Bagg v. Highbeam Research, Inc.

Citations: 862 F. Supp. 2d 41; 2012 U.S. Dist. LEXIS 74326; 2012 WL 1940231Docket: No. 11-cv-30199-MAP

Court: District Court, D. Massachusetts; May 17, 2012; Federal District Court

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A putative class action has been initiated by consumers against HighBeam Research, Inc., The Gale Group, Inc., and Cengage Learning, Inc. The plaintiffs allege deceptive practices, claiming they were misled into purchasing subscriptions to an online research database, resulting in unauthorized charges to their credit cards. The Amended Complaint cites violations of consumer protection laws in Massachusetts and Illinois, along with a claim for unjust enrichment.

Defendants filed a motion to dismiss, arguing that a forum selection clause in a clickwrap agreement on the HighBeam website mandates litigation in Illinois for disputes related to the agreement. The plaintiffs counter that this clause does not apply to their case. The court has denied the motion to dismiss without prejudice, allowing for a short period of limited discovery to clarify factual disputes and establishing a schedule for any necessary subsequent motions from the defendants.

The background reveals that plaintiffs signed up for free trial subscriptions but were later charged for continued services without proper disclosure of the terms, including the automatic conversion to paid subscriptions. They assert that no express consent was obtained for these charges and that they were not provided an easy way to cancel subscriptions. Despite the defendants arguing that consumers must agree to a user agreement, the plaintiffs did not attach this agreement to their complaint and claimed uncertainty about whether they assented to any agreement, particularly concerning the forum selection clause.

Plaintiffs question the process of signing up for free trials, alleging they may have had to provide credit card information before reviewing the Agreement with the forum selection clause. Defendants moved to dismiss based on this clause. Plaintiffs contend that the court should not consider the clause or the Agreement in the motion to dismiss, arguing their claims are non-contractual and that the Agreement applies only to Defendant HighBeam. The court finds Plaintiffs' arguments regarding the applicability of the clause unconvincing but acknowledges that certain factual disputes require resolution through discovery before a ruling can be made. 

The court explains that while a motion to dismiss is typically based on the Complaint's allegations, exceptions exist when a complaint's claims are linked to a document whose authenticity is undisputed. Here, Plaintiffs' claims are intertwined with the Agreement, allowing the court to consider its terms in the dismissal ruling if it is assumed to be identical to the version presented by Defendants. Plaintiffs dispute the authenticity of the Agreement provided by Defendants and question whether they agreed to the same version from 2006 to 2010. Defendants claim no changes have occurred in the Agreement during that time but have not substantiated this assertion. Without clear evidence of Plaintiffs' assent to an Agreement containing the forum selection clause, the court cannot enforce it. Consequently, the court denies Defendants' motion to dismiss without prejudice, allowing for limited discovery to clarify these issues and setting a schedule for further motions. Plaintiffs' argument that their claims are independent of the Agreement is deemed unpersuasive.

Forum selection clauses are generally valid and enforceable unless the party resisting enforcement can demonstrate that it would be unreasonable. Courts routinely uphold forum selection clauses in clickwrap agreements, despite low user awareness of their contents. The key issue is whether Plaintiffs' claims fall within the scope of a specific forum selection clause requiring that all disputes related to the Agreement be brought in the Northern District of Illinois. The First Circuit interprets "relating to" in these clauses broadly, encompassing tort and statutory claims that may connect to a contract, even if no explicit contract claims are made. Prior cases have affirmed that tort claims linked to contractual relationships are still subject to forum selection clauses, and Plaintiffs cannot bypass these clauses by framing their claims as torts. 

In this case, Defendants assert that Plaintiffs could not have accessed HighBeam’s services without entering into the Agreement, and that Plaintiffs' claims focus on alleged failures to disclose material terms within that Agreement. The Amended Complaint includes a claim under the Illinois Automatic Contract Renewal Act, which pertains to the contractual relationship between Plaintiffs and Defendants. Although the Amended Complaint does not directly state that the contract in question is the Agreement, no alternative contract has been identified by Plaintiffs. Furthermore, Plaintiffs' argument that their claims concern disclosures on HighBeam’s website rather than the Agreement itself is undermined by their acknowledgment that some disclosures were indeed within the Agreement. The broad interpretation of "relating to" as established in prior case law supports the conclusion that Plaintiffs' claims are connected to the Agreement, reinforcing the applicability of the forum selection clause.

The plaintiff in Huffington contended that his tort and statutory fraudulent misrepresentation claims were independent of his contract with the defendant, asserting that the misrepresentations would be actionable regardless of any contract. However, the First Circuit determined that these claims were indeed related to the agreement, as the misrepresentations led the plaintiff to make an unfavorable purchase. Similarly, in the current case, the plaintiffs allege that the defendants’ misrepresentations prompted them to enroll in HighBeam's free trial, thereby binding them to the clickwrap agreement. If they had not entered the agreement, they would not have incurred any losses. 

The plaintiffs referenced cases where courts ruled that forum selection clauses did not apply, but these cases involved distinct factual circumstances. For instance, in Bay State Anesthesia Inc. v. Mallinckrodt, Inc., claims were deemed unrelated to the contract because they revolved around statements made to non-parties or actions post-contract termination. In Pixel Enhancement Labs. Inc. v. McGee, claims involved a non-party to the license agreement and breaches of employment contracts that lacked forum selection clauses.

Several factual disputes remain to be resolved before any dispositive motion can be ruled upon. Key issues include the authenticity of the Agreement and whether plaintiffs had to click an “I agree” button when signing up for free trials from 2006 to 2010, as well as confirming the sequence of actions required to enroll. There is a contention regarding whether plaintiffs had to provide credit card information before clicking “I agree,” which is significant for determining potential losses related to the Agreement. Discovery is necessary to clarify if consumers could engage with the defendants detrimentally without agreeing to the contract. 

Additionally, plaintiffs argue that the forum selection clause only applies to HighBeam, though the Agreement mentions it benefits HighBeam and its successors. Defendants’ counsel indicated that HighBeam has merged into Gale, the parent company of Cengage, and expressed willingness to conduct limited discovery on the relationships among defendants.

In conclusion, the court denied the defendants' motion to dismiss without prejudice and allowed two weeks for the parties to exchange information to address the identified issues.

The court emphasizes the importance of efficiency and clarity in the proceedings, encouraging counsel to avoid unnecessary complications in factual inquiries. Counsel must ensure a clear record and communicate the outcomes of informal exchanges to the court by May 31, 2012, along with any proposals for further proceedings. If disputes remain unresolved, Plaintiffs have sixty days to serve formal interrogatories and take depositions related to three specified issues. Following the completion of discovery by August 17, 2012, Defendants may file a renewed dispositive motion, with Plaintiffs having until September 14, 2012, to respond. The court will review the motion based on written submissions or schedule oral argument.

Plaintiff Kathleen Geisse initiated a free trial of High-Beam’s services in 2006, while other plaintiffs did so in 2010. Plaintiffs have not contested the reasonableness of enforcing a relevant clause. Defendants assert that Illinois law governs the case due to a choice of law provision. However, there is no conflict among federal common law, Massachusetts law, and Illinois law regarding the enforceability of forum selection clauses, as they are treated similarly. The court notes that it does not need to determine which law applies in this diversity case but will permit limited discovery on this matter.