Brooks v. Sotheby's et al

Filing 19

ORDER GRANTING MOTION TO DISMISS. Signed by Judge Richard Seeborg on 7/1/13. (cl, COURT STAFF) (Filed on 7/1/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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SAN FRANCISCO DIVISION

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For the Northern District of California

United States District Court

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No. 13-cv-02183 RS

STEVEN BROOKS,

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Plaintiff,

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ORDER GRANTING
MOTION TO DISMISS

v.

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SOTHEBY’S, SOTHEBY’S, INC., AND
DOES 1 THROUGH 10, INCLUSIVE,

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Defendants.
____________________________________

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I.

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INTRODUCTION

Defendants Sotheby’s and Sotheby’s, Inc. seek dismissal of Plaintiff Steven Brooks’

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complaint for improper venue.1 Brooks’ claim for relief arises out of his purchase of a painting

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from an auction conducted by Sotheby’s in London, England. Brooks’ auction bid was subject to

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the Conditions of Business set forth in Sotheby’s auction catalogue, including a forum-selection

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clause granting exclusive jurisdiction to the Courts of England to settle all disputes in connection

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There is some dispute between the parties about the distinction between Sotheby’s, Sotheby’s,
Inc., and a third entity, Sotheby’s London. The parties’ disagreement about their interrelatedness
and the extent to which that affects the reach of the forum-selection clause at issue has been
considered, but these arguments are omitted as irrelevant to the disposition of this motion.
NO. 13-CV-02183 RS
ORDER GRANTING MOTION TO DISMISS

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with the auction. Because the forum-selection clause did not result from fraud or overreaching and

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enforcement would not violate fundamental fairness or contravene public policy, the forum-

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selection clause is controlling, and the case is dismissed for improper venue.

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II.

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A. Plaintiff’s Purchase of the Painting and Terms Governing Its Sale.

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BACKGROUND

Plaintiff Steven Brooks purchased the painting known as “Allegorical portrait of a lady as

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Diana, wounded by Cupid” for approximately $96,000, by absentee bid through an auction in

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London, England conducted by Sotheby’s, an international auction house. Def.’s Mot. Dismiss 3.

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This painting was Brooks’ 32nd purchase from auctions at Sotheby’s salesrooms in London, and he

For the Northern District of California

United States District Court

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subsequently purchased four additional items from Sotheby’s London auctions. Id. at 4. When

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Brooks attempted to consign the painting for sale with the auction house Christies, experts there

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informed him the painting once was owned by Hermann Goering, founder of the Nazi Gestapo.

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Compl. ¶ 8. In light of the circulation of confiscated and forcibly sold artwork from Jewish

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collections that occurred after 1933, Christies concluded there was insufficient evidence to

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determine the circumstances under which Goering acquired the painting in 1939, and thus they

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could not assist Brooks in its sale. Id. at ¶¶ 5, 8. Brooks returned to Sotheby’s, informed them of

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Christies’ findings, and requested their assistance selling the painting. Id. at ¶ 8. After researching

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the painting’s ownership history, Sotheby’s concluded they were unable to clarify the painting’s

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provenance sufficiently to offer it for sale, and declined to refund Brooks’ purchase price. Id.

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Prior to the auction at issue, Sotheby’s distributed a catalogue describing the artworks for

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sale at the auction and the Conditions of Business governing the auction. Def’s Mot. Dismiss 4.

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The Conditions of Business state, “[t]he nature of the relationship between Sotheby’s, Sellers and

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Bidders and the terms on which Sotheby’s (as auctioneer) and Sellers contract with Bidders are set

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out below.” Aguilar Decl. Ex. A at 278. Section 13 of the Conditions of Business, headed “Law

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and Jurisdiction” in bold print, states in part, “[f]or the benefit of Sotheby’s, all Bidders and Sellers

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agree that the Courts of England are to have exclusive jurisdiction to settle all disputes arising in

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connection with all aspects of all matters or transactions to which these Conditions of Business

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relate or apply.” Id. at 280. Following Brooks’ successful bid on the painting, Sotheby’s sent
NO. 13-CV-02183 RS
ORDER GRANTING MOTION TO DISMISS

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Brooks an invoice reflecting his purchase, and included in the invoice a reference to the Conditions

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of Business from the auction catalogue. Aguilar Decl. ¶ 4, Ex. B. The painting Brooks purchased

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appeared on page 243 of the catalogue, and the Conditions of Business appeared on pages 278-80.

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Def’s Mot. Dismiss 4. Brooks’ earlier 31 purchases from Sotheby’s London salesrooms were also

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conducted pursuant to the governing Conditions of Business contained in the catalogues for those

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auctions. Aguilar Decl. ¶ 6. Sotheby’s operates 90 locations in 40 countries, holding about 250

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auctions annually in ten salesrooms around the world. Def.’s Reply Br. Supp. Mot. Dismiss 3 n.1.

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B. Procedural History.

For the Northern District of California

Brooks filed a complaint in the Superior Court of San Francisco averring Defendants

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United States District Court

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Sotheby’s, Sotheby’s, Inc., and Does 1 through 10, inclusive: 1) violated the California Consumers

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Legal Remedies Act, section 1750 of the California Civil Code, for engaging in “unfair, deceptive

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and unlawful practices and unconscionable commercial practices in connection with the sale of any

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goods or services[;]” 2) engaged in “unlawful,” “unfair,” and “fraudulent” business practices in

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violation of the Unfair Competition Law, section 17200 of the California Business and Professions

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Code; 3) received unjust enrichment; 4) engaged in fraudulent concealment; and 5) made negligent

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misrepresentations. Compl. ¶¶ 13, 19, 24-26, 28-32, 34-39.

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After removing to this Court, Sotheby’s and Sotheby’s, Inc. moved to dismiss Brooks’

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complaint in its entirety pursuant to Federal Rule of Civil Procedure 12(b)(3) for improper venue.

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Def’s Mot. Dismiss 2. In their motion, Defendants argue the dispute arises under a contract

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containing an enforceable mandatory forum-selection clause granting exclusive jurisdiction to the

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Courts of England, and where the proper venue is in a foreign country, the Court must dismiss for

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lack of authority to transfer a case to a foreign court. Id. at 4-9. Brooks seeks denial of Defendants’

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motion and a finding the forum-selection clause is unenforceable, on the grounds enforcement

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would violate California public policy and lack of reasonable notice. Pl.’s Opp’n Def’s Mot.

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Dismiss 4-9, 11. Defendants, however, contend Brooks has failed to show English law would

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provide inadequate remedies or that English courts would refuse to apply California law under

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English choice-of-law provisions. Def.’s Reply Br. Supp. Mot. Dismiss 5. They also argue Brooks

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had reasonable notice, based on the forum-selection clause’s physical prominence, the invoice’s
NO. 13-CV-02183 RS
ORDER GRANTING MOTION TO DISMISS

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reference to the Conditions of Business and its stated requirement payment be made in British

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pounds to Sotheby’s bank in London, Brooks’ ability and incentive to become meaningfully

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informed about the Conditions of Business, and his prior experience purchasing items from

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Sotheby’s auctions in London. Id. at 7-9.
III.

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LEGAL STANDARD

A motion to dismiss based on a forum-selection clause is governed by Federal Rule of Civil

Mexicano, S.A., 87 F.3d 320, 324 (9th Cir. 1996). When considering a forum-selection clause under

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a Rule 12(b)(3) motion, the Court need not accept pleadings as true and may consider facts outside

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For the Northern District of California

Procedure 12(b)(3), which allows a case to be dismissed for improper venue. Argueta v. Banco

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United States District Court

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the pleadings, but the Court must draw all reasonable inferences and resolve all factual conflicts in

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favor of the non-moving party. Murphy v. Schneider Nat’l, Inc., 362 F.3d 1133, 1137-38 (9th Cir.

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2003). A district court shall dismiss or transfer a case “laying venue in the wrong division or

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district.” Rodriguez v. PepsiCo Long Term Disability Plan, 716 F. Supp. 2d 855, 857 (N.D. Cal.

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2010) (citing 28 U.S.C. § 1406(a)).

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A forum-selection clause is presumptively enforceable unless it violates fundamental

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fairness or is the result of fraud or overreaching. See M/S Bremen v. Zapata Off-Shore Co., 407

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U.S. 1, 15 (1972); Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593-94 (finding forum-

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selection clauses to be binding even if the contract in question was not negotiated). Courts may find

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a forum-selection clause unreasonable and unenforceable if: 1) its inclusion was the result of fraud,

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undue influence, or overweening bargaining power; 2) the selected forum is so “gravely difficult

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and inconvenient” the complaining party would “for all practical purposes be deprived of [his] day

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in court[;]” or 3) enforcement would contravene a strong public policy of the forum in which the

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suit is brought. Argueta, 87 F.3d at 325 (quoting Bremen, 407 U.S. at 12-13). A plaintiff seeking to

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avoid dismissal due to a forum-selection clause has the burden to show venue is proper in his chosen

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forum. Id.

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IV.

DISCUSSION

Brooks has not averred facts sufficient to overcome the presumption in favor of upholding
the forum-selection clause at issue. He does not aver Sotheby’s engaged in fraud, undue influence,
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ORDER GRANTING MOTION TO DISMISS

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or overweening bargaining power to include the forum-selection clause in the Conditions of

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Business, nor that England would be a “gravely difficult or inconvenient” forum such that he would

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be deprived of his day in court. While Brooks argues public policy prevents enforcement of the

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forum-selection clause and that he lacked reasonable notice of its terms, his claims are insufficient

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to find the forum-selection clause invalid.

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A. California Public Policy.
a. The Consumer Legal Remedies Act.
Courts will not uphold a forum-selection clause “if enforcement would contravene a strong
public policy of the forum in which suit is brought, whether declared by statute or by judicial

For the Northern District of California

United States District Court

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decision.” Bremen, 407 U.S. at 15. The California Court of Appeal recognizes California public

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policy against waivers of consumer rights under the Consumer Legal Remedies Act (CLRA).

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America Online, Inc. v. Superior Court of Alameda County (Mendoza), 108 Cal. Rptr. 2d 699, 710

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(Cal. Ct. App. 2001). The CLRA provides, “[a]ny waiver by a consumer of the provisions of this

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title is contrary to public policy and shall be unenforceable and void.” Doe 1 v. AOL LLC, 552 F.3d

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1077, 1084 (9th Cir. 2009) (citing Cal. Civ. Code § 1751). In Mendoza, the court held AOL’s

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forum-selection clause was unenforceable in a class-action suit, reasoning transfer to Virginia state

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courts, accompanied by a choice-of-law provision applying Virginia law, would waive consumers’

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CLRA statutory remedies. See Mendoza, 108 Cal. Rptr. 2d at 710-11 (noting consumer class

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actions are not allowed in Virginia state courts). The Court of Appeals for the Ninth Circuit applied

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California’s public policy against waivers of consumer rights under the CLRA in a similar class-

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action suit, declining to enforce forum-selection and choice-of-law clauses limiting venue to

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Virginia state courts and requiring application of Virginia law. Doe 1 v. AOL LLC, 552 F.3d at

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1080, 1082, 1084 (holding the forum-selection clause was “unenforceable as to California resident

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plaintiffs bringing class action claims under California consumer law.”).

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Courts uphold forum-selection clauses in cases involving CLRA claims when the plaintiff

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does not show choice-of-law provisions limit his remedies or that the designated forum’s law would

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not provide the same or equivalent remedies as California law. See, e.g., Mazzola v. Roomster

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Corp., 2010 WL 4916610, *3-4 (C.D. Cal. Nov. 30, 2010) (concluding in such circumstances,
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ORDER GRANTING MOTION TO DISMISS

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“enforcing the forum selection clause itself does not amount to a deprivation of Plaintiff’s rights

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under California law”); Gamayo v. Match.com LLC, 2011 WL 3739542, *6 (N.D. Cal. Aug. 24,

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2011) (distinguishing Mendoza and AOL as “based on the conclusion that the plaintiffs would not be

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able to pursue their claims as a class action if the forum selection clause were enforced.”). In

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Mazzola, the plaintiff argued Mendoza and California public policy required the court not to enforce

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a forum-selection clause for violating the CLRA’s anti-waiver provision. 2010 WL 4916610 at *3-

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4. In transferring the case to New York, the court reasoned the absence of choice-of-law provisions

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in the contract left the plaintiff “free to argue for application of California law[,]” and the plaintiff

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“made no showing that New York law—assuming it did apply to her action—does not provide the

For the Northern District of California

United States District Court

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same or equivalent remedies as are available under California law.” Id.
Brooks has not shown enforcing the forum-selection clause at issue would effectuate a

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waiver of his CLRA claims in violation of California public policy. As in Mazzola, the governing

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law provisions do not preclude application of California law in the designated forum, and Brooks is

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free to argue California law should govern this dispute under English conflict-of-law rules. Def.’s

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Reply Br. Supp. Mot. Dismiss 5. Brooks also does not aver English law provides remedies different

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and not equivalent to those available under California law. The instant case, involving a single

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plaintiff, is further distinguishable from Mendoza and AOL, both class-action suits.
b. Waiver of Trial by Jury.

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The right to a jury trial in federal court is generally governed by federal law. Simler v.

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Conner, 372 U.S. 221, 222 (1963); but see Fin. Tech. Partners L.P. v. FNX Ltd., 2009 WL 464762,

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*1-2 (N.D. Cal. Feb. 24, 2009) (applying California law to hold a jury waiver unenforceable in a

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contract with a California choice-of-law provision). Under federal law, the right to a jury trial may

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be waived by a contract knowingly and voluntarily executed. Okura & Co. (America), Inc. v.

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Careau Group, 783 F. Supp. 482, 488 (C.D. Cal. 1991) (citing Leasing Service Corp. v. Crane, 804

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F.2d 828, 832-33 (4th Cir. 1986)).2 To determine whether a waiver is thereby enforceable, courts

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In contrast, under California law pre-dispute waivers of the right to a jury trial are generally
unenforceable. See Grafton Partners L.P. v. Superior Court of Alameda County, 36 Cal. 4th 944,
950, 961 (2005) (holding unenforceable the parties’ express pre-dispute waiver to have their civil
disputes adjudicated in a court trial rather than a jury trial). While Brooks does not raise Financial
Technology as providing a basis for analyzing his jury trial rights under California law, it is worth
distinguishing that case as involving a contract with uncontested and explicit California choice-ofNO. 13-CV-02183 RS
ORDER GRANTING MOTION TO DISMISS

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consider the following factors: “(1) whether there was a gross disparity in bargaining power between

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the parties; (2) the business or professional experience of the party opposing the waiver; (3) whether

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the opposing party had an opportunity to negotiate contract terms; and (4) whether the clause

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containing the waiver was inconspicuous.” See, e.g., Century 21 Real Estate LLC v. All

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Professional Realty, Inc., 2012 WL 2682761, *3 (E.D. Cal. July 6, 2012).

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Enforcing the forum-selection clause at issue would not violate Brooks’ right to a jury trial

this right in federal court, should not apply here. Under the four factors articulated in Century 21

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Real Estate, Brooks knowingly and voluntarily accepted the terms of the auction contract. While

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For the Northern District of California

under federal law. Brooks does not present any reason why federal law, which generally governs

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United States District Court

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this was not a bargained for or negotiated contract, Brooks was an experienced participant and the

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terms contained in the auction catalogue were not inconspicuous. This was Brooks’ 32nd purchase

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from a Sotheby’s London auction, and he freely chose to bid in the auction subject to terms of which

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he had reasonable notice, as discussed below in greater detail.

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In any event, independent of whether California or federal law governs Brooks’ right to a

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jury trial, he has not shown enforcement of the forum-selection clause would indirectly effectuate a

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waiver of that right. In support of his argument, Brooks cites English law that provides in part,

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“[w]here, on the application of any party . . . the court is satisfied that there is in issue . . . a charge

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of fraud against that party . . . the action shall be tried with a jury, unless the court is of opinion that

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the trial requires any prolonged examination of documents or accounts or local investigation which

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cannot conveniently be made with a jury.” Pl.’s Suppl. Opp’n Def.’s Mot. Dismiss 1-2 (citing

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Senior Courts Act 1981 § 69(1)). The Act further provides cases falling outside section 69(1) “shall

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be tried without a jury unless the court in its discretion orders it to be tried with a jury.” Id. at 2

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(citing Senior Courts Act 1981 § 69(3)). Brooks’ claim for relief, including a charge of fraud, falls

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within the ambit of section 69(1) on its face, and English courts additionally retain discretion to

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order a jury trial under section 69(3). Unlike in Grafton, the forum-selection clause at issue does

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law provisions. 2009 WL 464762, at *1-2. In contrast, it is not clear California law governs the
contract at issue here, and the parties do not contest choice-of-law issues at this time.
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not expressly waive Brooks’ right to a jury trial, and the provisions of English law he cites do not

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suggest he would necessarily be denied that right in English courts.

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c. Other Public Policy Arguments.

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Public policy arguments for upholding the forum-selection clause at issue in Shute apply

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here. As the Court reasoned in Shute, concerning the forum-selection clause attached to a cruise

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passenger’s ticket, a “reasonable forum clause in a form contract” was permissible for three main

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reasons: 1) the cruise line “has a special interest in limiting the fora in which it potentially could be

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subject to suit[,]” since the nature of its business exposes it to potential litigation in different fora

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from plaintiffs from many locales; 2) an ex ante forum-selection clause dispels confusion about

For the Northern District of California

United States District Court

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where suits must be brought and defended, saving litigants the time and expense of pretrial motions

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to determine the correct forum; and 3) passengers likely benefit from forum-selection clauses in the

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form of reduced fares, reflecting savings the cruise line enjoys by limiting the fora in which it may

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be sued. Shute, 499 U.S. at 593-94.

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These reasons similarly apply to the instant case. First, Defendants have a special interest in

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limiting the fora in which they might defend suit. With operations in 40 countries and 250 annual

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auctions in ten global salesrooms, Sotheby’s conducts a business that, by its nature, exposes it to

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potential litigation in different fora from plaintiffs from many locales. Second, the ex ante forum-

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selection clause at issue serves a similar purpose as the clause in Shute, attempting to dispel

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confusion about where suits must be brought and defended. Finally, there is no reason to suggest

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Shute’s third rationale would not also apply to Sotheby’s, whereby auction participants would

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benefit from forum-selection clauses in the form of reduced costs, reflecting the savings Sotheby’s

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enjoys by limiting the fora in which it may be sued.

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B. Reasonable Notice.

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The validity of a forum-selection clause in an adhesion contract depends on whether the

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clause was communicated reasonably to the plaintiff. Deiro v. American Airlines Inc., 816 F.2d

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1360, 1364 (9th Cir. 1987). This is a question of law for the Court, consisting of a two-prong test

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including: 1) the physical characteristics of the contract, such as size of type, conspicuousness,

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clarity of notice, and ease with which the plaintiff can read the relevant provisions; and 2) the
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overall circumstances, including “any extrinsic factors indicating the [plaintiff’s] ability to become

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meaningfully informed of the contractual terms at stake[,]” such as his familiarity with the contract,

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the time and incentive he has to study its provisions, and any other notice he received in addition to

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the contract. Id. at 1363.

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Assuming Brooks was unaware of the forum-selection clause, as required at this stage of the

clause’s physical characteristics present a mixed case. Its small font size and location at the end of

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the catalogue weigh against reasonable notice, but it was clearly labeled with the bolded heading

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“Law and Jurisdiction.” Under the second prong, however, extrinsic factors clearly indicate Brooks

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For the Northern District of California

pleadings, he nonetheless had reasonable notice as a matter of law. Under the first prong, the

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United States District Court

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had the ability to become meaningfully informed about the contractual terms at stake. He does not

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challenge Defendants’ contention they sent him a catalogue containing the Conditions of Business

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prior to the auction, and he presents no issue relative to his receipt of the catalogue in advance of his

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auction participation. Brooks also does not contest this was his 32nd purchase from a Sotheby’s

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auction in London, and his participation in similar transactions suggests he was familiar with the

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type of catalogue in dispute. He had a large incentive to study the contract provisions, since this

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single transaction involved the purchase of a $96,000 painting. His receipt of the invoice provided

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additional notice outside the catalogue, by reference to the Conditions of Business. Finally, the

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invoice’s listing of the painting’s price in British pounds and its direction to transfer funds directly

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to Sotheby’s bank in London would have put Brooks on notice England might be the designated

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forum for disputes arising from his participation in the London auction.

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C. Whether the Forum-Selection Clause Requires Dismissal.
Mandatory forum-selection clauses are to be “strictly enforced” unless the plaintiff can meet

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his burden of showing its enforcement would be unreasonable. Hsu v. OZ Optics Ltd., 211 F.R.D.

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615, 618 (N.D. Cal. 2002) (citing Bremen, 407 U.S. at 12). To be mandatory, a forum-selection

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clause “must contain language that clearly designates a forum as the exclusive one.” Id. (quoting

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Northern Cal. Dist. Council of Laborers v. Pittsburg-Des Moines Steel Co., 69 F.3d 1034, 1037 (9th

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Cir. 1995)). If the proper venue is in a foreign country, federal courts lack authority to transfer and

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must dismiss for improper venue. SeeComm Network Servs. Corp. v. Colt Telecomms., 2004 WL

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1960174, *2 (N.D. Cal. Sept. 3, 2004).
The forum-selection clause at issue is mandatory rather than permissive. Its language clearly

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designates the Courts of England as the exclusive forum for disputes such as this, stating: “all

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Bidders and Sellers agree that the Courts of England are to have exclusive jurisdiction to settle all

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disputes arising in connection with all aspects of all matters or transactions to which these

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Conditions of Business relate or apply.” Aguilar Decl. Ex. A at 280 (emphasis added). Brooks’

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claims for relief center on Sotheby’s actions related to his auction purchase, falling within the ambit

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of the Conditions of Business which govern “all disputes arising in connection” with the auction.

For the Northern District of California

United States District Court

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The breadth of the forum-selection clause, covering “all disputes arising in connection with all

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aspects of all matters or transactions[,]” supports this finding, and Brooks does not contest it. In

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order to enforce strictly the plain language of the forum-selection clause at issue, which grants the

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Courts of England exclusive jurisdiction over this case, the action must be dismissed for improper

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venue.
V.

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CONCLUSION

Defendants’ motion to dismiss for improper venue is granted.
IT IS SO ORDERED.

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Dated: 7/1/13
RICHARD SEEBORG
UNITED STATES DISTRICT JUDGE

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