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Mortgage Plus, Inc. v. DocMagic, Inc., 2004 WL 2331918, 2004 US Dist. LEXIS 20145 (D. Kan. 2004) (full-text).
Factual Background Edit
In the fall of 1997, Mortgage Plus Inc. (“Plaintiff”), a mortgage lending company, began using DocMagic Inc.’s (“Defendant”) loan preparation software and services. Plaintiff contends that the parties entered into an oral agreement in the fall of 1997, which was finalized when defendant shipped the software necessary to utilize their services. Plaintiff further contends that there was no discussion of any forum selection clause in their fall 1997 agreement.
Defendant contends that no formal, oral agreement was created in the fall 1997. Rather, the formal agreement was created when plaintiff loaded the software that defendant sent to them. When loading the software, a box of text pops up containing the various user agreement terms and a forum selection clause stating that any disputes will be resolved in the “appropriate court in Los Angeles California.” The user must select “yes” to the question “Do you accept all the terms of the preceding license agreement?” If the user selects “no” then the setup will close. Plaintiff selected “yes” to the licensing agreement and installed the program. Thus Ddefendant contends that when the plaintiff selected “yes,” a valid contract was formed.
Trial Court Proceedings Edit
On October 23, 2003, plaintiff filed suit against the defendant, alleging that defendant’s software had failed to produce documents that complied with the federal Truth in Lending Act of 1968 (TILA) causing the plaintiffs to be subjected to claims from their borrowers.
Defendant moved to transfer the case to the Central District of California in accordance with the forum selection clause included in the licensing agreement. Plaintiff opposed the removal on the grounds that the forum selection clause does not apply because: (1) the licensing agreement is invalid; (2) it was not supported by consideration; and (3) the person who assented to it lacked the authority to bind the company.
In addressing the Plaintiff’s contentions, the court held first that the license agreement was a valid contract, reasoning that the pop-up terms constituted a “clickwrap” licensing agreement, which are generally found to be valid and enforceable. Additionally, during installation of the software, the plaintiff had a choice as to whether or not to utilize the services, and because the plaintiff affirmatively clicked the “yes” button, he assenting the terms contained within. Second, the court held that the agreement was supported by valid consideration — plaintiff agreed to pay a fee in exchange for use of defendant’s services. Finally, the court held that the person who clicked “yes” did have the authority to bind the company because the plaintiff failed to provide the name, title or job description of this person, and the plaintiff ratified his acceptance through re-installing the software three times over six years.