any 20 defendant resides; (2) in a judicial district in which a 21 substantial part of the events giving rise to the claim 22 occurred; or (3) if no judicial district is otherwise 23 appropriate, in any judicial district in which any defendant is 24 subject to the court’s personal jurisdiction. 28 U.S.C. 25 § 1391(b). But even when a plaintiff has filed suit in a venue 26 deemed proper under Section 1391(b), a defendant may still move 27 to transfer “any civil action to any other district or division 28 where it might have been brought or to any district or division 1 to which all parties have consented.” 28 U.S.C. § 1404. 2 Section 1404 is the proper mechanism for enforcing a forum- 3 selection clause that points to another federal district. 4 Atlantic Marine Constr. Co. v. U.W. Dist. Court for Western 5 Dist. Of Texas, 571 U.S. 49, 59 (2013). 6 Normally, section 1404 requires district courts to 7 “evaluate both the convenience of the parties and various 8 public-interest considerations.” Id. at 62. Courts “weigh the 9 relevant factors and decide whether, on balance, a transfer 10 would serve ‘the convenience of parties and witnesses’ and 11 otherwise promote ‘the interest of justice.’” Id. at 62-63 12 (quoting 28 U.S.C. § 1404(a)). But when the parties are bound 13 by a valid forum-selection clause, a court must transfer the 14 case to the agreed-upon district “absent extraordinary 15 circumstances unrelated to the convenience of the parties.” Id. 16 at 62. “[A] proper application of § 1404 requires that a forum- 17 selection clause be ‘given controlling weight in all but the 18 most exceptional cases.’” Id. at 59-60 (quoting Stewart 19 Organization, Inc. v. Ricoh Corp., 487 U.S. 22, 33 (1988) 20 (KENNEDY, J., concurring)). 21 But “[b]efore the court may consider the impact of any 22 forum selection clause on [a] plaintiff’s choice of forum . . ., 23 it must first determine whether a contract exists and[] whether 24 it contains the forum selection clause at issue.” Morgan Tire 25 of Sacramento, Inc. v. Goodyear Tire & Rubber Co., 60 F. Supp. 26 3d 1109, 1113 (E.D. Cal. 2014). Here, the parties do not 27 dispute that they entered into valid contractual agreements. 28 Rather, they disagree about whether the agreements properly 1 incorporated by reference the terms and conditions on WiarCom’s 2 website—terms and conditions that included, among other things, 3 a forum-selection clause. Mot. to Transfer at 6-10; Opp’n at 4 17-23. 5 “A contract may validly include the provisions of a 6 document not physically part of the basic contract.” Shaw v. 7 Regents of Univ. of Cal., 58 Cal. App. 3d 44, 54 (2009). Under 8 California law, the incorporation by reference doctrine is not 9 one to prioritize form over substance. A “contract need not 10 recite that it ‘incorporates’ another document” to avail itself 11 of the doctrine’s benefits. The reference must, nevertheless, 12 be “clear and unequivocal.” Id. It must “guide[] the reader to 13 the incorporated document” such that the terms referenced are 14 “easily accessible to the contracting parties.” Id. at 54-55 15 (quoting Chan v. Drexel Burnham Lambert, Inc., 178 Cal. App. 3d 16 632, 644 (1986); Williams Constr. Co. v. Standard-Pac. Corp., 17 254 Cal. App. 2d 442, 454 (1967)). 18 WiarCom argues that each of the Service Rate Plans clearly 19 and unequivocally incorporates the terms and conditions listed 20 on its website. The Court disagrees. The Service Rate Plans 21 include a section labeled “Additional Terms and Conditions. 22 Compl. ¶ 11; see also Ex. A to Compl., ECF No. 1-2. Paragraph 3 23 of that section states, “Service is to be provided in accordance 24 with the current Terms and Conditions of Service found at 25 www.WiarCom.com.” Ex. A to Compl. At 1. But, as MFE argues, 26 www.WiarCom.com links to WiarCom’s homepage. Opp’n at 19. This 27 page does not contain WiarCom’s terms and conditions, nor does 28 it feature any clear reference to those terms. See WiarCom.com. 1 WiarCom insists its terms and conditions “can be easily 2 found on www.WiarCom.com because that website contains little 3 content and only seven links.” Mot. to Transfer at 7. Indeed, 4 it argues, “[a]Jn internet user should be able to find the Terms 5 and Conditions within only a few minutes of browsing the 6 | website.” Id. But this argument is undermined by the stark 7 differences between how WiarCom’s exhibits depict its homepage 8 and how WiarCom.com actually looks online: 9 WiarG HarCou 1 0 Mobile Communications A home senees sunpet pvoutue Contacte ces Support About Us Contact Us □ rN = WiarCom™ 3 (NEW! □ 1 1 Wiarcom™ = NEW! Welcome to Woon .. a leading provider of wireless data Lege ME megs yur ecco RCM sihlouieg □□□□□□□□□□□□□□□□□□□□□ meskes 12 to ee |e □□□ sauce more vi series ean recent cas ln sneer hctcttp eahcpemaieee haat rie mess ved Our commitment to fat, rable, and inexpensive communication has » Upto crt card a Pera A □□□ eraa ec EE □□ a eee ee rey eens ania onthe mata 1 3 on the market. 14 J ‘WiarCom™, Inc. @ 2006 - 2019. All rights reserved. | Legal Notices, 1 5 \WarCom™, Ine. @ 2008 - 2019. All rights rese-ved. | Legal Notices: 16 Compare WiarCom.com, with Ex. A to Shepperd Decl., ECF No. 20-1. 17 WiarCom depicts its homepage as seven links on a blank 18 canvas; each as obvious as the next. See Ex. A to Shepperd 19 Decl. This is misleading. Simply visiting WiarCom.com reveals 20 that some links are more apparent than others. The webpage 21 includes five large tabs at the top, each distinguished from the 22 other and set apart from the dark background. The sixth link is 23 in a white text box on the right side of the screen: “HERE” 24 bolded, underlined, and capitalized. But in case you still 25 | missed it, there is a large grey bubble overhead, exclaiming 26 “NEW!” in blue block letters. Then, relegated to the bottom of 27 the page, is a single line of text: WiarCom™, Inc. © 2006 - 28 2019. All rights reserved. | Legal Notices. It’s the only time 1 black, non-specialized font sits directly against the web page’s 2 dark grey background. The words “Legal Notices” link to a page 3 containing WiarCom’s terms and conditions. The domain name for 4 that page is https://www.wiarcom.com/Mobile-Communication- 5 Legal/Legal-Notices.html. 6 WiarCom argues this practice is no different than those 7 approved in Chudner v. TransUnion Interactive, Inc., 626 F. 8 Supp. 2d 1084, 1090 (D. Or. 2009) and Turfworthy, LLC v. Dr. 9 Karl Wetekam & Co. KG, 26 F. Supp. 3d 496 (M.D.N.C. 2014). But 10 neither Chudner nor Turfworthy aid this Court’s analysis. 11 Neither case arises in this district or applies California’s 12 “clear and unequivocal” test. Furthermore, the facts of both 13 cases are too different from this one to provide a helpful 14 analog. 15 First, the contract in Chudner did not even implicate 16 incorporation by reference doctrine. 626 F. Supp. 2d at 1086. 17 In Chudner, the company placed an agreement in a small text box 18 on its webpage that forced customers to press a scroll button 48 19 times before reaching the forum-selection clause. Id. Chudner 20 addressed the question of whether formatting the agreement this 21 way rendered the forum-selection clause an unconscionable 22 “surprise.” Id. at 1089-90. The “clear and unequivocal” 23 standard did not apply to this analysis. 24 Although Turfworthy does involve a valid incorporation by 25 reference, it still does not compel the result WiarCom seeks. 26 In Turfworthy, a company purported to incorporate its terms and 27 conditions into an agreement it entered with the plaintiff. 26 28 F. Supp. 3d at 504. The agreement and related documents stated 1 that they incorporated the company’s “Standard Terms and 2 Conditions.” Id. In reality, the company’s terms and 3 conditions were in a document titled, “General Terms and 4 Conditions.” Id. The court nonetheless found the incorporation 5 was proper because the incorporating document specifically 6 directed the plaintiff to the location of the terms being 7 incorporated. See id. at 504. The document read, “We also call 8 your attention to the statement at the bottom of each of your 9 company’s Order Confirmations for all the yarns we ordered that 10 your ‘Standard Terms and Conditions apply to all offers and 11 sales contracts . . . .’” Id. Put simply, the clarity of the 12 instructions provided offset the nominal mis-match between the 13 incorporating document’s reference and the title of the 14 incorporated document. Id. But WiarCom’s contract does not 15 provided this clarity. Unlike the agreement in Turfworthy, the 16 Service Rate Plans do not “guide” the parties to the 17 incorporated document. Instead, it sent MFE to a generic 18 webpage where the least obvious hyperlink was the one MFE was 19 supposed to find. Contra Int’l Star Registry of Ill. v. 20 Omnipoint Marketing, LLC, No. 05-cv-6923, 2006 WL 2598056, at *3 21 (finding an incorporation was sufficiently “clear and specific” 22 where it described the document being incorporated and links to 23 a “specific web page”). The relevant link was obscured at the 24 bottom of the page and its title, “Legal Notices,” did not match 25 the title referenced in the agreement. It was certainly 26 possible for MFE to find WiarCom’s Terms and Conditions within 27 the maze WiarCom created. But California law requires an 28 incorporation to be “clear and unequivocal,” not simply 1 conceivable. Shaw, 58 Cal. App. 4th at 54. 2 Absent a valid forum-selection clause, the movant bears the 3 burden of showing transfer is proper under 28 U.S.C. § 1404(a). 4 Celtic Int’l LLC v. J.B. Hunt Transport, Inc., 234 F.Supp. 1034, 5 1042 (E.D. Cal. 2017). WiarCom failed to show a valid forum- 6 selection clause bound the parties. Nor did it identify any 7 other basis for transferring the suit. The Court therefore 8 denies WiarCom’s motion to transfer venue. 9 D. Motion to Dismiss 10 WiarCom also brings a motion to dismiss, arguing that Rule 11 12(b)(6) requires dismissal of MFE’s fraud claim. MFE’s 12 complaint alleges WiarCom committed fraud by “fraudulently 13 inducing MFE to sign the Service Rate Plans without disclosing” 14 all of the contracts’ material terms. Compl. ¶ 36. WiarCom 15 first contends this allegation cannot serve as the basis of a 16 fraud claim because each term MFE challenges was, by law, 17 properly incorporated into the Service Rate Plans. Mot. to 18 Dismiss at 5-8. As discussed above, this argument is without 19 merit. WiarCom urges dismissal is nonetheless proper because 20 MFE’s fraud claim is insufficiently pled. Id. at 8-11. On this 21 point, the Court agrees. 22 To state a claim of fraud under California law, a plaintiff 23 must allege (1) misrepresentation (false representation, 24 concealment, or nondisclosure), (2) knowledge of falsity, 25 (3) intent to defraud, (4) justifiable reliance, and (5) damage. 26 Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal.4th 979, 990 27 (2004). Every element of a fraud claim “must be specifically 28 pleaded; a general pleading of the legal conclusion . . . is 1 insufficient.” Tindell v. Murphy, 22 Cal. App. 5th 1239, 1249 2 (2018). 3 MFE identifies several purported deficiencies in its 4 contracts with WiarCom: the agreements obscured the existence of 5 early termination fees and equipment return fees; they 6 improperly minimized the font size of certain provisions; they 7 failed to hyperlink “www.WiarCom.com” until after MFE signed the 8 agreement; and they did not properly direct MFE to WiarCom’s 9 terms and conditions webpage. Compl. ¶ 36. These allegations— 10 at best—only satisfy the first element of fraud. But MFE’s 11 complaint fails to specifically allege WiarCom had knowledge of 12 any falsities or an intent to defraud. MFE attempts to fulfill 13 this requirement in paragraph 37 of its complaint: 14 WiarCom intentionally designed its Service Rate Plans in the manner described above with specific intent and 15 for the sole purpose of inducing and defrauding MFE to enter into the Service Rate Plans without actual or 16 constructive knowledge of the additional terms and conditions so that WiarCom could unjustly enrich 17 itself. 18 Compl. ¶ 37. MFE’s opposition brief fails to identify any cases 19 where this type of conclusory allegation has been enough to 20 state a claim for fraud under either Rule 12(b)(6) or California 21 law. Indeed, this Court finds the caselaw directs otherwise. 22 See Ashcroft v. Iqbal, 556 U.S. 662, 678-79 (2009); Tindell, 22 23 Cal. App. 5th at 1249. Accordingly, the Court dismisses MFE’s 24 fraud claim without prejudice. 25 E. Page Limits 26 The Court’s Order re Filing Requirements (“Order”), ECF No. 27 3-2, limits memoranda in support of and opposition to motions to 28 dismiss and motions to transfer venue to fifteen pages. Order at 1 1. A violation of the Order requires the offending counsel (not 2 the client) to pay $50.00 per page over the page limit to the 3 Clerk of Court. Id. 4 WiarCom argues MFE’s twenty-five page opposition violates 5 the Court’s page limits. In doing so, WiarCom ignores the fact 6 | that MFE’s opposition responded to the two motions WiarCom filed— 7 motions that, when added together, total twenty-three pages. 8 | WiarCom made a strategic choice to file its motions separately, 9 availing itself of additional pages on which to air its 10 arguments. The Court declines to penalize MFE for responding in 11 kind. 12 13 Til. ORDER 14 For the reasons set forth above, the Court DENIES WiarCom’s 15 | motion to transfer venue and GRANTS WiarCom’s motion to dismiss. 16 | The Court dismisses MFE’s fraud claim WITHOUT PREJUDICE. If MFE 17 elects to amend its complaint with respect to this claim, it 18 shall file a First Amended Complaint within thirty (30) days of 19 this Order. WiarCom’s responsive pleading is due thirty (30) days 20 thereafter. 21 IT IS SO ORDERED. 22 Dated: March 31, 2020 □□ DA HN A. MENDEZ, a UNITED STATES DISTRICT 25 26 27 28 13