Doe 1 v. AOL LLC

Per Curiam Opinion; Concurrence by Judge D.W. NELSON; Concurrence by Judge BEA.

On July 31, 2006, AOL LLC (formerly America Online, Inc.) made publicly available the internet search records of more than 650,000 of its members. The records contained personal and sometimes embarrassing information about the members. Plaintiffs, members of AOL, brought an action in federal district court in California on behalf of themselves and a putative nationwide class of AOL members, alleging violations of federal electronic privacy law, 18 U.S.C. § 2702(a). A subclass of AOL members who are California residents also alleged various violations of California law, including the California Consumers Legal Remedies Act, California Civil Code § 1770.

Under the AOL Member Agreement, all plaintiffs agreed to a forum selection clause that designates the “courts of Virginia” as the fora for disputes between AOL and its members. The Member Agreement also contains a choice of law clause designating Virginia law to govern disputes.

AOL moved to dismiss the action for improper venue pursuant to Federal Rule of Civil Procedure 12(b)(3), on the basis of the parties’ forum selection clause. AOL *1079contends the clause permits plaintiffs to refile their consumer class action in state or federal court in Virginia. Plaintiffs contend the forum selection clause limits them to Virginia state court, where a class action remedy would be unavailable to them; this, they contend, violates California public policy favoring consumer class actions and renders the forum selection clause unenforceable.

The district court granted AOL’s motion and dismissed the action without prejudice to plaintiffs refiling it in a state or federal court in Virginia. We hold the district court erred when it interpreted the forum selection clause to permit actions in either state or federal court in Virginia; the plain language of the clause — courts “of’ Virginia — demonstrates the parties chose Virginia state courts as the only fora for any disputes. We reverse and remand for further proceedings.

I.

A. The Complaint

Plaintiffs Kasadore Ramkissoon and Doe 1 and Doe 2,1 members of AOL, filed a class action complaint in the District Court for the Northern District of California against AOL on behalf of themselves and a nationwide putative class of AOL members. The complaint alleges Ramkissoon currently is a resident of New York, while Doe 1 and Doe 2 currently are residents of California. The complaint does not state when Doe 1 and Doe 2 became residents of California, where they resided when they entered into the Member Agreement with AOL, or where they resided when they used AOL’s services.

AOL provides its members with access to the Internet and a variety of related features, including search tools and security features. The complaint alleges that on July 31, 2006, “roughly twenty million AOL Internet search records were packaged into a database” and made publicly available for download for a period of approximately ten days. The data consisted of the records of which internet sites were visited by nearly 658,000 AOL members who conducted such visits from approximately March 2006 through May 2006. AOL does not contest this occurrence.

The complaint alleges the data contained the addresses, phone numbers, credit card numbers, social security numbers, passwords and other personal information of AOL members. Plaintiffs also allege the searches reveal members’ “personal struggles with various highly personal issues, including sexuality, mental illness, recovery from alcoholism, and victimization from incest, physical abuse, domestic violence, adultery, and rape,” by revealing their Internet searches for information on these issues. Although AOL admitted it made a “mistake” and took down the data, “mirror” websites appeared on the internet that reproduced the data. Some of these websites present the data in a searchable form and others “invite the public to openly criticize and pass judgment on AOL members based on their searches.”

Plaintiffs’ complaint alleges seven causes of action. Two of the causes of action— violation of the federal Electronic Communications Privacy Act, 18 U.S.C. § 2702(a),2 *1080and unjust enrichment under federal common law — are brought on behalf of all plaintiffs and the putative nationwide class.

The other five causes of action are brought under California statutory and common law. Doe 1 and Doe 2 bring these claims on behalf of the putative subclass of AOL members who are California residents. They allege AOL violated the following California statutes: (1) the California Consumers Legal Remedies Act (CLRA),3 which prohibits unfair methods of competition and unfair or deceptive acts or practices resulting in the sale of goods or services; (2) the California Customer Records Act,4 which requires businesses to destroy customers’ records that are no longer to be maintained, and requires businesses to maintain security procedures to protect customers’ personal information; (3) California False Advertising law;5 and (4) California Unfair Competition law,6 which prohibits unfair, unlawful, and fraudulent business practices. These California plaintiffs also allege AOL committed the tort of public disclosure of private facts under California common law.

B. The Forum Selection and Choice of Law Clause

AOL’s headquarters are located in Dulles, Virginia. All members of AOL’s online service, including all plaintiffs and putative class members, must agree to the AOL Member Agreement as a prerequisite to register for AOL service. Each member must click on a box that states the member has agreed to the terms of the Member Agreement before he can complete his registration.

The Member Agreement contains a choice of law clause that designates Virginia law, excluding its conflict-of-law rules. It also contains a forum selection clause that designates the “courts of Virginia” as the fora for disputes between AOL and its members. The choice of law and forum selection clause of the Member Agreement in effect during the time period relevant to the complaint — January 1, 2004 through September 22, 2006 — states in its entirety:

The laws of the Commonwealth of Virginia, excluding its conflicts-of-law rules, govern- this Member Agreement and your membership. You expressly agree that exclusive jurisdiction for any claim or dispute with AOL or relating in any way to your membership or your use of the AOL Services resides in the courts of Virginia and you further agree and expressly consent to the exercise of personal jurisdiction in the courts of Virginia in connection with any such dispute including any claim involving AOL or AOL Services. The foregoing provision may not apply to you depending on the laws of your jurisdiction. This Agreement shall not be governed by the United Nations Convention on Contracts for the International Sale of Goods.

C. District Court Order

Based on the forum selection clause, AOL moved to dismiss the action for improper venue under Federal Rule of Civil Procedure 12(b)(3) (“Rule 12(b)(3)”), or, alternatively, to transfer venue to the District Court for the Eastern District of Virginia pursuant to 28 U.S.C. § 1406(a).7 The district court granted AOL’s Rule *108112(b)(3) motion to dismiss and adopted AOL’s proposed order in its entirety. The district court held the forum selection clause “expressly requires that this controversy be adjudicated in a court in Virginia” and that “[pjlaintiffs agreed the courts of Virginia have ‘exclusive jurisdiction’ over any claims or disputes with AOL, and venue in the Northern District of California is improper.” The order dismissed plaintiffs’ complaint “without prejudice to the refiling of their claims in a state or federal court in Virginia.”

II.

We review a district court’s order enforcing a contractual forum selection clause and dismissing a case for improper venue for abuse of discretion. Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 323 (9th Cir.1996). Where the interpretation of contractual language in a forum selection clause does not turn on the credibility of extrinsic evidence but on an application of the principles of contract interpretation, we review the district court’s interpretation de novo. Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75, 77 (9th Cir.1987).

A motion to enforce a forum selection clause is treated as a motion to dismiss pursuant to Rule 12(b)(3); pleadings need not be accepted as true, and facts outside the pleadings may be considered. Argueta, 87 F.3d at 324.

III.

As a threshold matter, the parties dispute the meaning of the forum selection clause, specifically the phrase “exclusive jurisdiction ... resides in the courts of Virginia.” AOL claims the phrase “courts of Virginia” refers to state and federal courts in Virginia, while plaintiffs claim it refers to Virginia state courts only. We agree with plaintiffs’ interpretation.

We apply federal law to the interpretation of the forum selection clause. Manetti-Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509, 513 (9th Cir.1988). When we interpret a contract under federal law, we look for guidance “to general principles for interpreting contracts.” Klamath Water Users Protective Ass’n v. Patterson, 204 F.3d 1206, 1210 (9th Cir.1999).

“Contract terms are to be given their ordinary meaning, and when the terms of a contract are clear, the intent of the parties must be ascertained from the contract itself. Whenever possible, the plain language of the contract should be considered first.” Id. (internal citation omitted). We apply the “primary rule of interpretation ... that the common or normal meaning of language will be given to the words of a contract unless circumstances show that in a particular case a special meaning should be attached to it.” Hunt Wesson Foods, Inc., 817 F.2d at 77 (internal quotation marks and alteration omitted). We read a written contract as a whole, and interpret each part with reference to the whole. Klamath Water Users Protective Ass’n, 204 F.3d at 1210. That the parties dispute a contract’s meaning does not render the contract ambiguous; a contract is ambiguous “if reasonable people could find its terms susceptible to more than one interpretation.” Id.

The district court, without discussion, interpreted the forum selection clause to refer to state and federal courts of Virginia. We determine the meaning of the phrase “courts of Virginia” de novo, Hunt Wesson Foods, Inc., 817 F.2d at 77, and look first to its plain meaning. We have not previously addressed the meaning of a forum selection clause designating the courts “of,” rather than “in,” a state. We hold that the forum selection clause at issue here—designating the courts of Virginia—means the state courts of Virginia *1082only; it does not also refer to federal courts in Virginia.

The clause’s use of the preposition “of’ — rather than “in” — is determinative. Black’s Law Dictionary defines “of’ as a term “denoting that from which anything proceeds; indicating origin, source, descent, and the like.8 Black’s Law Dictionary 1080 (6th ed.1990). Thus, courts “of’ Virginia refers to courts proceeding from, with their origin in, Virginia — i.e., the state courts of Virginia. Federal district courts, in contrast, proceed from, and find their origin in, the federal government.9

Our interpretation finds support among opinions by our sister circuits who have addressed the meaning of forum selection clauses designating the “courts of’ a state — all of whom have interpreted such clauses to refer to the state courts of the designated state, and not also to the federal courts in the designated state. See Am. Soda, LLP v. U.S. Filter Wastewater Group, Inc., 428 F.3d 921, 926 (10th Cir.2005) (interpreting “Courts of the State of Colorado” to mean Colorado state courts; the clause “refers to sovereignty rather than geography”); Dixon v. TSE Int’l Inc., 330 F.3d 396, 398 (5th Cir.2003) (interpreting “Courts of Texas, U.S.A.” to mean Texas state courts; “[fjederal district courts may be in Texas, but they are not of Texas”); LFC Lessors, Inc. v. Pac. Sewer Maint. Corp., 739 F.2d 4, 7 (1st Cir.1984) (interpreting forum selection and choice of law clause stating the contract shall be interpreted according to “the law, and in the courts, of the Commonwealth of Massachusetts” to designate the state courts of Massachusetts; “the word ‘of as it appears in the phrase in question must have been intended to restrict the meaning of both ‘law’ and ‘courts’ to those that trace their origin to the state.”).

Accordingly, we hold the plain meaning of the forum selection clause’s designation of the “courts of Virginia” is the state courts of Virginia; it does not include federal district courts located in Virginia.10

IV.

Having interpreted the AOL forum selection clause to designate Virginia state courts, we turn to the enforceability of the clause.

Plaintiffs contend the forum selection clause so construed is unenforceable as a matter of federal law, because it violates California public policy against waivers of class action remedies and rights under the California Consumers Legal Remedies Act. AOL, however, steadfastly has assert*1083ed the forum selection clause permits plaintiffs to maintain an action in federal court in Virginia, where plaintiffs could pursue their consumer class action remedies. AOL has raised no contention that the forum selection clause, construed to mean only Virginia state courts, nevertheless is enforceable and does not violate California public policy.

We apply federal law to determine the enforceability of the forum selection clause. Manetti-Farrow, 858 F.2d at 513. A forum selection clause is presumptively valid; the party seeking to avoid a forum selection clause bears a “heavy burden” to establish a ground upon which we will conclude the clause is unenforceable. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 17, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). Under the directives of the Supreme Court in Bremen, we will determine a forum selection clause is unenforceable “if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision.” Id. at 15, 92 S.Ct. 1907 (emphasis added).

California has declared “by judicial decision” the same AOL forum selection clause at issue here contravenes a strong public policy of California — as applied to California residents who brought claims under California statutory consumer law in California state court. In America Online, Inc. v. Superior Court of Alameda County (Mendoza), 90 Cal.App.4th 1, 108 Cal. Rptr.2d 699 (2001), Mendoza, a California resident and member of AOL, brought a putative class action on behalf of AOL members in California state court, alleging violations of California state law, to wit: the California Consumers Legal Remedies Act, the California Unfair Business Practices Act, and common law conversion and fraud. Mendoza, 108 Cal.Rptr.2d at 702.

AOL moved to dismiss Mendoza’s action based on its forum selection clause designating the “courts of Virginia.” Id. at 701-02. The state trial court denied AOL’s motion, holding the forum selection clause was unenforceable because it “diminished” the rights of California consumers, and remedies available in Virginia were not “comparable” to those in California.11 Id. at 703.

AOL filed a petition for writ of mandamus. The California Court of Appeal denied the writ, thereby leaving in place the trial court’s denial of AOL’s motion to dismiss. Relevant to the instant appeal, the California Court of Appeal held the AOL forum selection clause was unenforceable, because the clause violated California public policy on two grounds: (1) enforcement of the forum selection clause violated California public policy that strongly favors consumer class actions, because consumer class actions are not available in Virginia state courts, id. at 712;12 *1084and (2) enforcement of the forum selection clause violates the anti-waiver provision of the Consumer Legal Remedies Act (CLRA), id. at 710, which states “[a]ny waiver by a consumer of the provisions of this title is contrary to public policy and shall be unenforceable and void.” Cal. Civ.Code § 1751. The state Court of Appeal held the forum selection clause, together with the choice of law provision, effect a waiver of statutory remedies provided by the CLRA in violation of the anti-waiver provision, as well as California’s “strong public policy” to “protect consumers against unfair and deceptive business practices.”13 Mendoza, 108 Cal.Rptr.2d at 710.

We agree with plaintiffs that Mendoza is the kind of declaration “by judicial decision” contemplated by Bremen. Mendoza found a California public policy against consumer class action waivers and waivers of consumer rights under the CLRA that California public policy applies to California residents bringing class action claims under California consumer law. As to such California resident plaintiffs, Mendoza holds California public policy is violated by forcing such plaintiffs to waive their rights to a class action and remedies under California consumer law.

Accordingly, the forum selection clause in the instant member agreement is unenforceable as to California resident plaintiffs bringing class action claims under California consumer law.14

REVERSED and REMANDED.15