California Choice of Law Provision Defeats Claim Under NJ Consumer Protection Law
California’s test for enforcing a choice-of-law clause, set forth by the California Supreme Court in Washington Mut. Bank, F.A. v. Superior Court, 24 Cal. 4th 906, 916 (2001), begins by asking whether the chosen state has a substantial relationship to the parties or their transaction or, if not, whether there is any other reasonable basis for the choice. If the answer to either question is yes, a plaintiff seeking to avoid application of the contractual choice must establish both “that the chosen law is contrary to a fundamental policy” of the alternative state and that the alternative state “has a materially greater interest in the determination of the particular issue.” Facebook easily cleared the burden-shifting hurdle because it is headquartered in California. Plaintiffs then failed to meet their burden because they “failed to show that California’s consumer protection law,” which itself precludes a wide array of false and deceptive practices and “aim[s] to accomplish the same end,” is “contrary to New Jersey policy.” That California’s law “affords different rights and remedies” is immaterial because “[c]ourts should not refrain from applying the chosen law merely because this would lead to a different result.”
The decision’s caveats are important, but the bottom line is that non-New Jersey choice-of-law clauses, applied by online retailers outside New Jersey, may preclude TCCWNA claims.