United States Court of Appeals For the First Circuit

No. 22-1451

FRED KLEINER, on behalf of himself and all others similarly situated,

Plaintiff, Appellant,

v.

CENGAGE LEARNING HOLDINGS II, INC.; CENGAGE LEARNING, INC.,

Defendants, Appellees,

DOE AFFILIATED ENTITIES 1-10,

Defendants.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS

[Hon. Richard G. Stearns, U.S. District Judge]

Before

Kayatta, Lynch, and Gelpí, Circuit Judges.

Richard Weingarten, with whom David Slarskey, Slarskey LLC, Edward V. Colbert III, David Koha, and Casner & Edwards, LLP, were on brief, for appellant. Michael R. Gottfried, with whom Duane Morris LLP was on brief, for appellees. April 19, 2023 KAYATTA, Circuit Judge. Fred Kleiner claims that

Cengage Learning Holdings II, Inc., and Cengage Learning, Inc.

(collectively, "Cengage") committed unfair and deceptive business

practices under Massachusetts law by intentionally obfuscating

information regarding the sales of his published books. Cengage

parries that a choice of law clause in its contract with Kleiner

bars his suit against it. The district court agreed with Cengage

and granted its motion to dismiss. We disagree, and find that the

choice of law clause does not bar this lawsuit. Our reasoning

follows.

I.

Because we are reviewing the dismissal of a complaint,

we take all allegations in the complaint as true and draw all

reasonable inferences in the plaintiff's favor. City of Mia. Fire

Fighters' & Police Officers' Ret. Tr. v. CVS Health Corp.,

(1st Cir. 2022). Fred Kleiner is a professor emeritus at

Boston University who has written several academic textbooks. In

2005, Kleiner entered into a publishing agreement with Wadsworth

Publishing Company ("Wadsworth"), Cengage's predecessor in

interest. Under the agreement, Kleiner agreed to author and

deliver certain academic works. Wadsworth, in turn, agreed to

publish and market the works, and to pay Kleiner royalties as

specified in the agreement. The agreement contains two "escalator

levels," which increase Kleiner's royalty percentage once a

- 3 - certain number of aggregate units are sold. The agreement also

imposes a reporting obligation: The publisher must "report on the

sale of the Work in March and September of each year, for the six-

month period ending the prior December 31 and June 30,

respectively." Finally, the agreement contains a choice of law

provision, which states that "[t]his Agreement shall be construed

and governed according to the laws of the State of New York."

Cengage is a publisher and distributor of textbooks and

other academic material. It acquired Wadsworth and, with it, a

relationship with Kleiner. Cengage and Kleiner thereafter twice

amended the agreement without changing the choice of law clause.

After entering and emerging from bankruptcy around 2013–

2014, Cengage shifted its focus from a traditional textbook sales

model to a subscription model. In the new model, called Cengage

Unlimited, students can pay a single-price subscription fee per

semester for Cengage's entire catalog, rather than purchasing

books individually. To fit this new business model, Cengage

designed a new method of calculating royalties owed to authors, as

it no longer simply sold discrete units of an author's work. Under

the new method, Cengage allocates the subscription fees users pay

into several different "revenue pools" based on the type of

material included in the subscription (e-books, courseware

supplements, or print rentals) and assigns authors' works into one

of the revenue pools. Authors are then paid royalties from the

- 4 - revenue pool based on several variables, including (1) the

author's contractual royalty rate, (2) the number of "uses" of the

work, and (3) the net price as a percentage of total revenue for

each title and product type.

Kleiner claims that Cengage exploited opportunities for

obfuscation and deception that resulted from this new, more complex

method of calculating royalties. Kleiner alleges that Cengage

provided authors with incorrect and otherwise confusing reports,

and then refused to provide straightforward responses to author

inquiries that would have revealed that Cengage was not paying the

full amount of royalties due to the authors. In a proposed amended

complaint submitted along with his opposition to Cengage's motion

to dismiss, Kleiner further alleges that Cengage sought to leverage

authors' confusion by negotiating new agreements with terms more

favorable to Cengage.

Kleiner's putative class action complaint against

Cengage on behalf of himself and other authors alleges a single

count for violation of Massachusetts General Laws Chapter 93A,

which prohibits unfair or deceptive acts or practices in trade or

commerce. M.G.L. c. 93A §§ 2, 11. He seeks declaratory and

injunctive relief requiring Cengage to disclose its royalty

calculation methods and provide reasonable disclosures of royalty-

related information. He also seeks treble damages and attorneys'

fees.

- 5 - Cengage moved to dismiss the complaint on the grounds

that the choice of law clause in Kleiner's publishing agreement

bars the assertion of a claim arising only under Massachusetts

law. Cengage also argued that even if Massachusetts law applies,

the complaint fails to state a claim under Chapter 93A.

The district court granted Cengage's motion, reading the

choice of law clause as "mandating that all disputes be resolved

according to New York law." The court held the clause enforceable

and characterized Kleiner's claim as "'essentially duplicative' of

a contract claim"; therefore, the court reasoned, it was barred by

the choice of law clause. The district court did not address

whether the complaint failed to state a claim under Chapter 93A.

Kleiner appealed. He argues that the agreement's

selection of New York law is unenforceable, and that even if it is

enforceable, its selection of New York law to construe and govern

the agreement does not bar Kleiner's statutory claim under

Massachusetts' Chapter 93A. As we will explain, we agree with

Kleiner that the choice of law clause does not bar the assertion

of Kleiner's claim. And because neither party points to any other

respect in which New York and Massachusetts law differ as they

might bear on this dispute, we decline to decide whether the choice

of New York law is unenforceable.

- 6 - II.

We review the district court's dismissal of a complaint

de novo. City of Mia. Fire Fighters' & Police Officers' Ret. Tr.,

; see also Robidoux v. Muholland,

(1st Cir. 2011) (applying de novo review to choice of law

determinations).

We begin with the language of the choice of law clause

itself. In determining the scope of that clause, we will assume

without deciding that the parties are correct that we should apply

the choice of law principles of the forum state -- here,

Massachusetts. See, e.g., Patton v. Johnson,

(1st Cir. 2019).

The clause reads, in pertinent part: "This Agreement

shall be construed and governed according to the laws of the State

of New York." Kleiner argues that this clause is too narrow to

govern his claim because it directs only that the "Agreement . . .

be construed and governed" in accordance with the laws of New York.

His claim, he says, is not about how the agreement should be

construed or governed; rather, his complaint asserts that

Cengage's reporting practices are unfair and deceptive, which does

not implicate any dispute concerning the construction of the

agreement.

Cengage counters by pointing to Northeast Data Systems

v. McDonnell Douglas Computer Systems Co.,

(1st Cir.

- 7 - 1993), in which we held that a contractual choice of law clause

precluded the assertion of Massachusetts Chapter 93A claims for

"willfully," "knowingly," or with "bad motive" breaching a

contract, where breach was an essential element of the 93A claims.

at 609–10. But the choice of law clause in Northeast Data

Systems cut a much wider swath than does the clause before us in

this case. That clause stated: "This Agreement and the rights

and obligations of the parties hereto shall be governed by and

construed in accordance with the laws of California."

(emphasis added). The much narrower choice of law clause here, by

contrast, is for present purposes the same as the clause considered

by the Massachusetts Supreme Judicial Court ("SJC") in Jacobson v.

Mailboxes Etc. U.S.A., Inc.,

(Mass. 1995), which

stated that the agreement was "to be construed under and governed

by the laws of the State of California."

.

Distinguishing Northeast Data Systems, the SJC found in Jacobson

that this narrower clause did not preclude or govern Chapter 93A

claims.

at 746 n.9. The SJC reasoned that because "[t]he

agreement does not state that the rights of the parties are to be

governed by California law but only that the agreement is to be

governed and construed by California law[,] [t]he choice of law

- 8 - clause does not purport to bar the application of G.L. c. 93A to

the parties' dealings in Massachusetts." Id.1

Subsequently, in Vertex Surgical, Inc. v. Paradigm

Biodevices, Inc.,

(1st Cir. 2010) (Souter, J.), we

found that a choice of law clause stating that "Massachusetts law

exclusively shall govern all terms of this Agreement" did not bar

a claim brought under a Georgia statute, because "the narrow choice

of law provision" did not state that the "rights of the parties

are to be governed by [Massachusetts] law."

at 3 & n.3

(alteration in original) (quoting Jacobson, 646 N.E.2d at 746 n.9).

Similarly, in Valley Juice Ltd. v. Evian Waters of France, Inc.,

(2d Cir. 1996) (citing Jacobson, 646 N.E.2d at

746 n.9), the Second Circuit reversed a district court's dismissal

of a Massachusetts Chapter 93A claim where the choice of law clause

stated that the "Agreement is to be governed by the laws of the

State of New York." The Second Circuit concluded that

"Massachusetts would not interpret the choice of law clause in the

Agreement to bar Valley's [Chapter 93A] claim by requiring that it

proceed under New York law." Id. at 612; see also L'Oreal USA,

1 Jacobson also applied California law to examine a forum selection clause that encompassed "all actions enforcing this agreement," and much of the opinion was devoted to determining the scope of that clause. 646 N.E.2d at 743. Because the SJC was analyzing different language in that provision (and applying California law to that language), we examine only its comments on the separate choice of law clause. Id. at 746 n.9.

- 9 - Inc. v. RG Shakour, Inc., No. 08-cv-40064,

, at *5

(D. Mass. Sept. 3, 2010) (finding that Chapter 93A claim survived

notwithstanding choice of law clause stating, "this Agreement

shall be construed in accordance with and all disputes herein shall

be governed by" New York law).2

The clause at issue in this case states only that "[t]his

Agreement shall be construed and governed" according to New York

law. It does not otherwise select any state's law as governing

the parties' rights and obligations that are created by statute.

Nor does it "mandat[e]," as the district court mistakenly asserted,

"that all disputes be resolved according to New York law."

Therefore, the agreement does not suggest that the parties agreed

that New York law would govern the adjudication of a claim that

Cengage breached a statutory duty imposed by Massachusetts law.

This conclusion is supported by Jacobson's determination that a

choice of law clause stating an agreement was "to be construed

2Cengage points to Northeast Data Systems' favorable citation of an earlier case from the Southern District of Florida, Scheck v. Burger King Corp.,

, 546 n.1 (S.D. Fla. 1991), which found that a choice of law provision in a franchise agreement stating that "[t]his Agreement . . . shall be governed and construed under and in accordance with the laws of the State of Florida" barred certain Chapter 93A claims. But Scheck pre- dated Jacobson, and was in any event not a decision by a Massachusetts court.

- 10 - under and governed by" one state's law does not extend to bar a

statutory claim under another state's law. 646 N.E.2d at 746 n.9.

Cengage's argument that it is impossible to resolve

Kleiner's claim without construing the contract does not undercut

this conclusion. Consider for example a simple contract that

contained a choice of law clause like the one in this case, and

stated that A will pay B $1 per book sold by A. Imagine further

that A sold 200 books but convinced B to accept $100 by preparing

and sending to B in Massachusetts a doctored invoice falsely

reporting only 100 books sold. In such a scenario, were there any

dispute about construing the contract (e.g., can parol evidence be

considered?), New York law would govern that question (assuming as

we do here that the choice of law claim is enforceable). But that

fact would provide no reason to preclude a fraud claim under

Massachusetts law, nor would it require that New York law govern

the fraud claim. See First Marblehead Corp. v. House,

,

8–9 (1st Cir. 2006) (applying Delaware law to contract and

promissory estoppel claims pursuant to choice of law clause stating

that plan's provisions "shall be governed by and interpreted in

accordance with" Delaware law, but applying Massachusetts law to

negligent misrepresentation claim). So too, here, if Cengage

deceived an author in reporting what royalties were due under the

contract as construed under New York law, nothing in the contract

would dictate the choice of law to be applied in determining

- 11 - whether that alleged deception was actionable not as a breach of

contract, but as a violation of Chapter 93A. See Dinan v. Alpha

Networks, Inc.,

(1st Cir. 2014) (holding that a

choice of law clause "about the law to be applied in construing

and enforcing the . . . agreement" did not apply to a quasi-

contract duty that "arose outside of that agreement"). We

therefore do not believe that Kleiner's Chapter 93A claim is

precluded by the narrow choice of law clause before us.

Finally, we decline the parties' invitation to rule on

whether Kleiner's complaint otherwise states a claim under

Chapter 93A. Although the parties point out that we could address

this issue in our discretion, we are not obligated to do so. See

Singleton v. Wulff,

(1976) ("The matter of what

questions may be taken up and resolved for the first time on appeal

is one left primarily to the discretion of the courts of

appeals . . . ."). We thus abide by the "general rule" that "a

federal appellate court does not consider an issue not passed upon

below."

; see also United States ex rel. Est. of

Cunningham v. Millennium Lab'ys of Calif., Inc.,

,

675–76 (1st Cir. 2013) (remanding for district court to consider

whether the relator had stated a claim after vacating order

dismissing complaint on jurisdictional grounds).

- 12 - III.

For the foregoing reasons, we reverse the judgment of

the district court and remand for further proceedings consistent

with this opinion.

- 13 -