Mendoza et al v. Microsoft, Inc.

Filing 23

ORDER DENYING 3 Motion to Dismiss ; GRANTING 3 Motion to Transfer Case to the Western District of Washington; DENYING 17 Motion to Strike ; DENYING 21 Motion to Strike Signed by Judge David A. Ezra. (wg)[Transferred from txwd on 3/6/2014.]

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
MANUEL MENDOZA, MATHEW
MENDOZA, JOHN SWEENEY,
FRANK ORTEGA, DEZRA
GUTHRIE, KALEB MCKIBBEN,
and others similarly situated,

)
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)
)
)
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Plaintiffs,
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v.
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MICROSOFT, INC.,
)
)
Defendant.
)
________________________________ )

CV NO. 5:13-CV-378-DAE

ORDER: (1) DENYING PLAINTIFFS’ MOTIONS TO STRIKE DEFENDANT’S
NOTICES OF SUPPLEMENTAL AUTHORITY (2) DENYING DEFENDANT’S
MOTION TO DISMISS AS MOOT; (3) GRANTING DEFENDANT’S MOTION
TO TRANSFER VENUE TO THE WESTERN DISTRICT OF WASHINGTON
Before the Court are three pending motions: a Motion to Dismiss, or
in the alternative, Motion to Transfer Venue to the Western District of Washington
filed by Defendant Microsoft Corporation (“Defendant” or “Microsoft”) (Dkt. # 3)
and two Motions to Strike Defendant’s Notices of Supplemental Authority filed by
Plaintiffs Manuel Mendoza, Mathew Mendoza, John Sweeney, Frank Ortega,
Dezra Guthrie, and Kaleb McKibben (“Plaintiffs”) (Dkt. # 17; Dkt. # 21). The
Court held a hearing on March 4, 2014. Omar W. Rosales, Esq. represented
1

Plaintiffs; Thomas G. Yoxall, Esq. represented Defendant. Upon careful analysis
of the supporting and opposing memoranda, as well as the arguments presented at
the hearing, the Court DENIES Plaintiffs’ Motions to Strike Defendant’s Notices
of Supplemental Authority; DENIES AS MOOT Defendant’s Motion to Dismiss;
and GRANTS Defendant’s Motion to Transfer Venue to the Western District of
Washington.
BACKGROUND
Defendant Microsoft owns and operates a well-known gaming portal
called Xbox LIVE, which provides streaming video via internet access, online
gaming services, online video rental services, and online video services.
(“Compl.,” Dkt. # 1 ¶ 2.) Defendant Microsoft is incorporated in Washington state
and has a principal place of business in Redmond, King County, Washington. (Id.
¶ 17.) Plaintiffs are six individuals that were previous subscribers of Xbox LIVE’s
service. (Id. ¶¶ 55–60.) They reside in California, Oregon, Florida, Ohio, and
Texas.1 (Id. ¶¶ 11–16.)
Plaintiffs admit that they entered into contracts with Defendant
Microsoft when they subscribed to its Xbox LIVE service. (Id. ¶¶ 1, 29–35, 55–
1

Plaintiff Frank Ortega lives in California (Compl. ¶ 14); Plaintiff Dezra Gurthrie
lives in Oregon (id. ¶ 15); Plaintiff John Sweeney lives in Florida (id. ¶ 13);
Plaintiff Kaleb McKibben resides in Ohio (id. ¶ 16); and Plaintiffs Mathew and
Manuel Mendoza live in La Porte, Texas, which is located in the Southern District
of Texas (id. ¶ 11–12; “Yoxall Decl.,” Dkt. # 4, Ex. B ¶ 3).
2

60, 97–98.) Before entering into their respective contracts with Microsoft, they
were given an opportunity to review Xbox LIVE’s “Terms of Use.” (See “Coon
Decl.,” Dkt. # 4, Ex. A ¶ 5.) 2 The Terms of Use provide, in pertinent part:
1. This is a Contract between You and Microsoft.
....
18. Choice of Law and Location for Resolving Disputes
If this contract is with Microsoft Corporation, then claims for breach
of contract will be subject to the laws of the State of Washington,
without reference to conflict of laws principles. If this contract is with
a Microsoft affiliate, claims for breach of contract will be subject to
the laws of the place of incorporation for such Microsoft affiliate,
without reference to conflict of laws principles. All other claims,
including claims regarding consumer protection laws, unfair
competition laws, and in tort, will be subject to the laws of your state
of residence in the United States, or, if you reside outside the United
States, under the laws of the country to which we direct your Service.
If this contract is with Microsoft Corporation, you consent to the
exclusive jurisdiction and venue of state and federal courts in King
County, Washington, USA for all disputes relating to this contract or
the Service. If this contract is with a Microsoft affiliate, you consent
to the exclusive jurisdiction and venue of the courts located in the
place of incorporation for such Microsoft affiliate for all disputes
relating to this contract or the Service. You cannot revoke this
consent.

2

In considering motions to transfer venue, a court can rely on undisputed facts
presented to the court “by affidavit, deposition, stipulation, or other relevant
documents.” Midwest Precision Servs., Inc. v. PTM Indus. Corp., 574 F. Supp.
657, 659 (N.D. Ill. 1983); accord Cooper v. Farmers New Century Ins. Co., 593 F.
Supp. 2d 14, 18–19 (D.D.C. 2008).
3

(Dkt. # 4, Ex. A-1 ¶¶ 1, 18 (emphasis added).)3 After being presented with these
Terms of Use, Plaintiffs accepted them by clicking “ACCEPT” on the screen. 4
Sometime before May 2012, Plaintiffs canceled their Xbox LIVE
subscriptions. (Compl. ¶¶ 55–60.) According to Plaintiffs, after they canceled
their subscriptions, Microsoft unlawfully retained and disclosed their personal
information. (Id. ¶ 1.) They make three claims regarding their canceled
subscriptions.
First, they allege that Microsoft retained their names, addresses, credit
card information, billing addresses, usernames, passwords, and video programming
histories for at least two years after they canceled their respective Xbox LIVE
accounts. (Id. ¶ 6.) Plaintiffs also claim that Microsoft improperly stored their
consumer information overseas where it is supposedly more vulnerable to a
3

Although Plaintiffs admit that they entered into contracts with Defendant
Microsoft when they subscribed to Microsoft’s Xbox LIVE service, they do not
specify when they entered into such contracts. However, Defendant affirms that
since the inception of Xbox LIVE’s launch in 2002, the Xbox LIVE Terms of Use
“contain essentially the same forum-selection clause specifying the exclusive
jurisdiction and venue of state or federal courts in King County, Washington, for
all lawsuits relating to the Xbox LIVE Terms of Use or the Xbox LIVE service.”
(Mot. at 4.)
4

Plaintiffs would not have been able to use the Xbox LIVE service until they
accepted the Terms of Use by selecting “ACCEPT” on the screen that displays the
Terms of Use. (See Dkt. # 4, Ex. A-1 ¶ 1 (“If you do not agree to this contract, in
its entirety, or if you were a party to a prior version of this contract and do not
agree to waive the notice requirement, you must select “DECLINE” and
discontinue your registration and you will have no right to use the Service.”); Coon
Decl. ¶ 5.)
4

security breach. (Id. ¶ 37.)
Second, Plaintiffs allege that Microsoft used their personal
information unlawfully: by disclosing and selling it for profit to data mining
companies, by using it for advertising and marketing, by sharing it with vendors,
and using it to populate Microsoft’s search engine, “Bing.” (Id. ¶¶ 8–9.)
Third, Plaintiffs contend that Microsoft’s privacy policy is “unclear”
and “located piecemeal in various sections of its corporate website and hidden in a
third-level webpage not usually seen by consumers.” (Id. ¶¶ 29–36.)
Plaintiffs seek relief under the following statutes: (1) the Video
Privacy Protection Act, 18 U.S.C. § 2710; (2) California’s Customer Records Act,
Cal. Civ. Code § 1798.80; (3) California’s Unfair Competition Law, Cal. Bus. &
Prof. Code § 17200; and (4) Texas’s Deceptive Trade Practices Act, Tex. Bus. &
Comm. Code § 17.46(b)(12). (Id. ¶¶ 69–96.)
Shortly after receipt of Plaintiffs’ Complaint, Defendant filed the
instant Motion to Dismiss Pursuant to 28 U.S.C. § 1406(a) and Federal Rule of
Civil Procedure 12(b)(3), (6) or, in the alternative, to Transfer Venue to the
Western District of Washington Pursuant to 28 U.S.C. § 1406(a) or 28 U.S.C.
§ 1404(a) (“Motion”). (“Mot.,” Dkt. # 3.) Plaintiffs filed a Response opposing
any transfer of venue. (“Resp.,” Dkt. # 6.) Defendant filed a Reply. (“Reply,”
Dkt. # 9.)
5

On December 16, 2013, Defendant filed a Notice of Supplemental
Authority bringing to the Court’s attention a recent case from the United States
Supreme Court, Atlantic Marine Construction Co. v. United States District Court
for the Western District of Texas, 134 S. Ct. 568 (2013), which had reversed the
Fifth Circuit’s enforcement of forum-selection clauses. (“Supp. Br.,” Dkt. # 16.)
In response, Plaintiffs filed a Motion to Strike Defendant’s Supplemental Brief,
(Dkt. # 17), to which Defendant filed a Response (Dkt. # 18). Shortly before the
hearing, Defendant filed another Notice of Supplemental Authority identifying
recent district court opinions discussing the Supreme Court’s decision in Atlantic
Marine. (Dkt. # 20.) Plaintiffs responded with another Motion to Strike asserting
the same arguments as their previous Motion to Strike. (Dkt. # 21.)
DISCUSSION
I.

Plaintiffs’ Motions to Strike Defendant’s Notices of Supplemental Authority
As a preliminary matter, the Court will first address Plaintiffs’

arguments that Defendant improperly filed its Notices of Supplemental Authority.
Defendant’s supplemental briefing to the Court addresses the merits of the
Supreme Court’s Atlantic Marine decision and its effect on the enforcement of
forum-selection clauses in cases involving motions to dismiss for improper venue
and motions to transfer venue. In light of the Atlantic Marine holding, Defendant’s
Supplement withdraws its dismissal argument under Rule 12(b)(3) and 28 U.S.C.
6

§ 1406(a) and exclusively asks this Court to transfer the case to the Western
District of Washington under 28 U.S.C. § 1404(a). (See Supp. Br. at 6 (“In light of
Atlantic Marine’s holding that Rule 12(b)(3) and § 1406(a) are improper
mechanisms to enforce a forum selection clause, the Court should not dismiss this
lawsuit under Rule 12(b)(3) or § 1406(a). Rather, the Court should grant
Microsoft’s alternative motion to transfer it under § 1404(a).” (citations omitted)).)
Plaintiffs aver that Defendant should have filed a “Motion for Leave
to Supplement” pursuant to Federal Rule of Civil Procedure 15(d). That rule
governs supplementing pleadings, and provides:
On motion and reasonable notice, the court may, on just terms, permit
a party to serve a supplemental pleading setting out any transaction,
occurrence, or event that happened after the date of the pleading to be
supplemented. The court may permit supplementation even though
the original pleading is defective in stating a claim or defense. The
court may order that the opposing party plead to the supplemental
pleading within a specified time.
Fed. R. Civ. P. 15(d). By its very terms, Rule 15(d) applies exclusively to
pleadings asserting claims or defenses—not motions in general. See “Pleading,”
Black’s Law Dictionary (9th ed. 2009) (“A formal document in which a party to a
legal proceeding (esp. a civil lawsuit) sets forth or responds to allegations, claims,
denials, or defenses. In federal civil procedure, the main pleadings are the
plaintiff’s complaint and the defendant’s answer.”). As such, Plaintiffs’ reliance
on Rule 15(d) is misplaced.
7

Other federal districts in Texas do prescribe local rules that prohibit
supplemental briefs or authorities without permission of the presiding judge. See
N.D. Tex. Civ. R. 56.7 (“Except for the motions, responses, replies, briefs, and
appendixes required by these rules, a party may not, without the permission of the
presiding judge, file supplemental pleadings, briefs, authorities, or evidence.”);
accord Bankr. N.D. Tex. R. 7056-1(g) (same). However, the Western District of
Texas has no specific such prohibition for supplemental briefing. The Western
District Local rules only prohibit surreplies. See W.D. Tex. Civ. R. 7(f)(1)
(“Replies. A party may file a reply in support of a motion. Absent leave of the
court, no further submissions on the motion are allowed.”).
Furthermore, it is likely that the ethical rules prompted Defendant to
file its supplemental briefing. Defendant’s first Notice of Supplemental Authority
removes its Motion to Dismiss because of the Atlantic Marine decision—arguably
a position contrary to Defendant’s earlier position in its original Motion. Texas
Disciplinary Rule of Professional Conduct 3.03(a)(4) suggests that Defendant had
an obligation to inform the Court of controlling authority contrary to its position.
See Tex. Disciplinary R. Prof’l Conduct 3.03(a)(4) (providing that a lawyer shall
not knowingly “fail to disclose to the tribunal authority in the controlling
jurisdiction known to the lawyer to be directly adverse to the position of the client
and not disclosed by opposing counsel”). Striking Defendant’s Notices of
8

Supplemental Authority would discourage future parties from apprising courts of
changes to applicable and controlling authorities—surely a perverse result. See
Sisk v. Abbott Labs., 1:11CV159, 2012 WL 1164559, at *1 (W.D.N.C. Apr. 9,
2012) (“[A] notice of supplemental authority [is] commonly used in the federal
court system to alert the Court to a decision of another court issued after the close
of the briefing period. . . . To suggest that a party may not file such a notice and
inform the Court of subsequent authority is nonsensical.”); Hornor, Townsend &
Kent, Inc. v. Hamilton, CIV.A.1:01 CV 2979 J, 2004 WL 2284503, at *11 (N.D.
Ga. Sept. 30, 2004) (“[F]iling notices of supplemental authorities that come to a
party's attention after briefing is complete is a well-established practice . . . [and]
such practice is helpful to the Court, which of course always endeavors to apply
current authority in resolving the issues before it.”).
In any event, the Court finds that even if Defendant should have
sought leave of the Court before filing its Notices of Supplemental Authority,
striking Defendant’s supplemental briefing is unwarranted. Plaintiffs have not
suffered any prejudice due to Defendant’s Notices of Supplemental Authority
addressing the Atlantic Marine holding. Defendant’s original Motion placed
Plaintiffs on notice of Atlantic Marine’s pending status in the Supreme Court. (See
Mot. at 10–11.) Moreover, Plaintiffs primarily used their Motion to Strike to
reassert arguments presented in their Response to Defendant’s original Motion.
9

See Hunter v. District of Columbia, 824 F. Supp. 2d 125, 135 n.5 (D.D.C. 2011)
(noting that because the plaintiff used his motion to strike the defendants’ notice of
supplemental authority to clarify the scope of his opposition, the plaintiff “cannot
[have] been said to have been prejudiced”).
Accordingly, the Court DENIES Plaintiffs’ Motions to Strike.
II.

Defendant’s Motion to Dismiss
Defendant initially argued that this case should be dismissed under 28

U.S.C. § 1406(a) or, in the alternative, transferred under 28 U.S.C. § 1404(a) to the
Western District of Washington because Plaintiffs agreed to a valid forumselection clause in their Xbox LIVE subscription agreements requiring that
disputes be brought exclusively in King County, Washington. (Mot. at 1.) As
noted above, pursuant to Atlantic Marine, Defendant’s Supplemental Brief
relinquishes its Motion to Dismiss and only asks this Court to transfer the case to
the Western District of Washington. (Supp. Br. at 6.) Therefore, the Court
DENIES Defendant’s Motion to Dismiss AS MOOT.
III.

Defendant’s Motion to Transfer Venue
Pursuant to § 1404(a), Defendant Microsoft seeks to transfer this case

to the United States District Court for the Western District of Washington in
accordance with the forum-selection clause in the agreed-to Xbox LIVE Terms of
Use. The instant Motion to Transfer affords this Court the opportunity to apply the
10

United States Supreme Court’s recent decision in Atlantic Marine Construction
Co., Inc. v. United States District Court for Western District of Texas, 134 S. Ct.
568 (2013), which outlines the proper analysis this Court should undertake in
evaluating a § 1404 motion to transfer venue when a valid forum-selection clause
exists between the parties.
But before addressing the Atlantic Marine decision, the Court must
first determine whether the forum-selection clause in the Xbox LIVE Terms of Use
is a contractually valid forum-selection clause. See Atl. Marine Constr. Co., 134 S.
Ct. at 581 n.5 (noting that a motion to transfer venue pursuant to a forum-selection
clause presupposes a contractually valid forum-selection clause).
A.

Existence of Contractually Valid Forum-Selection Clause
Whether a forum-selection clause applies to the present case involves

two separate inquiries: (1) whether the forum-selection clause is enforceable, and
(2) whether the present case falls within the scope of the forum-selection clause.
Brown v. Federated Capital Corp., --- F. Supp. 2d ----, 2014 WL 97292, at *2 (S.D.
Tex. Jan. 6, 2014) (citing Stinger v. Chase Bank, USA, NA, 265 F. App’x 224,
226–27 (5th Cir. 2008) (evaluating whether to apply a contract provision
mandating arbitration by assessing (1) whether there is a valid agreement to
arbitrate between the parties; and (2) whether the dispute in question falls within
the scope of that arbitration agreement); Braspetro Oil Servs. Co. v. Modec (USA),
11

Inc., 240 F. App’x 612, 616 (5th Cir. 2007) (enforcing a forum-selection clause
requires first assessing the clause’s contractually validity and its scope)).
1.

Enforceability of Forum-Selection Clause

The Fifth Circuit holds that federal law applies to determine the
enforceability of forum-selection clauses in both diversity and federal question
cases. Braspetro Oil Servs. Co., 240 F. App’x at 615 (citing Haynsworth v. The
Corp., 121 F.3d 956, 962 (5th Cir. 1997)); see also Ginter ex rel. Ballard v.
Belcher, Prendergast & Laporte, 536 F.3d 439, 441 (5th Cir. 2008) (enforcement of
forum-selection clause depends on federal law). According to federal law, “such
clauses ‘are prima facie valid and should be enforced unless enforcement is shown
by the resisting party to be unreasonable under the circumstances.’” Braspetro Oil
Servs. Co., 240 F. App’x at 615 (quoting M/S Bremen v. Zapata Off-Shore Co.
(“The Bremen”), 407 U.S. 1, 10 (1972)); accord Ginter, 536 F.3d at 441.
In Haynsworth, the Fifth Circuit provided a list of four factors to
determine whether a forum-selection clause may be considered unreasonable:
(1) the incorporation of the forum selection clause into the agreement
was the product of fraud or overreaching; (2) the party seeking to
escape enforcement “will for all practical purposes be deprived of his
day in court” because of the grave inconvenience or unfairness of the
selected forum; (3) the fundamental unfairness of the chosen law will
deprive the plaintiff of a remedy; or (4) enforcement of the forum
selection clause would contravene a strong public policy of the forum
state.
121 F.3d at 963. The party resisting the forum-selection clause’s enforcement on
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these grounds bears a “heavy burden of proof.” Id. (quoting The Bremen, 407 U.S.
at 17).
a.

Incorporation of the Forum-Selection Clause Was Not
the Product of Fraud or Overreaching

“[U]nreasonable fraud or overreaching does not mean that any time a
dispute arising out of a transaction is based upon an allegation of fraud[,] . . . the
clause is unenforceable.” Id. (quoting Scherk v. Alberto-Culver Co., 417 U.S.
506, 519 n.14 (1974)). “Rather, it means that an arbitration or forum-selection
clause in a contract is not enforceable if the inclusion of that clause in the contract
was the product of fraud or coercion.” Id. “Allegations of such [fraudulent]
conduct as to the contract as a whole—or portions of it other than the [forumselection] clause—are insufficient; the claims of fraud or overreaching must be
aimed straight at the [forum-selection] clause in order to succeed.” Id.
Plaintiffs do not argue that the forum-selection clause was the product
of fraud or overreaching. Instead, they contend that the forum-selection clause
should not be enforced because it was not reasonably communicated to them prior
to commencing their subscription with Microsoft’s Xbox LIVE Service. (Resp. at
10.) The assert that the clause “is buried in a 13-page contract, in 4-point font, and
is not highlighted nor distinguished from any other portions of the contract. These
venue provisions are not easy to read, are not highlighted, nor are they displayed
prominently.” (Id.)
13

Plaintiffs first rely on Carnival Cruise Lines, Inc. v. Shute, 499 U.S.
585 (1991). However, the Court has searched in vain for any passage from
Carnival Cruise Lines requiring that a forum-selection clause be reasonably
communicated. In fact, the Supreme Court did not address such a question:
Second, we do not address the question whether respondents had
sufficient notice of the forum clause before entering the contract for
passage. Respondents essentially have conceded that they had notice
of the forum-selection provision. Brief for Respondents 26 (“The
respondents do not contest the incorporation of the provisions nor
[sic] that the forum selection clause was reasonably communicated to
the respondents, as much as three pages of fine print can be
communicated”).
499 U.S. at 590.
Additionally, Plaintiffs rely on O’Brien v. Okemo Mountain, Inc., 17
F. Supp. 2d 98 (D. Conn. 1998), wherein a district court held that a forum-selection
clause was not enforceable because it was printed on the back of a ski-lift ticket in
small letters and was not reasonably communicated to the plaintiffs. (Id. at 10–
11.) But Plaintiffs’ reliance O’Brien is similarly misplaced because the Fifth
Circuit—unlike the Second Circuit—does not require that a forum-selection clause
be reasonably communicated; rather, the Fifth Circuit holds that forum-selection
clauses are “presumed enforceable” and should be upheld unless the party
opposing its enforcement can show that the clause was unreasonable under
Haynsworth’s four factors. Compare O’Brien, 17 F. Supp. 2d at 103 (“[T]he
validity of a forum selection clause in an adhesion contract depends on whether the
14

existence of the clause was reasonably communicated to the plaintiff.” (citing
Effron v. Sun Line Cruises, 67 F.3d 7, 9 (2d Cir. 1995))); with Ginter, 536 F.3d at
441 (“[T]he forum-selection clause should be upheld unless the party opposing its
enforcement can show that the clause is unreasonable. The clause might be
unreasonable when, among other things, its inclusion is the product of
‘overreaching’ or when its enforcement would ‘contravene a strong public policy
of the forum state.’” (quoting Haynsworth, 121 F.3d at 963)); Braspetro Oil Servs.
Co., 240 F. App’x at 615 (holding that forum-selection clauses “should be
enforced” unless enforcement would be unreasonable under the circumstances
outlined in Haynsworth).
But even assuming Plaintiffs’ reasonably communicated theory,
O’Brien is easily distinguishable because that case involved a ski-lift ticket with a
forum-selection clause printed on the back of the ticket. In O’Brien, the district
court emphasized that the forum-selection clause was not reasonably
communicated because
[t]he clause, placed near the bottom of the backside of the ticket, is
written in very small typeface with only a single word capitalized.
The front of the ticket contains no instruction to read its back. These
features, coupled with the affixing of the ticket on a wicket on the
skier’s jacket, easily distinguish it from clauses contained in passenger
cruise tickets and approved by courts in this Circuit as providing
adequate notice.
17 F. Supp. 2d at 103. Here, in contrast, the opening lines to Xbox LIVE’s Terms
15

of Use read, in bold: “This Is a Contract between You and Microsoft.” (Dkt.
# 4, Ex. A-1 ¶ 1.) Unlike a ski-lift ticket, which by itself does not suggest a
binding contract with a forum-selection clause embedded within, the Xbox LIVE
Terms of Use explicitly and expressly tell subscribers, like Plaintiffs, that
subscribing to the Service results in a binding contract with certain terms of use as
specified by Microsoft. Also unlike a ski-lift ticket, subscribers, like Plaintiffs, are
required to review the Terms of Use prior to subscribing to the Service. In fact, the
Xbox LIVE registration does not allow consumers to access the Service unless
they affirmatively assent to the Terms of Use. (See Coon Decl. ¶ 5 (“Before
subscribers are able to access or use the Xbox LIVE service, they must enter into a
contract with Microsoft under which they agree to be bound by the Xbox LIVE
TOUs.”); see also Dkt. # 4, Ex. A-1 ¶ 1 (“If you do not agree to this contract, in its
entirety . . . you must select “DECLINE” and discontinue your registration, and
you will have no right to use the Service.”).)
Moreover, although Plaintiff takes issue with the clause’s lack of
bolding and highlighting and characterizes the text as font size 4, a forum-selection
clause “need not be so conspicuous.” Doe v. Cultural Care, Inc., 09-CV-6126,
2010 WL 3075711, at *4 (N.D. Ill. Aug. 3, 2010). Indeed, while a clause “buried
in illegible fine print” may be unenforceable, one that can be comfortably read will
be considered valid, even if the font size is quite small. See Nw. Nat. Ins. v.
16

Donovan, 916 F.2d 372, 377 (7th Cir. 1990) (noting, despite “heavily corrected
middle-aged eyesight,” that Judge Posner could still make out the forum selection
clause, even though the print was small and provided to the court in pale,
underexposed photocopies). The photocopy of Xbox LIVE’s Terms of Use that
Plaintiffs tendered to the Court does not contain text that is a size 4 font. (See Dkt.
# 6, Ex. 3.) Quite the contrary—the font size of the Xbox LIVE Terms of Use is
only slightly smaller than that used by Plaintiffs in their briefing. Although the
Court agrees that Microsoft could have more prominently displayed the forumselection clause to the subscriber, the text is entirely legible and can be
comfortably read.
Because Plaintiffs have not demonstrated that the forum-selection
clause itself was the product of fraud or overreaching, the Court concludes that the
first Haynsworth factor weighs in favor of enforcing the forum-selection clause.
b.

Enforcement of the Forum-Selection Clause Would Not
Deprive Plaintiffs of Their Day in Court

Given that any inconvenience of the forum was foreseeable at the time
of contracting, The Bremen, 407 U.S. at 17, to invalidate a forum-selection clause
predicated on the “grave inconvenience” or “fundamental unfairness” of a
preselected forum, Plaintiffs must demonstrate they will “for all practical purposes
be deprived of [their] day in court.” Haynsworth, 121 F.3d at 963.
Plaintiffs do not argue that litigating this claim in Washington will be
17

an inconvenient forum, much less deprive them of their day in court. Rather,
Plaintiffs discuss how it is “very convenient” for them to litigate this claim the
Western District of Texas and how Plaintiffs’ counsel “can easily make court
hearings in the Western District of Texas.” (Resp. at 23.) Plaintiffs also devote
extensive briefing to the “Goliath”-like bargaining power of Microsoft, recounting
Defendant’s “virtually limitless resources” and “thousands of attorneys at its
disposal”—factors that are irrelevant for purposes of the enforcement of a forumselection clause under Haynsworth. (Id. at 20, 23.) In the absence of any evidence
that litigating this claim would be substantially burdensome (as opposed to “very
convenient”) for Plaintiffs, the Court finds that this factor weighs in favor of
enforcing the forum-selection clause. See Pugh v. Arrow Elecs., Inc., 304 F. Supp.
2d 890, 896 (N.D. Tex. 2003) (granting transfer based on forum-selection clause
when the plaintiff failed to present convincing evidence that costs were so grave or
unfair to deprive him of his day in court).
c.

Chosen Law is Not Fundamentally Unfair

In addition to the forum-selection clause, the Xbox LIVE Terms of
Use contain two choice-of-law clauses. The first clause specifies that claims for
breach of contract “will be subject to the laws of the State of Washington, without
reference to conflict of law principles.” (Dkt. # 4, Ex. A-1 ¶ 18.) The second
clause provides that other than claims for breach of contract, “[a]ll other claims,
18

including claims regarding consumer protection laws, unfair competition laws, and
in tort, will be subject to the laws of [the plaintiff’s] state of residence in the United
States.” (Id.) Accordingly, the laws of Washington govern any contractual
disputes Plaintiffs assert, and the law of each Plaintiff’s home state governs each
Plaintiff’s non-contractual claims alleged in the Complaint. Transferring venue
pursuant to the forum-selection clause will not affect the choice-of-law provision
already specified in the Xbox LIVE Terms of Use. Therefore, the third
Haynsworth factor is irrelevant to the determination of whether the forum-selection
clause is unreasonable.
However, the Court takes a moment to address Plaintiffs’ concern that
the forum-selection clause is “ambiguous and confusing” and “creates
dichotomies.” (Resp. at 11.) In their Response, Plaintiffs recite a portion of the
contract and then posit a series of rhetorical questions, presumably to argue that the
forum-selection clause is unreasonable:
Defendant’s contract reads:
If this contract is with Microsoft Corporation, then claims
for breach of this contract will be subject to the laws of
the State of Washington, without reference to the conflict
of laws principles. All other claims, including claims
regarding consumer protection laws, unfair competition
laws, and in tort, will be subject to the laws of your state
of residence in the United States.
So, if a consumer has a claim under Hawaii law, will a Washington
State Court litigate that claim, using Hawaii law? Or, if a consumer
19

has a claim under the California Unfair Competition Law, will the
Washington State Court litigate that claim, using California law?
(Id.)
Plaintiffs misunderstand the difference between the forum-selection
clause specifying a particular venue for a lawsuit and a choice-of-law clause
specifying which jurisdiction’s laws apply to a given claim. Compare “ForumSelection Clause,” Black’s Law Dictionary (9th ed. 2009) (“A contractual
provision in which the parties establish the place (such as the country, state, or type
of court) for specified litigation between them.” (emphasis added)), with “Choiceof-Law Clause,” Black’s Law Dictionary (9th ed. 2009) (“A contractual provision
by which the parties designate the jurisdiction whose law will govern any disputes
that may arise between the parties.” (emphasis added)). And, in response to
Plaintiffs’ questions, a federal court sitting in Washington can adjudicate claims
using Hawaii or California law and often do just that. See Atl. Marine Constr. Co.,
134 S. Ct. at 584 (“[F]ederal judges routinely apply the law of a State other than
the State in which they sit.”).
d.

Public Policy

Plaintiffs do not point to any Texas public policy advocating retaining
the instant action. Rather, Plaintiffs assert that “[p]rivacy and illegal data
collection are an important interest [sic] in a populated area such as the Western
District of Texas.” (Resp. at 24.) While respecting privacy and guarding against
20

illegal data collection are indeed interests of this Court, it is by no means unique to
the Western District of Texas.
Moreover, Plaintiffs purport to bring a nationwide class action, with
class members located not just in Texas, but across the United States. Indeed, only
two of the six named Plaintiffs reside in Texas; and of those two, neither reside in
the Western District of Texas. (See Compl. ¶¶ 11–16; see also Yoxall Decl. ¶ 3.5)
Thus, the Western District of Texas does not have a strong local interest in this
dispute.
Having assessed the four reasonableness-factors as outlined in
Haynsworth, 121 F.3d at 963, the Court finds that the forum-selection clause in the
Xbox LIVE Terms of Use is valid and enforceable.
2. Scope of the Forum-Selection Clause
To determine whether the forum-selection clause applies to the type of
claims asserted in the lawsuit, courts “look to the language of the parties’ contract
to determine which causes of action are governed by the forum selection
clause . . . .” Marinechance Shipping, Ltd. v. Sebastian, 143 F.3d 216, 222 (5th
Cir. 1998). “If the substance of the plaintiff’s claims, stripped of their labels, does
5

According to the Yoxall Declaration, Plaintiffs Mathew and Manuel Mendoza
reside in La Porte, Texas, Harris County, which is located within the Southern
District of Texas. See “Addresses, Houston Division,” United States District &
Bankruptcy Courts, Southern District of Texas, available at
http://www.txs.uscourts.gov/addresses/hou.pdf (including Harris county in the
Houston Division of the Southern District of Texas).
21

not fall within the scope of the forum selection clause, the clause cannot apply.”
Id.
The forum-selection clause in the Xbox LIVE Terms of Use provides:
If this contract is with Microsoft Corporation, you consent to the
exclusive jurisdiction and venue of state and federal courts in King
County, Washington, USA for all disputes relating to this contract or
the Service.
(Dkt. # 4, Ex. A-1 ¶ 18 (emphasis added).) As such, if the dispute is related to the
contract, or related to the Service, the dispute is within the scope of the forumselection clause, and then that clause controls the venue-transfer inquiry.
Plaintiffs argue that the forum-selection clause in the Xbox LIVE
Terms of Use does not cover the instant action because Plaintiffs allege violations
of federal law and the clause fails to address non-contractual disputes and disputes
regarding federal law. (Resp. at 16.)
Plaintiffs’ argument that their causes of action are exempt from the
forum-selection clause’s reach because their claims are non-contractual in nature is
likely the product of their limited reading of the clause’s text. In their Response to
Defendant’s Motion, Plaintiffs proffered that the clause read: “If this contract is
with Microsoft Corporation, you consent to the exclusive jurisdiction and venue of
state and federal courts in King County, Washington, USA for all disputes relating
to this contract.” (Id. at 17 (quoting Dkt. # 6, Ex. 3 ¶ 18).) However, contrary to
Plaintiffs’ abbreviated reading, the forum-selection clause covers non-contractual
22

disputes as it provides in full: “If this contract is with Microsoft Corporation, you
consent to the exclusive jurisdiction and venue of state and federal courts in King
County, Washington, USA for all disputes relating to this contract or the Service.”
(Dkt. # 4, Ex. A-1 ¶ 18 (emphasis added).) As such, because the forum-selection
clause includes disputes relating to the Xbox LIVE Service, the forum-selection
clause is not solely limited to contractual claims.
In any event, the forum-selection clause covers all disputes related to
either the contract or the Xbox LIVE Service, and the term “related to” is typically
defined more broadly while not being necessarily tied to the concept of a causal
connection. Webster’s Dictionary defines “related” simply as “connected by
reason of an established or discoverable relation.” Webster’s Third New
International Dictionary 1916 (1986). As the “related” definition would suggest,
forum-selection clauses covering claims “relating to” an agreement are broad in
scope. TGI Friday’s Inc. v. Great Nw. Restaurants, Inc., 652 F. Supp. 2d 750, 759
(N.D. Tex. 2009) (citing MaxEn Capital, LLC v. Sutherland, H-08-3590, 2009 WL
936895, at *6 (S.D. Tex. Apr. 3, 2009) (“Such clauses are broad, encompassing all
claims that have some possible relationship with the contract, including claims that
may only ‘relate to’ the contract.”); Smith v. Lucent Techs., Inc., 2004 WL
515769, at *8 (E.D. La. Mar. 16, 2004) (“The term ‘related to’ is typically defined
more broadly and is not necessarily tied to the concept of a causal connection.”));
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c.f. Prima Paint Corp. v. Flood & Conklin Mfg. Co., 388 U.S. 395, 397–98 (1967)
(labeling as “broad” a clause requiring arbitration of “[a]ny controversy or claim
arising out of or relating to this Agreement”).
The Court finds that the forum-selection clause encompasses
Plaintiffs’ claims—be they federal claims or not—because they relate to the
contract. Indeed, Plaintiffs’ Complaint extensively recounts portions of the Xbox
LIVE Terms of Use (i.e., the contract), which include Microsoft’s Privacy Policy,
to illustrate Defendant Microsoft’s alleged privacy infractions. (Id. ¶¶ 29–33, 40.)
Plaintiffs affirm: “By its own terms and policy, Microsoft admits that it collects
purchasing and decisions [sic] on videos and movies made by customers on its
X-Box Live gaming system.” (Id. ¶ 34 (emphasis added).) Plainly, Plaintiffs’
causes of action derive from a dispute about the privacy policies contained in the
contract.
But even if Plaintiffs’ claims were not related to the contract, at a
minimum, Plaintiffs’ claims are essentially “disputes relating to . . . the Service.”
(Dkt. # 4, Ex. A-1 ¶ 18.) Plaintiffs assert claims for violations of the Video
Privacy and Protection Act, California’s Customer Records Act, California’s
Unfair Competition Law, and Texas’s Deceptive Trade Practices Act. The basis
for all of Plaintiffs’ claims is that Defendant Microsoft retained, stored, and
utilized their order history and billing information for at least two years after they
24

canceled their subscriptions to the Xbox LIVE Service and that this information
was then sold by Defendant Microsoft to data-mining companies for profit.
(Compl. ¶¶ 4–8.) All of Plaintiffs’ claims relate to the manner in which Defendant
Microsoft handles personal data under the Xbox LIVE Service, which comes
within the scope of the forum-selection clause’s “related-to” provision.
Accordingly, because the forum-selection clause is enforceable and
Plaintiffs’ claims fall within the purview of the forum-selection clause, that clause
governs this Court’s venue-transfer inquiry under 28 U.S.C. § 1404(a).
B.

Section 1404(a) & Atlantic Marine
In Atlantic Marine, the Supreme Court held that a party may not

enforce a forum-selection clause by seeking dismissal of the suit under 28 U.S.C.
§ 1406(a) and Rule 12(b)(3) because those provisions only apply when venue is
“wrong” or “improper,” as determined by federal venue law, 28 U.S.C. § 1391.
134 S. Ct. at 577–79. Rather, a forum-selection clause may be enforced through a
motion to transfer under 28 U.S.C. § 1404(a), which “permits transfer to any
district where venue is also proper (i.e., ‘where [the] case] might have been
bought’) or to any other district to which the parties have agreed by contract or
stipulation.” Id. at 579 (quoting 28 U.S.C. § 1404(a)). “When the parties have
agreed to a valid forum-selection clause, a district court should ordinarily transfer
the case to the forum specified in that clause” and a proper application of § 1404(a)
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requires that a forum-selection clause be “given controlling weight in all but the
most exceptional cases.” Id. at 581.
In the typical § 1404(a) analysis, the district court weighs the relevant
public and private factors and decides whether, on balance, a transfer would serve
“the convenience of parties and witnesses” and otherwise promote “the interest of
justice.” Id. at 581 n.6. The private factors include: (1) the relative ease of access
to sources of proof; (2) the availability of compulsory process to secure the
attendance of witnesses; (3) the cost of attendance for willing witnesses; and (4) all
other practical problems that make trial of a case easy, expeditious, and
inexpensive. In re Volkswagon, AG, 371 F.3d 201, 203 (5th Cir. 2004). The
public factors include: (1) the administrative difficulties flowing from court
congestion; (2) the local interest in having localized interests decided at home; (3)
the familiarity of the forum with the law that will govern the case; and (4) the
avoidance of unnecessary problems of conflict of laws or applying the foreign law.
Id. A court also gives some weight to the plaintiff’s choice of forum. Atl. Marine
Constr. Co., 134 S. Ct. at 581 n.6.
However, the usual § 1404(a) calculus changes when the transfer
motion is premised on a forum-selection clause. Id. This is primarily because “a
forum-selection clause . . . may have figured centrally in the parties’ negotiations
and may have affected how they set monetary and other contractual terms . . . .”
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Id. at 583. In fact, it may “have been a critical factor in their agreement to do
business together in the first place.” Id. As such, “when parties have contracted in
advance to litigate disputes in a particular forum,” district courts should adjust their
usual § 1404(a) analysis in three ways to “not unnecessarily disrupt the parties’
settled expectations.” Id. at 582–83.
First, “the plaintiff’s choice of forum merits no weight.” Id. at 581.
Although the plaintiff is ordinarily allowed to select whatever forum it considers
most advantageous, “when a plaintiff agrees by contract to bring suit only in a
specified forum, the plaintiff has effectively exercised its ‘venue privilege’ before
the suit arises.” Id. at 581–82. As such, only the plaintiff’s initial choice—that is,
the agreed-to choice memorialized in the contract’s forum-selection clause—
deserves deference. Id. at 582. The plaintiff bears the burden of establishing that
transfer to the forum for which the parties bargained is unwarranted. Id.
Second, a court should not consider arguments about the parties’
private interests because when parties agree to a forum-selection clause, they have
effectively waived their right to challenge the preselected forum. Id. “[A] court
must deem the private-interest factors to weigh entirely in favor of the preselected
forum” because “‘whatever inconvenience [the parties] would suffer by being
forced to litigate in the contractual forum as [they] agreed to do was clearly
foreseeable at the time of contracting.’” Id. (quoting The Bremen, 407 U.S. at 17–
27

18). Instead, a court may only consider arguments about public-interest factors.
Id. “Because those factors will rarely defeat a transfer motion, the practical result
is that forum-selection clauses should control except in unusual cases.” Id.
Third, “when a party bound by a forum-selection clause flouts its
contractual obligation and files suit in a different forum, a § 1404(a) transfer of
venue will not carry with it the original venue’s choice-of-law rules—a factor that
in some circumstances may affect public-interest considerations.” Id. Rather, the
court in the contractually selected venue should not apply the law of the transferor
venue; instead, it should apply its own law. Id. at 583.
In sum, Atlantic Marine held that if a contractually valid forumselection clause exists and applies to the lawsuit, a court should grant the motion to
transfer in accordance with the forum-selection clause absent extraordinary
circumstances. Id. at 581. The party opposing the transfer bears a heavy burden of
establishing that the transfer is unwarranted due to the extraordinary circumstances
as “[i]n all but the most unusual cases,” no such circumstances will exist. Id. at
582–83.
When determining whether extraordinary circumstances exist that
warrant denial of transfer, only the public-interest factors of a traditional § 1404(a)
analysis may be considered, including: (1) the administrative difficulties flowing
from court congestion; (2) the local interest in having localized interests decided at
28

home; (3) the familiarity of the forum with the law that will govern the case; and
(4) the avoidance of unnecessary problems of conflict of laws of the application of
foreign law. Id. at 581–82.
Plaintiffs only argue that “there are no administrative difficulties that
will be placed on the court via this litigation” because “[a]lmost all class action
cases are settled prior to trial.” (Resp. at 24.) They also contend that this Court is
“erudite, capable, and qualified to adjudicate the instant dispute” having
“previously written very eloquent, precise, and informative opinions.” (Id.) While
the Court appreciates Plaintiffs’ assessment of this Court’s adjudicative abilities,
none of Plaintiffs’ arguments demonstrate “most unusual” or “extraordinary”
circumstances sufficient to defeat a motion to transfer. See Atl. Marine Constr.
Co., 134 S. Ct. at 575, 581, 583. At best, Plaintiffs argue that the litigation is
better-suited to the Western District of Texas, but under Atlantic Marine, that
consideration is irrelevant. See id. at 575 (holding that “a district court should
transfer the case unless extraordinary circumstances unrelated to the convenience
of the parties clearly disfavor a transfer” (emphasis added)). Given that Plaintiffs
have not met their burden of demonstrating extraordinary circumstances, the Court
finds that a transfer of venue is warranted pursuant to the contractually valid
forum-selection clause.

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C.

Class Action Fairness Act
Alternatively, Plaintiffs argue that the Class Action Fairness Act

(“CAFA”) preempts the forum-selection clause in the Xbox LIVE Terms of Use
and the transfer-venue analysis from Atlantic Marine. (Resp. at 14–15.) Plaintiffs
contend that because their lawsuit alleges a violation of the Video Privacy
Protection Act and that Act does not contain a venue provision, the fallback
position reverts to the permissive venue provisions of CAFA. (Id.)
But CAFA does not specifically designate a particular venue for a
class action. CAFA is only designed to confer diversity jurisdiction over class
actions that satisfy certain criteria. Instead, 28 U.S.C. §§ 1391, 1392, the usual
venue statutes for civil actions apply to class action lawsuits brought under CAFA.
See Hawkins v. Gerber Prods. Co., 924 F. Supp. 2d 1208, 1213–14 (S.D. Cal.
2013) (applying 28 U.S.C. § 1391(c) to determine the proper venue for a class
action brought under CAFA); Roling v. E*Trade Sec., LLC, 756 F. Supp. 2d 1179,
1185 (N.D. Cal. 2010) (same).
For this reason, courts have held that the CAFA, like other federal
statutes subject to the civil venue statutes, does not preempt a valid forum-selection
clause. See Norris v. Commercial Credit Counseling Servs., Inc., 4:09-CV-206,
2010 WL 1379732 (E.D. Tex. Mar. 31, 2010) (“[T]he court declines to adopt the
Plaintiffs’ assertion that CAFA preempts the contractual forum selection/choice30

of-law clause.”); accord Guenther v. Crosscheck Inc., No. C 09-01106, 2009 WL
1248107, *5 (N.D. Cal. 2009) (“Although CAFA may otherwise afford this Court
jurisdiction, however, CAFA does not trump a valid, enforceable and mandatory
forum-selection clause . . . .”); see also Piechur v. Redbox Automated Retail, LLC,
No. 09-cv-984-JPG, 2010 WL 706047, at *2–3 (S.D. Ill. Feb 24, 2010) (remanding
case to state court due to an enforceable forum-selection clause despite the
plaintiffs bringing claims under CAFA).
Accordingly, CAFA does not alter this Court’s decision to transfer the
instant action to the Western District of Washington pursuant to the contractually
valid forum-selection clause contained in the Xbox LIVE Terms of Use.
CONCLUSION
For the aforementioned reasons, the Court DENIES Plaintiffs’
Motions to Strike Defendant’s Notices of Supplemental Authority (Dkt. # 17; Dkt.
# 21); DENIES AS MOOT Defendant’s Motion to Dismiss (Dkt. # 3); and
GRANTS Defendant’s Motion to Transfer Venue to the Western District of
Washington (Dkt. # 3).
IT IS SO ORDERED.
DATED: San Antonio, Texas, March 5, 2014.

_____________________________________

31

David Alan Ezra
Senior United States Distict Judge