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Caspi v. Microsoft Network LLC

Superior Court of New Jersey, Appellate Division
732 A.2d 528 (1999)
ELI5:

Rule of Law:

A forum selection clause contained in an online 'clickwrap' agreement is prima facie valid and enforceable if the user is given a reasonable opportunity to review the terms and must affirmatively manifest assent before being bound.


Facts:

  • Microsoft Network, L.L.C. (MSN) offered an online computer service to subscribers.
  • To become an MSN member, a prospective user was required to view a membership agreement presented on their computer screen in a scrollable window.
  • The agreement contained a forum selection clause stipulating that all disputes must be litigated in King County, Washington.
  • A user could not complete the registration process without clicking an 'I Agree' button, which signified assent to the terms in the membership agreement.
  • Steven J. Caspi and the other named plaintiffs registered for MSN by viewing the agreement and clicking 'I Agree'.
  • Subsequently, Microsoft allegedly rolled over the plaintiffs' memberships into more expensive plans without their explicit permission, a practice plaintiffs termed 'unilateral negative option billing'.
  • This billing practice formed the basis of the legal dispute between the plaintiffs and Microsoft.

Procedural Posture:

  • Steven J. Caspi and other plaintiffs filed a purported class action complaint against Microsoft in a New Jersey state trial court.
  • Microsoft removed the case to the U.S. District Court for the District of New Jersey but later withdrew the removal, returning the case to state court.
  • Plaintiffs moved for multistate class action certification.
  • Microsoft filed a motion to dismiss the complaint for improper venue, citing the forum selection clause in its membership agreement.
  • The trial court granted Microsoft's motion to dismiss, finding the forum selection clause valid and enforceable.
  • Plaintiffs (appellants) appealed the trial court's dismissal to the Superior Court of New Jersey, Appellate Division, with Microsoft as the appellee.

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Issue:

Does a forum selection clause in an online subscriber agreement bind a user who signifies assent by clicking 'I Agree', even if they did not read the clause?


Opinions:

Majority - Kestin, J.A.D.

Yes. A forum selection clause presented in an online subscriber agreement is valid and enforceable when the user has an opportunity to review the agreement and is required to affirmatively assent to its terms. Forum selection clauses are presumed valid in New Jersey and will be enforced unless the objecting party can show the clause resulted from fraud or overweening bargaining power, its enforcement would violate strong public policy, or it would seriously inconvenience the trial. Here, plaintiffs failed to meet that burden. There was no fraud, as the clause was clear and not concealed. There was no overweening bargaining power, as consumers had other choices in the competitive online service market and could reject Microsoft's terms with impunity. Enforcing the clause does not violate New Jersey's consumer protection policies, and given that the plaintiffs and the proposed class reside in various states, litigating in Washington is not demonstrably more inconvenient than any other single location. The on-screen presentation and the requirement to click 'I Agree' provided adequate notice, making the scenario analogous to traditional print contracts where a party is bound by the terms, read or not.



Analysis:

This case is a foundational decision in the law of electronic commerce, establishing that 'clickwrap' agreements are generally enforceable contracts. By applying the principles from traditional contract law, particularly the reasoning in Carnival Cruise Lines v. Shute, to the digital realm, the court affirmed the validity of standard form online agreements. The decision provides legal certainty for online vendors wishing to use forum selection clauses to manage litigation risks across multiple jurisdictions. It solidifies the principle that a user's affirmative action, like clicking 'I Agree', constitutes a binding acceptance of terms they had an opportunity to review, thereby placing the onus on the consumer to read online contracts.

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