TradeComet.com LLC v. Google, Inc.

10-911-cv
TradeComet.com LLC v. Google, Inc.
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY
ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF
APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER
IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR
AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY
ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
1 At a stated term of the United States Court of Appeals for the Second Circuit, held at the
2 Daniel Patrick Moynihan United States Courthouse, 500 Pearl Street, in the City of New York,
3 on the 26th day of July, two thousand eleven.
4
5 PRESENT:
6
7 RALPH K. WINTER,
8 ROBERT D. SACK,
9 DEBRA ANN LIVINGSTON,
10
11 Circuit Judges.
12 _____________________________________________________
13
14 TRADECOMET.COM LLC,
15
16 Plaintiff-Appellant,
17
18 -v.- No. 10-911-cv
19
20 GOOGLE, INC.,
21
22 Defendant-Appellee.
23 _____________________________________________________
24
25 CHARLES F. RULE (Jonathan Kanter, Joseph J. Bial, and
26 Daniel J. Howley, on the brief), Cadwalader, Wickersham
27 & Taft LLP, Washington, D.C., for Plaintiff-Appellant.
28
29 JONATHAN M. JACOBSON (Sara Ciarelli Walsh, on the
30 brief), Wilson Sonsini Goodrich & Rosati, P.C., New York,
31 NY, for Defendant-Appellee.
1
1 UPON DUE CONSIDERATION, it is hereby ORDERED, ADJUDGED, and DECREED
2 that the judgment of the district court be AFFIRMED.
3 Plaintiff-Appellant TradeComet.com LLC (“TradeComet”) appeals from a judgment entered
4 pursuant to an opinion and order of the United States District Court for the Southern District of New
5 York (Stein, J.) dismissing its complaint. TradeComet brought this action against Defendant-
6 Appellee Google, Inc. (“Google”) for alleged violations of the Sherman Act, 15 U.S.C. §§ 1, 2. On
7 March 31, 2009, Google moved to dismiss TradeComet’s complaint for lack of subject matter
8 jurisdiction and improper venue, pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(3). The district court
9 granted Google’s motion on March 5, 2010. TradeComet timely appealed to this Court on March
10 15, 2010. In an opinion filed contemporaneously with this order, we hold that a defendant may seek
11 enforcement of a forum selection clause specifying a federal forum other than the one in which suit
12 is pending through a Rule 12(b) motion to dismiss. See TradeComet.com LLC v. Google, Inc., –
13 F.3d –, No. 10-911-cv (2d Cir. _____ __, 2011). Here, we address whether the district court
14 properly applied our four-part test for determining whether to dismiss a claim based on a forum
15 selection clause. See TradeComet.com, LLC v. Google, Inc., 693 F. Supp. 2d 370 (S.D.N.Y. 2010).
16 We assume the parties’ familiarity with the underlying facts and procedural history.
17 On appeal, TradeComet argues that the district court erred by: 1) failing to conduct an
18 evidentiary hearing on whether TradeComet was reasonably informed of the August 2006
19 agreement’s forum selection clause; 2) applying the August 2006 forum selection clause to claims
20 arising from conduct that occurred prior to Google’s publication and TradeComet’s alleged
21 acceptance of the August 2006 agreement; and 3) declining to find the forum selection clause
22 unreasonable and/or unconscionable. Our review of a district court’s dismissal of a complaint
23 pursuant to Rules 12(b)(1) and 12(b)(3) is de novo. See Phillips v. Audio Active Ltd., 494 F.3d 378,
2
1 384 (2d Cir. 2007); Makarova v. United States, 201 F.3d 110, 113 (2d Cir. 2000). We must view
2 all the facts in the light most favorable to the non-moving party. Phillips, 494 F.3d at 384. Our
3 review of a district court’s interpretation of a contract is also de novo. Id. Both parties agree that
4 California state law controls the interpretation of the Google agreements and that federal law applies
5 as to the enforceability of the forum selection clause.
6 Under our precedent, a determination of “whether to dismiss a claim based on a forum
7 selection clause involves a four-part analysis.” Id. at 383. First, a court must determine whether the
8 clause was “reasonably communicated to the party resisting enforcement.” Id. Second, it must
9 determine whether the language of the clause is mandatory, as opposed to merely permissive. Id.10 Third, the court must examine “whether the claims and parties involved in the suit are subject to the
11 forum selection clause.” Id. If these three requirements are met, the forum selection clause is
12 presumptively enforceable. Id. The final step of the analysis requires a court to find whether the
13 party resisting enforcement of the clause “has rebutted the presumption of enforceability by making
14 a sufficiently strong showing that ‘enforcement would be unreasonable or unjust, or that the clause
15 [is] invalid for such reasons as fraud or overreaching.’” Id. at 383-84 (quoting M/S Bremen v.
16 Zapata Off-Shore Co., 407 U.S. 1, 15 (1972)).
17 A. The District Court’s Factual Findings
18 TradeComet argues that the district court committed a legal error by resolving a disputed
19 issue of fact against it without an evidentiary hearing. TradeComet attests that it disputed whether
20 the terms of the August 2006 agreement had been reasonably communicated to it. TradeComet,
21 however, has forfeited this argument by failing to seek an evidentiary hearing before the district
22 court. See United States ex rel. Drake v. Norden Sys., Inc., 375 F.3d 248, 256 (2d Cir. 2004) (noting
23 that the plaintiff waived his right to an evidentiary hearing by failing to request it until after the court
3
1 ruled against him). We conclude, moreover, that TradeComet failed to raise any material issue of
2 fact as to Google’s communication of the terms of the August 2006 agreement that required an
3 evidentiary hearing.
4 In determining whether to dismiss a claim based on a forum selection clause, the district
5 court must view all the facts in the light most favorable to the party claiming that venue is proper,
6 while “no disputed fact should be resolved against that party until it has had an opportunity to be
7 heard.” New Moon Shipping Co., Ltd. v. MAN B&W Diesel AG, 121 F.3d 24, 29 (2d Cir. 1997).
8 Accordingly, a “disputed fact may be resolved in a manner adverse to that party only after an
9 evidentiary hearing.” Id. (emphasis added). Here, TradeComet points to information provided by
10 Google showing that, in August 2006, a user agreed to the August 2006 agreement for at least ten
11 of TradeComet’s AdWords accounts within a span of three seconds. Google, however, did not
12 dispute this fact; rather, it explained that TradeComet had an umbrella account that allowed one user
13 to accept the August 2006 terms and conditions at once for all accounts included under the umbrella
14 (here, the ten accounts that indicated assent). TradeComet did not contest this explanation below,
15 and does not dispute it on appeal. Further, as the district court found, TradeComet did not submit
16 any evidence to the contrary. TradeComet’s belated demand for an evidentiary hearing is therefore
17 misplaced; the district court did not err in concluding that TradeComet accepted the terms of the
18 August 2006 agreement.
19 B. “Retroactive” Application of the August 2006 Forum Selection Clause
20 TradeComet next argues that the forum selection clause contained in its April 2005 and May
21 2006 agreements with Google should apply in the instant case, and that TradeComet’s antitrust
22 claims do not fall within the scope of that clause. It further argues that the district court erred by
23 “retroactively” applying the August 2006 agreement to Google’s alleged anticompetitive conduct,
4
1 which began prior to the effective date of this agreement. We find TradeComet’s contentions to be
2 without merit.
3 Both parties agree that California law controls in interpreting the agreements, including the
4 scope of their respective forum selection clauses. Under California law, “[t]he words of a contract
5 are to be understood in their ordinary and popular sense, rather than according to their strict legal
6 meaning.” Badie v. Bank of Am., 67 Cal. App. 4th 779, 797 (Cal. Ct. App. 1998) (quoting Cal. Civ.
7 Code § 1644). We must apply “the standard statutory rules of contract interpretation in order to
8 ascertain the mutual intention of the parties as it existed at the time the original account agreements
9 were entered into.” Id. at 798 (citing Cal. Civ. Code §§ 1636, 1637).
10 TradeComet cites few cases directly addressing the “retroactive” application of a forum
11 selection clause. We are therefore guided here by analogous cases discussing the retroactive
12 application of arbitration clauses. See AVC Nederland B.V. v. Atrium Inv. P’ship, 740 F.2d 148, 158
13 (2d Cir. 1984) (quoting Scherk v. Alberto-Culver Co., 417 U.S. 506, 518-19 (1974)) (“[A]n
14 agreement to arbitrate . . . is, in effect, a specialized kind of forum-selection clause . . . .”). Courts
15 construing arbitration clauses have refused to subject claims to arbitration where the claims arise
16 from or relate to conduct occurring prior to the effective date of the agreement, and where the clause
17 is limited to claims under “this Agreement.” See, e.g., Thomas v. Carnival Corp., 573 F.3d 1113,
18 1117-19 (11th Cir. 2009) (refusing to apply arbitration clause “retroactively” where the clause
19 applied to “[a]ny and all disputes arising out of or in connection with this Agreement” (emphasis
20 added)); Wachovia Bank N.A. v. Schmidt, 445 F.3d 762, 767-69 (4th Cir. 2006) (same); Sec. Watch,
21 Inc. v. Sentinel Sys., Inc., 176 F.3d 369, 372 (6th Cir. 1999) (finding arbitration clause inapplicable
22 to disputes under previous agreements where clause applied to all claims “arising out of or relating
23 to the [p]roducts furnished pursuant to this Agreement or acts or omissions . . . under this
5
1 Agreement” (emphasis added)).
2 In contrast, courts have found claims arising from or related to conduct occurring before the
3 effective date of an arbitration clause to be within the scope of a clause that “is not limited to claims
4 arising under the agreement itself.” In re Verisign, Inc. Derivative Litig., 531 F. Supp. 2d 1173,
5 1224 (N.D. Cal. 2007). In such circumstances, “courts have allowed arbitration agreements to apply
6 retroactively to transactions that occurred prior to the execution of the agreement.” Id. The court
7 in In re Verisign rejected a retroactivity argument similar to TradeComet’s, on the ground that the
8 arbitration provision was “extremely broad, and cover[ed] not just services provided under the
9 Agreement, but also ‘any other services provided by’” the defendant. Id.; see also In re Currency
10 Conversion Fee Antitrust Litig., 265 F. Supp. 2d 385, 407 (S.D.N.Y. 2003) (finding arbitration
11 clause applicable to claims arising prior to execution of the agreement when it covered claims
12 beyond those under the agreement); cf. Al-Thani v. Wells Fargo & Co., No. C 08-1745, 2009 U.S.
13 Dist. LEXIS 2732, at *16-*17 (N.D. Cal. Jan. 7, 2009) (finding arbitration clause applicable to
14 claims arising prior to execution of agreement, and observing that a clause not limited to claims
15 under the agreement “place[s] no retroactive obligation on Plaintiff” and merely imposes a
16 “prospective obligation to arbitrate, rather than litigate”).
17 TradeComet nevertheless contends that California courts are hostile towards such retroactive
18 application of forum selection clauses. TradeComet’s cited case law, however, does not support this
19 view. In Bancomer S.A. v. Superior Court of Los Angeles County, for example, the court refused
20 to apply the forum selection clause because the party against whom enforcement was sought was
21 never a party to the agreement containing the clause. 44 Cal. App. 4th 1450, 1459-61 (Cal. App.
22 Ct. 1996). In Allez Medical Applications v. Allez Spine, LLC, No. G037314, 2007 WL 927905 (Cal
23 App. Ct. Mar. 29, 2007) (unpublished), the arbitration clause at issue did not take effect until after
6
1 the plaintiff filed suit. See id. at *1. Neither of these cases, fairly read, support TradeComet’s broad
2 proposition. In fact, California courts “have placed a substantial burden on a plaintiff seeking to
3 defeat a [forum selection] clause, requiring it to demonstrate enforcement of the clause would be
4 unreasonable under the circumstances of the case.” CQL Orig. Prods., Inc. v. Nat’l Hockey League
5 Players’ Ass’n, 39 Cal. App. 4th 1347, 1354 (Cal. Ct. App. 1995).
6 Here, the plain language of the August 2006 agreement applies to claims “arising out of or
7 relating to this agreement or the Google Program(s).” August 2006 Adwords Agreement ¶ 9
8 (emphasis added). “Google Programs,” in turn, is defined to include the AdWords program at issue
9 in this case. See id. ¶ Introduction. The forum selection clause is therefore not limited to claims
10 arising from or related to the August 2006 agreement itself; it broadly includes any claim arising
11 under or related to the “Google Programs,” irrespective of whether it arose prior to or subsequent
12 to the acceptance of the August 2006 agreement. The district court expressly found TradeComet’s
13 claims to “relate to” the “Google Programs,” a finding TradeComet does not dispute on appeal. In
14 addition, the April 2005 and May 2006 agreements expressly permitted Google to modify the forum
15 selection clause to that contained in the August 2006 agreement, which – through TradeComet’s
16 acceptance – “supersede[d] and replace[d] any other agreements, terms and conditions applicable
17 to the subject matter hereof.” August 2006 AdWords Agreement ¶ 9 (emphasis added). The district
18 court therefore did not impermissibly give “retroactive” effect to the August 2006 forum selection
19 clause.
20 C. Unreasonableness and Unconscionability
21 TradeComet finally argues that enforcement of the forum selection clause would be
22 unconscionable and against public policy. TradeComet bears the burden of showing that
23 “enforcement would be unreasonable or unjust, or that the clause was invalid for such reasons as
7
1 fraud or overreaching.” Phillips, 494 F.3d at 384 (quoting Bremen, 407 U.S. at 15). This exception
2 to enforcement “is interpreted narrowly,” and rebuts the presumption of enforceability where, inter
3 alia, the incorporation of the clause “into the agreement was the result of fraud or overreaching,”
4 or “if the clause[] contravene[s] a strong public policy of the forum state.” S.K.I. Beer Corp. v.
5 Baltika Brewery, 612 F.3d 705, 711 (2d Cir. 2010) (quoting Roby v. Corp. of Lloyd’s, 996 F.2d
6 1353, 1363 (2d Cir. 1993)). For the following reasons, TradeComet’s arguments fail.
7 1. Overreaching
8 TradeComet first contends that the forum selection clause is unenforceable because it was
9 the result of overreaching on Google’s part. In Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 58510 (1991), the Supreme Court held that a forum selection clause contained in a form passage contract
11 was enforceable, id. at 595, despite the fact that the terms of the form passage contract were not
12 subject to negotiation, and that individuals had no bargaining power with the vendor, id. at 593. The
13 Court rejected the argument that a non-negotiated forum selection clause was never enforceable
14 simply because it was not subject to bargaining. Id. The Court found that a reasonable forum
15 selection clause was permissible where there was a “special interest in limiting the fora in which [a
16 party] potentially could be subject to suit.” Id. Such a “special interest” was present where there
17 were transactions with individuals from many locales, and where a mishap could subject the vendor
18 to litigation in several different fora. See id.19 Similar concerns warrant finding the forum selection clause reasonable in this case.
20 TradeComet itself attests that Google is “the essential medium for search advertising to over a
21 million advertisers, ranging from the largest companies in the world to the smallest, unsophisticated
22 operations.” Appellant’s Br. 5 (emphasis added). Each of these advertisers, meanwhile, agrees to
23 the terms of the agreement at issue in this case in connection with its participation in programs like
8
1 AdWords. Google unquestionably holds a “special interest” in making sure that it is not subject to
2 suit in numerous different fora for claims arising from its agreements with over a million advertisers.
3 TradeComet nevertheless argues that Google’s ability to “modify . . . [the] Terms at any time
4 without liability” constitutes overreaching where it expands the scope of an agreement into areas not
5 contemplated by the original agreement. Specifically, TradeComet contends that Google’s
6 modification of its forum selection clause to include claims arising from or relating to “the Google
7 Programs” was such an unreasonable expansion. TradeComet’s own cited precedent, however,
8 expressly distinguishes modifications to an agreement that were “clearly related to a matter
9 addressed in the original contract.” Badie, 67 Cal. App. 4th at 792. Here, a forum selection clause
10 specifying Santa Clara County, California as the locus for litigation was present in all three of the
11 relevant agreements. The modification to the forum selection clause was therefore “clearly related”
12 to a matter addressed by the agreements – namely, where cases between the parties were to be tried.
13 Furthermore, TradeComet points to no evidence suggesting that Google’s purpose in modifying the
14 forum selection clause was to discourage plaintiffs from bringing suit. See Shute, 499 U.S. at 595
15 (noting the Supreme Court’s concern over forum selection clauses that serve as “means of
16 discouraging [plaintiffs] from pursuing legitimate claims”). TradeComet’s claims of overreaching
17 are therefore without merit.
18 2. Public Policy
19 Relying on our prior decision in American Safety Equipment Corp. v. J.P. Maguire & Co.,
20 391 F.2d 821 (2d Cir. 1968), TradeComet next contends that Google’s forum selection clause is
21 contrary to public policy favoring enforcement of antitrust laws by private parties. This argument
22 fails. The Supreme Court limited American Safety Equipment Corp. in Mitsubishi Motors Corp. v.
23 Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985), where it held that arbitration clauses subjecting
9
1 federal antitrust claims to arbitration were enforceable. Id. at 640. In doing so, the Court found that
2 “[t]he mere appearance of an antitrust dispute does not alone warrant invalidation of the selected
3 forum on the undemonstrated assumption that the arbitration clause is tainted.” Id. at 632. In
4 accordance with Mitsubishi Motors, we have also found enforceable an arbitration clause applicable
5 to federal antitrust claims. See JLM Indus. Inc. v. Stolt-Nielsen S.A., 387 F.3d 163, 181 (2d Cir.
6 2004). We held in Bense v. Interstate Battery System of America, Inc., 683 F.2d 718 (2d Cir. 1982),
7 moreover, that a forum selection clause was applicable to the plaintiff’s federal antitrust claims. See
8 id. at 720. In short, both this Circuit and the Supreme Court have made clear that the mere existence
9 of a federal antitrust claim does not void a forum selection clause as against public policy.
10 TradeComet thus fails to meet its burden of demonstrating that the forum selection clause was
11 unreasonable or unconscionable.
12 D. Conclusion
13 We have considered the parties’ remaining arguments and find them to be moot or without
14 merit. For the foregoing reasons, and for the reasons stated in an opinion filed contemporaneously
15 with this order, the judgment of the district court is AFFIRMED.
16
17 FOR THE COURT:
18 Catherine O’Hagan Wolfe, Clerk
19
10