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					                                         Chapter 19

                  E-Contracts and
                   E-Signatures

Case 19.1
United States District Court,E.D. Pennsylvania.
Lawrence FELDMAN, Plaintiff,
v.
GOOGLE, INC., Defendant.
Civil Action No. 06-2540.
March 29, 2007.
MEMORANDUM
GILES, J.
I. Introduction
*1 Before the court is Defendant Google, Inc.'s Motion to Dismiss Plaintiff's Amended Complaint, or in the alternative, to
Transfer, which motion the court converted to a Motion for Summary Judgment. Also before the court is Plaintiff Lawrence
E. Feldman's Cross-Motion for Summary Judgment. The ultimate issues raised by the motions and determined by the court
are whether a forum selection clause in an internet “clickwrap” agreement is enforceable under the facts of the case and, if
so, whether transfer of this case to the Northern District of California is warranted. The court finds in the affirmative as to
both issues and, therefore, denies Plaintiff's Motion for Summary Judgment, grants Defendant's Motion to Transfer, and
transfers this case to the Northern District of California, San Jose Division. The reasons follow.
Defendant's motion seeks to enforce the forum selection clause in an online “clickwrap” agreement, which provides for venue
in Santa Clara County, California, which is within the San Jose Division. In his original complaint, Plaintiff based his claims
on a theory of express contract. In his Amended Complaint, however, Plaintiff offers a wholly new legal theory. He argues
that no express contract existed because the agreement was not valid. Withdrawing his express contract allegations, Plaintiff
advanced the theory of implied contract because he argues he did not have notice of and did not assent to the terms of the
agreement and therefore there was no “meeting of the minds.” Plaintiff also argues that, even if the agreement were
controlling, it is a contract of adhesion and unconscionable, and that the forum selection clause is unenforceable.

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The court will address these arguments in turn. First, the court will examine what law governs this action, Pennsylvania or
California law, state or federal law. Turning to the question of whether the forum selection clause is enforceable, the court
will determine whether an express or implied contract exists and whether there was reasonable notice of the contract's
terms. The court next will examine whether the contract and its terms are unconscionable.
If the forum selection clause is enforceable, the court will address whether dismissal or transfer is the appropriate remedy,
and, if transfer is appropriate, whether 28 U.S.C. § 1404(a) or 28 U.S.C. § 1406 applies. If § 1404(a) controls, the court will
determine whether the language of the forum selection clause is permissive or mandatory in order to ascertain what weight
to give it. Then, the court will examine the validity or reasonableness of the forum selection clause through application of the
test in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12-13, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). Finally, the court will
weigh the private and public factors under § 1404(a) to determine whether transfer is warranted.
II. Factual Background
A. General Background
On or about January 2003, Plaintiff, a lawyer with his own law firm, Lawrence E. Feldman & Associates, purchased
advertising from Defendant Google, Inc.'s “AdWords” Program, to attract potential clients who may have been harmed by
drugs under scrutiny by the U.S. Food and Drug Administration.
*2 In the AdWords program, whenever an internet user searched on the internet search engine, Google.com, for keywords or
“Adwords” purchased by Plaintiff, such as “Vioxx,” “Bextra,” and “Celebrex,” Plaintiff's ad would appear. If the searcher
clicked on Plaintiff's ad, Defendant would charge Plaintiff for each click made on the ad.
This procedure is known as “pay per click” advertising. The price per keyword is determined by a bidding process, wherein
the highest bidder for a keyword would have its ad placed at the top of the list of results from a Google.com search by an
internet user.
Plaintiff claims that he was the victim of “click fraud.” Click fraud occurs when entities or persons, such as competitors or
pranksters, without any interest in Plaintiff's services, click repeatedly on Plaintiff's ad, the result of which drives up his
advertising cost and discourages him from advertising. Click fraud also may be referred to as “improper clicks” or, to coin a
phrase, “trick clicks.” Plaintiff alleges that twenty to thirty percent of all clicks for which he was charged were fraudulent.
He claims that Google required him to pay for all clicks on his ads, including those which were fraudulent.
Plaintiff does not contend that Google actually knew that there were fraudulent clicks, but alleges that click fraud can be
tracked and prevented by computer programs, which can count the number of clicks originating from a single source and
whether a sale results, and can be tracked by mechanisms on websites. Plaintiff alleges, therefore, that Google had the
capacity to determine which clicks were fraudulent, but did nothing to prevent the click fraud, and did not adequately warn
him about click fraud or investigate his complaints about click fraud. Plaintiff alleges that Google informed him that it did
not keep records on an advertiser's account and click history for more than the most recent three months, and that Google
disclaimed liability for clicks older than sixty days. The issue of click fraud with respect to the AdWords program led to a
class action suit in Arkansas, which was settled and court approval was given on or about July 26, 2006. (Pl. Opp. to Mot. to
Dismiss, Ex. A.) Plaintiff alleges that he was a member of that class but timely opted out in order to pursue an individual
action. Plaintiff alleges Google charged him over $100,000 for AdWords from about January 2003 to December 31, 2005.
Plaintiff seeks damages, disgorgement of any profits Defendant obtained as a result of any unlawful conduct, and restitution
of money Plaintiff paid for fraudulent clicks.
B. The Online Agreement and Forum Selection Clause
This cross-summary judgment battle turns entirely on a forum selection clause in the AdWords online agreement. It is
undisputed that the forum selection clause provides: “The Agreement must be construed as if both parties jointly wrote it,
governed by California law except for its conflicts of laws principles and adjudicated in Santa Clara County, California.”(Def.
Mot. to Dismiss, Ex. A, at ¶ 7 (emphasis added).)
*3 Annie Hsu, an AdWords Associate for Google, Inc., testified by affidavit that the following procedures were in place at the
time that Plaintiff activated his AdWords account in about January 2003. (Hsu Decl. ¶ 7). Although Plaintiff claims that the
AdWords Agreement “was neither signed nor seen and negotiated by Feldman & Associates or anyone at his firm” (Pl. Opp.
to Mot. to Dismiss at 2) and that he never “personally signed a contract with Google to litigate disputes in Santa Clara
County, California” (Pl. Reply at 1), Plaintiff does not dispute that he followed the process outlined by Hsu. It is undisputed
that advertisers, including Plaintiff, were required to enter into an AdWords contract before placing any ads or incurring any
charges. (Hsu Decl. ¶ 2.) To open an AdWords account, an advertiser had to have gone through a series of steps in an online
sign-up process. (Hsu Decl. ¶ 3.) To activate the AdWords account, the advertiser had to have visited his account page,
where he was shown the AdWords contract. (Hsu Decl. ¶ 4.)
Toward the top of the page displaying the AdWords contract, a notice in bold print appeared and stated, “Carefully read
the following terms and conditions.If you agree with these terms, indicate your assent below.”(Hsu Decl. ¶ 4.) The terms
and conditions were offered in a window, with a scroll bar that allowed the advertiser to scroll down and read the entire
contract. The contract itself included the pre-amble and seven paragraphs, in twelve-point font. The contract's pre-amble, the
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first paragraph, and part of the second paragraph were clearly visible before scrolling down to read the rest of the contract.
The preamble, visible at first impression, stated that consent to the terms listed in the Agreement constituted a binding
agreement with Google. A link to a printer-friendly version of the contract was offered at the top of the contract window for
the advertiser who would rather read the contract printed on paper or view it on a full-screen instead of scrolling down the
window. (Hsu Decl. ¶ 5.) At the bottom of the webpage, viewable without scrolling down, was a box and the words, “Yes, I
agree to the above terms and conditions.”(Hsu Decl. ¶ 4.) The advertiser had to have clicked on this box in order to proceed
to the next step. (Hsu Decl. ¶ 6.) If the advertiser did not click on “Yes, I agree ...” and instead tried to click the “Continue”
button at the bottom of the webpage, the advertiser would have been returned to the same page and could not advance to the
next step. If the advertiser did not agree to the AdWords contract, he could not activate his account, place any ads, or incur
any charges. Plaintiff had an account activated. He placed ads and charges were incurred.
III. Procedural History
This matter commenced by writ of summons in the Common Pleas Court of Philadelphia County on March 9, 2006. Plaintiff
filed his original Complaint on June 5, 2006. The matter was removed to federal district court on June 14, 2006 pursuant to
diversity jurisdiction under 28 U.S.C. § 1332. On July 10, 2006, Defendant filed its first Motion to Dismiss the original
complaint.
*4 On August 9, 2006, without leave of court, Plaintiff filed an Amended Complaint, which eliminated the express contract
claim and asserted instead claims styled as (1) breach of implied contract, (2) breach of implied covenant of good faith and
fair dealing, (3) fraudulent inducement, (4) negligence, (5) unjust enrichment, and (6) violation of California's Business and
Professions Code, § 17200, et. seq. Plaintiff reduced his demand for damages from $100,000 to $50,000. This court has
jurisdiction based on diversity under 28 U.S.C. § 1332 because the amount in controversy measured as of the date of
removal exceeded the jurisdictional threshold. See Angus v. Shiley, Inc., 989 F.2d 142, 145 (3d Cir.1993).
The court notes that Plaintiff did not seek leave of court or written consent of the adverse party in filing its Amended
Complaint after a responsive pleading had been served. SeeFed.R.Civ.P. 15(a). Defendant, however, did not object to or move
to strike the Amended Complaint. Instead, on August 28, 2006, Defendant filed a Motion to Dismiss the Amended Complaint
under Fed.R.Civ.P. 12(b) (6) or, in the alternative, to transfer the case pursuant to 28 U.S.C. § 1404(a) to the Northern
District of California, whose San Jose Division is located within Santa Clara County (Def. Mot. to Dismiss at 4 n. 3). The
court deems any objections waived and considers the claims in the Amended Complaint to have amended those in the
original complaint. Furthermore, the court considered the Amended Complaint at oral argument. (See, e.g., Hrg. Tr. 14-15.)
Consequently, the court deems the Amended Complaint to have legal effect. When the briefing was complete, the court held
oral argument on the motion to dismiss on November 1, 2006. At oral argument, the court converted the motion to dismiss
into one for summary judgment under Fed.R.Civ.P. 56 pursuant to Fed.R.Civ.P. 12(b). Matters outside the pleadings had to
be considered to address the motion adequately. The court ordered the parties to submit information regarding the clickwrap
agreement and the manner into which it was entered. In response, Defendant submitted a Supplemental Memorandum on
November 16, 2006, to which Plaintiff responded on December 26, 2006. On December 6, 2006, Plaintiff filed a Motion for
Summary Judgment. Defendant filed a response to Plaintiff's summary judgment motion on January 8, 2007, to which
Plaintiff replied on January 26, 2007.
IV. Legal Standard for Summary Judgment
Under Fed.R.Civ.P. 56(c), summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that
the moving party is entitled to a summary judgment as a matter of law.”Celetox Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct.
2548, 91 L.Ed.2d 265 (1986); Fed.R.Civ.P. 56(c). In order to defeat a motion for summary judgment, disputes must be both 1)
material, meaning concerning facts that will affect the outcome of the issue under substantive law, and 2) genuine, meaning
the evidence must be such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Summary judgment is mandated “against a party who fails to
make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will
bear the burden of proof at trial.”Celotex, 477 U.S. at 322-23. In reviewing a motion for summary judgment, the court “does
not make credibility determinations and must view facts and inferences in the light most favorable to the party opposing the
motion.”Siegel Transfer, Inc. v. Carrier Express, Inc., 54 F.3d 1125, 1127 (3d Cir.1995).
IV. Discussion
A. Choice of Law
*5 Defendant argues that the court must apply California law. The AdWords Agreement contains a choice of law clause,
specifying that the Agreement must be governed by California law. (Def. Mot. to Dismiss, Ex. A, at ¶ 7.) Defendant and
Plaintiff both rely upon Pennsylvania and California substantive law in their briefs and arguments.
In a diversity case, a federal court must apply the conflict of laws principles of the state in which it sits. Klaxon Co. v. Stentor
Electric Mfg. Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Under Pennsylvania law, conflict of laws
principles generally are not offended by the application of a contractual choice of law provision in a valid contract.Boase v.
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Lee Rubber & Tire Corp., 437 F.2d 527, 529 (3d Cir.1970); cf.Restatement (Second) of Conflict of Laws § 187 (1989). As
discussed in detail below, the court finds that the AdWords Agreement is enforceable. California law therefore would govern
this dispute. Cf. DeJohn v. TV Corp. Int'l, 245 F.Supp.2d 913, 918 (N.D.Ill.2003) (applying New York substantive law to
claims involving an online agreement and its forum selection clause because the agreement at issue was valid and required
New York law in its choice of law clause).
Most circuit courts, however, have found that federal, and not state law, applies in the determination of the effect given to a
forum selection clause in diversity cases. See, e.g., Rainforest Café v. EklecCo, L.L.C., 340 F.3d 544, 546 (8th Cir.2003); Jones
v. Weibrecht, 901 F.2d 17, 19 (2d Cir.1990); Manetti-Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509, 512-13 (9th Cir.1988);
Stewart Org., Inc. v. Ricoh Corp., 810 F.2d 1066, 1067-69 (11th Cir.1987) (en banc), aff'd on other grounds,487 U.S. 22, 108
S.Ct. 2239, 101 L.Ed.2d 22 (1988); see also Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 31-32, 108 S.Ct. 2239, 101 L.Ed.2d
22 (1988) (holding that in diversity cases, federal law governs determination of what effect to give forum selection clause in
contract). The Third Circuit has held that federal law controls because “questions of venue and the enforcement of forum
selection clauses are essentially procedural, rather than substantive, in nature.”Jumara v. State Farm Ins. Co., 55 F.3d 873,
877 (3d Cir.1995) (quoting Weibrecht, 901 F.2d at 19);see Wall Street Aubrey Golf, LLC v. Aubrey, 189 Fed. Appx. 82, 84 (3d
Cir.2006) (following Jumara to apply federal law); AmericanAnglican Envtl. Techs., L.P. v. Doherty, 461 F.Supp.2d 359
(E.D.Pa.2006) (same). Thus, this court follows the Third Circuit precedent set out in Jumara and applies federal law in
determining the validity of the forum selection clause at issue here.
B. The Online AdWords Agreement is a Valid Express Contract.
1. The Clickwrap Agreement is Enforceable.
Plaintiff contends that the online AdWords Agreement was not a valid, express contract, and that the law of implied contract
applies. In support of this contention, Plaintiff argues that he did not have notice of and did not assent to the terms of the
Agreement. Implying that the contract lacked definite essential terms, but failing to brief the issue, Plaintiff argues that the
contract did not include fixed price terms for services. He further argues that the AdWords Agreement presented does not set
out a date when Plaintiff may have entered into the contract. As to the latter argument, the unrebutted Hsu Declaration
states that the AdWords Agreement and online process presented went into effect at the time that Plaintiff activated his
AdWords account. (Hsu Decl. ¶ 7.) Plaintiff has not presented any evidence to the contrary, nor does he allege that any
agreement he made was different from the one presented through the Hsu Declaration. Thus, there is undisputed evidence
that the AdWords Agreement presented is the same that Plaintiff activated with Defendant.
*6 “Contracts are „express' when the parties state their terms and „implied‟ when the parties do not state their terms. The
distinction is based not on the contracts' legal effect but on the way the parties manifest their mutual assent.”Baer v. Chase,
392 F.3d 609, 616 (3d Cir.2006) (citing In re Penn. Cent. Transp. Co., 831 F.2d 1221, 1228 (3d Cir.1987)).“There cannot be an
implied-in-fact contract if there is an express contract that covers the same subject matter.”Id. at 616-17;see DeJohn, 245
F.Supp.2d at 918 (finding that implied contract claims were precluded where an enforceable express contract, an online
agreement, governed the parties' relationship); see also Crescent Int'l, Inc. v. Avatar Cmties., 857 F.2d 943, 944 (3d Cir.1988)
(“[P]leading alternate non-contractual theories is not alone enough to avoid a forum selection clause if the claims asserted
arise out of the contractual relation and implicate the contract's terms.”). The type of contract at issue here is commonly
referred to as a “clickwrap” agreement. 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.FN1Specht v. Netscape Comms. Corp., 306 F.3d 17, 22 (2d Cir.2002); Kevin W. Grierson, Enforceability of
“Clickwrap” or “Shrinkwrap” Agreements Common in Computer Software, Hardware, and Internet Transactions, 106 A.L.R.
5th 309, § 1.a n. 3 (2004); 4-GL Computer Contracts C (2006). Even though they are electronic, clickwrap agreements are
considered to be writings because they are printable and storable. See, e.g., In Re RealNetworks, Inc., Privacy Litigation, No.
00-c-1366, 2000 U.S. Dist. LEXIS 6584, at *8-11, 2000 WL 631341, at *3-4 (N.D.Ill. May 11, 2000).
FN1. A clickwrap agreement is distinguishable from a “browsewrap” agreement, which “allow[s] the user to view the terms
of the agreement, but do[es] not require the user to take any affirmative action before the Web site performs its end of the
contract,” such as simply providing a link to view the terms and conditions. James J. Tracy, Case Note, Legal Update:
Browsewrap Agreements: Register.com, Inc. v. Verio, Inc., 11 B.U. J. Sci. & Tech. L 164, 164-65 (2005).
To determine whether a clickwrap agreement is enforceable, courts presented with the issue apply traditional principles of
contract law and focus on whether the plaintiffs had reasonable notice of and manifested assent to the clickwrap agreement.
See, e.g., Specht, 306 F.3d at 28-30;Forrest v. Verizon Communications, Inc., 805 A.2d 1007, 1010 (D.C.Cir.2002); Barnett v.
Network Solutions, Inc., 38 S.W.3d 200 (Tex.App.2001); Caspi v. Microsoft Network, L.L.C., 323 N.J.Super. 118, 125-26, 732
A.2d 528 (App.Div.1999); John M. Norwood, A Summary of Statutory and Case Law Associated With Contracting in the
Electronic Universe, 4 DePaul Bus. & Comm. L.J. 415, 439-49 (2006) (discussing clickwrap cases); 1-2 Computer Contracts §
2.07 (2006) (analyzing clickwrap cases). Absent a showing of fraud, failure to read an enforceable clickwrap agreement, as
with any binding contract, will not excuse compliance with its terms. See, e.g., Specht, 306 F.3d at 30;Lazovick v. Sun Life
Ins. Co. of Am., 586 F.Supp. 918, 922 (E.D.Pa.1984); Barnett, 38 S.W.3d at 204.
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a. There was Reasonable Notice of and Mutual Assent to the AdWords Agreement.
*7 Plaintiff claims he did not have notice or knowledge of the forum selection clause, and therefore that there was no
“meeting of the minds” required for contract formation. In support of this argument, Plaintiff cites Specht v. Netscape
Comms. Corp., in which the Second Circuit held that internet users did not have reasonable notice of the terms in an online
agreement and therefore did not assent to the agreement under the facts of that case. 306 F.3d at 20, 31.
The facts in Specht, however, are easily distinguishable from this case. There, the internet users were urged to click on a
button to download free software. Id. at 23, 32.There was no visible indication that clicking on the button meant that the
user agreed to the terms and conditions of a proposed contract that contained an arbitration clause. Id. The only reference to
terms was located in text visible if the users scrolled down to the next screen, which was “submerged.” Id. at 23, 31-32.Even
if a user did scroll down, the terms were not immediately displayed. Id. at 23.Users would have had to click onto a hyperlink,
which would take the user to a separate webpage entitled “License & Support Agreements.” Id. at 23-24.Only on that
webpage was a user informed that the user must agree to the license terms before downloading a product. Id. at 24.The user
would have to choose from a list of license agreements and again click on yet another hyperlink in order to see the terms and
conditions for the downloading of that particular software.Id.
The Second Circuit concluded on those facts that there was not sufficient or reasonably conspicuous notice of the terms and
that the plaintiffs could not have manifested assent to the terms under these conditions. Id. at 32, 35.The Second Circuit was
careful to differentiate the method just described from clickwrap agreements which do provide sufficient notice. Id. at 22 n.
4, 32-33.Notably, the issue of notice and assent was not at issue with respect to a second agreement addressed in Specht. Id.
at 21-22, 36.In that clickwrap agreement, when users proceeded to initiate installation of a program, “they were
automatically shown a scrollable text of that program's license agreement and were not permitted to complete the
installation until they had clicked on a „Yes' button to indicate that they had accepted all the license terms. If a user
attempted to install [the program] without clicking „Yes,‟ the installation would be aborted.”Id. at 21-22. Through a similar
process, the AdWords Agreement gave reasonable notice of its terms. In order to activate an AdWords account, the user had
to visit a webpage which displayed the Agreement in a scrollable text box. Unlike the impermissible agreement in Specht,
the user did not have to scroll down to a submerged screen or click on a series of hyperlinks to view the Agreement. Instead,
text of the AdWords Agreement was immediately visible to the user, as was a prominent admonition in boldface to read the
terms and conditions carefully, and with instruction to indicate assent if the user agreed to the terms.
*8 That the user would have to scroll through the text box of the Agreement to read it in its entirety does not defeat notice
because there was sufficient notice of the Agreement itself and clicking “Yes” constituted assent to all of the terms. The
preamble, which was immediately visible, also made clear that assent to the terms was binding. The Agreement was
presented in readable 12-point font. It was only seven paragraphs long-not so long so as to render scrolling down to view all
of the terms inconvenient or impossible. A printer-friendly, full-screen version was made readily available. The user had
ample time to review the document.
Unlike the impermissible agreement in Specht, the user here had to take affirmative action and click the “Yes, I agree to the
above terms and conditions” button in order to proceed to the next step. Clicking “Continue” without clicking the “Yes”
button would have returned the user to the same webpage. If the user did not agree to all of the terms, he could not have
activated his account, placed ads, or incurred charges.
The AdWords Agreement here is very similar to clickwrap agreements that courts have found to have provided reasonable
notice. See, e.g., Forrest v. Verizon Communications, Inc., 805 A.2d 1007, 1010-11 (D.C.Cir.2002) (holding that adequate
notice was provided of clickwrap agreement terms where users had to click “Accept” to agree to the terms in order to
subscribe, an admonition in capital letters was presented at the top of the agreement to read the agreement carefully, the
thirteen-page agreement appeared in a scroll box with only portions visible at a time, and the forum selection clause was
located in the final section and presented in lower case font); In Re RealNetworks, Inc., Privacy Litigation, No. 00-c-1366,
2000 U.S. Dist. LEXIS 6584, at *2, 15-17, 2000 WL 631341, at *1, 5-6 (N.D.Ill. May 11, 2000) (finding reasonable notice of
clickwrap agreement terms existed where the user had to agree to the terms in order to install software, the agreement came
in a small pop-up window, in the same font-size as words in the computer's own display, and with the arbitration clause
located at the end of the agreement); Caspi v. Microsoft Network, L.L.C., 323 N.J.Super. 118, 122, 125-27, 732 A.2d 528
(App.Div.1999) (finding that reasonable notice of the terms of a clickwrap agreement was provided where the user had to
click “I agree” before proceeding with registration, the agreement was presented in a scrollable window, and the forum
selection clause was presented in lower case letters in the last paragraph of the agreement); cf. Pollstar v. Gigmania Ltd.,
170 F.Supp.2d 974, 981 (E.D.Cal.2000) (finding that reasonable notice of the terms of a browsewrap agreement was not
provided when a hyperlink to the terms appeared in small gray print on a gray background).
A reasonably prudent internet user would have known of the existence of terms in the AdWords Agreement. Plaintiff had to
have had reasonable notice of the terms. By clicking on “Yes, I agree to the above terms and conditions” button, Plaintiff
indicated assent to the terms. Therefore, the requirements of an express contract for reasonable notice of terms and mutual
assent are satisfied. Plaintiff's failure to read the Agreement, if that were the case, does not excuse him from being bound by
316        CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW


his express agreement.
b. The AdWords Agreement is Enforceable Despite Its Lack of a Definite Price Term.
*9 Plaintiff's argument that the AdWords Agreement is unenforceable because of failure to supply a definite, essential term
as to price is without merit. Under California and Pennsylvania law, the price term is an essential term of a contract and
must be supplied with sufficient definiteness for a contract to be enforceable. See, e.g., Levin v. Knight, 780 F.2d 786, 786
(9th Cir.1986); Lackner v. Glosser, 2006 Pa.Super. 14, 22-24, 892 A.2d 21 (Super.Ct.2006). If the parties, however, have
agreed upon a practicable method of determining the price in the contract with reasonable certainty, such as through a
market standard, the contract is enforceable. See, e.g., Portnoy v. Brown, 430 Pa. 401, 243 A.2d 444 (1968); 1 Witkin Sum.
Cal. Law Contracts § 142 (2006) (“[T]he complete absence of any mention of the price is not necessarily fatal: The contract
may be interpreted to mean the market price or a reasonable price.”).
The AdWords Agreement does not include a specific price term, but describes with sufficient definiteness a practicable
process by which price is determined.FN2(Def. Mot. to Dismiss, Ex. A, at ¶ 5.) The premise of the AdWords program is that
advertisers must bid for keywords or Adwords, and the highest bidder is placed at the top of the advertising hierarchy. Prices
are determined by the market, with the keywords higher in demand garnering higher prices. Plaintiff had to have been
aware of and understood the pricing process. Each time that he purchased keywords, he engaged in this process. At oral
argument, Plaintiff explained the process by which price was determined and conceded that the process was outlined in the
Agreement.FN3(Hrg. Tr. at 17-18.) The court concludes that the Adwords Agreement is enforceable because it contained a
practicable method of determining the market price with reasonable certainty.
FN2. Paragraph 5 of the Agreement states in part: “Payment.You shall be charged based on actual clicks or other billing
methods you may choose online (e.g. cost per impression). You shall pay all charges in the currency selected by you via your
online AdWords account, or in such other currency as is agreed to in writing by the parties. Charges are exclusive of taxes.
You are responsible to paying (y) [sic] all taxes and government charges, and (z) reasonable expenses and attorney fees
Google incurs collecting late amounts. You waive all claims relating to charges unless claimed within 60 days after the
charge (this does not effect your credit card issuer rights). Charges are solely based on Google's click measurements. Refunds
(if any) are at the discretion of Google and only in the form of advertising credit for Google Partners.”
FN3. Counsel for Plaintiff stated: “[T]he popularity of the word drives up the price of the click, and so when you go to not
enter the contract, but go to figure out what word you want to purchase, you see the going rate, and that can change from
hour-to-hour, day-to-day.”(Hrg. Tr. at 17-18.) When counsel for Defendant commented that this process is described in the
contract, Plaintiff's counsel said, “Yes, they explain that to you. It's the internet your honor, it is the twenty-first
century.”(Hrg. Tr. at 18.)
Because there was an express contract covering the same conduct at issue (pay-per-click advertising under the AdWords
program) and because the concepts of express and implied contracts are mutually exclusive and cannot co-exist, Plaintiff's
argument of an implied contract is precluded as a matter of law. In addition, the AdWords Agreement provides that it
constitutes the entire agreement between the parties, with the exception of any modifications in writing and executed by
both parties. (Def. Mot. to Dismiss, Ex. A, at ¶ 7.)
2. The Clickwrap Agreement is not Unconscionable.
Plaintiff argues that the AdWords Agreement and in particular the forum selection clause are unconscionable.
Unconscionability is a general defense to the enforcement of a contract or its specific terms. Blake v. Ecker, 93 Cal.App.4th
728, 741, 113 Cal.Rptr.2d 422 (Ct.App.2001), overruled on other grounds by Le Francois v. Goel, 35 Cal.4th 1094, 1107, 29
Cal.Rptr.3d 249, 112 P.3d 636 (2005); cf. Denlinger, Inc. v. Dendler, 415 Pa.Super. 164, 608 A.2d 1061, 1067
(Pa.Super.Ct.1992). Unconscionability has procedural and substantive components. Blake, 93 Cal.App.4th at 742, 113
Cal.Rptr.2d 422.“The procedural component is satisfied by the existence of unequal bargaining positions and hidden terms
common in the context of adhesion contracts. The substantive component is satisfied by overly harsh or one-sided results
that „shock the conscience.‟ ”Comb v. PayPal, Inc., 218 F.Supp.2d 1165, 1172 (N.D.Cal.2002) (citations omitted). The party
challenging the contractual provision has the burden to prove unconscionability. Crippen v. Cent. Valley RV Outlet, Inc., 124
Cal.App.4th 1159, 1165, 22 Cal.Rptr.3d 189 (Ct.App.2004).
a. The AdWords Agreement is not Procedurally Unconscionable.
*10 Under California law, a contract or its terms may be procedurally unconscionable if it is an adhesion contract. Flores v.
Transamerica HomeFirst, Inc., 93 Cal.App.4th 846, 853, 113 Cal.Rptr.2d 376 (Ct.App.2001); cf. Ostroff v. Alterra Healthcare
Corp., 433 F.Supp.2d 538, 542 (E.D.Pa.2006) (defining procedural unconscionability under Pennsylvania law as the “absence
of meaningful choice on the part of one of the parties”). A contract of adhesion is a form or standardized contract prepared by
a party of superior bargaining power, to be signed by the party in the weaker position, who only has the opportunity to agree
to the contract or reject it, without an opportunity to negotiate or bargain. Armendariz v. Found. Health Psychcare Serv., 24
Cal.4th 83, 113, 99 Cal.Rptr.2d 745, 6 P.3d 669 (2000); cf. McNulty v. H & R Block, Inc., 843 A.2d 1267, 1273
(Pa.Super.Ct.2004).
The opportunity to negotiate by itself does not end the inquiry into procedural unconscionability. Courts consider factors
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such as the buyer's sophistication, the use of high-pressure tactics or external pressure to induce acceptance, and the
availability of alternative sources of supply. See, e.g., Comb, 218 F.Supp.2d at 1172-73;Dean Witter Reynolds, Inc. v. Superior
Court, 211 Cal.App.3d 758, 767-72, 259 Cal.Rptr. 789 (Ct.App.1989); DeJohn v. TV. Corp. Int'l, 245 F.Supp.2d 913, 919
(N.D.Ill.2003).
Plaintiff argues the AdWords Agreement was a contract of adhesion because it was not negotiated at arms length and was
offered on a “take it or leave it” basis, without an opportunity to bargain. Internet users had to agree to the terms in order to
activate an AdWords account and purchase AdWords. Defendant counters that Plaintiff is a sophisticated purchaser, an
attorney, who had full notice of the terms, who was capable of understanding them, and who assented to them. Plaintiff has
not alleged high-pressure tactics or external pressure to accept the Agreement.
Defendant also argues that other internet providers offer similar advertising services, including MSN Search, AOL Search,
Ask.com, Yahoo!, Excite, Infospace, and HotBot, and thus Plaintiff could have chosen to take his business
elsewhere.FN4Plaintiff counters that the availability of other internet service providers does not undercut the existence of an
adhesion contract. See Comb, 218 F.Supp.2d at 1173 (citing Armendariz, 24 Cal.4th at 113, 99 Cal.Rptr.2d 745, 6 P.3d 669,
for the proposition that a contract may be adhesive even though alternative sources of employment not conditioned on
acceptance of an arbitration clause exist). Plaintiff also asserts that only Yahoo offers comparable advertising and that
Yahoo's sign up system is similar to Google's.
FN4. Defendant has not presented evidence as to this assertion.
Plaintiff, however, has not offered any evidence in support of his assertion. FN5 As such, he has not met his affirmative burden
on his summary judgment motion to make a sufficient showing that other online companies did not offer similar, competing
advertising services, which lacked forum selection clauses. See Crippen, 124 Cal.App.4th at 1165, 22 Cal.Rptr.3d 189
(holding that the burden to prove unconscionability rests with the party challenging the contractual provision). On this
factor in the analysis, the agreement stands up as not being procedurally unconscionable.
FN5. The court observes that, as one court has noted, “[t]he on-line computer industry is not one without competition, and
therefore consumers are left with choices as to which service they select for Internet access, e-mail and other information
services.”Caspi v. Microsoft Network, L.L.C., 323 N.J.Super. 118, 122-24, 732 A.2d 528 (App.Div.1999) (citations and
quotations omitted).
*11 Plaintiff also argues that the AdWords Agreement is procedurally unconscionable because the Agreement violates
Fed.R.Civ.P. 23(e), which requires adequate notice of opt-out rights. See Amchem Prods. v. Windsor, 521 U.S. 591, 628, 117
S.Ct. 2231, 138 L.Ed.2d 689 (1997). Plaintiff contends that Google violated Rule 23(e) and Plaintiff's due process rights in
that the settlement notice in the Arkansas class action did not state that any individual litigation would require bringing
suit in Santa Clara, California. Plaintiff's argument is flawed for several reasons. First, Plaintiff received adequate notice of
the forum selection clause requiring litigation in Santa Clara when he assented to the AdWords Agreement. Second, only the
settlement notice, and not the AdWords Agreement and its terms, could violate Rule 23(e), and violation of Rule 23(e) is not
part of the procedural unconscionability inquiry. Finally, the court-approved Arkansas class action settlement cannot be
collaterally attacked even if Plaintiff continued as a member of the class. See In re Diet Drugs, 431 F.3d 141, 145 (3d
Cir.2005) (holding that under federal law, an absent class member may only collaterally attack notice of a prior settlement if
there is a lack of due process, and that, once the issue of notice is decided by a court, it may not be relitigated). As an opt-out,
he has no standing in this action to challenge the adequacy of the class action notice approved by the Arkansas court.
A contract is not necessarily one of adhesion simply because it is a form contract. Courts have recognized the prevalence and
importance of standardized contracts in people's everyday lives. ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1451 (7th Cir.1996)
(quoting Restatement (2d) of Contracts § 211 cmt a (1981)) (“Standardization of agreements serves many of the same
functions as standardization of goods and services; both are essential to a system of mass production and distribution. Scarce
and costly time and skill can be devoted to a class of transactions rather than the details of individual transactions.”); Neal
v. State Farm Ins. Cos., 188 Cal.App.2d 690, 694, 10 Cal.Rptr. 781 (Ct.App.1961). Because Plaintiff was a sophisticated
purchaser, was not in any way pressured to agree to the AdWords Agreement, was capable of understanding the
Agreement's terms, consented to them, and could have rejected the Agreement with impunity, this court finds that the
AdWords Agreement was not procedurally unconscionable.
b. The AdWords Agreement is not Substantively Unconscionable.
Even if the AdWords Agreement were procedurally unconscionable, it is not substantively unconscionable. Under California
law, a contract found to be procedurally unconscionable may still be enforceable if its substantive terms are reasonable.
Craig v. Brown & Root, Inc., 84 Cal.App.4th 416, 422, 100 Cal.Rptr.2d 818 (Ct.App.2000); cf. Ostroff v. Alterra Healthcare
Corp., 433 F.Supp.2d 538, 542 (E.D.Pa.2006) (finding substantive unconscionability under Pennsylvania law where contract
terms unreasonably favor the party with greater bargaining power). California courts focus on whether there was a lack of
mutuality in contract formation and on the practical effects of the challenged provisions. Comb, 218 F.Supp.2d at
1173;Armendariz, 99 Cal.4th at 116-17 (noting that substantive unconscionability is satisfied if the agreement lacks a
“modicum on bilaterality”); Ellis v. McKinnon Broad Co., 18 Cal.App.4th 1796, 1803-04, 23 Cal.Rptr.2d 80 (Ct.App.1993).
318        CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW


*12 Plaintiff argues that the forum selection clause and other provisions lacked consideration and assent from the Plaintiff,
and therefore the Agreement was lacking a modicum of bilaterality. As the court has found that the AdWords Agreement
provided reasonable notice of its terms, had mutual assent, and was in other respects a valid express contract, the court
rejects this argument.
Plaintiff next argues that the AdWords Agreement contains several unilateral clauses, including the forum selection clause,
which make it substantively unconscionable. He argues that the forum selection clause unreasonably favors Google because
it requires billing disputes to be adjudicated in California. FN6 Plaintiff characterizes as unreasonable provisions disclaiming
all warranties, limiting liabilities, and requiring that claims relating to charges be brought within sixty days of the
charges.FN7Plaintiff contends that the effect of these provisions, in combination with the forum selection clause, is to
discourage meritorious litigation regarding billing disputes.
FN6. Plaintiff's assertion of undue burden due to health-related travel restrictions are irrelevant to the unconscionability
inquiry, which focuses on the unfairness of the terms at the time of entry into the Agreement. See Aron v. U-Haul Co. of
California, 143 Cal.App.4th 796, 808, 49 Cal.Rptr.3d 555 (Ct.App.2006). The court addresses this assertion in the context of
transfer under 28 U.S.C. § 1404(a) below.
FN7. The provisions cited by Plaintiff are:
(1) “GOOGLE DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION FOR
NONINFRINGEMENT, MERCHANTABILITY AND FITNESS FOR ANY PURPOSE.”(Def. Mot. to Dismiss, Ex. A, at ¶ 4);
(2) “EXCEPT FOR INDEMNIFICATION AMOUNTS PAYABLE TO THIRD PARTIES HEREUNDER AND YOUR
BREACHES OF SECTION 1, TO THE FULLEST EXTENT PERMITTED BY LAW: (a) NEITHER PARTY WILL BE
LIABLE FOR ANY CONSEQUENTIAL, SPECIAL, INDIRECT, EXEMPLARY, PUNITIVE, OR OTHER DAMAGES
WHETHER IN CONTRACT, TORT OR ANY OTHER LEGAL THEORY, EVEN IF ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY;
AND (b) EACH PARTY'S AGGREGATE LIABILITY TO THE OTHER IS LIMITED TO AMOUNTS PAID OR PAYABLE TO
GOOGLE BY YOU FOR THE AD GIVING RISE TO THE CLAIM.”(Def. Mot. to Dismiss, Ex. A, at ¶ 4); and
(3) “You waive all claims relating to charges unless claimed within 60 days after the charge (this does not effect your credit
card issuer rights).” (Def. Mot. to Dismiss, Ex. A, at ¶ 5).
First, the court is not persuaded that the forum selection clause, or any other provision cited by Plaintiff, is unreasonable or
shocks the conscience. As the United States Supreme Court has found, a forum selection clause in a standardized, non-
negotiable contract may be permissible for several reasons, reasons which apply here. See Carnival Cruise Lines, Inc. v.
Shute, 499 U.S. 585, 593-94, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991). Just as a cruise line has a special interest in limiting
fora because it could be subject to suit where its passengers come from many locales, Defendant has the same interest where
its internet users are located across the United States and the world. See id. at 593.Another benefit of such a forum selection
clause is that it dispels confusion over where suits are to be brought, conserving both litigant and judicial resources. Id. at
593-94.Finally, just as for the passengers in Carnival Cruise Lines, the benefits of such a forum selection clause may be
passed to internet users in the form of reduced rates for services, because of savings enjoyed by internet service providers by
limiting the fora for suit. See id. at 594.Plaintiff's argument that the terms discourage litigation of billing disputes thus is
not persuasive, especially where Defendant's principal place of business is in California. See Barnett v. Network Solutions,
Inc., 38 S.W.3d 200, 204 (Tex.App.2001) (citing Carnival Cruise Lines, 499 U.S. at 594).
Further, the provision requiring that claims relating to charges be brought within sixty days of the charges is not
unconscionable. Contractual limitations periods are valid and can be shorter than limitations periods prescribed by statute
so long as the period for bringing claims is reasonable. Han v. Mobil Oil Corp., 73 F.3d 872, 877 (9th Cir.1995); see Harris
Methodist Fort Worth v. Sales Support Servs. Inc. Employee Health Care Plan, 426 F.3d 330, 337 (5th Cir.2005); Northlake
Reg'l Med. Ctr. v. Waffle House Sys. Employee Benefit Plan, 160 F.3d 1301, 1302-03 (11th Cir.1998); Doe v. Blue Cross & Blue
Shield United of Wis., 112 F.3d 869, 874 (7th Cir.1997). California courts have upheld contractual limitations periods similar
to the one here. See, e.g., Levitsky v. Farmers Ins. Group of Cos., No. A096220, 2002 Cal.App. Unpub. LEXIS 2004, at *13-15,
2002 WL 1278071, at *4 (Cal.Ct.App. June 10, 2002) (finding that a 60-day limitations period in which to file billing claims is
not unreasonable); Capehart v. Heady, 206 Cal.App.2d 386, 388-91, 23 Cal.Rptr. 851 (Ct.App.1962) (holding that a three-
month limitations period in a lease was not unreasonable).
*13 Cases cited by Plaintiff in support of his position are distinguishable because the AdWords Agreement effects only billing
disputes and does not inhibit any judicially-created doctrines or prevent litigants from enforcing constitutionally-protected
rights. See Anthony v. Alexander Int'l, L.P., 341 F.3d 256, 266 (3d Cir.2003) (finding unreasonable a 30-day limitations
period for any claim arising out of an employment agreement); Circuit City Stores, Inc. v. Adams, 279 F.3d 889, 894 (9th
Cir.2002) (concluding that a one-year limitations period to state Fair Employment and Housing Act Claims was
unreasonable because it would deprive plaintiffs of the judicially-created continuing violation doctrine in discrimination
cases). In the present case, Plaintiff is an attorney and sophisticated purchaser capable of understanding the limitations
provision. The 60-day limitations period affords sufficient time to identify, investigate, and report billing errors.
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Finally, as to the other provisions, including those disclaiming all warranties and limiting liabilities, Plaintiff has not met
his burden of persuasion as to unconscionability and does not present case law to support his position. No basis has been
presented for the court to conclude that these commonplace terms are unreasonable.
In addition, even if any of the provisions of the contract were unenforceable, these provisions could be modified or severed
under the AdWords Agreement's severability clause. FN8(Def. Mot. to Dismiss, Ex. A, at ¶ 7.) The court finds that neither the
AdWords Agreement nor its terms, including the forum selection clause, are unconscionable, and that the AdWords
Agreement and its forum selection clause are enforceable.
FN8. The clause provides: “Unenforceable provisions will be modified to reflect the parties' intention, and remaining
provisions of the Agreement will remain in full effect.”(Def. Mot. to Dismiss, Ex. A, at ¶ 7.)
C. Analysis under 28 U.S.C. § 1404(a)
1. Transfer of Venue
Defendant moves for this court to dismiss Plaintiff's complaint or in the alternative, transfer this case to the federal district
court in Santa Clara County, pursuant to 28 U.S.C. § 1404(a). As discussed above, federal law controls when deciding
whether to give effect to a forum selection clause and transfer a case. Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29, 32,
108 S.Ct. 2239, 101 L.Ed.2d 22 (1988); Jumara v. State Farm Ins. Co., 55 F.3d 873, 877 (3d Cir.1995). Although dismissal
under Rule 12(b)(6) is a “permissible means of enforcing a forum selection clause that allows suit to be filed in another
federal forum,” the Third Circuit cautions that “as a general matter, it makes better sense, when venue is proper but the
parties have agreed upon a not-unreasonable forum selection clause that points to another federal venue, to transfer rather
than dismiss.”Salovaara v. Jackson Nat'l Life Ins. Co., 246 F.3d 289, 298-99 (3d Cir.2001); see Stewart, 487 U.S. at 28-29, 32
(holding that a federal court sitting in diversity jurisdiction should treat a request to enforce a forum selection clause in a
contract as a motion to transfer venue under applicable federal law, 28 U.S.C. § 1404(a)); 15 Charles Alan Wright, Arthur R.
Miller & Edward H. Cooper, Federal Practice and Procedure § 3803.1 (2d ed. 1986 & Supp.2006).
*14 Transfer, however, is not available when a forum selection clause specifies a non-federal forum. Salovaara, 246 F.3d at
298. Plaintiff contends that the forum selection clause contemplated jurisdiction in state, not federal court. However, the
forum selection clause, which states “[t]he Agreement must be ... adjudicated in Santa Clara County, California,” on its face
does not limit jurisdiction to state court. The forum selection clause provides for proper venue in both federal and state
courts, so long as those courts are located in Santa Clara County, California, because the provision's plain language is
construed to cover any court in that county. See Jumara, 55 F.3d at 881 (construing an arbitration provision requiring the
action to transpire within a particular county to mean that the action would be permitted in any court, state or federal, in
that county).
The federal courthouse for the San Jose Division of the Northern District of California is located in the city of San Jose. San
Jose is the county seat of government for Santa Clara County. The federal courthouse therefore is located undisputably in
Santa Clara County. Transfer is an available remedy because the forum selection clause includes a federal forum. See id. at
881-83 (applying the § 1404(a) analysis for transfer where a forum selection clause permitted any state or federal forum
within a particular county). If transfer is the appropriate remedy, the court must then consider whether 28 U.S.C. § 1404(a)
or § 1406 applies. “Section 1404(a) provides for the transfer of a case where both the original venue and the requested venue
are proper. Section 1406, on the other hand, applies where the original venue is improper and provides for either transfer or
dismissal of the case.”Id. at 878.Whether venue is proper in this district is governed by the federal venue statute, 28 U.S.C. §
1391. Id.
Without considering the forum selection clause, venue is proper in the Eastern District of Pennsylvania. Neither party
disputes that Defendant is subject to personal jurisdiction in this district because Defendant transacts business here. See28
U.S.C. § 1391(c); Jumara, 55 F.3d at 878-79;Stewart, 487 U.S. at 29 n. 8 (“The parties do not dispute that the District Court
properly denied the motion to dismiss the case for improper venue under 28 U.S.C. § 1406(a) because respondent apparently
does business [there].”). Defendant itself raised transfer under 1404(a), conceding that venue is proper here. Thus, the venue
here is proper but the parties are subject to an enforceable forum selection clause, which, as discussed below, is not
unreasonable and specifies a federal forum. See Salovaara, 246 F.3d at 298-99. This court therefore concludes that the
appropriate analysis is whether the case should be transferred under § 1404(a).See id.
2. Section 1404(a) Factors
Section 1404(a) controls the inquiry of whether to give effect to a forum selection clause and to transfer a case. Stewart, 487
U.S. at 29, 32.Section 1404(a) provides that “a district court may transfer any civil action to any other district or division
where it might have been brought” for “the convenience of parties and witnesses” and “in the interest of justice.” 28 U.S.C. §
1404(a); see Stewart, 487 U.S. at 29. Courts must adjudicate motions to transfer based on an “individualized, case-by-case
consideration of convenience and fairness,” weighing a number of factors. Id. (quoting Van Dusen v. Barrack, 376 U.S. 612,
622, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964)). A court's review is not limited to the three enumerated factors in § 1404(a)-
convenience of the parties, convenience of witnesses, or interests of justice-and courts may consider various private and
public interests. Jumara, 55 F.3d at 879-80.
320        CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW


*15 The parties' agreement as to the proper forum, although not dispositive, receives “substantial consideration” in the
weighing of relevant factors. Id. at 880;see Stewart, 487 U.S. at 29-30 (“The presence of a forum selection clause ... will be a
significant factor that figures centrally in the district court's calculus.... The flexible and individualized analysis Congress
prescribed in § 1404(a) thus encompasses consideration of the parties' private expression of their venue preferences.”). The
deference generally given to a plaintiff's choice of forum is “inappropriate where the plaintiff has already freely chosen an
appropriate venue.”Jumara, 55 F.3d at 880. Although the moving party carries the burden to show the need for a transfer, if
“the forum selection clause is valid, which requires that there have been no „fraud, influence, or overweening bargaining
power,‟ the plaintiffs bear the burden of demonstrating why they should not be bound by their contractual choice of
forum.”Id. at 879-80 (quoting M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 12-13, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972)).
Having determined that § 1404(a) controls, the court now examines whether the language of the forum selection clause is
permissive or mandatory in order to ascertain what weight to give it. Next, the court examines the validity or reasonableness
of the forum selection clause through application of the test in M/S Bremen v. Zapata Off-Shore Co., 407 U.S. at 12-13, and
determines whether Plaintiff has met his burden of demonstrating why he should not be bound by the forum selection
clause. Finally, the court weighs the private and public factors under § 1404(a).
a. The Language of the Forum Selection Clause is Mandatory.
Plaintiff argues that even if the forum selection clause is valid, this court still retains jurisdiction because the forum
selection clause contains language that is permissive, not mandatory. Where a forum selection clause is permissive, the
parties are not exclusively limited to litigating their disputes in only one forum and courts accord the clause less weight. See
Hunt Wesson Foods, Inc. v. Supreme Oil Company, 817 F.2d 75, 77 (9th Cir.1987); E'Cal Corp. v. Office Max Inc., No. 01-
3281, 2001 U.S. Dist. LEXIS 15868, at *6, 2001 WL 1167534, at *2 (E.D.Pa. Sept.10, 2001). The forum selection clause does
not have to contain language such as “exclusive” or “sole” to be mandatory. Wall Street Aubrey Golf, LLC v. Aubrey, 189 Fed.
Appx. 82, 85-86 (3d Cir.2006) (upholding a forum selection clause, which stated “[t]his Lease shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania, with venue laid in Butler County, Pennsylvania,” and
finding it unambiguous “[d]espite the provision's failure to use words like „exclusive‟ or „sole‟ with respect to venue”). The
forum selection clause states, “[t]he Agreement must be ... adjudicated in Santa Clara County, California.”By its plain
language, the forum selection clause unambiguously provides that disputes must be brought in Santa Clara County. Cf.
Person v. Google, Inc., 456 F.Supp.2d 488, 493-94 (S.D.N.Y.2006) (finding similar language to be mandatory where the forum
selection clause provided that “[any] dispute or claim arising out of or in connection with this Agreement shall be adjudicated
in Santa Clara County, California”).“This mandatory language makes clear that venue, the place of suit, lies exclusively in
the designated county. Thus, whether or not several states might otherwise have jurisdiction over actions stemming from the
agreement, all actions must be filed and prosecuted in [the designated county].”Docksider, Ltd. v. Sea Tech., Ltd., 875 F.2d
762, 764 (9th Cir.1989) (construing a forum selection clause's language that “venue of any action brought hereunder shall be
deemed to be in Gloucester County, Virginia” to be mandatory). The court finds that the forum selection clause's clear and
explicit language in this case is mandatory and enforceable.
b. The Forum Selection Clause is Valid and Reasonable.
*16 “Where the forum selection clause is valid, which requires that there have been no „fraud, influence, or overweening
bargaining power,‟ the plaintiffs bear the burden of demonstrating why they should not be bound by their contractual choice
of forum.”Jumara, 55 F.3d at 880 (quoting Bremen, 407 U.S. at 12-13). The objecting party must show that (1) the forum
selection clause is the result of fraud or overreaching, (2) its enforcement would violate a strong public policy of the forum, or
(3) its enforcement would result in litigation so seriously inconvenient and unreasonable that it would deprive a litigant of
his or her day in court. Bremen, 407 U.S. at 15-17;In re Diaz Contracting, Inc., 817 F.2d 1047, 1051-52 (3d Cir.1987).
i. No Fraud or Overreaching.
Plaintiff presents arguments that the AdWords Agreement was an adhesion contract and that the Agreement and its forum
selection clause are unconscionable. The court has already rejected these arguments and does not find any evidence of fraud,
coercion, or overreaching in this case with respect to the contract as a whole and the forum selection clause in particular. A
non-negotiated forum selection clause in a form contract may be enforceable even if it is not the subject of bargaining.
Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593-94, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991).
Although forum selection clauses are subject to judicial scrutiny for fundamental fairness, there is no evidence of bad faith
by the Defendant. See id. at 595.There is no indication that Defendant included the forum selection clause “as a means of
discouraging [customers] from pursuing legitimate claims,” especially where Defendant has its principal place of business in
Santa Clara and has a legitimate interest in protecting itself from suit in all fifty states. See id.Furthermore, Plaintiff had
notice of the forum selection clause and retained the option of rejecting the contract with impunity. See id.
ii. No Violation of a Strong Public Policy of the Forum.
The forum selection clause at issue does not violate a strong public policy of this forum. Indeed, it would be consistent with
the public policy of this forum to enforce the forum selection clause in order to give force to the parties' agreement. See
Jumara, 55 F.3d at 880 (holding that valid forum selection clauses are entitled to substantial consideration). In addition, a
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California forum would be more appropriate because California law applies to disputes under the Agreement.
iii. Enforcement Will Not Deprive Plaintiff of his Day in Court.
Plaintiff argues that litigating this dispute in California would be prohibitively difficult, so as to deprive him of his day in
court, because his heart condition requires that he restrict his travel (Pl. Mot. for Summ. J., Ex. A) and because the cost of
hiring a lawyer in California would be prohibitively expensive. “Mere inconvenience or additional expense is not the test of
unreasonableness since it may be assumed that the plaintiff received under the contract consideration for these things. If the
agreed upon forum is available to plaintiff and said forum can do substantial justice to the cause of action then plaintiff
should be bound by his agreement.”Cent. Contracting Co. v. Maryland Casualty Co., 367 F.2d 341, 344 (3d Cir.1966) (quoting
Cent. Contracting Co. v. C.E. Youngdahl & Co., Inc., 418 Pa. 122, 133-34, 209 A.2d 810 (1965)).
*17 Plaintiff's arguments regarding additional expense are not sufficient to show he would be deprived of his day in court.
Furthermore, Plaintiff or any of the attorneys he employs in his law firm, such as those who have appeared on his behalf in
this matter, may apply for admission pro hac vice to represent Plaintiff in any litigation in California, thus relieving Plaintiff
of hiring a lawyer in California. Although the court is sympathetic to Plaintiff's health concerns, the restriction on his travel
does not have the effect of depriving him of his day in court. As Defendant has proposed, accommodations can be made, such
as arranging for his continued representation by attorneys in his firm in California court, possible telephonic or video
appearances, and, where possible, the scheduling of depositions to occur near Plaintiff's home.
California is not a “remote alien forum.” See Carnival Cruise Lines, 499 U.S. at 594 (quoting Bremen, 407 U.S. at 17). Nor is
this dispute an inherently local one more suited to resolution in Pennsylvania than in California. See id.Although Plaintiff
argues that its witnesses and key documents are located in this judicial district, the alleged wrongful acts, including the
failure to prevent or investigate click-fraud and the overcharging for fraudulent clicks, occurred in substantial part in
California, where Defendant is headquartered. Thus, relevant documents and witnesses are located in California. Finally,
this dispute is better suited for resolution in a California court because California law governs this dispute and the amended
complaint includes a count under California law. Transfer to the appropriate venue ensures that Plaintiff will have his day
in court. There is no evidence that litigation in California would prevent Plaintiff from bringing any of his claims.
Enforcement of the forum selection clause therefore will not result in litigation so seriously inconvenient and unreasonable
so as to deprive Plaintiff of his day in court. Because the forum selection clause is valid, Plaintiff must demonstrate why he
should not be bound by it. See Jumara, 55 F.3d at 880.
c. Private Factors under § 1404(a)
The court accordingly turns to the private factors under § 1404(a). The private interests a court may consider in a § 1404(a)
analysis include: “plaintiff's forum preference as manifested in the original choice; the defendant's preference; whether the
claim arose elsewhere; the convenience of the parties as indicated by their relative physical and financial condition; the
convenience of the witnesses-but only to the extent that the witnesses may actually be unavailable for trial in one of the fora;
and the location of books and records (similarly limited to the extent that the files could not be produced in the alternative
forum).”Jumara, 55 F.3d at 879 (citations omitted). Because the forum selection clause is valid and reasonable, the choice of
forum of Santa Clara County in the AdWords Agreement is accorded substantial consideration and Plaintiff's choice of forum
is not given deference. Again, although Plaintiff argues that his witnesses and key documents are located in this judicial
district, any documents or witnesses needed to prove the heart of Plaintiff's claims-that Google had the capacity to determine
which clicks are fraudulent, did nothing to prevent click fraud, charged Plaintiff for fraudulent clicks, and failed to
investigate Plaintiff's complaints regarding click fraud-may be found in California, where Google is headquartered and
where a significant part of the alleged wrongs occurred. For the reasons discussed previously, Plaintiff's health condition and
expense concerns do not outweigh factors militating in favor of transfer. The private factors thus weigh in favor of transfer.
d. Public Factors under § 1404(a)
*18 The public interests a court may consider in a § 1404(a) analysis include: “the enforceability of the judgment; practical
considerations that could make the trial easy, expeditious, or inexpensive; the relative administrative difficulty in the two
fora resulting from court congestion; the local interest in deciding local controversies at home; the public policies of the fora;
and the familiarity of the trial judge with the applicable state law in diversity cases.”Jumara, 55 F.3d at 879-80 (citations
omitted).
The public factors under § 1404(a) also weigh in favor of transfer to Santa Clara County, California. As previously stated,
this dispute is better suited for resolution in a California court because California law governs this dispute and the amended
complaint includes a count under California law. Additionally, California courts have expertise in commercial litigation
involving web-based technology. This dispute is not inherently local, and the public policy of this forum would support
enforcement of the valid forum selection clause. Plaintiff has not met his burden as to why he should not be bound by the
valid forum selection clause. See id., 55 F.3d at 880. After according the parties' original choice of forum, as expressed in the
forum selection clause, substantial weight, and balancing the convenience of the parties, the convenience of the witnesses,
and the interests of justice, the court finds that this matter should be transferred to the Northern District of California, San
Jose Division.
322        CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW


D. Unjust Enrichment Claim
Defendant argues, in the alternative, that Plaintiff's unjust enrichment claim should be dismissed. As this matter was not
brought in the proper forum and is being transferred, this court does not have jurisdiction to decide this issue.
V. Conclusion
For the foregoing reasons, Defendant's motion to transfer is granted and Plaintiff's motion for summary judgment is denied.
An appropriate Order follows.




Case 19.2
2004 WL 2331918 (D.Kan.), 55 UCC Rep.Serv.2d 58
United States District Court,
D. Kansas.
MORTGAGE PLUS, INC., Plaintiff,
v.
DOCMAGIC, INC. d/b/a Document Systems, Inc., Defendant.
No. 03-2582-GTV-DJW.
Aug. 23, 2004.
WAXSE, Magistrate J.
Pending before the Court is Defendant's Motion to Transfer (doc. 9) this action to the Central District of California. Also
pending is Plaintiff's Motion for Leave to File Surreply to Defendant's Reply Memorandum (doc. 23). The Court will grant
Plaintiff's Motion to Leave to File Surreply and, upon consideration of the briefing before the Court, including the referenced
Surreply, [FN1] will grant Defendant's Motion to Transfer.
FN1. The Surreply is attached as an exhibit to Plaintiff's Motion (doc. 23).
Background
 Plaintiff Mortgage Plus, Inc. is a mortgage lender engaged in the business of originating mortgage loans in the State of
Kansas, its principal place of business. In the Fall of 1997, Mortgage Plus began looking for computer software and related
services to assist in preparation and management of loan closing documents. Mortgage Plus asserts it subsequently
negotiated and entered into a contract with Defendant DocMagic, Inc.--a California corporation-- whereby Mortgage Plus
agreed to pay specific amounts to DocMagic in exchange for access and use of software as well as for document preparation
services. Mortgage Plus maintains that neither during these negotiations nor in the resulting contractual agreement did the
parties discuss a venue where a potential dispute between the parties would have to be filed and resolved. Although no
documentation of this contractual agreement has been submitted to the Court, Mortgage Plus asserts in its pleadings that
the terms of this original agreement included the following price structure:
. Standard Draw w/ email transfer: $40
. Standard Draw w/o email transfer: $35
. 1st Re-Draw w/ email transfer: $25
. 1st Re-Draw w/o email transfer: $20
. 2nd Re-Draw w/ email transfer: $25
. 2nd Re-Draw w/o email transfer: $20
. 3+ Re-Draws w/ email transfer: $5 each
. 3+ Re-Draws w/o email transfer: N/C
. Additional Software User Fee $95
DocMagic disputes the existence of any informal or formal agreement regarding the use of its software and services at this
stage of the parties' discussion regarding prices. The parties do agree, however, that DocMagic ultimately shipped to
Mortgage Plus a CD-ROM containing the software required to begin using DocMagic's loan document preparation services.
The parties further agree that in order to begin using DocMagic's services, a customer must load the software from the CD-
ROM onto a designated computer. Before the software is installed on the customer's computer, a window displaying a
Software License and User Agreement ("Agreement") appears on the screen. At the end of the Agreement, the following text
is displayed: "Do you accept all terms of the preceding License Agreement? If you choose No, Setup will close." Notably, the
                                                        CHAPTER 19: E-CONTRACTS AND E-SIGNATURES                            323

Licensing Agreement contains a forum selection clause stating: "Both you and [DocMagic] submit to jurisdiction in California
and further agree that any cause of action arising under this Agreement shall be brought in the appropriate court in Los
Angeles, California."
After installing the software, Mortgage Plus regularly began utilizing the software and DocMagic's document preparation
services. Preparation of loan documents with DocMagic involved a three-step process. The first step required a Mortgage
Plus representative to use the DocMagic software to enter the specific loan information, which then created a user
worksheet. The Mortgage Plus representative then electronically sent the user worksheet to DocMagic for processing and,
after such processing, final loan documents that incorporated the information previously submitted in the worksheet were
electronically transferred to Mortgage Plus via e-mail for printing. On October 23, 2003, Mortgage Plus filed a lawsuit
against DocMagic in the District Court of Johnson County, Kansas alleging that in various loan transactions, DocMagic's
software failed to produce documents in the manner required by the federal Truth In Lending Act ("TILA"). Mortgage Plus
claims that these errors or omissions resulted in borrowers bringing claims against it for such violations and that the claims
ultimately cost Mortgage Plus $150,000 to resolve. The lawsuit, which consists of both contract and tort claims, subsequently
was removed to this Court. After removal, Defendant filed the pending Motion to Transfer this action to the Central District
of California on grounds that the terms of the Licensing Agreement require all claims arising out of the Agreement to be
brought in Los Angeles, California. Plaintiff opposes transfer of any and all of its claims and asserts that the forum selection
clause should not be enforced on several grounds. First, Plaintiff disputes the validity of the Software Licensing Agreement
as a contractual agreement between the parties. Second, Plaintiff challenges the enforceability of the forum selection clause.
Next, Plaintiff argues that its tort law claims are not transferable because they did not arise under the Software Licensing
Agreement. Finally, Plaintiff argues it would be in the interest of justice to keep the entire case in the District of Kansas
because it is a more convenient forum.
Discussion
 Upon review of the parties' arguments and the applicable law, the Court finds there are two primary issues to be
determined. The first issue is whether the Software Licensing Agreement is a valid contract. The second issue is whether
this case should be transferred pursuant to 28 U.S.C. § 1404(a) and, within that issue, the extent to which the forum
selection clause is enforceable. The Court will address each issue accordingly.
A. Is the Software Licensing Agreement a Valid Contract?
1. Choice of Law
To determine whether an agreement exists and, if so, the terms of such an agreement, a federal court must apply state law.
[FN2] When exercising diversity jurisdiction, the court must apply the forum state's choice of law rules to determine which
state's substantive law applies. [FN3] Thus, in this case, Kansas choice of law rules govern whether the Licensing
Agreement is to be construed under Kansas or California law.
FN2. M.K.C. Equip. Co. v. M.A.I.L.Code, Inc., 843 F.Supp. 679 (D.Kan.1994).

FN3. Boyd Rosene & Assoc. v. Kan. Mun. Gas Agency, 123 F.3d 1351, 1352-53 (10th Cir.1997) (citing Klaxon Co. v. Stentor
Elec. Mfg. Co., 313 U.S. 487, 495-97, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)).
Under Kansas choice of law rules, "[t]he law of the forum applies unless it is expressly shown that a different law governs,
and in case of doubt, the law of the forum is preferred." [FN4] "Generally, the party seeking to apply the law of a jurisdiction
other than the forum has the burden to present sufficient facts to show that other law should apply." [FN5]
FN4. Philippine Am. Life Ins. v. Raytheon Aircraft Co., 252 F.Supp.2d 1138, 1142 (D.Kan.2003) (citing Sys. Design & Mgmt.
Info. Inc. v. Kansas City Post Office Employees Credit Union, 14 Kan.App.2d 266, 788 P.2d 878, 881 (Kan.App.2d 1990)).
FN5. Miller v. Dorr, 262 F.Supp.2d 1233, 1237 (D.Kan.2003) (citing Layne Christensen Co. v. Zurich Canada, 30 Kan.App.2d
128, 38 P.3d 757, 767 (Kan.App.2002)).
As a preliminary matter, this Court notes that Kansas choice of law rules honor an effective choice of law provision made by
contracting parties. [FN6] In the absence of such a choice of law provision, Kansas choice of law rules alternatively provide
the law of the jurisdiction where the last act necessary to form a contract occurs that governs the contract's interpretation.
[FN7]
FN6. Equifax Servs. Inc. v. Hitz, 905 F.2d 1355, 1360 (10th Cir.1990).
FN7. Hall-Kimbrell Envtl. Servs., Inc. v. Archdiocese of Detroit, 878 F.Supp. 1409, 1414 n. 3 (D.Kan.1995) (citing Neumer v.
Yellow Freight Sys., Inc., 220 Kan. 607, Syl. ¶ 2, 556 P.2d 202 (1976)) (Kansas follows "lex loci contractus" theory of contract
interpretation; law of place contract was made governs construction of contract).
The Court, however, finds neither of these Kansas choice of law rules applies to the facts presented, because both rules
assume the existence of a contract in the first place. [FN8] Where, as here, the parties dispute the very existence of the
alleged contract, a choice of law analysis that considers the formation of and/or the terms and conditions of such a contract is
inherently defective. In the absence of a contract, "[t]he law of the forum applies unless it is expressly shown that a different
law governs, and in case of doubt, the law of the forum is preferred." [FN9] Thus, the Court concludes Kansas law is the
324        CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW


preferred law to apply to determine whether the Software Licensing Agreement is a valid contract. This conclusion is
supported by the fact that in their briefing, both parties primarily rely on Kansas and Tenth Circuit law.
FN8. See Excel Laminates, Inc. v. Lear Corp., No. 01-2172-GTV, 2003 WL 22466192, *3 (D.Kan. Oct.28, 2003) (rejecting
claimant's argument that a contract's choice of law provision was binding where the parties disputed the existence of the
contract) (citation omitted).
FN9. Philippine Am. Life Ins. v. Raytheon Aircraft Co., 252 F.Supp.2d at 1142.
2. The Validity of the Software Licensing Agreement
Mortgage Plus argues the purported license agreement is invalid, as it improperly attempts to supplement and/or modify the
terms of the parties' original contractual agreement. In support of this argument, Mortgage Plus maintains that prior to the
subject license agreement, Mortgage Plus and DocMagic negotiated and entered into a contract whereby Mortgage Plus
agreed to pay specific amounts to DocMagic in exchange for document preparation services. Mortgage Plus submits that
when DocMagic shipped the software necessary to utilize these services, the parties entered into a binding contract and that
neither during these negotiations nor in the resulting agreement did the parties discuss a venue where a potential dispute
between the parties would have to be filed and resolved.
a. Analysis under the Uniform Commercial Code
Relying first on Section 2-207 of the Uniform Commercial Code (U.C.C.), [FN10] Mortgage Plus argues that DocMagic's
attempt to modify and/or supplement the terms of the alleged original contractual agreement through the licensing
agreement was a mere proposal and, in the absence of additional consideration and the express agreement of Mortgage Plus,
does not alter the terms of the original contractual agreement.
FN10. Codified by Kansas at K.S.A. 84-2-102.
The Court finds this reasoning critically flawed, as Mortgage Plus improperly relies on the Uniform Commercial Code to
support its argument. The U.C.C. applies only to the sale of goods and is not applicable to the sale of services. [FN11] Even if
the contract here is construed to include both services and goods, Kansas law dictates the U.C.C. will apply only when the
"predominant" purpose of the contract is a sale of goods. [FN12] In this case, the service provided by DocMagic in preparing
documents for Mortgage Plus and other lender customers clearly is the predominant purpose of the Agreement. The software
provided to DocMagic customers is worthless without the actual loan preparation services; thus, the software is wholly
incidental to the agreement. This is supported by the fact that although Mortgage Plus continued to possess the referenced
software after DocMagic discontinued its loan preparation services, Mortgage Plus immediately sought to restore its access
to the loan preparation services, claiming such services were critical to close outstanding loans.
FN11. U.C.C. § 2-102 (1998).
FN12. M.K.C. Equipment Co., Inc. v. M.A.I.L.Code, Inc., 843 F.Supp. 679, 684 (D.Kan.1994); Hope's Architectural Prods., Inc.
v. Lundy's Constr., Inc., 781 F.Supp. 711, 713 (D.Kan.1991); Systems Design and Mgmt. Information Inc. v. Kansas City Post
Office Employees Credit Union, 14 Kan.App.2d 266, 271, 788 P.2d 878 (1990).
In sum, the Court is persuaded that the predominant purpose of the agreement between the parties here was providing loan
preparation services; thus, any agreement between the parties is not covered by the Uniform Commercial Code.
b. Analysis under Traditional Contract Principles
i. Validity of the Software Licensing Agreement as a Modification to the Original Contractual Agreement
Notwithstanding inapplicability of the U.C.C., Mortgage Plus argues it is not bound by the Software Licensing Agreement
because the license was not an "agreed-to" modification of the original agreement between the parties. The Court is not
persuaded by this argument. First, Mortgage Plus has failed to present evidence to establish existence of the phantom
"original contract," including but not limited to the date the contract was formed, the terms and conditions of the contract
(other than pricing) or documents memorializing the agreement. The Court cannot find the software licensing agreement
improperly altered the terms and conditions of the original contractual agreement when there is no evidence that an original
contractual agreement ever existed.
ii. Validity of the Software Licensing Agreement as the Primary Agreement
Mortgage Plus next contends that even in the absence of an original agreement, it simply was not aware of and never
accepted any version of the Software Licensing Agreement. In support of its contention, Mortgage Plus states (1) a clickwrap
agreement consisting of a window entitled "Software Licensing Agreement" appearing prior to installation of software cannot
be construed as a legally binding contract; (2) the Software Licensing Agreement is not supported by consideration; and (3)
the Software Licensing Agreement was not agreed to by an employee with the authority to bind the company.
(1) Validity of "Clickwrap" License Agreements
A license is a form of contract and is objectionable on grounds applicable to contracts in general. [FN13] By the terms of the
license here, installation and use of the software with the license attached constituted acceptance of the license terms. The
license was "bundled" with the DocMagic software, meaning that the software required users to accept the terms by clicking
through a series of screens before they could access and subsequently install the software. This type of license is known as a
"clickwrap" license agreement. Such agreements are common on websites that sell or distribute software programs. [FN14]
                                                        CHAPTER 19: E-CONTRACTS AND E-SIGNATURES                          325

The term "clickwrap" agreement is borrowed from the idea of "shrinkwrap agreements," which are generally license
agreements placed inside the cellophane "shrinkwrap" of computer software boxes that, by their terms, become effective once
the "shrinkwrap" is opened. Courts have found both types of licenses valid and enforceable. [FN15] And, although it appears
no Kansas court has considered the validity of a "clickwrap" license agreement, this Court recently was confronted with, and
refused to enforce, a "shrinkwrap" license agreement. [FN16]
FN13. ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1450 (7th Cir.1996).
FN14. Stomp, Inc. v. NeatO, LLC, 61 F.Supp.2d 1074, 1081 (C.D.Cal.,1999).
FN15. See ProCD, 86 F.3d at 1449 (shrinkwrap); Adobe Sys., Inc. v. Stargate Software, Inc., 216 F.Supp.2d 1051
(N.D.Cal.2002) (shrinkwrap); I.Lan Sys., Inc. v. Netscout Serv. Level Corp., 183 F.Supp.2d 328, 338 (D.Mass.2002) (click-
wrap); Peerless Wall & Window Coverings, Inc. v. Synchronics, Inc., 85 F.Supp.2d 519, 527 (W.D.Pa.2000) (shrinkwrap);
Forrest v. Verizon Communications, Inc., 805 A.2d 1007 (D.C.2002) (click-wrap); Caspi v. Microsoft Network, LLC, 323
N.J.Super. 118, 732 A.2d 528 (N.J.App.Div.1999) (click-wrap); but, see, Specht v. Netscape Communications, Corp., 306 F.3d
17 (2d Cir.2002) (rejecting click-wrap); Comb v. Paypal, Inc., 218 F.Supp.2d 1165, 1169 (N.D.Cal.2002) (click-wrap invalid
contract of adhesion).
FN16. Klocek v. Gateway, Inc., 104 F.Supp.2d 1332 (D.Kan.2000).
In Klocek v. Gateway, the Court considered a standard "shrinkwrap" license agreement that was included in the box
containing the computer ordered by the plaintiff. Relying on Section 2-207 of the Uniform Commercial Code applicable to the
sale of goods, the Court held that the computer purchaser was the offeror, and that the vendor accepted the purchaser's offer
by shipping the computer in response to the offer. Given the purchaser was not a merchant, the Court held the vendor's
enclosure of the license agreement in the computer box did not become part of the parties' agreement unless the purchaser
expressly agreed to them. [FN17] More specifically, the Court found the vendor had not made acceptance of the license
agreement a condition of the purchaser's acceptance of the computer, and that "the mere fact that Gateway shipped the
goods with the terms attached did not communicate to the purchaser any unwillingness to proceed without the purchaser's
agreement to the [license terms.]" [FN18] In concluding that the purchaser did not agree to the license terms, the Court held
the purchaser could not be compelled to arbitrate as set forth in the license agreement. [FN19]
FN17. Id. (citing K.S.A. 84-2-207, Kansas Comment 2) (if either party is not a merchant, additional terms are proposals for
addition to the contract that do not become part of the contract unless the original offeror expressly agrees)).
FN18. Id. at 1340.
FN19. Id. at 1341.
The facts presented in this case differ fundamentally from the facts in Klocek. First, and as discussed above, the U.C.C. is
inapplicable because the transaction here primarily involves the sale of services, not the sale of goods. Moreover, it is
undisputed between the parties in this case that Mortgage Plus had to affirmatively click the "Yes" button in assenting to
the Software Licensing Agreement as a prerequisite to installing the DocMagic software. [FN20] It further is undisputed
that the software would not be installed if Mortgage Plus did not accept the terms and conditions of the Software Licensing
Agreement. Plaintiff had a choice as to whether to download the software and utilize the related services; thus, under the
specific facts presented here, installation and use of the software with the attached license constituted an affirmative
acceptance of the license terms by Mortgage Plus and the licensing agreement became effective upon this affirmative assent.
The Court finds the clickwrap agreement here is a valid contract.
FN20. See I.Lan Sys. v. Netscout Serv. Level Corp., 183 F.Supp.2d 328, 338 (D.Mass.2002) (holding that clicking the "I Agree"
button was an explicit acceptance of clickwrap license agreement); Specht v. Netscape Communications Corp., 150 F.Supp.2d
585, 595 (S.D.N.Y.2001) ("clicking on an icon stating 'I assent' has no meaning or purpose other than to indicate ... assent").
(2) Consideration
Next, Mortgage Plus argues the Software Licensing Agreement is not a valid contract between the parties because it is not
supported by consideration. The Court is not persuaded by this agreement and finds sufficient consideration to enforce the
parties' mutual obligations, i.e., Mortgage Plus agreed to pay DocMagic a fee in exchange for DocMagic's permission (a) to
install the loan preparation computer software program; and (b) to use the loan document preparation and delivery services
provided by DocMagic in conjunction with such software.
(3) Authority to Bind
Finally, Mortgage Plus argues that the person who clicked the "yes" button indicating affirmative acceptance of the terms
and conditions of the Software Licensing Agreement lacked authority to contractually bind the company. The Court again is
unpersuaded by Plaintiff's argument. First, Mortgage Plus fails to identify by name, title or job description the individual(s)
who accepted the terms of the Software Licensing Agreement by downloading the software. Moreover, even if such individual
was not authorized to contractually bind the company, the undisputed facts establish that Mortgage Plus thereafter ratified
its acceptance of the Software Licensing Agreement. It is well-settled that a party with knowledge of the facts can ratify an
unauthorized act through conduct. Ratification is the adoption or confirmation by a principal of an unauthorized act
performed on its behalf by an agent. [FN21] One example of such ratification is election by the principal to treat the act as
326         CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW


authorized, which includes attempting to enforce the contract or retain the benefits of the contract. [FN22] Under agency
law, once a principal acquires knowledge of an agent's unauthorized actions, it cannot sit back and wait to see if it will
benefit or suffer from the agent's actions. Instead, a principal who receives notice of an unauthorized act of an agent must
promptly repudiate the agent's actions or it is presumed that the principal ratified the act.
FN21. Theis v. duPont, Glore Forgan Inc., 212 Kan. 301, 304-05, 510 P.2d 1212 (1973).
FN22. Dearborn Motors Credit Corp. v. Neel, 184 Kan. 437, 337 P.2d 992, 1001 (Kan.1959) (by retaining benefits of contract,
a party is charged with knowledge of the unauthorized act and "is presumed to have affirmed and ratified the contract, and
is estopped to deny the agency.").
Here, on at least three occasions over the course of six years, an individual within the Mortgage Plus organization installed
the DocMagic software and each time was required to assent to the Software Licensing Agreement in order to complete such
installation. While Mortgage Plus fails to identify the individual who accepted the terms and conditions of the Software
Licensing Agreement before downloading the software, there is no dispute that for six years after such acceptance Mortgage
Plus consistently utilized the loan document preparation services associated with the software. The undisputed facts
establish Mortgage Plus utilized the software to create and electronically submit literally hundreds of user worksheets to
DocMagic for processing and preparation of final loan documents. By doing so, Mortgage Plus obtained the benefits of the
Agreement, and thereby ratified any unauthorized acceptance of its terms.
Based on this discussion, the Court finds the Software Licensing Agreement is a valid contract. Accordingly, the Court will
now address whether the forum selection clause within the Licensing Agreement is enforceable.
B. Enforceability of the Parties' Forum Selection Clause Under 28 U.S.C. § 1404(a)
The determination of whether to enforce a forum selection clause in a diversity action is governed by federal law. [FN23]
Thus, it is 28 U.S.C. § 1404(a) that governs the court's decision whether to give effect to the parties' forum selection clause
and transfer the case to the Central District of California. [FN24] Section 1404(a) provides that "[f]or the convenience of
parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division
where it might have been brought."
FN23. Stewart Organization, Inc., v. Ricoh Corp., 487 U.S. 22, 32, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988).
FN24. Id. at 29.
As a preliminary mater, DocMagic contends, and Mortgage Plus does not dispute, that venue in California is appropriate for
this lawsuit under 28 U.S.C. § 1391(a)(1). Given that the threshold requirement for transfer set forth in section 1404(a) has
been met, [FN25] the Court now must consider the following factors in determining whether to transfer this case pursuant to
section 1404(a): (1) Plaintiff's choice of forum; (2) the convenience for witnesses; (3) the accessibility of witnesses and other
sources of proof; (4) the possibility of obtaining a fair trial; and (5) all other practical considerations that make trial
expeditious and economical. [FN26]
FN25. Mid Kansas Federal Sav. and Loan Ass'n of Wichita v. Orpheum Theater Co., Ltd., 810 F.Supp. 1184, 1189
(D.Kan.1992).
FN26. See Chrysler Credit Corp. v. Country Chrysler, Inc., 928 F.2d 1509, 1516 (10th Cir.1991).
Although technically the balancing of these section 1404(a) factors remains unchanged when there also exists a forum selection
clause, the United States Supreme Court specifically has noted that "the presence of a forum selection clause such as the
parties entered into in this case will be a significant factor that figures centrally in the district court's analysis" under section
1404(a). [FN27] Therefore, the forum selection clause should be considered as a significant factor among the other applicable
factors.
FN27. Stewart Org., 487 U.S. at 29.
1. Plaintiff's Contract Claims
The forum selection clause here requires all legal proceedings arising out of or in connection with the Software Licensing
Agreement be brought in the appropriate court in Los Angeles, California. While litigation of this case in California is not
the forum chosen by Mortgage Plus, there are numerous witnesses in both California and Kansas, relevant documents can be
found in both California and Kansas and the actions and events leading up to this lawsuit occurred in both California and
Kansas. Although transfer of this case likely will result in some level of inconvenience to Mortgage Plus down the line, such
inconvenience simply is insufficient to counterbalance the significant weight of the valid and enforceable forum selection
clause. Thus, the 1404(a) balancing test weighs in favor of transfer to California.
2. Plaintiff's Tort Claims
Plaintiff argues even if the forum selection clause is enforceable, the clause covers only the litigation of contractual claims
and does not cover Plaintiff's tort claim. The Court disagrees, finding that Plaintiff may well have acquiesced to jurisdiction
in Los Angeles, California with respect to its tort claim based on the broad language within the forum selection clause in the
Software Licensing Agreement. More specifically, the forum selection clause at issue here states that the parties agree that
any cause of action arising under the Agreement shall be brought in the appropriate court in Los Angeles, California. While
it appears Kansas has not yet addressed the issue, several courts have held that a forum provision in a contract may not only
                                                         CHAPTER 19: E-CONTRACTS AND E-SIGNATURES                             327

apply to litigation of the contract in which it is contained, but also to tort claims arising out of or relating to the contract,
particularly when those tort claims involve the same operative facts as a parallel claim for breach of contract. [FN28]
FN28. See Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991) (broad forum selection
clause in form ticket contract enforceable with respect to passenger's negligence action); Hitachi Credit America Corp. v.
Signet Bank, 166 F.3d 614, 628 (4th Cir.1999) (contractual choice of law provision sufficiently broad to indicate that parties
intended "to cover more than merely contract claims"); Marinechance Shipping, Ltd. v. Sebastian, 143 F.3d 216, 222- 23 (5th
Cir.1998) (district court did not err in applying forum selection clause to tort claims where nothing in clause justified
limiting application to contract claims); Terra Int'l, Inc. v. Mississippi Chemical Corp., 119 F.3d 688, 693-95 (8th Cir.1997)
(forum selection clause applied to tort claims where tort claims involved same operative facts as parallel claim for breach of
contract); Turtur v. Rothschild Registry Int'l, Inc., 26 F.3d 304, 309-10 (2d Cir.1994) (applying contractual choice-of-law
provision to tort claim because, by its terms, provision applied to disputes "arising out of or relating to" to the contract);
Hugel v. Corporation of Lloyd's, 999 F.2d 206, 209 (7th Cir.1993) (holding that if the duty arises from contract, forum
selection clause governs action.).
In this case, Plaintiff brings four contract claims and one claim of negligent misrepresentation, a tort claim that appears to
be closely related to the contract claims. The tort claim focuses on whether the representations Defendant made about the
capabilities of its software were false. This issue is also present in the breach of contract, breach of express warranty and
breach of implied warranty claims. The same operative facts surround each claim and, in fact, the tort claim appears to arise
out of the contractual relationship to implicate the very terms of the Software Licensing Agreement at issue. Whether cast in
tort or contract, the crux of Plaintiff's claim is the allegation that the software did not perform as DocMagic stated it would.
Both of these claims depend on resolution of the same factual issue: whether DocMagic's software operated properly. The
Court finds the forum selection clause is valid and enforceable with respect to Plaintiff's negligent misrepresentation claim.
Conclusion
 The Court finds the Software Licensing Agreement is a valid contract and the 28 U.S.C. § 1404(a) factors, including but not
limited to the forum selection clause, weigh in favor of transfer to California with respect to both contract and tort claims
asserted by Plaintiff.
Accordingly, it is hereby ordered that
(1) Plaintiff's Motion for Leave to File Surreply to Defendant's Reply Memorandum (doc. 23); and
(2) Defendant's Motion to Transfer (doc. 9) is granted and, pursuant to 28 U.S.C. § 1404(a), this case and all orders and
matters therein, shall be and are transferred to the United States District Court for the Central District of California.
IT IS SO ORDERED.




Case 19.3
Slip Copy, 2007 WL 512410 (E.D.Cal.)
United States District Court,E.D. California.
AMBER CHEMICAL, INC., a California corporation, Plaintiff,
v.
REILLY INDUSTRIES, INC., an Indiana corporation, Defendant.
No. 1:06-CV-06090 OWW SMS.
Feb. 14, 2007.
MEMORANDUM DECISION AND ORDER RE: DEFENDANT'S MOTION FOR SUMMARY JUDGMENT.
, United States District Judge.
I. INTRODUCTION
*1 Plaintiff Amber Chemical (“Amber”) filed suit in the Superior Court for the County of Kern against Defendant Reilly
Industries (“Reilly”), for damages arising out of an alleged breach of a requirements contract for the delivery of chemical
products. (See Doc. 1.) Reilly removed the case to federal court on the basis of diversity jurisdiction. (Id.) Before the Court for
decision is Defendant Reilly's motion for summary judgment. (Doc. 19, filed Aug. 19, 2005.) Amber filed opposition (Doc. 20,
filed Sept. 8, 2005), and Reilly replied (Doc. 22, filed Oct. 31, 2005).
II. BACKGROUND
Amber is a wholesale commodity chemical company that specializes in selling chemical inputs to oil field service companies,
328        CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW


but has recently expanded to also distribute chemicals to agricultural businesses. (Deft's Statement of Undisputed Facts
(“DSUF”), Doc. 19-2 # 3.)
Historically, the relationship proceeded in the following manner. In the fall of each year, Reilly would provide Amber with
firm prices for potassium chloride for the following year. (Plaintiff's Statement of Disputed/Undisputed Fact (“PSF”), Doc. 20
# 27.) Amber then agreed to purchase a minimum annual quantity of potassium chloride from Reilly at that agreed upon
price, unless Reilly was unable to meet Amber's needs. (DSUF # 1.) Logistically, Amber would not order and pay for their
annual volume of potassium chloride all at once. Rather, Amber placed periodic orders, depending on its needs during any
given time period. Amber submitted purchase orders for the purchase of each shipment of potassium chloride. (DSUF # 5.)
Once Reilly received a purchase order from Amber, Reilly then processed that order and shipped the product. (DSUF # 7.)
It is undisputed that Reilly shipped the product to Amber along with a standard invoice, which set forth standard terms and
conditions (“Standard Terms”), including the condition that the invoice and the terms and conditions constitute the parties'
entire agreement and that the terms could only be amended, modified or revised through a written document executed by the
parties. (DSUF7-9.) However, Amber employees, Bob Brister and Sandra Kay Newman, testified that they had no knowledge
of these standard terms and conditions. (Amber's Response to DSUF7-9; Brister Decl. at ¶ ¶ 17, 19; Brister Depo. at 142-
144; Newman Depo. at 13-14.)
Amber believed that it was obligated to purchase all of its requirements for potassium chloride from Reilly, unless Reilly was
unable to supply. On occasion, Reilly would be unable to meet Amber's needs for short periods of time as a result of logistical
problems or other reasons. On one occasion, Reilly was unable to meet Amber's needs for several months. On these occasions,
Amber contracted with Mississippi Potash to provide replacement potassium chloride. Amber, however, believed that it
should always give Reilly, in substance, a right of first refusal whenever it contemplated contracting with Mississippi
Potash. On occasion, when informed of Amber's intent to obtain replacement material from Mississippi Potash, Reilly
attempted to deliver potassium chloride to Amber by alternative means. (Brister Depo. 49, 81-82.)
*2 Reilly contends that its relationship with Amber ended in March 2004, when Reilly sold its potassium chloride business to
another vendor. (DSUF # 2.) Amber maintains that during the fall of 2003, through a series of e-mails between Reilly
employee Brett Wilhelm and Amber employee Bob Brister, an agreement was reached whereby Reilly would sell Amber
potassium chloride throughout 2004 at a fixed price of $122.50 per ton, so long as the volume of potassium chloride
purchased by Amber from Reilly met or exceeded the volume it purchased from Reilly in 2003. The relevant exchange of e-
mails, the authenticity of which is not disputed, begins with an e-mail from Brett Wilhelm at Reilly to Bob Brister at Amber:
From: Wilhelm, Brett
Sent: Friday, September 12, 2003 5:16 PM
To: „bbaci5201@aol.com‟
Subject: 2004 pricing
Bob,
As I mentioned to Kay on the phone, I'd be willing to work out a contract with you for the upcoming year we hold the
material pricing, but push through the increase in retail rate (4%). This would account for approximately $1.00-$1.50 a ton
increase. If the volume remains the same, or increases, this would be something I'd be willing to do to maintain our
partnership. Let me know if this works for you for the upcoming year and if it is something that will work for Amber. The
key for us is to maintain and build upon our relationship. We ordered five more Hopper cars today to help alleviate some of
the bumps that have occurred on the supply side in the past. I'm in the office all next week, so give me a call and we can
discuss this proposal. Have a great weekend!
Sincerely,
Brett Wilhelm,
Reilly Industries, Inc.
On September 15, 2003, Bob Brister at Amber sent the following e-mail to Brett Wilhelm at Reilly:
From: ACIBB5201@aol.com
Sent: Monday, September 15, 2003 2:44 PM
To: BWilheim@reilyind.com
Subject: Re: FW: 2004 pricing
Brett
looks good to me please work the contract up
bob
amber
Brett Wilhelm at Reilly responded to the above message as follows:
Subject: Re: FW: 2004 pricing
Sent: 9/15/033 1:02:36 PM Pacific Standard Time
From: BWilhelm@reilyind.com
                                                         CHAPTER 19: E-CONTRACTS AND E-SIGNATURES                            329

To: ACIBB5201@aol.com
Bob,
What type of volume are you committing to? Will it [at] least be the same as 2003?
Brett
 (Decl. of Bobby Brister, Doc. 20, Ex. A (formatting modified).)
At some point, either during or following this exchange of e-mails, Wilhelm called Brister to confirm the quantity of
potassium chloride Amber intended to purchase from Reilly in 2004. (PSF # 36.) Brister orally confirmed that Amber would
purchase at least as much or more potassium chloride from Reilly as it had in 2003. (PSF # 37.) However, the alleged
agreement was never reduced to writing. In fact, at no point during the course of Amber and Reilly's business relationship
did the two companies ever execute a formal written contract reflecting any long term contractual arrangement. (PSF # 26.)
*3 It is undisputed that, throughout the early part of 2004, up until March 15, 2004, the date on which Reilly cut off
shipments to Amber, Amber bought all of its requirements for potassium chloride from Reilly, and that these purchases were
in excess of the quantities it bought in 2003.
Reilly concedes that Amber intended to rely on the firm price quoted by Reilly to enter into contracts with Amber's
customers. (PSF # 29.) Reilly also concedes that if Amber was unable to meet its commitments, both as to supply and price,
this would pose a “very big problem” for Amber. (PSF # 30.) When the e-mail exchange between Wilhelm and Amber took
place in the Fall of 2003, Wilhelm knew Reilly was negotiating a sale of its potassium chloride business. (PSF # 31.)
Amber relied upon Reilly's alleged promise by entering into contracts with its own customers based on the quoted price. (PSF
# 32.) Amber suffered damages as a result of Reilly's failure to supply potassium chloride at the allegedly agreed-upon price.
(PSF # 33.)
III. STANDARD OF REVIEW
Summary judgment is warranted only “if the pleadings, depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to any material fact.” ; . Therefore, to defeat a
motion for summary judgment, the non-moving party must show (1) that a genuine factual issue exists and (2) that this
factual issue is material. Id. A genuine issue of fact exists when the non-moving party produces evidence on which a
reasonable trier of fact could find in its favor viewing the record as a whole in light of the evidentiary burden the law places
on that party. See ; see also . Facts are “material” if they “might affect the outcome of the suit under the governing law.”
(quoting
The non-moving party cannot simply rest on its allegations without any significant probative evidence tending to support the
complaint. . The plain language of mandates the entry of summary judgment, after adequate time for discovery and upon
motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to the
party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be “no genuine issue
as to any material fact,” since a complete failure of proof concerning an essential element of the nonmoving party's case
necessarily renders all other facts immaterial. . The more implausible the claim or defense asserted by the non-moving party,
the more persuasive its evidence must be to avoid summary judgment. See . Nevertheless, the evidence must be viewed in a
light most favorable to the nonmoving party. . A court's role on summary judgment is not to weigh evidence or resolve issues;
rather, it is to determine whether there is a genuine issue for trial. See .
IV. ANALYSIS
A. Formation of a Contract
1. Formation of a Written Contract/ Statute of Frauds Requirement.
*4 (“the Code”) provides in relevant part as follows:
Except as otherwise provided in this section a contract for the sale of goods for the price of five hundred dollars ($500) or
more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for sale
has been made between the parties and signed by the party against whom enforcement is sought or by his or her authorized
agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon but the contract is not
enforceable under this paragraph beyond the quantity of goods shown in the writing.
(“Formal requirements; statute of frauds”).
The statute of frauds covers contracts for the sale of goods over $500. Goods means “all things (including specially
manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which
the price is to be paid, investment securities ... and things in action.” . Potassium chloride is a “thing” and is therefore a
“good” for purposes of the statute of frauds. It is undisputed that alleged contract, if formed, was for more than $500 worth of
potassium chloride. Therefore, the alleged requirements contract must conform to the statute of frauds in order to be
enforceable.
Plaintiff alleges that the series of e-mails between authorized agents of Amber and Reilly establish an enforceable contract.
A contract within the statute of frauds is enforceable “if it is evidenced by any writing, signed by or on behalf of the party to
be charged, which [1] reasonably identifies the subject matter of the contract, [2] is sufficient to indicate that a contract with
330        CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW


respect thereto has been made between the parties or offered by the signer to the other party, and [3] states with reasonable
certainty the essential terms of the unperformed promises in the contract.” .
Here, the statute of frauds is not satisfied because the e-mails do not sufficiently “indicate that a contract with respect
thereto has been made between the parties or offered by the signer to the other party.” Generally, “[a]n offer is the
manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to
that bargain is invited and will conclude it.” 1 Witkin Cal. Summ., Ch. I, Contracts § 125 (10th ed.2005). Similarly, section
26 of the Second Restatement of Contracts states: A manifestation of willingness to enter into a bargain is not an offer if the
person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain
until he has made a further manifestation of assent. (quoted in 1 Witkin, Contracts § 130.)
The e-mail of September 12, 2003, from Brett Wilhelm, the manager of Reilly's brine division, to Bob Brister, Amber's
president, reads in relevant part:
*5 ... I'd be willing to work out a contract with you for the upcoming year we hold the material pricing, but push through the
increase in retail rate (4%). This would account for approximately $1.00-$1.50 a ton increase. If the volume remains the
same, or increases, this would be something I'd be willing to do to maintain our partnership. Let me know if this works for
you for the upcoming year and if it is something that will work for Amber. The key for us is to maintain and build upon our
relationship. We ordered five more Hopper cars today to help alleviate some of the bumps that have occurred on the supply
side in the past. I'm in the office all next week, so give me a call and we can discuss this proposal. Have a great weekend!
 (emphasis added.)
This e-mail did not constitute an offer because it merely invited the parties to “work[ ] out a contract,” that would be reduced
to writing, and evidenced only a willingness to “discuss this proposal .” Wilhelm did not “intend to conclude a bargain until
he [had] made a further manifestation of assent.” As such, this e-mail it is no more than an invitation to negotiate. On
September 15, 2003, Brister replied on behalf of Amber: “[L]ooks good to me [.] [P]lease work the contract up[.]” Since
Wilhelm's prior e-mail did not constitute an offer, it did not create the power in Brister to accept. Nor does Brister's reply
purport to actually be an acceptance. Rather, Brister indicates that Reilly should “work the contract up.” This language
evidences an understanding that no contract yet existed and that Amber intended that any contract be reduced to writing.
No written contract was ever prepared.
The final e-mail in this series is Wilhelm's response to Brister's reply: “What type of volume are you committing to? Will it be
the same as 2003?” This specifically indicates that Brister had not offered a specified quantity in his e-mail, and Wilhelm
needed to establish this term with certainty before making the offer of the quoted price. No evidence of a written reply by
Brister was submitted.
The writings in evidence do not indicate that a contract was formed, as there was no offer and acceptance. Therefore, unless
the statute of frauds is excused or an exception applies, the alleged agreement is unenforceable.
2. Exception to the Statute of Frauds for Certain Oral Agreements.
Although the e-mails do not themselves establish that a written contract for sale was formed, California's Commercial Code
provides several ways in which an oral agreement may satisfy the statute of frauds. . Potentially relevant in this case is ,
which provides: “A contract which does not satisfy the requirements of [the statute of frauds] but which is valid in other
respects is enforceable ... [i]f the party against whom enforcement is sought admits in his or her pleading, testimony, or
otherwise in court that a contract for sale was made, but the contract is not enforceable under this provision beyond the
quantity of goods admitted ...” (emphasis added).
*6 Although Mr. Wilhelm of Reilly admitted to providing a firm price to Amber in the fall of 2003 for 2004 (Wilhelm Depo.
107-108), Wilhelm nowhere admits that a contract or a requirement contract was made between the parties. This, is
insufficient to satisfy .
B. Promissory Estoppel.
Amber asserts that Reilly should be estopped from disclaiming the existence of a contract because Reilly made an oral
promise to Amber upon which Amber relied to its detriment.
states “[u]nless displaced by the particular provisions of this code, the principles of law and equity, including ... estoppel ...
supplement its provisions.” Estoppel serves as “one further exception to imposition of the statute of frauds.” . The California
Supreme Court has held:
The doctrine of estoppel to assert the statute of frauds has been consistently applied by the courts of this state to prevent
fraud that would result from refusal to enforce oral contracts in certain circumstances. Such fraud may inhere in the
unconscionable injury that would result from denying enforcement of the contract after one party has been induced by the
other seriously to change his position in reliance on the contract....”
.The doctrine of estoppel is proven where one party suffers an unconscionable injury if the statute of frauds is asserted to
prevent enforcement of oral contracts. Unconscionable injury results from denying enforcement of a contract after one party
is induced by another party to seriously change position relying upon the oral agreement. It also occurs in cases of unjust
enrichment.
                                                           CHAPTER 19: E-CONTRACTS AND E-SIGNATURES                             331

. Application of the doctrine is ordinarily a question of fact. (citing (Kaufman, J dissenting)).
1. Promise.
The threshold question is whether any oral agreement was reached between the parties prior to Amber's detrimental
reliance. To be binding for purposes of promissory estoppel, the promise must be “clear and unambiguous.” (reviewing
numerous cases and treatises that so hold).
Plaintiff alleges that an oral requirements contract was formed here. Requirements contracts “have been enforced by the
courts with little difficulty, where the surrounding circumstances indicate the approximate scope of the promise.” (overruled
on other grounds by ). A specific quantity term is not required if quantity may be measured by the requirements of the buyer
or if the contract is for exclusive dealings. provides:
*7 (1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual
output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated
estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be
tendered or demanded.
(2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless
otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to
promote their sale.
Comment 3 to specifically addresses the import of a minimum quantity term:If an estimate of output or requirements is
included in the agreement, no quantity unreasonably disproportionate to it may be tendered or demanded. Any minimum or
maximum set by the agreement shows a clear limit on the intended elasticity. In similar fashion, the agreed estimate is to be
regarded as a center around which the parties intend the variation to occur. Here, Bob Brister testified that the e-mails
exchanged in September 2003 and a contemporaneous phone conversation between Mr. Brister (of Amber) and Mr. Wilhelm
(of Reilly) resulted in a two-way promise, pursuant to which Reilly promised to provide Amber a firm price for 2004, in
exchange for Amber's commitment not only to purchase its requirements from Reilly but to purchase at least as much
potassium chloride as it had in 2003. (Brister Depo. at 203-205.) Although Reilly disputes the formation of any such
agreement, on summary judgment it is Amber's version of events that must be accepted. Amber's evidence indicates that an
oral requirements contract was formed.
2. Reilly's Argument that Exclusivity is a Necessary Element of a Requirements Contract.
Reilly argues that a requirements contract can only be formed if the buyer agrees to purchase its requirements exclusively
from the seller. It is undisputed here that, on occasions when Reilly could not deliver Potassium Chloride to Amber, Amber
purchased potassium chloride from a different company, Mississippi Potash. (Brister Depo at 48-50.) Mr. Brister testified
that he believed Amber was obligated to purchase 100% of its needs from Reilly, unless Reilly was unable to supply. If it
appeared that Reilly would be unable to meet Amber's needs, Amber would communicate closely with Reilly to ensure that
this really was the case before purchasing from Mississippi Potash. .) Reilly asserts that this arrangement precludes the
existence of a requirements contract because Amber did not purchase exclusively from Reilly. First, demanding exclusivity
for all requirements contracts is contrary to the plain language of , which clearly indicates that a requirements contract may
be formed either (a) when the agreed-upon quantity term is for “such actual ... requirements as may occur in good faith” or
(b) when the agreement is for exclusive dealing in the kind of goods concerned ...” (emphasis added).
*8 In support of imposing an exclusivity requirement on all requirements contracts, Reilly cites Volume 1 of Witkin's
Summary of California Law, Contracts, Chapter 1, Section 228, which provides:
Where the proposal is to furnish all goods of a certain kind that the other party may need or require in a certain business for
a definite period, acceptance results in a contract. Although the acceptor does not in this situation agree to take any particular
quantity (for he or she may not need any), there is consideration, because the acceptor has parted with the right to buy the
goods elsewhere. ( Tennant v. Wilde (1929) 98 C.A. 437, 454, 98 Cal.App. 437, 277 P. 137;             citing the text; see ; 2 Corbin
(Rev. ed.), § 6.5; 3 Williston 4th, § 7:12; 17A Am.Jur.2d (2004 ed.), Contracts § 132; 52 Harv. L.Rev. 836; [comprehensive
analysis of problems of drafting and construction]; 8 So. Cal. L.Rev. 243; [mutuality of contract to furnish another with his
or her needs, wants, desires, requirements, and the like]; [output contracts under ].)
But, this summary, which is part of a subchapter dedicated to problems of consideration, relies upon cases in which the
purchaser's needs were so completely uncertain that consideration was lacking. For example, in , the purchaser agreed to
take from the supplier “all the water it should need for its lands, depending ... upon seasonal and weather conditions....”
Even though the purchaser had not agreed to take any particular quantity, a circumstance which otherwise might result in
the absence of consideration, the purchaser promised to buy water from “no other source....” . The Andersen court held that,
even though there was a chance that the purchaser would buy nothing during the contract period, “a promise of one party to
buy of no one else is [ ] sufficient consideration.” Id.; see also, (“Here there is no consideration for the promise or offer, for the
promisee has not bound himself to anything, and has incurred no legal liability at all.”).
Here, in exchange for Reilly's promise of a fixed price, Amber promised to purchase a minimum quantity of potassium
chloride. This is sufficient consideration. It is not essential that a requirements contract containing a minimum purchase
332        CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW


quantity also be for exclusive dealings.
         As a general rule “[c]onsideration may be either (1) a benefit conferred or agreed to be conferred upon the promisor
         or some other person; or (2) a detriment suffered or agreed to be suffered by the promisee or some other person.” 1
         Witkin, Contracts, Ch. I, § 203.
3. Unconscionable Injury.
The second requirement to establish promissory estoppel is that the party asserting estoppel must have suffered
“unconscionable injury:
*9 The doctrine of estoppel is proven where one party suffers an unconscionable injury if the statute of frauds is asserted to
prevent enforcement of oral contracts. Unconscionable injury results from denying enforcement of a contract after one party
is induced by another party to seriously change position relying upon the oral agreement. It also occurs in cases of unjust
enrichment. The undisputed evidence arguably supports a finding of unconscionable injury. Mr. Wilhelm testified that he
knew that Amber intended to, and in fact did, rely on the firm price for product offered by Reilly for 2004 by entering into
contracts to supply Amber's own customers. (Wilhelm Depo. at 100-101, 134.) Mr. Wilhelm, of Reilly, also testified that he
knew that if Amber was unable to meet its commitments to its customer, both as to supply and price, it would be a “very big
problem” for Amber. .) Finally, it is undisputed that Amber suffered financial damages as a result of the alleged breach,
because Amber purchased potassium chloride from other sources at unfavorable prices. (Brister Decl. at ¶ ¶ 15-16.)
4. Reilly's Theory that Amber Has Admitted that the Alleged “Promise” by Reilly was Really an “Assumption”
Made by Amber.
Reilly asserts that Amber's promissory estoppel claim must fail because “Amber's witnesses have testified that the alleged
„promise‟ was not a promise made by Reilly, but rather an assumption made by Plaintiff based upon the contract identified
above and their prior business relationship.” (See PSF # 24.) In support of this assertion, Reilly cites the Deposition of
William Brister at paragraphs 134:15-19, 161:1-3, 205-7-11. But, none of these record citations support Reilly's assertion.
         The court is under no obligation to search the record. See .
The first citation is to page 134, lines 15-19 of the Brister Deposition which contains the following question:
Q. So based upon the exchange of e-mail and your understanding as to a specific price from Reilly Industries, you made
verbal commitments to Geo-Western, MI Drilling Fluid, Enterprise Drilling, and that's it; correct?
 (Mr. Brister answered in the affirmative at line 20, which was not cited by Reilly.) This exchange does not support Reilly's
assertion. In fact, it appears to confirm that Amber relied upon the firm price it received frm Reilly to enter into contracts
with its customers.
The second excerpt cited by Reilly is page 161, lines 1-3 of the Brister Deposition:
Q. It was your assumption that it was the same it's always been; correct?
A. Been that way for 15 years. Yes.
This exchange, on its own, is not particularly enlightening. When placed in context of the preceding and subsequent
discussion, however, it is apparent that Brister was discussing whether the 2004 agreement retained a “net-90 day” payment
term that had been part of the parties' previous agreements for fifteen years. Brister indicated that it was his “assumption”
that this provision was the same as it always had been. This is far from an admission that he assumed the existence of the
entire agreement.
*10 Finally, Reilly cites page 205, lines 7-11 of the Brister Deposition:
[Q.] So the e-mail and the one conversation comprised the promise that's being discussed in Paragraph 19 of Exhibit 31;
correct?
A. It would be the contract for 2004, yes.
Again, this excerpt is not meaningful on its own, particularly given that the cited Exhibit 31 was not presented to the Court.
Nevertheless, when placed in context, this exchange does not support Reilly's assertion. In the preceding and subsequent
pages, Brister was merely discussing the various communications that led him to believe an agreement had been reached.
5. Conclusion Regarding Promissory Estoppel.
In sum, viewing the evidence in the light most favorable to Plaintiffs, an oral requirements contract was formed; exclusivity
is not required; and unconscionable injury occurred. Defendant's motion for summary judgment is DENIED as to the claim
of promissory estoppel.
C. The Import of the Purchase Orders and Invoices.
Reilly places great weight on the fact that, prior to each shipment of potassium chloride, Amber sent Reilly a purchase order.
Then, along with each shipment, Reilly sent Amber an invoice, incorporating standard terms and conditions (the “Standard
Terms”), including an integration clause, which stated that the invoice and terms and conditions constitute the parties'
entire agreement and that the terms can only be amended, modified or revised through a written document executed by the
partes.
         Amber vigorously disputes the admissibility of the invoices containing the Standard Terms. For the purposes of this
         discussion only, the district court will assume the admissibility of those documents.
                                                         CHAPTER 19: E-CONTRACTS AND E-SIGNATURES                             333

Reilly asserts (a) that Amber's purchase order was an “offer”; (b) that Reilly's invoice, incorporating the Standard Terms, was
an acceptance of that offer; and (c) that the Standard Terms became a part of the contract. In support of this assertion, Reilly
cites , which sets forth the procedure by which additional terms contained in an acceptance or confirmation may become part
of a contract. Amber does not directly address or its applicability here. For the purposes of this discussion only, it is assumed
that the Standard Terms became part of a written agreement between Amber and Reilly for each purchase.
          provides, in pertinent part:
          (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable
          time operates as an accept ance even though it states terms additional to or different from those offered or agreed
          upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
          (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such
          terms become part of the contract unless: (a) The offer expressly limits acceptance to the terms of the offer; (b) They
          materially alter it; or (c) Notification of objection to them has already been given or is given within a reasonable
          time after notice of them is received.
          ***
Assuming as much, Reilly suggests that the integration clause precludes the alleged oral agreement from having any force
and effect. Specifically, Reilly asserts that the parol evidence rule bars consideration of the oral agreement. Because this is a
contract for the sale of goods, the applicable parol evidence rule is found in , which provides:
Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing
intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not
be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or
supplemented
(a) By course of dealing, course of performance, or usage of trade (Section 1303); and
*11 (b) By evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete
and exclusive statement of the terms of the agreement.
 (emphasis added). Accordingly, if the alleged oral agreement contradicts the standard terms incorporated into the invoices,
the oral agreement must be disregarded. However, the oral agreement may be supplemented by “course of dealing, course of
performance, or usage of trade.” Moreover, the oral agreement may provide “consistent additional terms,” unless “the court
finds the writing to have been intended ... as a complete and exclusive statement of the terms of the agreement.” The
determination as to whether a contract is intended to be “complete and exclusive” is a question for the court. (discussing ).
          , which applies to all contracts for the sale of goods, slightly alters the parol evidence rule as set forth in . Whereas
          presumed integration, “assumes that a written contract does not express the full agreement of the parties unless
          the court expressly so finds.” , Comment 1.
 “Evidence of surrounding circumstances and prior negotiations may be admitted for the limited purpose of assisting the trial
court in determining whether a document was intended to be the final agreement of the parties superseding all other
transactions.” Id . “[C]ourts do not necessarily treat merger or integration clauses as conclusive of whether a writing was
intended by the parties to encompass the entire agreement.” .
          An integration may be partial or complete. “[T]he parties may intend a writing to finally and completely express
          certain terms of their agreement rather than the agreement in its entirety. When only part of the agreement is
          integrated, the parol evidence rule applies to that part. However, extrinsic evidence may be used to prove elements
          of the agreement not reduced to writing.” (citations omitted).
Here, the evidence viewed in a light most favorable to Amber, indicates that the parties did not intend for the Standard
Terms contained within the invoice to constitute the complete and exclusive statement of the terms of the agreement. For
example, Bob Brister testified in his deposition that he had no knowledge of the Standard Terms:
Q. And you recognize this as, basically, a Reilly invoice?
A. Yeah. It looks familiar.
Q. Do you see on the bottom where it says, “This sale is subject to Reilly Industries standard terms and conditions”?
A. Yes, I do.
Q. Did you ever notice that before-
A. No.
Q. -today. Okay. Taking a look at what's attached, “Terms and Conditions of Sale Reilly Industries,” have you ever seen that
before?
A. Not that I'm aware of.
Q. Were you aware that the invoices and the product being shipped were subject to Pages -460 and -461?
A. No.
Q. I will represent to you that these were taken from what you produced to us.
Do you see the numbers?
334        CASE PRINTOUTS TO ACCOMPANY BUSINESS LAW


A. I understand that. But I'm not aware of them.
Q. So you are not familiar with any of the terms and conditions that are contained in Pages -460 or -461?
A. No.
Q. So you are not familiar with Paragraph 18 on Page -461?
A. I am not familiar with these documents at all.
Q. So in terms of what you understood, or Amber understood, to be the terms and conditions of its purchases from Reilly, you
had no understanding that they incorporated these terms and conditions on Pages-for example, on Pages -460 and -461?
*12 A. I had no knowledge of them.
 (Brister Depo. 142-144.) Similarly, Sandra Kay Newman, the office manager of Amber throughout the relevant time period
testified, similarly, that she had never seen the “Standard Terms.” (Newman Depo. 13-14.)
Moreover, Brett Wilhelm, of Reilly, testified that the parties' practice for many years was that, in the fall of each year, Reilly
would give Amber a firm price, which would govern pricing for the entire following year. (Wilhelm Depo 107-108.) Wilhelm
specifically testified that he had given Amber a firm price for the 2004 year. (Id. at 108.) Although Reilly disputes that
providing a “firm price” is sufficient to establish the existence of a requirements contract, this fact, along with other evidence
that suggests a requirements contract was formed, is sufficient to call into question Reilly's assertion that the Standard
Terms were a complete expression of the parties' agreement(s). Therefore, for the purposes of this motion for summary
judgment, the evidence supports a finding that the agreement was not integrated.
The question then becomes whether the terms of the oral agreement were contradictory or supplementary to the Standard
Terms. Reilly provided no argument and no authority on this issue. There is, in fact, no apparent conflict between the
substance of the oral agreement and the substance of any agreement that may have been reached by the documents
exchanged between Amber and Reilly. The oral agreement relates to the parties long term commitments and pricing
arrangement, while the purchase orders/invoices relate to specific transactions. Amber contends that the purchase
order/invoices are reflections of the overall requirements agreement; Reilly contends otherwise. This is a factual dispute that
cannot be resolved on summary judgment.
VI. CONCLUSION
The alleged requirements agreement for the sale of goods is subject to the writing requirement contained in the statute of
frauds. The e-mails exchanged between the parties in the fall of 2003 are insufficient to establish the existence of a written
contract, and no exception to the statute of frauds applies. However, the evidence of an alleged oral promise made by Reilly
is sufficient to raise a question of fact as to the application of promissory estoppel. Finally, assuming, arguendo, that the
documents exchanged between the parties formed a contract containing an integration clause, there are facts, when viewed
in a light most favorable to Amber, which suggest that the parties did not intend for these documents to be a complete
expression of their agreement. Accordingly, the parol evidence rule does not bar the introduction of evidence regarding the
oral agreement. For all these reasons, Reilly's motion for summary judgment is DENIED.
IT IS SO ORDERED.

				
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