A Bidder is Bound by a Forum Selection Clause That is Fair and Reasonable

The Florida Court of Appeals of the Fourth District held in Early Auction Co. v. Koelzer, 114 So. 3d 1038 (Fla. Dist. Ct. App. 4th Dist. 2013) that a fair and reasonable mandatory forum selection clause is enforceable.  The Defendant-Appellant sought to dismiss the Plaintiff-Appellee’s complaint for improper venue.  The appellate court held that the Appellee is bound by the mandatory forum selection clause in the Terms and Conditions and therefore the venue was improper.  

The lawsuit in this case was filed by the plaintiff Leo Koelzer (“Appellee”), a Broward County resident, against Early Auction Company (“Appellant”), an Ohio auction house.  Appellee in this case bid and purchased a lamp that was represented as a Tiffany Studios lamp. The auction was held in Kentucky, but the plaintiff bid telephonically from his Florida home through an Early Auction employee and won the bid on the lamp. Later Appellee come to know that the Tiffany Studios Lamp sold by Early Auction was a fake one.  Appellee filed a suit in the trial court alleging that the Appellant negligently represented that the lamp was an authentic Tiffany Studios Lamp.  

Appellant in turn filed a motion to dismiss before the trial court seeking dismissal of Appellee’s complaint for lack of personal jurisdiction and improper venue. Appellant pointed out that the terms and conditions of the auction sale included a mandatory forum selection clause and the Appellee is bound to follow these terms. The trial court denied the motion. This appeal followed.  

The Court of Appeals reviewed de novo the question as to whether or not the mandatory forum selection clause in the terms and conditions of the auction sale is enforceable. Id. at 1040.  The court observed that “‘[a] party contesting the venue selected by the plaintiff has the burden of clearly proving that the venue selected by the plaintiff is improper.’" Id. ( quoting Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Nat'l Bank of Melbourne & Trust Co., 238 So. 2d 665, 667 (Fla. 4th DCA 1970)).  However, "[a]s a general principle, the trial court must honor a mandatory forum selection clause in a contract in the absence of a showing that the clause is unreasonable or unjust." Id. (quoting Mgmt. Computer Controls, Inc. v. Charles Perry Constr., Inc., 743 So. 2d 627, 631 (Fla. 1st DCA 1999). "If the venue clause is phrased in mandatory terms, each party has a contractual right to demand that the case be litigated in the forum referred to in the contract." Id. (quoting Mgmt. Computer Controls, Inc. v. Charles Perry Constr., Inc., 743 So. 2d 627, 631 (Fla. 1st DCA 1999).

The appellate court stated that the party contesting improper venue has the “heavy burden” to prove that the forum is improper. Id.  The party is also required to prove why the forum would be unreasonable. Id. (internal citations omitted).  The court stated that the relevant inquiry is whether the terms of the clause were reasonably communicated to the consumer and are otherwise fundamentally fair. Id. ( citing Sun Trust Bank v. Sun Int'l Hotels, Ltd., 184 F. Supp. 2d 1246, 1259 (S.D. Fla. 2001)). This test "takes into account both the physical characteristics of the contract itself, and also any extrinsic factors indicating the plaintiff's ability to become meaningfully informed and to reject the contractual terms at stake." Id.

The court of appeals referred to Sun Trust Bank’s findings in this case. “‘In order to be enforceable the forum-selection clause in a form contract must reasonably warn the consumer that the terms and conditions are important matters affecting legal rights.’" Id. at 1040-41 (quoting Sun Trust Bank at 1259-60). "‘Thus, not only must the operative language be sufficiently clear as to its import and meaning, but the clause itself must also be physically conspicuous and 'eye-catching' in the printed document.’" Id. at 1041 ( quoting Sun Trust Bank at 1260.) "‘Features such as size of type, conspicuousness and clarity of notice on the face of the contract, and the ease with which the plaintiff can read the provisions are all important considerations which, again, must be assessed on a case-by-case basis.’"Id. (quoting Sun Trust Bank at 1260.)

The court of appeals stated that auctions present a unique circumstance because the "terms on which goods are to be sold at auction are often made known in advertisements or catalogues or posted at the place where the auction is to be held." Id. Restatement (Second) of Contracts § 28, cmt. e (1981). Therefore, unless a contrary intention is manifested, "bids at an auction embody terms made known by advertisement, posting or other publication of which bidders are or should be aware, as modified by any announcement made by the auctioneer when the goods are put up." Id. Restatement (Second) of Contracts § 28(2) (1981). Comment e to § 28 of the Restatement elaborates on this rule as follows:

Ordinarily bidders are or should be aware of terms so published or announced. A bid need not repeat such terms; it is understood as embodying them. Hence the bidder is held to the published or announced terms, even though he may have neglected to read them or may have arrived at the auction after the announcement was made. Id. Restatement (Second) of Contracts § 28, cmt. e (1981) (emphasis added).

In light of the points noted above, the court found that, in auction sales, there is clear authority that "‘a catalog is effective in defining the conditions of sale.’" Id. ( quoting A. Belanger & Sons, Inc. v. U.S. for Use and Ben. of Nat'l U.S. Radiator Corp., 275 F.2d 372, 375 (1st Cir. 1960) (applying Massachusetts law)). " ‘Although in auction transactions there is more reason for a prospective purchaser to seek out written conditions of sale, and therefore constructive knowledge could be carried further, we believe that the auction cases . . . support a conclusion that a prior statement of conditions of sale, as in a catalog, can be incorporated into the contract of sale.’" Id. (quoting A. Belanger & Sons, Inc. at 375) The test for determining whether the conditions set forth in the catalog are incorporated into the contract is whether "it appears obvious from the catalog that the buyer's attention is drawn to the terms announced and that the terms apply to the purchase the buyer proposed to make." Id.

In the case at hand, the Appellee argued that he cannot be bound by the Terms and Conditions because he did not sign the Terms and Conditions, he was not physically present at the auction to view the Terms and Conditions there.  The trial court ruled in the Appellee’s favor believing the Appellee’s testimony that he was unaware of the Terms and Conditions. The court of appeals rejected the Appellee’s plaintiff's arguments and concluded that the trial court erred in refusing to enforce the forum selection clause in the Terms and Conditions of the auction.

The court of appeals found that the Appellee, as a bidder in the auction, is held to the published terms of the auction regardless of whether he actually read them. Id. The court of appeals observed that the Appellee received a catalog setting forth the Terms and Conditions of Sale at Auction, including a forum selection clause. Id. at 1041-42. The Terms and Conditions were in large type on the inside front cover and at end of the catalog. Id. They were prominent. Id. The forum selection clause in this case was a mandatory forum selection clause, providing that "[a]ll disputes arising from an auction or sale shall be resolved in Cincinnati, Ohio . . . ." (Emphasis added). Although the forum selection clause itself was near the bottom of the page and was not any more "eye-catching" than the other terms and conditions, it was in reasonably large type and was not hidden or otherwise disguised so as to "sneak by unnoticed." Id. ( citing Sun Trust Bank , 184 F. Supp. 2d at 1260.) It was obvious from the catalog that a buyer's attention would be drawn to the Terms and Conditions and that those terms would apply to any sale at the auction. Furthermore, the terms were posted at the auction site, and the plaintiff's agent was physically present at the auction.

The appellate court found that the Appellee, who received the catalog in advance of the auction, had a meaningful opportunity to consider the forum selection clause, and could have rejected it by refusing to bid or by making an offer on terms different from those announced. Id. See Restatement (Second) Contracts § 28, cmt. e (1981).  Theoretically, a bidder could make an offer on terms different from those announced, but bidders seldom or never do so. Id. 

Therefore, by choosing to bid on the lamp at the auction, the Appellee "offered" to purchase the lamp under the Terms and Conditions that the auction house advertised. Id. The court further stated that the Appellee also failed to show that enforcement of the forum selection clause was unreasonable or unfair in any way. So, the appellate court reversed the trial court’s order and found that the Appellee is bound by the forum selection clause.