Ninth Circuit Invalidates Forum Selection and Choice of Law Clauses

The use and enforcement of choice of law and forum selection clauses has become a very important issue in wage and hour law.

In Doe 1 v. AOL, LLC (Jan. 16, 2009) the plaintiffs filed a class action against AOL after AOL made public information regarding its users' search records. The plaintiffs sued in federal court in California for violation of a federal privacy law, and the California plaintiffs sued for violation of the Consumer Legal Remedies Act ("CLRA"). California Civil Code Section 1770.

AOL moved to dismiss the case, relying on its member agreement, which designated the courts of Virginia as the proper venue for any dispute between AOL and its members, and designated Virginia law to govern such disputes. The District Court granted the motion without prejudice to plaintiffs' right to file in the Virginia state or federal courts.

The Ninth Circuit Court of Appeals reversed the trial court's decision. First, the Ninth Circuit held that the Member Agreement's clause designating the "courts of Virginia" as the proper fora for any dispute meant the Virginia state courts, and not the federal courts located in Virginia.

Next, the Court held that "the forum selection clause so construed is unenforceable as a matter of federal law, because it violates California public policy against waivers of class action remedies and rights under the California Consumers Legal Remedies Act." Despite the "heavy burden" on the party opposing the forum selection clause to show that it is not enforceable, the Court held that the forum selection clause is not enforceable. The Court relied on a 2001 California Court of Appeal decision finding the same forum selection clause unenforceable because the clause violated California public policy on two grounds:

(1) enforcement of the forum selection clause violated California public policy that strongly favors consumer class actions, because consumer class actions are not available in Virginia state courts, id. at 712;12 and (2) enforcement of the forum selection clause violates the anti-waiver provision of the Consumer Legal Remedies Act (CLRA), id. at 710, which states “[a]ny waiver by a consumer of the provisions of this title is contrary to public policy and shall be unenforceable and void.” Cal. Civ. Code § 1751.

Accordingly, the Court held that the forum selection clause in AOL's member agreement is unenforceable as to California resident plaintiffs bringing class action claims under California consumer law.

Judge Nelson wrote the Court's opinion. Judges Reinhardt and Bea joined, with Judge Bea writing a separate concurring opinion.