Category Archives: online forum selection clauses

When Are Online Forum Selection Clauses Enforceable in New York?

Should a defendant, who uses the Internet to market and sell nationally, be able to restrict jurisdiction with the use of a forum selection clause (“FSC”)? On the other  hand, should a plaintiff be able to drag an online company, that provides convenient and often times cheaper services, into court across the country?

In Guillermo Jerez v. JD Closeouts, LLC, JD CLOSEOUTS.COM, Inc., 2012-22070 (District Court of Nassau County, First District, March 20, 2012),  the Court addressed the issue of whether FSCs are enforceable. In that case, the plaintiff, Guillermo Jerez “plaintiff”, brought suit against two Florida corporations; JD Closeouts, LLC and JD Closeouts.com, Inc. (collectively, “Defendants”). The plaintiff purchased several tube-socks from the defendants’ online company via the defendants’ website. Plaintiff claimed that the tubes-socks were “defective” and that the defendants’ refused to refund his money. The plaintiff filed suit in New York, the location where he accessed the Internet to purchase the socks and where the socks were shipped.  However, the defendants claimed that because there was an FSC in the terms and conditions of their website, the plaintiff was limited to suing in Nassau County, Florida.  

 In the decision, the Court provided the background law regarding how courts generally treat FSCs. They are presumptively valid in regard to online contract formation. However, FSCs need to be fair; online companies must provide notice of such a clause so that a reasonable person would be aware of the terms prior to entering into the agreement. Online companies need not negotiate online contracts with their users in order to be valid; they only need to provide reasonable notice of the terms.  Therefore, as long as a website’s FSC “is not unreasonably masked from the view of the prospective purchaser,” courts will hold FSCs enforceable.

In analyzing this requirement, the Court cited cases with contrary holdings. In Specht v. Netscape Communications Corp., the Court held that the plaintiff, a user who downloaded from the defendant’s
website, was not put on reasonable notice of the contract terms. The Court explained that the terms were not reasonably communicated to the user because they were located on an “unexplored portion of the webpage” underneath the “download button.” Specht v. Netscape Communications Corp., 306 F.3d 17 (2d Cir. 2002). However, in Caspi v. Microsoft Network, LLC., the Court held, the terms of a contract enforceable where the user of online software was required to click “I agree” or “ I don’t agree” before the use of the software. This required affirmative step, on the part of the user, provided reasonable notice of the terms of the agreement.

The Court, in JD Closeouts held that the defendants’ FSC was not enforceable.  The court based its decision on the fact that the defendants’ FSC was “buried” and “submerged” on the defendants’ webpage. The only way the plaintiff could have become aware of the FSC would be if, by chance, he happened to find it by clicking the “About  Us” tab. Online users are not expected to conduct a wild goose chase; searching every corner of a website for contractual obligations that will be imposed upon them by online companies.

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© 2012 Nissenbaum Law Group, LLC