Bayol v. Zipcar, Inc.

Filing 32

ORDER denying 17 Motion to Transfer Case. Signed by Judge Thelton E. Henderson. (tehlc1, COURT STAFF) (Filed on 9/25/2014)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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GABRIELA BAYOL,

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Plaintiff,
v.

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ZIPCAR, INC.,

Case No. 14-cv-02483-TEH
ORDER DENYING DEFENDANT’S
MOTION TO TRANSFER VENUE

Defendant.

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This matter is set for hearing on October 6, 2014. Having considered the parties’

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United States District Court
Northern District of California

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arguments in the papers submitted, the Court now DENIES Defendant’s motion without

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oral argument, pursuant to Civ. L.R. 7-1(b).

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BACKGROUND
This is a putative class action challenging Zipcar’s late fee policies. Plaintiffs claim

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that Zipcar’s fees are illegal liquidated damages provisions under California’s consumer

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protection laws, and seek remedies under the Consumers Legal Remedies Act (CLRA),

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sections 1750 to 1784 of the California Civil Code. In this motion, Zipcar seeks to enforce

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the forum selection clause in its Membership Agreement, which provides “All disputes

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hereunder shall be resolved solely in the applicable state or federal courts of

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Massachusetts.” Zipcar-Bayol Membership Agreement at ¶ 9-5, Ex. 1 to Mot. (Docket

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No. 17-1). The Membership Agreement also includes a choice of law clause, which

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provides “This Contract is governed by the laws in force in the Commonwealth of

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Massachusetts and shall be interpreted according to the internal laws of such

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Commonwealth, without reference to its conflicts of laws or choice of law rules.” Id.

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LEGAL STANDARD
“For the convenience of parties and witnesses, in the interest of justice, a district

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court may transfer any civil action to any other district or division where it might have

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been brought or to any district or division to which all parties have consented.” 28 U.S.C.

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§ 1404(a). District courts generally have broad discretion in deciding a motion to transfer

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under § 1404(a). Ventress v. Japan Airlines, 486 F.3d 1111, 1118 (9th Cir. 2007). “The

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calculus changes, however, when the parties' contract contains a valid forum-selection

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clause . . . . [A] valid forum-selection clause should be given controlling weight in all but

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the most exceptional cases.” Atl. Marine Const. Co., Inc. v. United States Dist. Court, 134

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United States District Court
Northern District of California

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S.Ct. 568, 581 (2013) (internal quotations and alterations removed).
Because Atlantic Marine’s rule only applies in the context of a valid forum

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selection clause, district courts “must consider arguments that the clause is invalid.”

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Russel v. De Los Suenos, 2014 WL 1028882 at *6 (S.D. Cal. Mar. 17, 2014). “A forum

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selection clause is presumptively valid; the party seeking to avoid a forum selection clause

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bears a ‘heavy burden’ to establish a ground upon which [the court] will conclude the

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clause is unenforceable.” Doe 1 v. AOL LLC, 552 F.3d 1077, 1083 (9th Cir. 2009)

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(quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 17 (1972)). However, “a forum

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selection clause is unenforceable ‘if enforcement would contravene a strong public policy

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of the forum in which suit is brought . . . .’” Doe 1, 552 F.3d at 1083 (quoting Bremen,

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407 U.S. at 15).

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DISCUSSION
Zipcar brings this motion under 28 U.S.C. § 1404(a), which allows district courts to

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transfer venue “[f]or the convenience of parties and witnesses” and “in the interest of

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justice.” The Supreme Court recently concluded that, where there is a valid forum-

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selection clause in the contract between the parties, “the interest of justice” is best served

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by giving effect to the parties’ bargain. Atl. Marine, 134 S.Ct. at 581. Therefore, “a valid

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forum-selection clause should be given controlling weight in all but the most exceptional

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cases.” Id. (internal quotations and alterations removed).
However, the Supreme Court recognized that “[its] analysis presupposes a

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contractually valid forum-selection clause.” Id. at n.5. In the Ninth Circuit, “A forum

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selection clause is presumptively valid; the party seeking to avoid a forum selection clause

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bears a ‘heavy burden’ to establish a ground upon which [the court] will conclude the

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clause is unenforceable.” Doe 1, 552 F.3d at 1083. However, “a forum selection clause is

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unenforceable ‘if enforcement would contravene a strong public policy of the forum in

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which suit is brought . . . .’” Id.

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United States District Court
Northern District of California

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I. The Court Can Consider the Effect of the Choice of Law Clause
Before turning to the enforceability of the forum selection clause, the Court must

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decide the threshold question of whether it can and should consider the likely effect of the

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Membership Agreement’s choice of law clause. If the Court cannot or should not consider

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the choice of law clause at this time, as Zipcar argues, then it cannot determine whether

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enforcement of the forum selection clause would contravene California policy – the

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questions would be independent, because in theory, Plaintiffs could bring their California

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claims in federal court in Massachusetts. However, if the Court can and should consider

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the choice of law clause now, the questions become inseparably entwined – if transferring

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venue would also likely lead to the application of Massachusetts law, there would be a

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greater chance that enforcement of the forum selection clause will contravene California

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policy.

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It is clear that the Court can consider the combined effect of forum selection and

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choice of law clauses. Although the issue was not central to the case, the Supreme Court

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commented in an international antitrust dispute that, “in the event the choice-of-forum and

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choice-of-law clauses operated in tandem as a prospective waiver of a party's right to

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pursue statutory remedies for antitrust violations, we would have little hesitation in

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condemning the agreement as against public policy.” Mitsubishi Motors Corp. v. Soler
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Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n.19 (1985). More recently, and more closely

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on point for the current case, the Ninth Circuit held that a forum selection clause was

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invalid where, “together with the choice of law provision, [it would] effect a waiver of

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statutory remedies provided by the CLRA.” Doe 1, 552 F.3d at 1084 (following America

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Online, Inc. v. Mendoza, 108 Cal. Rptr. 2d 699, 710 (2001)); see also Perry v. AT&T

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Mobility LLC, No. 11-cv-01488-SI, 2011 WL 4080625 at *4 n.4 (N.D. Cal. Sept. 12, 2011)

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(“Defendants argue that the Court may not consider the choice of law clause, but they do

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not discuss the Supreme Court and Ninth Circuit law that clearly permits the Court to do

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so.”).

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Regardless of whether they may consider the effect of a choice of law clause, courts

United States District Court
Northern District of California

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in this district have taken differing approaches to the question of whether they should

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consider that effect. Some courts have found that the “strong public policy” at issue

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should specifically relate to venue, and that considering how another court will resolve a

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choice of law question calls for inappropriate speculation. E.g., East Bay Women’s Health,

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Inc. v. gloStream, Inc., No. 14-cv-00712-WHA, 2014 WL 1618382 at *3 (N.D. Cal.

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Apr. 21, 2014) (“[P]laintiffs are burdened to show a fundamental public policy underlying

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California's Unfair Competition Act that relates to venue because the instant motion seeks

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a forum-selection determination, rather than a choice-of-law determination.”); Voicemail

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Club, Inc. v. Enhanced Services Billing, Inc., No. 12-cv-02189-SI, 2012 WL 4837697 at

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*4 (N.D. Cal. Oct. 10, 2012) (“[B]ecause plaintiff improperly speculates as to how the

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transferee forum would ultimately resolve the issue of what substantive law should be

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applied to plaintiff's claims, plaintiff fails to demonstrate how transfer of this case would

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contravene [a] public policy . . . relate[d] specifically to venue.”); Besag v. Custom

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Decorators, Inc., No. 08-cv-05463-JSW, 2009 WL 330934 at *4 (N.D. Cal. Nov. 4, 2010)

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(“[A] party challenging enforcement of a forum selection clause may not base its challenge

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on choice of law analysis . . . . [Such challenges] are problematic because they require

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courts to speculate as to the potential outcome of the litigation.”) (quotations omitted).

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In another case, however, a court in this district found that “the enforceability of the

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forum selection clause cannot be divorced from the choice of law question,” because the

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basis of the claim concerned an unwaivable California right for which the transferee forum

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was inadequate. Perry, 2011 WL 4080625 at *4-5. Although “[a]s a general matter,

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California courts will enforce adequate forum selection clauses that apply to non-waivable

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statutory claims,” “if the forum is not adequate, a forum selection clause that applies to a

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non-waivable statutory claim may, in fact, improperly compel the claimant to forfeit his or

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her statutory rights.” Id.

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The split between these decisions is best explained by looking to whether the right
at issue was waivable, and where it was not, by further evaluating the likelihood that the

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United States District Court
Northern District of California

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unwaivable right would be upheld in the transferee forum. In East Bay Women’s Health,

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for instance, the court was willing to transfer because the Unfair Competition Law claims

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at issue were waivable, unlike the CLRA claims in Doe 1. 2014 WL 1618382 at *2 (the

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CLRA “explicitly forbids the waiver of its protections,” unlike the UCL). Similarly in

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Voicemail Club, the court distinguished Doe 1 by pointing to the fact that, in the prior case,

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“the California Court of Appeal specifically found that enforcement of an identical forum

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selection clause would violate California's strong public policy in favor of allowing class

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actions and against waiver of protections provided under the CLRA,” but those provisions

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were not at issue in Voicemail Club itself. 2012 WL 4837697 at *3. See also Perry, 2011

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WL 4080625 at *4-5.

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The Court finds both that certain of the rights at issue here are unwaivable, and that

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a federal court in Massachusetts would likely not enforce these unwaivable rights. As is

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discussed in more detail below, Plaintiffs invoke various remedial provisions of the CLRA,

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and the CLRA includes a specific anti-waiver provision – the same anti-waiver provision

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at issue in Doe I. See 552 F.3d at 1084. The fact that CLRA remedies are at stake is an

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especially powerful consideration, given the Ninth Circuit’s clear holding in Doe 1 that a

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choice of law clause cannot waive the unwaivable rights provided by the CLRA. Id. And

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while Zipcar argues that Massachusetts law, if applied, would adequately replace the
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CLRA, it does not dispute that the CLRA would apply to this case if it remained in

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California.

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While Plaintiffs may be free to argue for the application of California state law in

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Massachusetts federal court, there is good reason to conclude that such an argument would

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be futile. It is true that, in Doe 1, the forum selection clause was interpreted to require the

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dispute to be heard in Virginia state court, which the Ninth Circuit, relying on the

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California Court of Appeal, found to be an especially inadequate venue for a dispute to

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which the CLRA remedies applied. 552 F.3d at 1082-83. Here, Zipcar is seeking to

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transfer to federal court, rather than state court. However, the Supreme Court recently held
that, where a case is transferred to a new federal district court pursuant to a valid forum

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United States District Court
Northern District of California

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selection clause, the choice of law rules of the transferee venue control. Atl. Marine, 134

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S.Ct. at 582-83. Federal courts in the First Circuit are free to enforce contractual choice of

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law clauses without independent analysis. Borden v. Paul Revere Life Ins. Co., 935 F.2d

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370, 375 (1st Cir. 1991). “Indeed, absent exceptional circumstances or a manifest public

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policy conflict, Massachusetts courts honor contractual choice-of-law provisions.”

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ePresence, Inc. v. Evolve Software, Inc., 190 F. Supp. 2d 159, 162 (D. Mass. 2002).

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Zipcar urges this Court not to speculate as to the outcome of a District of

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Massachusetts court’s choice of law analysis, but gives no reason to think that such an

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analysis would result in the application of California law. Considering the First Circuit

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law identified by Plaintiffs, the Court concludes that the District of Massachusetts would

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be unlikely to apply California state law, including the unwaivable provisions of the

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CLRA. As a result, the Court will consider the likely application of Massachusetts law in

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determining whether enforcement of the forum-selection clause would contravene a strong

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California public policy.

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II. Enforcement of the Forum-Selection Clause Would Contravene California Policy
Under Bremen, a forum selection clause is invalid “if enforcement would
contravene a strong public policy of the forum in which suit is brought.” 407 U.S. at 15.
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Enforcement of a forum selection clause “contravene[s] a strong public policy” of a forum

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state, requiring invalidation of the clause, where enforcement would result in the waiver of

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an unwaivable right. Doe 1, 552 F.3d at 1084. In Doe 1, the Ninth Circuit found that

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enforcement of AOL’s forum-selection clause would place the case in Virginia state court,

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and that, once there, plaintiffs would be unable to invoke the protections of the class action

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mechanism or the CLRA, which provided for higher remedies and a longer statute of

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limitations than the comparable Virginia statute. Id. As already noted, the CLRA has an

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anti-waiver provision, which reads “[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.” Id. (quoting Cal.
Civ. Code § 1751). Relying on a California state court decision in a related case, the Ninth

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United States District Court
Northern District of California

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Circuit concluded that the forum selection and choice of law clauses, when put together,

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“effect a waiver of statutory remedies provided by the CLRA in violation of the anti-

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waiver provision, as well as California's ‘strong public policy’ to ‘protect consumers

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against unfair and deceptive business practices.’” Doe 1, 552 F.3d at 1084 (quoting

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America Online, 108 Cal. Rptr. 2d at 710). Two of the panel members made their

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reasoning crystal clear: “Any purported waiver of the rights of a California consumer is

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unenforceable.” Doe 1, 552 F.3d at 1085 (Nelson and Reinhardt, JJ., concurring).

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Here, Plaintiffs identify multiple California policies that would be undermined by

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the transfer to the District of Massachusetts and application of Massachusetts law. Opp’n

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at 12 (Docket No. 22). They would lose the protection of California Civil Code section

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1671, which protects consumers against liquidated damages clauses and forms the basis of

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their claim. Further, Plaintiffs may lose their right to a trial by jury, a right that California

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provides in cases such as this. Compare Cal. Const. art. I, § 16, with Frappier v.

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Countrywide Home Loans, Inc., 750 F.3d 91, 97-98 (1st Cir. 2014), and Nei v. Burley, 388

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Mass. 307, 310-15 (1983). Massachusetts law contains restrictions on attorney’s fees that

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are not present in the CLRA. Compare Cal. Civ. Code § 1780(e), with Mass. Gen. Laws

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ch. 93A, § 9(4). The CLRA also has a damages floor that is absent from the Massachusetts

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law. Compare Cal. Civ. Code §§ 1780(a)(1), with Mass. Gen. Laws ch. 93A. Finally,
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while class certification is mandatory under the CLRA in certain circumstances, there is no

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such mandatory class certification under the Massachusetts law. Compare Cal. Civ. Code

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§ 1781(b), with Mass. Gen. Laws ch. 93A.
Zipcar argues that Massachusetts law provides greater consumer protections than

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the CLRA in certain respects, and therefore Plaintiffs here would not be worse off by a

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transfer of venue. Zipcar’s argument is unconvincing, for two reasons. First, as already

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noted, if the case were transferred to Massachusetts, Plaintiffs would likely be giving up

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the liquidated damages provision that forms the basis of their claim; this is not an

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insignificant procedural provision, but a substantive consumer protection in California law.
Second, even if consumers in general are better off under Massachusetts’ laws, that does

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United States District Court
Northern District of California

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not change the fact that the application of such laws to the plaintiffs in this case would

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effect the waiver of California’s unwaivable consumer remedies. Plaintiffs should not be

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subject to this Court’s paternalistic determination that they would be fine under the

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protections of another state; rather, they are entitled to the specific protections provided by

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the legislature and courts of California.
The Court finds that enforcement of the forum selection clause would contravene

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California’s strong public policies, namely, the consumer protections and remedies of the

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CLRA. Plaintiffs have met their “heavy burden” under Bremen of showing that the forum

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selection clause is unenforceable.

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CONCLUSION
For the reasons already stated, the Court finds that the forum selection clause of the

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Membership Agreement, taken together with the choice of law clause and the choice of

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law rules of the District of Massachusetts, is unenforceable against the Plaintiffs in this

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case. Zipcar’s motion to transfer is DENIED.

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IT IS SO ORDERED.

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Dated: 09/25/2014

_____________________________________
THELTON E. HENDERSON
United States District Judge

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United States District Court
Northern District of California

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