Doe 1 et al v. Xytex Corporation et al

Filing 27

ORDER HOLDING IN ABEYANCE DEFENDANTS MOTION TO TRANSFER Jurisdictional Discovery due by 8/11/2016. Briefs due by 8/25/2016.. Signed by Judge Alsup on 7/19/16. (whalc1, COURT STAFF) (Filed on 7/19/2016)

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1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 JANE DOE 1 and JANE DOE 2, 11 For the Northern District of California United States District Court 10 12 13 14 15 16 17 No. C 16-02935 WHA Plaintiffs, v. XYTEX CORPORATION, a Georgia Corporation, XYTEX CRYO INTERNATIONAL, LTD., a Georgia Corporation, MARY HARTLEY, an individual, J. TODD SPRADLIN, an individual, and DOES 1–25, inclusive, ORDER HOLDING IN ABEYANCE DEFENDANTS’ MOTION TO TRANSFER Defendants. / 18 19 INTRODUCTION 20 In this product-liability action involving the sale of human semen for artificial 21 insemination, one defendant moves to transfer the action based on a forum-selection clause. 22 For the reasons stated below, the motion is HELD IN ABEYANCE, pending limited discovery 23 regarding the appearance of defendant’s website at the time in question and plaintiffs’ actual 24 knowledge of the forum-selection clause. 25 26 STATEMENT Plaintiffs Jane Doe 1 and Jane Doe 2, a same-sex couple, are San Francisco residents. 27 In 2004, they registered to use, a website operated by defendant Xytex Corporation. 28 Xytex, through its website, sold human semen for use in artificial insemination. 1 Xytex Corporation posted a written “Site Usage and Information Agreement” on its 2 website. That agreement could be accessed from by first pulling down a menu 3 labeled “About Us” on the main toolbar of the website and then selecting the “Site Usage” 4 button that appeared in that menu. The “About Us” menu appeared second in a toolbar of six 5 menus, including “Home,” “Patient Section,” “Physicians Info,” “Become a Donor,” and “XTS: 6 Xytex Tissue Services.” The toolbar appeared in the same location on every page of the site 7 (Scholer Reply Decl. ¶¶ 2–3). An image of the website as it appeared at the time in question is reproduced below1: 8 9 11 For the Northern District of California United States District Court 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1 Plaintiffs filed a screenshot of as it appeared at the time they filed their briefs herein (Gannon Decl., Exh. A). Xytex counters that the website looked different in 2004. In support of its reply, Xytex provided a screenshot of as it appeared in 2004 as archived on the Internet Archive’s Wayback Machine, supported by the declaration of Xytex’s president (Scholer Reply Decl., Exh. A). The screenshot submitted, however, was not of, and it did not demonstrate the menu in which the “Site Usage” link appeared. Additionally, the image included a vertical line through the middle of the page that appears to be an artifact of improper scanning. The image reproduced in this order is a screenshot of the Wayback Machine’s entry for in December 2004, retrieved by the Court on July 11, 2016. Our court of appeals has not addressed whether pages from the Wayback Machine are proper for judicial notice, and our record offers no indication of the accuracy of the Wayback Machine’s records, so this order does not take judicial notice of the records for the Wayback Machine. Nevertheless, this order assumes, solely for the sake of argument, that Xytex’s website appeared as represented herein in 2004. As discussed in greater detail below, both sides will have the opportunity to take jurisdictional discovery to establish whether the website, in fact, appeared as represented in this order. 2 1 The following is an image of the “About Us” pull-down menu: 2 3 4 5 6 7 8 Users could browse the website, register for the site, and purchase Xytex’s services 9 without reading or affirmatively consenting to the terms of the agreement. Section I of the 11 For the Northern District of California United States District Court 10 12 agreement provided, in pertinent part (Scholer Decl., Exh. B) (emphasis in original): I. IMPORTANT! THIS IS A BINDING LEGAL AGREEMENT (this “Agreement”). PLEASE READ THESE TERMS AND CONDITIONS OF USE CAREFULLY BEFORE USING THIS SITE. 13 14 15 16 17 18 19 20 21 22 23 24 The Agreement governs your use of this site (collectively, the “Site”) and is by and between Xytex Corporation (referred to herein as “Xytex”, “we”, “us”, or “our”) and you, on behalf of yourself and the buyer, member or supplier for which your have registered (“you”). By using, viewing, transmitting, caching, storing and/or otherwise using the Site, the services or functions offered in or by the Site and/or the contents of the Site in any way, you have agreed to each and all of the terms and conditions set forth below, and waive any right to claim ambiguity or error in this Agreement. If you do not agree to each and all of these terms and conditions please do not use the Site and leave the Site immediately. Section XV included a choice-of-law and forum-selection provision, as follows: This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia, without giving effect to any principles of conflicts of law. You agree that any action at law or in equity arising out of or relating to the terms of this Agreement shall be filed only in the state or federal courts located in Richmond County, Georgia and you hereby consent and submit to the personal jurisdiction of such courts for the purposes of litigating any such action. 25 After registering, plaintiffs reviewed the profiles of the sperm donors listed on Xytex’s 26 website and selected Donor #9623, whose profile stated he held a bachelor’s degree, a master’s 27 degree, and that he had been working toward a Ph.D. in artificial intelligence and neuroscience 28 engineering. Jane Doe 1 underwent an artificial insemination procedure using sperm from 3 1 Donor #9623. Approximately nine months later, Jane Doe 1 gave birth to a child, P.S., who is 2 now nine years old. Plaintiffs stored the remaining sample in case they decided to have a 3 second child.2 4 In April 2015, plaintiffs read an article that described a lawsuit brought against Xytex 5 involving Donor #9623. The lawsuit claimed that he had been diagnosed with schizophrenia, 6 that he had dropped out of college, that he had pled guilty to residential burglary, and that 7 Xytex had done nothing to investigate the veracity of the information the donor had submitted 8 for his profile. Plaintiffs investigated the claims in that lawsuit. claims for: (i) fraud, (ii) negligent misrepresentation, (iii) strict products liability, (iv) negligent 11 For the Northern District of California Plaintiffs commenced this action in San Francisco Superior Court in April 2016 bringing 10 United States District Court 9 products liability, (v) breach of express warranty, (vi) breach of implied warranty of 12 merchantability, (vii) battery, (viii) negligence, (ix) specific performance, (x) false advertising, 13 (xi) violation of California’s Unfair Competition Law, and (xii) wrongful birth. Defendants 14 removed the case to federal court here in San Francisco on the basis of declaratory judgment. 15 Xytex now moves to transfer the case to the Southern District of Georgia based on the forum- 16 selection clause in the agreement on its website.3 17 ANALYSIS 18 Xytex Corporation contends that this action must be transferred to the Southern District 19 of Georgia on the basis of a forum-selection clause in the written “Site Usage and Information 20 Agreement” that it purports applied to use of its website in December 2004, when plaintiffs 21 registered to use the site and purchased Donor #9623’s sperm. Plaintiffs counter that the 22 language containing the forum-selection clause appeared in an unenforceable “browsewrap 23 24 25 26 27 28 2 The specific dates of the artificial insemination procedure and P.S.’s birth, which have no bearing on the instant motion, are not stated in the complaint. 3 Defendant Xytex Cryo International Ltd. is the parent company of Xytex Corporation, and defendants Mary Hartley and J. Todd Spradlin are employees of Xytex Corporation. Xytex Cryo, Hartley, and Spradlin all moved to dismiss claims against them for lack of personal jurisdiction and joined in the instant motion. They withdrew their motion to dismiss and the parties stipulated to their dismissal. Xytex Corporation is the only remaining defendant. 4 1 agreement” to which plaintiffs never manifested their assent as required by Nguyen v. Barnes & 2 Noble Inc., 763 F.3d 1171 (9th Cir. 2014). 3 In Nguyen, the plaintiff purchased two computer tablets on the defendant’s website 4 during a clearance sale and received an email confirmation. The following day, he received an 5 email cancelling the order due to unexpectedly high demand. The plaintiff brought a putative 6 class action alleging deceptive business practices and false advertising. The defendant moved 7 to compel arbitration based on an arbitration clause in the terms of use of its website. 8 9 The defendant made its terms of use available via a hyperlink labeled “Terms of Use” at the bottom left-hand corner of every page on its website alongside other hyperlinks labeled “NOOK [another of the defendant’s products] Store Terms,” “Copyright,” and “Privacy 11 For the Northern District of California United States District Court 10 Policy.” The hyperlinks appeared underlined and set in a green typeface. The defendant 12 contended that the “Terms of Use” hyperlink placed the plaintiff on constructive notice of the 13 arbitration agreement and that the plaintiff’s continued use of the site bound him to the terms of 14 that agreement. 15 Our court of appeals adopted the Second Circuit’s view that an inconspicuous 16 browsewrap agreement never required the user to expressly manifest consent to the terms of 17 use, and such “[m]utual manifestation of assent, whether by written or spoken word or by 18 conduct is the touchstone of contract.” Id. at 1175 (quoting Specht v. Netscape 19 Communications Corp., 306 F.3d 17, 29 (2d Cir. 2002) (applying California law)). Thus, where 20 “there is no evidence that the website user had actual knowledge of the agreement, the validity 21 of the browsewrap agreement turns on whether the website puts a reasonably prudent user on 22 inquiry notice of the terms of the contract.” Id. at 1177.4 The “Terms of Use” link in Nguyen was too inconspicuous to place the plaintiff on 23 24 actual notice: Where a website makes its terms of use available via a conspicuous hyperlink on every page of the website but otherwise provides no notice to users nor prompts them to take any 25 26 27 4 28 The Terms of Use in Nguyen included a choice-of-law provision selecting New York law. Rather than engage in a circular choice-of-law analysis, the Nguyen court considered the result under both California law and New York law, which dictated the same results. Id. at 1175. 5 1 affirmative action to demonstrate assent, even close proximity of the hyperlink to relevant buttons users must click on — without more — is insufficient to give rise to constructive notice. 2 3 4 Id. at 1179. Perhaps acknowledging the clear analog between our case and Nguyen, Xytex makes no 5 attempt to distinguish the design of its website and the website at issue there. Indeed, Xytex 6 placed the link to its site-usage agreement even more inconspicuously than the defendant in 7 Nguyen had, inasmuch as the link on could only be accessed after a user pulled down 8 an additional menu, which menu itself had no indication of the nature of the contract hidden 9 within. Moreover, a consumer is even less likely to understand the contractual nature of a page 11 For the Northern District of California United States District Court 10 concerning “Site Usage” than one concerning “Terms of Use.” Rather than engage with Nguyen, Xytex argues that Nguyen and the authority on which 12 it relied all related to arbitration agreements, which required a “mutual manifestation of assent,” 13 while a forum-selection clause is presumptively valid so long as it is fundamentally fair. See 14 Carinval Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595 (1991). 15 Xytex’s argument is misguided. Nguyen was not so limited. It adopted the language in 16 Specht stating that “mutual assent . . . is the touchstone of contract.” Id. at 1175. It did not 17 limit the requirement of mutual assent to arbitration agreements. Moreover, Xytex’s argument 18 regarding the presumptive validity of the forum-selection clause begs the question of the 19 validity of the agreement containing it. 20 The California Court of Appeal roundly rejected Xytex’s arguments in Long v. Provide 21 Commerce, Inc., 245 Cal. App. 4th 855 (2016), which neither side herein addressed in their 22 briefs although it predated the instant motion by more than three months. There, the defendant 23 sought to enforce an arbitration agreement and a forum-selection clause in a browsewrap 24 agreement. The hyperlink to the agreement was placed at the bottom of each page in all-caps in 25 a light green typeface on the website’s lime green background among fourteen other hyperlinks 26 of the same format. 27 28 The defendant in Long cast Nguyen as an outlier case and suggested that a link to a browsewrap agreement could place a user on constructive notice of the agreement as long as it 6 1 was visible on the page without scrolling. The California Court of Appeal rejected that 2 argument, and aligned with Nguyen noting: 3 [W]ithout notifying consumers that the linked page contains binding contractual terms, the phrase “terms of use” may have no meaning or a different meaning to a large segment of the Internet-using public. In other words, a conspicuous “terms of use” hyperlink may not be enough to alert a reasonably prudent Internet consumer to click the hyperlink. 4 5 6 Id. at 867. It went on to hold: 7 [The defendant’s] reliance on the presumptive validity of forum selection clauses in otherwise enforceable contracts proves too much. Contrary to [the defendant’s] implicit premise, the presumption of validity is not a substitute for proof of the resisting party’s objective manifestation of assent to the larger contract. If it were, a party would establish the existence of a binding contract simply by showing that the contract contained a presumptively valid forum selection clause — an obviously absurd result. 8 9 11 For the Northern District of California United States District Court 10 12 Id. at 868 (emphasis in original).5 13 Relying on the assumption that the website looked as represented herein in 2004, this 14 order would hold that the Xytex failed to give plaintiffs constructive notice that the “Site 15 Usage” button included a hyperlink to the terms of a contract that supplied the terms for use of 16 Xytex’s website and services. Nevertheless, the record is inadequate to establish whether the 17 site, in fact, appeared as set forth above. At oral argument, counsel for plaintiffs specifically 18 asked for leave to take a Rule 30(b)(6) deposition regarding Xytex’s position on the appearance 19 of the website in 2004. Plaintiffs shall be permitted to take two four-hour depositions and to 20 propound up to eight requests for the production of documents directed solely at that question. 21 As discussed below, Xytex shall also be permitted to depose both plaintiffs and request the 22 production of documents. That discovery may address this issue as well as the issue of actual 23 notice. (The burden is on Xytex to prove up the existence of the agreement to select a forum.) 24 25 26 27 5 28 Xytex absurdly argues Nguyen is an outlier, inasmuch as it addressed the enforceability of a browsewrap agreement in the “early days” of Internet commerce — 2004. Nguyen did not so limit itself, and Long applied Nguyen to Internet commerce that occurred in 2013. 7 1 2. ACTUAL NOTICE. 2 Although, as stated, it appears that Xytex placed the hyperlink to the site-usage 3 agreement too inconspicuously to give constructive notice, the agreement (and the forum- 4 selection clause therein) may yet possibly be enforceable if our plaintiffs had actual knowledge 5 of the agreement. The only evidence in our record indicating plaintiffs’ lack of actual 6 knowledge is the declaration of Attorney Brendan Gannon, counsel for plaintiffs, in which he 7 avers “[p]laintiffs did not have knowledge of the existence of the forum selection clause on the 8 website for Defendant Xytex Corporation when they purchased human sperm for the purpose of 9 artificial insemination” (Gannon Decl. ¶ 6). Attorney Gannon’s statement lacks foundation, and, in any case, would be insufficient to overcome Xytex’s reasonable request for limited 11 For the Northern District of California United States District Court 10 discovery on this issue. 12 In its reply brief, Xytex requests leave to conduct discovery regarding the extent to 13 which plaintiffs had actual notice of the Site Usage and Information Agreement. Xytex shall be 14 permitted to propound up to eight requests for the production of documents and to take a four- 15 hour deposition of each plaintiff on the issue of actual knowledge of the site-usage agreement 16 and the forum-selection clause therein prior to purchasing Donor #9623’s sperm (two 17 depositions total). As stated, this discovery may also address the issue of plaintiffs’ recollection 18 of the appearance of the website in 2004. 19 20 CONCLUSION For the reasons stated above, Xytex’s motion to dismiss is HELD IN ABEYANCE pending 21 discovery into the issue of plaintiffs’ actual knowledge of the existence of the site-usage 22 agreement that contained the forum-selection clause at issue herein and the actual format of 23 Xytex’s website at the time in question. All discovery on these issues shall be completed by 24 AUGUST 11. 25 26 27 28 8 1 By AUGUST 25, Xytex shall submit a brief addressing evidence of plaintiffs’ actual 2 knowledge of the site-usage agreement and the forum-selection clause therein, and plaintiffs 3 shall submit a brief addressing evidence of the format of the website in 2004. The briefs shall 4 NOT EXCEED FIFTEEN PAGES. 5 the filing of the other’s brief. Upon review of the briefs, the Court will determine whether a 6 further hearing is necessary. Each side shall respond within FOURTEEN CALENDAR DAYS of 7 8 IT IS SO ORDERED. 9 Dated: July 19, 2016. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 11 For the Northern District of California United States District Court 10 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9

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