Scarcella v America Online

[*1] Scarcella v America Online 2004 NY Slip Op 51021(U) Decided on September 8, 2004 Civil Court Of The City Of New York, New York County Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on September 8, 2004
Civil Court of the City of New York, New York County

RUSSELL SCARCELLA, Claimant,

against

AMERICA ONLINE, Defendant.



1168/04



For Claimant:

Russell B. Scarcella, pro se

401 East 34th Street, Apt. 55M

New York, NY 10016

For Defendant

Elizabeth Prickett-Morgan, Esq.

Schlam, Stone & Dolan, LLP

26 Broadway

New York, NY 10004

Debra Rose Samuels, J.

Defendant's motion to dismiss is denied.

Defendant contends that the Court lacks subject-matter jurisdiction over Claimant's claim. That contention is based on a forum-selection clause in the Member Agreement by which Claimant contracted for Defendant's services. That clause, Paragraph 11(A) of the Member Agreement, states, in pertinent part:

Member expressly agrees that exclusive jurisdiction for any claim or dispute resides in the courts of the Commonwealth of Virginia. Member further agrees and expressly consents to the exercise of personal jurisdiction in the Commonwealth of Virginia in connection with any dispute or claim involving AOL, Inc.

The Member Agreement was executed not in the traditional manner, i.e., on paper, with signatures by the parties or their agents, but, as befits its subject matter, by the conventions of the Internet, with Claimant having "checked" a box indicating assent to the terms shown on his computer screen while signing up for Defendant's Internet service following the installation of Defendant's software.

Claimant first argues that the motion should be denied because motion practice is, as a general rule, frowned upon in Small Claims Court.

A motion of this type is, however, an exception to the general rule. It is entirely appropriate, even in Small Claims Court, that a court address a properly raised challenge to its jurisdiction before forcing a defendant to litigate the merits of the plaintiff's claim.[FN1]

On the merits of the jurisdictional question, Claimant points to British West Indies Guaranty Trust Co., Ltd. V. Banque Internationale A Luxembourg, 172 A.D.2d 234,

567 N.Y.S.2d 731 (1st Dep't 1991), which sets forth criteria for determining the enforceability of a forum-selection clause:

It is well accepted policy that forum-selection clauses are prima facie valid. In order to set aside such a clause, a party must show that enforcement would be unreasonable and unjust or that the clause is invalid because of fraud or overreaching, such that a trial in the contractual forum would be so gravely difficult and inconvenient that the challenging party would, for all practical purposes, be deprived of his or her day in court.

567 N.Y.S.2d at 732.

Claimant argues that the facts of this case bring it within the exception described in British West Indies to the general rule that such clauses are enforceable. Specifically, Claimant notes that the sign-up process involved viewing over 80 computer "screens" (91, to be exact, based on the printed-out screens furnished by Defendant as an exhibit to the affidavit of Kelli Tyus-Washington), two of which invited Claimant to consent to the terms of the Member Agreement. "By this point," Claimant contends, "the customer has already been lulled into a trance of lethargy and inattentiveness from the seemingly endless presentment of useful and inconsequential information."

Claimant argues, in essence, that it is not reasonable, under the circumstances, to infer his actual consent thereto from the fact that he "checked" the box saying that he accepted the terms of the Member Agreement.

In British West Indies, supra, the court upheld the forum-selection clause at issue, holding that

the allegations that plaintiff Grace Sanchez Brownlow, the signatory to the contract, did not read the provision, or that it was not brought specifically to her attention are of no avail, since as a [*2]signatory to the contract, she is presumed to know the contents of the instrument she signed and to have assented to such terms.

567 N.Y.S.2d at 732. If the series of computer screens at issue here is treated as the equivalent of a written contract on paper, the same principle would seem to apply. Refusal by the courts to treat the two as equivalent would threaten the viability of the internet as a medium of commerce. The Court does not doubt that the long series of screens with which Claimant was presented did, in fact, induce the "trance of lethargy and inattentiveness" that he describes, and would have the same effect on many others A contract of equivalent length printed on paper, however, could be expected to induce the same result. Nonetheless, "a signatory to [a] contract . . . is presumed to know the contents of the instrument she signed and to have assented to such terms." Id. The law does not treat prolixity as evidence of deception.

But Claimant's allegation that his consent to the terms of the Member Agreement was procured by deceit is based on something more. He shows that the screen on which the prospective subscriber is first invited to agree to the terms of the Member Agreement appears before the actual Member Agreement (divided into two parts, "Terms of Service" and "Rules of the Road" ).[FN2] On that screen, the prospective subscriber is told, in pertinent part:

Your use of the America Online (AOL) Service is conditioned upon your acceptance of AOL's Terms of Service (TOS) and Rules of the Road (ROR). We strongly encourage you to review the TOS and ROR now by clicking the Read Now button below. (Both documents are always available online, free of hourly charges, and can be accessed directly on AOL, by using Keyword TOS.)

The Membership Agreement, in the form in which it is presented in Exhibit 2 of Ms. Tyus-Washington's affidavit, runs 11 single-spaced pages and 11 double-spaced pages. But Defendant considerately makes it very easy to avoid going to the trouble of slogging through all of that text. The customer can bypass all that bother by simply pressing the "OK, I Agree" button. If the customer nonetheless bites the bullet and presses the "Read Now" button, Defendant affords him or her a second opportunity to skip over what will become the contract between the parties, showing the customer a screen that says, in pertinent part:

Because TOS and ROR are detailed, they are lengthy, and while we encourage you to take the time to read them now, we understand if you are eager to just go explore the service. That's OK, but you agree to read these documents once online, so you'll understand what this community is all about. Click on your choice below.

(Emphasis added.) [*3]

The customer is then given a second chance to press the "OK, I Agree" button or if not deterred by the warning that it is "detailed" and "lengthy," accompanied by the assurance that "if you are eager to just go and explore the service . . . That's OK" to press the "Read Now" button (which, by this point, might as well be subtitled "For Nerds Only").

"By this language," Claimant argues,

AOL encourages its customers to skip the [Member Agreement] with no expectation that you will actually go back and read it, yet comforted in their knowledge that you clicked the correct box in order for them to cloak themselves in the protection of the contract they drafted.

Claimant's characterization of Defendant's intent is by no means implausible. To decide this motion, however, the Court need not decide whether Defendant has, as Claimant alleges, engaged in a "deceptive practice" that vitiates Claimant's ostensible consent to the terms of the Member Agreement, nor consider the significance of Claimant's failure to deny specifically that he read and understood the forum-selection clause.

The U.S. Supreme Court has instructed the lower Federal courts that "A contractual choice-of-forum clause should be held unenforceable if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision." The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 92 S. Ct. 1907, 1916 (1972).

New York's courts have followed the same rule. Matter of the Estate of Betlem,

300 A.D.2d 1026, 753 N.Y.S.2d 632, 633 (4th Dep't 2002); Premium Risk Group v. Legion Insurance Company, 294 A.D.2d 345, 741 N.Y.S.2d 563, 564 (2d Dep't 2002); National Union

Fire Insurance Company of Pittsburgh, Pa. v. Williams, 223 A.D.2d 395, 637 N.Y.S.2d 36, 39

(1st Dep't 1996).

Enforcement of the forum-selection clause in this case would contravene the strong public policy embodied in the small-claims provisions of the Civil Court Act (§§ 1801 et seq.).

The Small Claims Part of what is now the Civil Court was established in 1934, because

There had been increasing awareness that existing courts, especially in large cities, did not provide adequate facilities for the litigant with a small claim who could not afford to employ a lawyer. Eventually it was recognized that real justice could be done in these cases only if delay, expanse and procedural formality were dispensed with. In his illuminating and comprehensive study, Reginald Heber Smith aptly said, "The essential features of a small claims court are extremely low costs or none at all, no formal pleadings, no lawyers, and the direct examination of parties and witnesses without formality by a trained judge who knows and applies the substantive law." (Smith on Justice and the Poor, p. 56.)

Levine v. Bucholtz, 208 Misc. 597, 145 N.Y.S.2d 79, 81 (A.T. 1st Dep't 1955), aff'd,

2 A.D.2d 351, 155 N.Y.S.2d 770 (1st Dep't 1956). Twenty years later, the court explained,

"night sessions of the Small Claims Part were inaugurated to make it readily accessible to those who cannot afford to lose working time by court attendance during the day . . . ." Id.,

145 N.Y.S.2d at 82.)

In Licitra v. Gateway, Inc., 189 Misc.2d 721, 734 N.Y.S.2d 389 (Sup. Ct. Richmond Co. 2001), the court refused to dismiss a Small Claims action based on an arbitration clause in the consumer contract at issue, holding that enforcement of the clause would frustrate the public [*4]policies embodied in the small-claims provisions of the Civil Court Act. The court identified numerous ways in which enforcement of the arbitration clause would deny the claimant benefits the Legislature had intended a small-claims litigant to enjoy.

Among those were

 the imposition of a higher filing fee for even a "documentary" hearing, and a still higher filing fee for a "participatory" hearing (provided as a matter of right in Small Claims Court upon filing of the basic filing fee);

 the possibility that the case would be heard in a location less convenient for the claimant (possibly as far away as South Dakota);

 more demanding pleading requirements; and

 the requirement that judgment be based on the "preponderance of the evidence," rather than the "substantial justice" standard applicable in Small Claims Court. Id.,

734 N.Y.S.2d at 394-396.

In Oxman v. Amoroso, 172 Misc.2d 773, 659 N.Y.S.2d 963 (Yonkers City Ct. 1997), the court likewise denied a motion to dismiss a Small Claims action [FN3] based on a forum-selection clause in the contract between the claimant and a Utah company that contracted to provide a suitable "au pair" to care for the claimant's children:

Forum selection clauses are among the most onerous and overreaching of all clauses that may appear in consumer contracts. The impact of these clauses is substantial and can effectively extinguish legitimate consumer claims, e.g., plaintiff's claim herein of $1,855 is, practically speaking, unenforceable except in the Small Claims Court, since the costs of retaining an attorney in and traveling to Utah would far exceed recoverable damages.

659 N.Y.S.2d at 967.

Defendant has cited several Civil Court and Supreme Court decisions in which motions to dismiss actions brought against Defendant in New York were granted based on the same

forum-selection clause. But none of those decisions addresses the question of the clause's enforceability vis a vis a small claim in light of the public policy manifested in Civil Court Act §§ 1801 et seq., discussed above.[FN4]

In this case, Claimant has availed himself of the low cost, relaxed pleading requirements and nighttime proceedings provided by the Legislature for small claims. To obtain those benefits, Claimant has waived his right to sue for more than $ 3,000 and his right to a jury trial.

Defendant has made no showing that Virginia would offer Claimant the same benefits as this Court's small-claims procedures. At a minimum, being forced to travel to Virginia would cost [*5]Claimant a day's work for every court appearance required.[FN5] The general policy of giving effect to forum-selection clauses must yield to the scheme enacted by the Legislature specifically to ensure that civil justice is meaningfully accessible to those seeking the adjudication of small claims.[FN6]

Dated: 9/8/04 /s/

DEBRA ROSE SAMUELS

JCC Footnotes

Footnote 1: Defendant, which was served with the Summons and Notice of Claim herein at "45 West 18th Street, New York City, NY 10011," does not dispute that personal jurisdiction over it has been properly obtained, nor that it "either resides or has an office for the transaction of business . . . within the city of New York," a prerequisite for susceptibility to suit in a small-claims action (Civil Court Act, § 1801).

Footnote 2: The affidavit of Kelly Tyus-Washington, submitted by Defendant, states that Exhibit 3 thereto (91 pages in length) contains all of the screens shown to Plaintiff during his sign-up process. But the screens shown do not appear to be entirely in order. For example, while Paragraph 1 of the TOS appears at Page 36 of the exhibit and concludes on Page 38 of the exhibit (followed by the beginning of Paragraph 2), Paragraph 11 of the TOS (the forum-selection clause) appears between the two, at page 37 of the exhibit.

Footnote 3: Small Claims parts have been established in courts outside New York City by legislative language essentially identical to Civil Court Act §§ 1801 et seq.

Footnote 4: Nor does any of those decisions address the question identified above but not resolved herein, i.e., whether the manner in which Defendant offered the text of the Member Agreement was so calculated to discourage the prospective subscriber from reading it as to vitiate the consent manifested by checking the "OK, I Agree" box.

Footnote 5: By contrast, as noted supra at n1, Defendant has not disputed that it maintains offices in New York. Nor has Defendant even suggested that trying this case in New York would impose any undue burden on it.

Footnote 6: At the same time, the Court commends to the Legislature the question of whether forum-selection clauses in consumer contracts between New York consumers and out-of-state vendors or service-providers should be enforceable in New York's courts at all.