AOL does not get to choose where it can be sued

In a recent decision in the case of Dix v. ICT Group, Inc., reversing the lower court, the appellate court in the state of Washington held unenforceable a forum selection clause in AOL’s terms of service which stated that Virginia courts have exclusive jurisdiction over any dispute arising in connection with the services.

The plaintiffs had sued AOL (and its independent contractor ICT to answer customer service questions) in Washington state court, claiming that they had been swindled when AOL started charging them for secondary accounts for which the plaintiffs had never signed up. AOL moved to dismiss, claiming that under the terms of service, Virginia was the only place in which such suit could be brought. The trial court agreed, and dismissed the lawsuit. The appellate court held otherwise, reversing the lower court’s dismissal and remanding the case for further proceedings.

The appellate court began its analysis by reminding us that a party to a contract challenging a forum selection clause bears a heavy burden. In the state of Washington, absent evidence of fraud, undue influence, or unfair bargaining power, courts are reluctant to invalidate forum selection clauses because they enhance contractual predictability.

The plaintiffs put forward two arguments to invalidate the forum selection clause. The court did not accept the plaintiffs’ first argument of fraud: that AOL began billing them for the new accounts without giving them the opportunity to sign new terms of service. The second argument, that enforcing the provision would violate public policy, passed muster.

Washington is not the first state to have had the opportunity to rule on the enforceability of AOL’s forum selection clause. The court looked to some mixed decisions on the issue coming from such states as California, Maryland and Florida. In the end, the court’s decision to hold the forum selection clause unenforceable was based mostly on the policy underlying the state’s consumer protection statue. Denying the ability to litigate the question in a Washington court would “undermine the very purpose” of the consumer protection act, which is to offer broad protection to its citizens.

Dix v. ICT Group, Inc., — P.3d —, 2005 WL 372483 (Ct. App. Wash., Feb. 17, 2005)