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1aeuipment

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1-A EQUIPMENT CO., INC. - law1-0361

v.

ICODE, INC.

No. 0057CV467

Massachusetts District Court, Wrentham

Nov. 17, 2000

 

Callaghan & Company's Headnote and Classification

 

Forum selection clause printed on software's packaging enforceable.

Massachusetts District Court, Wrentham Nov. 17, 2000

 

Although not part of the sales orders signed by buyer, the forum selection clause printed on the software's packaging constituted a valid and enforceable agreement between the parties. The sales orders for the business software directed, immediately before the signature line, that buyer 'please read the End User License and Service Agreement.' The End User Agreement, which provided that Virginia would be the exclusive venue for any litigation, was printed on the outside of the sealed envelope in which the software was delivered. The Agreement also appeared on the screen as part of the installation process requiring buyer to agree to its terms once at the commencement of the process and again before concluding it. Inasmuch as Virginia and Massachusetts law both required that forum selection clauses be upheld unless such provisions are unfair or unreasonable, or are affected by fraud or unequal bargaining power, it was not unfair or unreasonable for venue to be in Virginia where the seller was a Virginia corporation with its principal place of business in that state. Seller's motion to dismiss for improper venue accordingly allowed.

1-A EQUIPMENT CO., INC. v. ICODE, INC. (MASS DIST 2000). Not Reported in N.E.2d, 2000 WL 33281687 (Mass. Dist.), 43 UCC Rep.Serv.2d 807

 

UCC Sections Cited: None.

 

DANIEL B. WINSLOW, First Justice.

 

The plaintiff, 1-A Equipment Co., Inc. ('1-A'), dissatisfied with business software it had purchased from the defendant, ICode, Inc. ('ICode'), filed suit in the Wrentham District Court alleging breach of contract and misrepresentation. ICode moved to dismiss pursuant to Mass.R.Civ.P. 12(b)(3) for improper venue because the software license agreement included a forum selection clause limiting venue to the courts of the Commonwealth of Virginia. By Order dated November 17, 2000, treating the motion to dismiss as a motion for summary judgment in view of affidavits filed in support of the motion, the Court ordered judgment for ICode dismissing this action. FN1 By letter request dated December 19, 2000, in accordance with the terms of the November 17 Order, 1-A requested a memorandum of decision regarding the dismissal.

 

FN1 Rule 12(b) provides in part that 'on any motion asserting the defense numbered (6) . . . . matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56.' There is no parallel requirement where, as here, both parties have filed affidavits regarding a motion asserting the defense numbered (3), but the Court is unaware of any prohibition against treating the motion as one for summary judgment in the circumstances to permit consideration of matters raised outside the pleadings.

 

Summary judgment shall be granted where there are no genuine issues as to any material fact and where the moving party is entitled to judgment as a matter of law. Cassesso v. Commissioner of Correction, 390 Mass. 419, 422 (1983); Community Nat'l Bank v. Dawes, 369 Mass. 550, 553 (1976); Mass.R.Civ.P. 56(c). The moving party bears the burden of affirmatively demonstrating the absence of a triable issue, 'and further that the moving party is entitled to judgment as a matter of law.' Pederson v. Time, Inc., 404 Mass. 14, 16-17 (1989). Based on the affidavits submitted by the parties, there are no genuine issues of material fact. 1-A and ICode both are businesses. On or about December 20, 1999, 1-A signed a Sales Order for the lease of Accware 10 User NT software. On December 23, 1999, 1-A signed a Sales Order for Accware Installation, Setup and Training. The End User Agreement, which contains the forum selection clause, was not written on the Sales Orders; the Sales Orders provided in pertinent part immediately before the signature line:

 

Thank you for your order. No returns or refunds will be issued for software license and/or services. All sales are final.-Please read the End User License and Service Agreement.

 

The software was delivered to 1-A in a box which contained a sealed envelope bearing the software. The End User Agreement was printed on the outside of the envelope and provided, in part, as follows:

 

IMPORTANT-READ CAREFULLY BEFORE OPENING THIS PACKAGING OR DOWNLOAD OR INSTALLING OR USING ANY PART OF THIS PRODUCT. THIS IS A LEGAL DOCUMENT THAT STATES THE TERMS AND CONDITIONS THAT GOVERN YOUR USE OF THE PRODUCT. ICODE, INC. (THE 'COMPANY') IS WILLING TO LICENSE THIS PRODUCT TO YOU, THE LICENSEE ('YOU' OR 'LICENSEE') ONLY IF YOU ACCEPT ALL OF THE TERMS OF THIS END USER LICENSE AGREEMENT (THE 'AGREEMENT'). BY OPENING THIS PACKAGING, CLICKING YOUR ACCEPTANCE OF THE AGREEMENT DURING DOWNLOAD OR INSTALLATION OF THIS PRODUCT, OR BY USING ANY PART OF THIS PRODUCT, YOU AGREE TO BE LEGALLY BOUND BY THE TERMS OF THE AGREEMENT. IF YOU DO NOT AGREE TO THESE TERMS, DO NOT OPEN THE PACKAGING OR DOWNLOAD OR INSTALL OR USE THIS PRODUCT. WITHIN SEVEN (7) DAYS OF YOUR PURCHASE, RETURN THIS PRODUCT, IN ITS ORIGINAL PACKAGING, TO THE LOCATION WHERE IT WAS PURCHASED, FOR A FULL REFUND OF THE AMOUNT OF FEES YOU PAID FOR THE PRODUCT . . .

 

7. General Provisions. . . . . This agreement will be governed by the laws in force in the Commonwealth of Virginia excluding the application of its conflict of law rules and exclusive venue for any litigation shall be in Virginia . . . . (emphasis in original).

 

1-A opened the packaging and installed and used the software. When 1-A installed the software, as part of the installation process, the End User License Agreement appeared on the screen, and the customer was instructed to read the Agreement. In order to finish installing the software, the customer once again was required to agree to accept the terms of the License Agreement in order to complete the installation. As part of the installation process, the customer is instructed to register the software with ICode which, in turn, gives the customer a serial number and validation number. 1-A faxed ICode the registration form on January 24, 2000.

 

'Although for many decades Massachusetts did not enforce forum selection clauses except in special cases (see Nute v. Hamilton Mut. Ins. Co., 6 Gray at 184; Nashua River Paper Co. v. Hammermill Paper Co., 223 Mass. 8, 19 1916), more recent opinions indicate that such clauses are not inherently inappropriate (see W.R. Grace & Co. v. Hartford Accident & Indem. Co., 407 Mass. 572, 582 n. 13 1990; Ernest & Norman Hart Bros. v. Town Contractors, Inc., 18 Mass. App. Ct. 60, 65 1984). See Lambert v. Kvsar, 983 F.2d 1110, 1116-1118 (1st Cir. 1993) . . . . In The Bremen v. Zapata Off-Shore Co., 407 U.S. 1 (1972), the Supreme Court announced the Federal common law rule that forum selection clauses are valid and enforceable, except when it is shown that enforcement would be unreasonable. The Supreme Judicial Court accepts the modern view that forum selection clauses are to be enforced if it is fair and reasonable to do so. See Restatement (Second) of Conflict of Laws § 80 (1988 revision) ('The parties' agreement as to the place of the action will be given effect unless it is unfair or unreasonable'); Annot., Validity of Contractual Provision Limiting Place or Court in which Action may be Brought, 31 A.L.R. 4th 404, 409 (1984 & Supp. 1994).' Jacobson v. Mailboxes Etc. U.S.A., Inc., 419 Mass. 572, 574-575 (1995). Based on the undisputed facts of this action, the Court finds, as a matter of law, that the software packaging constituted a valid and enforceable agreement between the parties. The Court is guided in part by similar factual circumstances involving software licensing agreements which have been litigated in other jurisdictions.

 

In Washington, for example, the Court of Appeals noted in a software licensing dispute that ' 'transactions in which the exchange of money precedes the communication of detailed terms are common.' ProCD, Inc. v. Zeidenberg, 86 F.3d 1447, 1451 29 UCC Rep Serv 2d 1109 (7th Cir. 1996). In ProCD, the Seventh Circuit held that shrinkwrap licenses accompanying off-the-shelf computer software are enforceable unless their terms are objectionable under general contract law. See 86 F.3d at 1449. The defendant purchased ProCD software at a retail outlet and made the database information therein available on the World Wide Web at a cost less than what ProCD charged consumers. See id. at 1450. The district court refused to enforce the license agreement that came with the software because the purchaser did not agree to 'hidden terms'-those inside the box-even though a printed notice on the outside of the box referred to the license terms inside. See id.

 

The Seventh Circuit reversed. See id. at 1449. The court stated: 'Notice on the outside, terms on the inside, and a right to return the software for a refund if the terms are unacceptable (a right that the license expressly extends), may be a means of doing business valuable to buyers and sellers alike.' Id. at 1451 (citing E. Allan Farnsworth, 1 FARNSWORTH ON CONTRACTS § 4.26 (1990) and Restatement (Second) of Contracts § 211 cmt. a (1981)). The court discussed several examples of ' money now, terms later' transactions. See id. at 1451 (the purchase of insurance, airline tickets, electronic goods containing warranties inside the box, and drugs with inserts describing interactions and contraindications). Turning to the software industry, the court noted that software is often ordered over the phone and the Internet and that increasingly the delivery is also over the Internet. See id. at 1451-52 . . . . . The Seventh Circuit again upheld license terms in a pay-now-terms-later transaction with an accept-or-return provision in Hill v. Gateway 2000, Inc., 105 F.3d 1147, 1150 31 UCC Rep Serv 2d 303 (7th Cir.), cert. Denied, 522 U.S. 808 (1997).

 

In Hill, the customer ordered a computer over the phone, paying with a credit card, and received the computer in the mail accompanied by a list of terms to govern if the customer did not return the computer within 30 days. See id. at 1148. The court posed this question: 'Are these terms effective as the parties' contract, or is the contract term-free because the order-taker did not read any terms over the phone and elicit the customer's assent?' Id. Relying in part on ProCD the court held that the terms were effective stating: 'Practical considerations support allowing vendors to enclose the full legal terms with their products.' Id. at 1149.' M. A. Mortenson Company, Inc. v. Timberline Software Corporation, 93 Wash. App. 819, 829-30 37 UCC Rep Serv 2d 892 (1999), affirmed 140 Wash.2d 568 41 UCC Rep Serv 2d 357 (2000). FN2 Accordingly, the forum selection clause was properly within the agreement of the parties.

 

FN2 And see Brower v. Gateway 2000, Inc., 676 NYS2d 569, 571 37 UCC Rep Serv 2d 54 (1998) (New York Supreme Court Appellate Division opined that the software licensing contract 'was formed and acceptance was manifested not when the order was placed but only with the retention of the merchandise beyond the 30 days specified in the Agreement enclosed in the shipment of merchandise.')

 

As in Jacobson, where the agreement stated it was to be construed under the laws of the State of California, the agreement between the parties in this action provides it 'will be governed by the laws in force in the Commonwealth of Virginia excluding the application of its conflict of law rules.' 'Therefore, in the absence of any substantial Massachusetts public policy reason to the contrary, Massachusetts's attitude toward the forum selection clause is unimportant, and we should turn to the law of Virginia to determine the effect of that clause.' Jacobson v. Mailboxes Etc. U.S.A., Inc., 419 Mass. at 575. Virginia law regarding forum selection clauses parallels Massachusetts law, and forum selection clauses will be upheld unless a party establishes 'that such provisions are unfair or unreasonable, or are affected by fraud or unequal bargaining power.' Paul Business Systems, Inc. v. Canon USA, Inc., et al., 240 Va. 337, 342 (1990).

 

The pleadings reveal that ICode is a Virginia corporation with a principal place of business of business in Virginia (and the software at issue presumably was developed in Virginia). Faced with similar circumstances while addressing a Virginia forum selection clause, the Virginia circuit court noted that 'plaintiff is a Virginia corporation and plaintiff has alleged that some of the materials in this case were manufactured in Virginia. In light of these facts, it seems quite reasonable to this court that Virginia be selected as the forum state.' Americast, A Division of Valley Blox, Inc. v. Accubid Excavation, Inc., 50 Va. Cir 416 (1999). Accordingly, as a matter of Virginia law, it is not unfair or unreasonable for venue to be in Virginia. The motion to dismiss properly must be allowed.

 

ORDER

 

For the reasons stated and based on applicable law, the motion to dismiss was ALLOWED by Order dated November 17, 2000.

 

END OF DOCUMENT

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