Designer Skin LLC v. S & L Vitamins, Inc., et al.
Net2Phone, Inc. v. The Superior Court of Los Angeles County
109 Cal. App. 4th 583 (Cal. Crt. App., June 9, 2003)
Browse-Wrap Agreement Can Be Created By Use Of Website
Consumer Cause Alleges Ads Misleading
Net2Phone offers Internet telecommunication services to its customers. These services permit Net2Phone's customers to make telephone calls over the Internet.
Consumer Cause alleged that Net2Phone misled its customers in advertising materials Net2Phone distributed to market its services. More particularly, Consumer Cause alleged that these advertising materials failed to advise that, in calculating amounts due for phone calls, Net2Phone "rounded up" to the nearest minute, instead of using the actual duration of the call. Consumer Cause complained that consumers were only apprised of this practice in their contracts with Net2Phone.
Consumer Cause sued on behalf of those consumers in California, under California's Unfair Competition Law (Bus. & Prof. Code §17200 et seq.). Notably, this statute permits any person, whether or not personally injured, to pursue an unfair competition claim, provided he acts on behalf of the general public.
Net2Phone moved to stay or dismiss the action, arguing that Consumer Cause was bound by the forum selection clause contained in its contracts with its customers. The lower court rejected this contention.
Net2phone then commenced this mandamus proceeding for review of the lower court's decision. Holding that Consumer Cause was bound by the forum selection clause, the Court of Appeals directed the lower court to stay the proceeding commenced before it by Consumer Cause.
Court Upholds Forum Selection Clause
Because Consumer Cause was "closely related" to Net2Phone's customers, and was suing on their behalf, the Court held the forum selection clause applicable to it.
Finally, the Court held the forum selection enforceable and its application to the case at bar reasonable, notwithstanding the fact that it mandated suit in New Jersey, where Net2Phone had its principal place of business. In reaching this result, the Court rejected Consumer Cause's argument that New Jersey was not a suitable alternative forum, because, unlike California, it did not permit private parties who had not been personally injured by defendant's conduct to act on behalf of those who had been. Instead, New Jersey only permits consumers who were themselves injured, individually or as a class, or the State's Attorney General, to pursue such claims.
The Court accordingly directed that the instant action be stayed, as it was commenced in California in violation of the forum selection clause.
Judge Mosk Dissents