Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—D. N.J.: Maryland proper forum for class action over Hertz rental fees, (Oct 30, 2015)

By Michael Menzhuber, J.D., LL.M.

A motion to transfer, to the District of Maryland, a putative class action that asserted a violation of the New Jersey Consumer Fraud Act (NJCFA) by Hertz Corporation, was granted by the federal district court in Newark, New Jersey. In granting Hertz’s motion to transfer, the court determined that Maryland was the proper forum pursuant to the rental agreement’s forum selection clause and transfer was appropriate under U.S.C. § 1404(a) (Spotswood v. Hertz Corporation, October 27, 2015, Hammer, M.).

Background. Robert Spotswood, who was member of Hertz’s #1 Gold Club Program, rented a car from Hertz at its Baltimore Washington International Airport (BWI) location. As a Gold Club member, Spotswood agreed to Hertz’s terms and conditions which consisted of: (1) the rental agreement, which set for terms for Hertz’s rental customers and included vehicle damage fees that could be charged; and (2) the rental record, which contained estimated charges, the rental car number and location, and other transaction specific information.

The rental agreement contained two forum selection clauses: (1) one that applied when the rental commenced (first provision); and (2) one that applied at the time of enrollment or membership in the Gold Program (second provision). The first provision required application of the substantive law of the jurisdiction where the rental commenced, which in this case was in Maryland. The second provision required application of the jurisdiction of the location of Hertz’s principal executive office, which was in New Jersey.

Spotswood damaged the rental car in an accident which occurred in Maryland. After processing his claim, Spotswood’s insurance company rejected his request for payment of three fees Hertz charged in connection with the accident. Spotswood filed a putative class action, asserting a violation of the NJCFA, unjust enrichment, and breach of contract. Specifically, Spotswood asserted that the rental agreement limited the amount customers had to pay for car damage and precluded Hertz from charging the rental fees.

Before the court was Hertz’s motion to transfer the case to the federal district court in Maryland.

Forum selection clause. Hertz argued that Maryland was the proper forum because: (1) the first provision of the terms and conditions required application of the jurisdiction whether the rental occurred; and (2) Spotswood’s rental of the vehicle took place in Maryland. Hertz also argued that Spotswood’s claim did not arise in New Jersey because the accident occurred in Maryland.

Spotswood contended that the second provision of the terms and condition governed the dispute because the core dispute concerned his enrollment or membership in the Gold Program and the rental fees associated with the program. Since that provision required application of the jurisdiction where Hertz’s principal executive office was located, New Jersey was the proper forum for the dispute.

The court agreed with Hertz that the dispute was governed by the first provision because it was about the fees that Hertz could lawfully charge a renter who damaged a vehicle during the rental, regardless of whether the renter had a membership in the Gold Program. Because Spotswood did not argue that the first provision was unenforceable because of fraud or otherwise, the court found that it was valid and that Maryland was the proper venue for the dispute.

Transfer of venue. The court noted that transfer is appropriate under 28 U.S.C. §1404(a) if venue is proper in the transferee district and the transferee district can exercise personal jurisdiction over all parties. The court determined that venue was proper in Maryland because the parties executed the rental agreement in Maryland and that rental set in motion the key events of the case, all of which occurred in Maryland. Additionally, Maryland could exercise personal jurisdiction by virtue of the parties having entered into the forum selection clause. Maryland law allows personal jurisdiction if the claim arises from the defendant transacting business there. The court found that this standard was consistent with the traditional three-factor test to determine whether a court may exercise personal jurisdiction which included a determination that the defendant must have “purposed directed” its activities at the forum state.

The case is No. 15-3518 (ES).

Attorneys: Maureen Victoria Abbey (Heninger Garrison Davis, LLC) for Robert Spotswood. Kevin Harry Marino (Marino Tortorella & Boyle, PC) for Hertz Corp.

Companies: Hertz Corp.

Cases: StateUnfairTradePractices NewJerseyNews