Main St / FFD

Phil Cameron's picture
: FYI -- Main St / FFD

2010 WL 265805 (Kan.Dist.Ct.) (Trial Order) District Court of Kansas.
Johnson County

Zachary FEE, Plaintiff,
v.
EXPEDIA, INC., d/b/a Hotels.com, Defendant.

No. 09-CV-8466.

January 25, 2010.

Order on Motion to Dismiss for Improper Venue


David W. Hauber, District Court Judge.

The Court has before it defendant Expedia, Inc.'s ("Expedia") motion to dismiss plaintiff Zachary Fee's ("Fee") petition, filed pursuant to K.S.A. 60-212(b) ,
which asserts that plaintiff's claims, including those under the Kansas Consumer Protection Act ("KCPA"), K.S.A. 50-623 /et seq./ /,/ should be dismissed in favor of venue in Dallas County Texas, where defendant is based, because of a "clickwrap" agreement that is embedded with a forum selection clause when a consumer uses defendant's website, Hotels.com.


/Factual Basis for the Motion/


Plaintiff Zachary Fee asserts that he was damaged in connection with a hotel room reservation he made through Hotels.corm's website in that he was wrongfully relocated from a four-star hotel to a three-and-a-half star hotel when the original hotel could not accept his reservation.
Plaintiff contends that this relocation constitutes, among other things, "bait and switch selling" in violation of the KCPA. Defendant contends that this case should be dismissed for improper venue and that the Court should enforce the forum selection clause and dismiss this matter. Oral argument was held on this matter and the parties have fully briefed the issues. No supplemental authority has been provided to the Court.

Plaintiff is a resident of Johnson County, Kansas. Petition ("Pet.") at ¶ 1. He filed this lawsuit September 16, 2009. (Pet.). He alleges that, on June 25, 2009, he used Hotels.com. to reserve "hotel accommodations at the '4 Star' Hotel Phillips in Kansas City, Missouri" for the night of July 31, 2009. Pet. at ¶ 5. Plaintiff alleges that, on July 27, 2009, he received an e-mail from Hotels.com advising him that the Hotel Phillips was unable to accept his reservation. Pet. at ¶ 7. At that time, Hotels.com requested that Plaintiff contact its Hotel Partner Support Department, so it might assist him in finding alternate accommodations. Pet. at ¶ 7. Plaintiff further alleges that, on July 27, 2009, he obtained an alternative reservation from Hotels.com "at the
'3.5 Star' Westin Crown Center in Kansas City, Missouri." Pet. at ¶ 8.

Hotels.com is a Texas limited partnership, with its principal place of business in the State of Texas. Affidavit of Greg Lambert, at ¶ 2.^[FN1] The company operates the Hotels.com website, which offers hotel reservation services to its customers. Ex. A at ¶ 2. To make a hotel reservation using Hotels.com, a customer first chooses a hotel, and then inputs guest information, room preferences, and payment information.
/Id./ at 4. Before the reservation can be completed, however, a customer must agree to the Hotels.com User Agreement by means of a "clickwrap"
agreement. /Id./

FN1. As outlined in Greg Lambert's Affidavit, Hotels.com, L.P. is a
wholly-owned subsidiary of Expedia, Inc. not, as alleged in the
Petition, a d/b/a of Expedia, Inc. Accordingly, this motion is made
on behalf of Hotels.com only.

A clickwrap agreement "appears on an internet webpage, and requires that a user consent to any terms or conditions by clicking on a dialog box on the screen in order to proceed with the internet transaction." /Feldman v. Google, Inc.,/ 513 F. Supp.2d 229, 236 (E.D. Pa. 2007)
.
On Hotels.com, the clickwrap agreement appears immediately above the words "Book Reservation." /Id../ The customer must check a click-box
stating: "I agree to the Terms & Conditions." /Id../ The "Terms & Conditions" text is a hyperlink that will take the customer directly to the Hotels.com User Agreement. /Id../ Only after accepting the terms and conditions of the Hotels.com User Agreement by selecting the click-box, will the customer be able to complete the transaction. In other words, use of the Hotels.com website is conditioned upon the customer's acceptance of the Hotels.com User Agreement.

The Hotels.com User Agreement contains a mandatory forum selection clause which states that "this Agreement is governed by the laws of the State of Texas, U.S.A. You hereby consent to the exclusive jurisdiction and venue of the courts in Dallas County, Texas, U.S.A., in all disputes arising out of or relating to the use of this Website." The Hotels.com User Agreement further provides that "[b]y accessing or using this Website in any manner, you agree to be bound by the Agreement." Thus, the Hotels.com User Agreement offers customers use of the Hotels.com website conditioned only upon their "acceptance without modification of the terms, conditions, and notices," set forth in that agreement.

While plaintiff attacks, factually, the affidavit of defendant's corporate representative about his personal knowledge as to the Fee transaction, the affidavit establishes the agreement itself and that the user must agree to its terms - particularly the venue selection clause, before he can book a reservation. The affiant, Greg Lambert, is the director of customer care at Hotels.com, and has knowledge of this website requirement. There is no doubt that plaintiff used the website, see Ex. A to Petition, and his counsel admitted the same at oral argument.

Accordingly, what is pertinent to the Court, factually, is whether the agreement is enforceable and broad enough to cover the claims asserted under the KCPA. For reasons that will be discussed below, the Court concludes that the venue selection clause is enforceable.


/The Standard for a Motion to Dismiss/


On a motion to dismiss, the Court must presume the well-pleaded facts of the petition. However, when deciding a dismissal for improper venue, the standard is the same as for deciding a motion to dismiss for lack of personal jurisdiction. /Financial Sys. & Equip., Inc. v. Easy Sys., Inc.,/ 2000 WL 714331, at *1 (D. Kan. May 17, 2000)
.^[FN2]
That standard is well-established:

FN2. Because Fed. R. Civ. Pro. § 12(b) is essentially identical to
K.S.A. 60-212(b)(3)
,
the court finds federal decisions to be persuasive.

The plaintiff bears the burden of establishing personal jurisdiction over the defendant. Prior to trial, however, when a motion to dismiss for lack of jurisdiction is decided on the basis of affidavits and other written materials, the plaintiff need only make a prima facie showing.
The allegations in the complaint must be taken as true to the extent that they are uncontroverted by the defendant's affidavits. If the parties present conflicting affidavits, all factual disputes are resolved in the plaintiffs favor, and the plaintiff's prima facie showing is sufficient notwithstanding the contrary presentation by the moving party.

/Behagen v. Amateur Basketball Ass'n,/ 744 F.2d 731, 733 (10^th
Cir.1984)
,
/cert. denied,/ 471 U.S. 1010 (1985)

(citations omitted).


DISCUSSION


Plaintiff contests the motion to dismiss, principally, on two grounds.
The first is the venue provision of the KCPA, K.S.A. 50-638(b)
,
which provides:

Every action pursuant to this act shall be brought in the district court of any county in which there occurred an act or practice declared to be a violation of this act, or in which the defendant resides or the defendant's principal place of business is located. If the defendant is a non-resident and has no principal place of business in this state, then the non-resident can be sued either in the district court of Shawnee County or in the district court of any county in which there occurred an act or practice declared to be a violation of this act.

The second is that plaintiff contends his claims originate subsequently and independently from usage of the Hotels.com website and its User Agreement because his reservation was cancelled after confirmation at one hotel, but placed at another. In this regard, he points to the failure of defendant to supply the Hotel.com's referenced "Supplier Rules and Restrictions." In the User Agreement is a provision which
states: "Separate terms and conditions will apply to your reservation and purchase of travel related goods and services that you select.
Please read these separate terms and conditions carefully." This pertains to the rules of any participating hotel. In this regard, plaintiff contends that he became "aggrieved," pursuant to K.S.A. 50-634
,
as a consumer, on July 27, 2009, when he received a notice for cancellation of his reservation, for which he had paid $94.06. This occurred a month after his website use, which did not provide him additional separate terms.

From the foregoing, plaintiff argues that the KCPA governs conduct before, during and after a consumer transaction and that the forum selection clause only covers "disputes arising out of or relating to the use of the Website." Plaintiff does not dispute, however, his assent to the website agreement or the terms referenced.

/I. THE ENFORCEABILITY OF THE CLICKWRAP AGREEMENTS./

Defendant urges that numerous courts, including regional federal district court decisions, have found clickwrap agreements to be valid, enforceable agreements when the customer chooses to use the website.
/Burcham v. Hotels.com, Inc.,/ No.4:07CV1963CDP, 2009 WL 586513 at * 2 (E.D. Mo. March 6, 2009)
(citing
cases)(enforcing clickwrap agreement and noting "such agreements have been routinely upheld by circuit and district courts"); /see also / /Mortgage Plus, Inc. v. Docmagic, Inc.,/ No. 03-2582-GTV-DJW, 2004 WL 2331918, at *5 (D. Kan. Aug. 23, 2004)

(holding that clickwrap agreement is a valid contract); /see e.g., / /Seibert v. Amateur Athletic Union of U.S., Inc.,/ 422 F.Supp.2d 1033,
1040 (D. Minn. 2006)
("Most
courts which have considered the issue have upheld arbitration and forum selection clauses in so-called "clickwrap" or "shrinkwrap" form contracts."); /DeJohn v. The TV Corp. Int'l,/ 245 F. Supp.2d 913, 921 (N.D. III. 2003)
(enforcing
click-wrap forum selection clause).

In /Docmagic,/ the agreement is identical to the one at bar and was held to be valid and enforceable. /See/ 2004 WL 2331918 at *5
.
The /Docmagic/ plaintiff was required to click on a box indicating his agreement to the terms of use before he could complete his transaction.
/Id./ That clickwrap agreement contained a forum selection clause that required any suit arising from the agreement to be brought in a court in Los Angeles, California. /Id./ at *7. Plaintiff also argued that the clickwrap agreement did not create an enforceable contract. /Id./ at *2.
The court rejected this argument, holding that the plaintiff "had a choice as to whether to download the software and utilize the related services..." /Id./ at *5.

An identical user agreement was held valid and enforceable in /Burcham v. Expedia, Inc.,/ 2009 WL 586513 at *3 (E.D.Mo. 2009)
.
In /Burcham/ the plaintiff was required to accept Expedia's user agreement before completing the hotel reservation. /Id./ at *2. The agreement was identical to the Hotels.com agreement, except that it required actions to be brought in King County, Washington. The court enforced the agreement. /Id./ at *4.

/A. The Reasonable Relationship Caveat to Forum Selection Clauses./

Kansas has followed the enforcement of contractual forum-selection clauses and the rationale of /The / /Bremen v. Zapata Off-Shore Co.,/
407 U.S. 1(1972)
.
/See / /Vanier v. Ponsoldt,/ 251 Kan. 88, 99, 833 P.2d 949, 958 (1992)

(enforcing installment purchase and security agreement forum selection clause). The only /caveat/ to enforcement of such provisions is that they must be fair and reasonable, they must bear a reasonable relationship to the transaction and they must not be the result of fraud, duress or overreaching. /Id./ at 101.


Likewise, arbitration clauses with KCPA claims are enforced. /Packard v.
Credit Solutions of America, Inc.,/ 42 Kan. App. 2d 382, 213 P.3d 437
(2009)

(reversing district court on failure to grant motion to compel arbitration). In /Packard,/ the plaintiffs claimed violations of the KCPA against the defendant, a credit debt reduction company, which allegedly engaged in deceptive practices by taking debit transaction amounts from plaintiffs' bank accounts. It was not authorized to do business in Kansas. The agreement contained the following provisions:

/Arbitration of Dispute.-If/ there is /any dispute between the parties arising out of this agreement,/ the parties agree to submit that dispute to binding arbitration under the auspices of the American Arbitration Association (AAA).

/Choice of Law and Jurisdiction.-In/ the event of any dispute regarding this AGREEMENT including but not limited to service fees and costs, CLIENT and CSA agree that venue of resolution shall be in the county and city of Dallas, Texas. Both CSA and CLIENT agree that the laws of the State of Texas /shall govern any disputes arising from this AGREEMENT./

42 Kan. App. 2d at 383-84

(emphasis added).

The Packards argued that the conduct at issue did not "arise out this agreement" but the court noted that the plaintiffs did not "satisfactorily explain how their statutory claims do not arise out of the agreement, when, for example, in order to establish violations of the KCPA, they must show CSA's [defendant's] performance /under and pursuant to the agreement/ constituted material misrepresentations or deceptive acts and practices." 42 Kan. App. 2d at 441.

The Court did not address the forum selection clause directly, because its ruling on the arbitration clause was dispostive, /id./ at 387, except for the fact that it significantly noted that such clauses may be enforced if they bear a reasonable relationship to the transaction. /Id.
(citing / /Aylward v. Dar Ran Furniture Industries, Inc.,/ 32 Kan. App.
2d 697,700, 87 P.3d 341 (2004)
).
Presumably the /Packard/ court was fully cognizant of the KCPA's venue provision, even though it was decided under federal preemption.^[FN3]

FN3. /Packard/ does not suggest that absent the federal preemption
which existed there, pursuant to the Federal Arbitration Act, 9
U.S.C. §§ 1
-16
(2000)
,
the result would be any different. On the contrary, its specific
reference to the forum selection clause suggests its intent to
demonstrate both clauses would be enforceable.

/1. Whether the KCPA venue provision trumps the forum selection clause./

The KCPA venue clause, K.S.A. 50-638(b)
,
uses "shall," and not "may," to direct the filing of KCPA actions. The Court believes this is intended to contrast the word "may" which otherwise appears in ordinary venue provisions for civil actions against corporations, non-residents or non-qualified corporations, as referenced in K.S.A. 60-604

and 60-605
.
This limits where KCPA actions may be brought within the state, but does not otherwise speak to the enforceability of contract provisions. On the contrary, while the KCPA directs that a consumer "may not waive or agree to forego rights or benefits under this act," K.S.A. 50-625(a)
,
the act allows the enforcement of contractual settlements that are not unconscionable. K.S.A. 50-625(c)
.
The mere fact that a consumer may waive a right is not, in itself, unconscionable. /Farrell v. General Motors Corp.,/ 249 Kan. 231, 242,
815 P.2d 538 (1991)
.
Our courts, by definition, have precluded the concept of unconscionability by requiring forum selection clauses to be reasonably related to the transaction.

Similarly, the court in /Billings, M.D. v. Clinitec Intern., Inc.,/ 2000 WL 1072167, *3 (D. Kan., July 25, 2000)
,
considering K.S.A. 50-638(a)
,
construed that plaintiff, by signing an agreement containing a forum selection clause, did not waive or agree to forego any rights or benefits under the act, rather, he agreed to litigate them in Pennsylvania.

Plaintiff argues that it is unreasonable to force him to travel to Texas to litigate his KCPA claims because of the policy to liberally construe and protect Kansas consumers. K.S.A. 50-623(b)
;
/Ray v. Ponca/Universal Holdings, Inc.,/ 22 Kan. App. 2d 47, 49, 913P
.2d
209 (1995). /Vanier,/ however, held that a forum selection clause was reasonable if the forum selected was the home of one of the parties.
/Vanier,/ 251 Kan. at 101, 833 P.2d at 959

("We find the forum - selection clause fair and reasonable. The forum selected is the home of one of the parties to the contract and, thus, has a reasonable relationship to the transaction."). Moreover, the Court would note that plaintiff already has traveled to Texas to depose defendant's corporate representative, which, no doubt, would have been required if the case remained here. This is a consequence of longstanding rules enforced in this and federal courts, under the interpretation of FED. R. Civ. PRO. § 30(b)(6) [which is identical to K.S.A. 60-230(b)(5)
]
that requires corporate representatives to be deposed at defendant's corporate headquarters.^[FN4] This, essentially, is a fairness rule to a compelled litigant.

FN4. As a general rule, the court has "substantial discretion to
specify the place of the deposition."^FN23 The Tenth Circuit has
stated that the "deposition of a corporation by its agents and
officers should ordinarily be taken at its principal place of
business." ^FN24 For a corporation, this rule "translates to a
presumption that officers, directors and managing agents should be
available for deposition at the company's headquarters." ^FN25

FN23. /Stone v. Morton Int'l,/ 170 F.R.D. 498, 504 (D.Utah 1997)

(citing /In re Standard Metals Corp.,/ 817 F.2d 625 (10th Cir .1987)
).FN24.
/Thomas v. IBM,/ 48 F.3d 478, 483 (10th Cir.1995)

(citing 8A Charles Alan Wright, Arthur R. Miller & Richard L.
Marcus, Federal Practice and Procedure: Civil 2112 at 81 (1994)
).FN25.
/Payne v. McKune,/ No. 06-3010, 2007 U.S. Dist. LEXIS 77553, at *7,
2007 WL 3036190 (D.Kan. Oct. 16, 2007)
.

However, "[u]nderlying this rule appears to be the concept that it
is the plaintiff who brings the lawsuit and who exercises the first
choice as to the forum. The defendant, on the other hand, is not
before the court by choice." ^FN26 Indeed, in discussing the rules
surrounding the designation of place for a deposition, Moore's
Federal Practice states: "[t]here is a general presumption that a
defendant's deposition will be held in the /district/ of the
defendant's residence" and places the burden of deviating from this
presumption on the noticing plaintiff.^FN27 Depositions of a
corporate defendants' representatives presumptively take place at
the corporation's headquarters not, as plaintiff advocates, to allow
plaintiff ready access to documents located at a corporation's
facility, but rather to afford the corporate defendant and its
representatives, who did not have the first choice as to forum, a
measure of convenience.

FN26. /Payne,/ 2007 U.S. Dist. LEXIS 77553 at *6-7, 2007 WL 3036190

(citing /Farquhar v. Shelden,/ 116 F.R.D. 70, 72 (E.D. Mich.1987)
).
FN27.6-2 Moore's Federal Practice-Civil § 26.105 (emphasis added).

/ICE Corp. v. Hamilton Sundstrand Corp./ WL 4334918, 5 -6 (D.
Kan.,Dec. 6, 2007)

Thus, in terms of whether plaintiff will expend large sums of money to travel long distances, it is apparent that the rules anticipate that the mere fact that travel may be anticipated is not inherently unfair, particularly when it is the plaintiff who has chosen to litigate, such as in this case, over whether he received a four-star or a three-and-a-half star hotel room.

Here, Hotels.com is headquartered in Dallas County, Texas. Ex.. A at ¶ 2. Further, many (if not all) of its witnesses and relevant documents are likely located there. Accordingly, the forum selection clause at issue is reasonable.

/II. WHETHER THE SUBSEQUENT CANCELLATION WAS INDEPENDENT OF THE CONTRACT./

Next, the Court must consider plaintiff's argument that the cancellation of his reservation and decision to book an alternate hotel, was, somehow, a different transaction that is not governed by the User Agreement. There is little doubt that but for his reservation on the Hotels.com website, Fee would not have engaged in the transaction for which he now claims a violation of the KCPA. Indeed, one hinges on the other. The language of the User Agreement, however, uses broad language the is typical of an arbitration agreement, requiring the forum selected to address matters "arising out of or relating to" use of the website.

The parties agreed to arbitrate "[a]ny controversy or claim /arising out of or relating to/ payments to [Chelsea] by Medco." (Emphasis added).
The ordinary meaning of the phrase "relating to" is broad.^FN9 /Morales v. Trans World Airlines, Inc.,/ 504 U.S. 374, 383-84, 112 S.Ct. 2031,
119 L.Ed.2d 157 (1992)
;
/Coregis Ins. Co. v. Am. Health Found., Inc.,/ 241 F.3d 123, 128-29 (2d
Cir.2001)
;
/see also / /Prima Paint Corp. v. Flood & Conklin Mfg. Co.,/ 388 U.S.
395, 398, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967)

(construing an arbitration clause with the language "[a]ny controversy or claim arising out of or relating to this Agreement" as a broad one).

FN9. Because "relating to" is broader than "arising out of," we need not consider the scope of the phrase "arising out of" in isolation. /See / /Coregis Ins. Co. v. Am. Health Found., Inc.,/ 241 F.3d 123, 128 (2^nd
Cir.2001)

("[T]he ordinary meaning of the term 'related to' ... is broader than the term 'arising out of'...."); /Mediterranean Enters., Inc. v.
Ssangyong Corp.,/ 708 F.2d 1458, 1464 (9th Cir.1983)

(explaining that inclusion of the term "relating to" makes an arbitration clause broader than one including only the term "arising under").

/Chelsea Family Pharmacy, PLLC v. Medco Health Solutions, Inc.,/ 567 F.3d 1191, 1199 (10th Cir. 2009)
.

Because the language of the forum selection clause sweeps broadly, it encompasses subsequent transactions that might involve a cancellation or modification of prior arrangements. There is little doubt that the subsequent, and alternate reservation, is a transaction "relating to"
the earlier transaction. Accordingly, the Court rejects plaintiff's argument that an independent and subsequent cancellation negates the User Agreement and its forum selection clause.

For the foregoing reasons, the Court will grant the defendant's motion to dismiss.

IT IS SO ORDERED.

___________________________________________________________________________________________________________________________________________________________________________________

Dated

___________________________________________________________________________________________________________________________________________________________________________________

DAVID W. HAUBER

District Court Judge, Div. 7

Fee v. Expedia, Inc.
2010 WL 265805 (Kan.Dist.Ct.) (Trial Order)

--
Respectfully,


David J. Moraine, J.D., LL.M.
Texas State Bar Number 00795830
New York Bar Number 763095

MARCHAND & MORAINE, L.L.P.
Attorneys At Law

Principal Office:
Ten Thousand North Central Expressway
Tenth Floor, Suite 1043
Dallas, Texas 75231

http://www.marchandmoraine.com
djmoraine@marchandmoraine.com

Toll Free: (866) 484-1043
Dallas: (214) 378-1043
Denton: (940) 243-2876
Grapevine: (817) 300-3374

Facsimile: (214) 378-6399

DISCLAIMER: This communication is subject to the Electronic
Communications Privacy Act, and may contain information that is
confidential or privileged under relevant state or federal law.

If you are not the named recipient of this email, you are notified
that use or dissemination of the information contained in this email
is strictly prohibited. Your cooperation in notifying the sender
of your receipt of this email is appreciated.

Pursuant to IRS Circular 230, nothing contained in this email
transmission should be considered legal advice regarding a
federal tax matter. Marchand & Moraine, L.L.P. dispenses legal
advice on federal tax matters only through a qualified written tax
opinion, after undertaking sufficient due diligence to render the
opinion in accordance with relevant professional standards.

Uniform Electronic Transactions Act ["UETA"]. If this communication
concerns negotiation or formation of a contract or agreement,
UETA does not apply to this communication, unless an express intent
to form such a contract or agreement is set forth in the body of this email.
X