Opinion
06 CV 2503 (LBS).
June 21, 2006
Memorandum and Order
On February 22, 2006, Plaintiff Eslworldwide.com, Inc., ("Plaintiff") filed a Complaint in New York State Supreme Court, bringing claims for breach of contract, negligent misrepresentation, breach of the implied covenant of good faith and fair dealing, and negligence, against Defendants Interland, Inc., ("Interland") and iNNERHOST. On March 30, 2006, Defendants removed the case to this Court, and now move to dismiss the action for improper venue, pursuant to Rule 12(b)(3) of the Federal Rules of Civil Procedure. In the alternative, Defendants move to transfer venue to the Northern District of Georgia, pursuant to 28 U.S.C. § 1404(a). For the reasons stated below, the Court grants the Rule 12 motion with regard to Defendant Interland and grants the motion to transfer venue with regard to Defendant iNNERHOST.
FACTS
Plaintiff is a Korean corporation with its principal place of business in Seoul. (Compl. ¶ 5.) Plaintiff coordinates the teaching of English as a second language to students throughout the world. (Id. ¶ 10.)
Interland is a Minnesota corporation and iNNERHOST is a Delaware corporation. In September 2002, Interland acquired iNNERHOST as a wholly-owned subsidiary. (Furnish Decl. ¶ 3.) Both companies' principal place of business is Atlanta, Georgia. (Id. ¶ 4.) Defendants provide web-hosting services to individuals and small and medium-sized businesses. (Id. ¶ 5.)
In March 2006, Interland changed its name to Web.com, Inc. (Furnish Decl. ¶ 3.)
In April 2000, Plaintiff contracted for iNNERHOST to provide web-hosting services for Plaintiff's domain,www.eslworldwide.com. (Compl. ¶ 13.) After Interland acquired iNNERHOST, Plaintiff made payments on the account to Interland. (Id. ¶ 23.)
Plaintiff alleges that on September 1, 2004, Defendants lost access to the computer server assigned to Plaintiff's domain and that Defendants did not locate Plaintiff's accompanying lost database until March 2005. (Compl. ¶¶ 25, 33.) Plaintiff alleges that not having access to this data for nearly seven months cost Plaintiff substantial damages.
The events giving rise to the present motion occurred a few days before Defendants allegedly lost access to Plaintiff's data. Plaintiff alleges that on August 27, 2004, Jae Hong Shim, the President of Eslworldwide.com contacted Interland's Technical Support Department because he could not access Plaintiff's website on the internet. (Shim Decl. ¶ 10.) Shim says he was told that Plaintiff's credit card was invalid and that he should log on to Interland's website and provide a new credit card account. (Id.) Defendants' records reveal that Plaintiff's account was terminated in November 2003 for nonpayment, but that the website may have remained accessible for some period after the account was cancelled. (Robichaux Decl. ¶¶ 6-7.) Shim's email to Interland's Technical Support Department indicates he understood the account had been cancelled. See Shim Decl. at Ex. B ("Your company closed my account which your company serviced for eslworldwide.com without any notice.).
Shim maintains that his sole intention in logging on to Interland's website was to provide new credit card information. (Shim Decl. ¶ 10.) It seems that what he actually did, though, was to open a new account. When Shim entered the Support Site, he was required to "Accept" or "Decline" new Terms of Service. The text above the "Accept" and "Decline" boxes said, in bold print: "By clicking the `Accept' button below you acknowledge that you have read and agree to be bound by the policies listed below, including the Terms of Service and Acceptable Use Policy. Your acceptance of the policies listed below will apply to all active accounts." (Robichaux Decl. ¶ 10.) Interland's records reveal that Shim clicked "Accept" on August 27, 2004 at 8:57 p.m. (Id. ¶ 11.)
These new Terms of Service contained both a choice of law clause, requiring that any dispute be governed by Georgia law, and a forum selection clause, requiring that any suit involving the account (and not subject to the contract's mandatory arbitration provisions) be brought in a Georgia state or federal court in Fulton County, Georgia. (Robichaux Decl. Ex. A ¶ 15(b).)
DISCUSSION
Defendants first argue that the Court should dismiss for improper venue, due to the forum selection clause. Forum selection clauses are presumed valid and enforceable. See, e.g., Mercury West A.G., Inc. v. R.J. Reynolds Tobacco Co., No. 03-5262 (JFK), 2004 WL 421793, at *3 (S.D.N.Y. Mar. 5, 2004) (noting that "now when confronted with forum selection clauses courts presume them to be valid") (citation omitted). This presumption generally extends to forum selection clauses contained in so-called "click-wrap" contracts, that is, contracts to which a user manifests his or her assent by clicking on an icon. See Specht v. Netscape Commc'ns Corp., 150 F. Supp. 2d 585, 593-94 (S.D.N.Y. 2001) (describing a click-wrap contract and observing that "[t]he few courts that have had occasion to consider click-wrap contracts have held them to be valid and enforceable") (citations omitted); see also Hughes v. McMenamon, 204 F. Supp. 2d 178, 181-82 (D. Mass. 2002) (action dismissed based on forum selection clause in click-wrap contract). A party seeking to avoid the enforcement of a forum selection clause "bear[s] the heavy burden of making a `strong showing' in order to overcome the presumption of validity from which these clauses benefit." Mercury West, 2004 WL 421793, at *3 (citation omitted). This heavy burden is satisfied only when the court is convinced that "enforcement would be unreasonable and unjust, or that the clause is the result of fraud or overreaching." Id. (citations omitted).
Plaintiff first argues that the forum selection clause is not enforceable because Shim does not remember clicking the "Accept" box and was never told he was starting a new account. (Shim Decl. ¶ 10.) Neither of these representations is sufficient to overcome the presumption here. First, Shim may not remember clicking the icon, but Defendants' records reveal that he did, in fact, so click. See Robichaux Decl. ¶ 11. Furthermore, because of the manner in which the website is organized, without having clicked "Accept," Shim would not have been allowed to access certain other sections of the site, and it is uncontested that Shim did enter those sections. See Robichaux Decl. ¶ 12, 14; Shim Decl. ¶ 10. Finally, the text above the "Accept" icon clearly states that by clicking "Accept," a user is bound to the new Terms of Service, and such terms, which include the forum selection clause, are easily accessed by clicking on the accompanying link. Because Plaintiff has not met the heavy burden necessary to overcome the forum selection clause's presumptive validity, the Court holds that, at least as regards Interland, the motion to dismiss for improper venue is granted.
Plaintiff next contends that even if the forum selection clause is valid as to Interland, iNNERHOST was not a party to the new agreement and the contract governing Plaintiff's relationship with iNNERHOST, that is, the April 2000 contract, does not contain a forum selection clause. The Court notes that there is a clause in the Terms of Service of the 2004 contract which states that these new Terms "supersede all prior discussions, negotiations, and agreements between the parties . . . [and] constitute the sole and entire agreement between the parties with respect to the matters covered." (Robichaux Decl. Ex. A ¶ 15(e).) However, the Terms of Service also specify that any "Order submitted by Customer creates a contract between Customer and Interland, consisting of the Order, the applicable Service Description, and these Terms of Service." (Robichaux Decl. at Ex. A ¶ 1(a).) Although iNNERHOST is a wholly-owned owned subsidiary of Interland, the Court is without sufficient information to evaluate whether iNNERHOST is one of the "parties" bound by the 2004 Terms of Service, particularly in view of the fact that the Terms of Service refer only to Interland, never to iNNERHOST. Nevertheless, even though the Court cannot find, based on the record here, that the forum selection clause applies with regard to iNNERHOST, the Court does conclude that a venue transfer is appropriate with regard to iNNERHOST.
Venue transfers are governed by 28 U.S.C. § 1404(a), which provides that "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." 28 U.S.C. § 1404(a). This action in diversity "might have been brought" in the Northern District of Georgia. There is personal jurisdiction over Defendants in that district because their principal place of business is there. Venue is proper in that district because for venue purposes a defendant corporation is deemed to "reside" in any district in which it is subject to personal jurisdiction, see 28 U.S.C. § 1391(c), and venue in an action founded solely on diversity is proper in "a judicial district where any defendant resides, if all defendants reside in the same State." 28 U.S.C. § 1391(a). Because Defendants are subject to personal jurisdiction in the Northern District of Georgia they both "reside" there, and thus venue in this diversity suit is proper in that district.
Having concluded that this case "might have been brought" in the proposed alternative district, the Court must now examine whether a transfer is warranted for the convenience of the parties and witnesses and in the interest of justice. In making this determination, courts generally consider several factors, including (i) the convenience of the witnesses; (ii) the convenience of the parties; (iii) the location of relevant documents and the ease of access to sources of proof; (iv) the locus of operative facts; (v) the availability of process to compel the attendance of unwilling witnesses; (vi) the relative means of the parties; (vii) the comparative familiarity of each district with the governing law; (viii) the weight accorded to the plaintiff's choice of forum; and (ix) judicial economy and the interest of justice. See e.g., Zepherin v. Greyhound Lines Inc., 415 F. Supp. 2d 409, 411 (S.D.N.Y. 2006).
The totality of circumstances strongly indicates that the venue transfer motion should be granted. None of the parties nor any of Defendants' anticipated witnesses resides or works in New York. (Furnish Decl. ¶¶ 4, 10-11.) Defendants' anticipated witnesses are all former employees who reside in Georgia, except for one who resides in Miami. (Id. ¶ 10.) Plaintiff is a Korean corporation without any connection to New York and Plaintiff has not identified any witnesses who reside or work in New York. There are no relevant documents located in New York, but there are relevant documents at Defendants' headquarters in Atlanta. (Id. ¶ 12.) The locus of operative facts is difficult to pinpoint, because all action happened in cyberspace. Regarding the availability of process, none of Defendants' key witnesses are still employed by Defendants and they live in Georgia or Florida. (Id. ¶ 10.) As non-parties, they cannot be compelled to appear at trial in New York, but most of them can be compelled to appear in Georgia. Regarding the relative means of the parties, while Defendants may have a larger market capitalization than Plaintiff, they are both profitable corporations, and it is likely less expensive to litigate in Georgia than in New York. Moreover, while a plaintiff's choice of forum should usually not be disturbed unless the balance of factors is strongly in the defendant's favor, "the emphasis placed by a court on this choice diminishes where `the operative facts upon which the litigation is brought bear little material connection to the chosen forum,'"In re Nematron Corp. Sec. Litig., 30 F. Supp. 2d 397, 405 (S.D.N.Y. 1998) (citation omitted), and "a foreign plaintiff's choice of forum deserves less deference" than a domestic plaintiff. Maternales De Mexico, S.A. de C.V. v. Kiddie Prods., Inc., No. 94-8007 (JFK), 1995 WL 617188, at *3 (S.D.N.Y. Oct. 20, 1995). Here, there is no connection between the facts and New York, and Plaintiff is foreign. Finally, litigating in Georgia is not only more efficient than litigating in New York because all the documents and defense witnesses are there, but also because the forum selection clause necessitates that any case Plaintiff brings against Interland must be in Georgia. Rather than conducting two cases based on the same facts in different states, it is in the interest of justice that the case against iNNERHOST be transferred to the Northern District of Georgia.
Plaintiff argues that New York is more convenient both because there are no direct flights from Seoul to Atlanta and because New York has a larger Korean community than Atlanta. First, Defendants have cited to the Court direct flights from Seoul to Atlanta, and in any case the Court believes that any additional travel time it may take to get from Korea to Atlanta, instead of from Korea to New York, is not legally significant. Second, the comparative size of the Korean populations of New York and Atlanta is also not legally significant in this context.
CONCLUSION
The Court orders that the case against Interland be dismissed without prejudice for improper venue, and the case against iNNERHOST be transferred to the Northern District of Georgia.
SO ORDERED.