INTERNET JURISDICTION - A PRAGMATIC APPROACH
By: David Williams Russell
A.
Introduction.
The question of Internet jurisdiction - or of what acts or conduct outside a state of
the United States may lead to a company’s or individual’s involvement in litigation in
such state - is a confusing one. It is confusing because, on the one hand, the federal courts
are charged with the responsibility of making sure that state courts do not extend their
jurisdiction too far outside their borders. State courts, on the other hand, tend to take the
attitude that they will hear all cases brought before them, and presume jurisdiction - often
conclusively.
Fortunately, federal law trumps state law in this “due process” area. Federal
courts often wind up with state lawsuits involving citizens of different states by reason of
their jurisdiction over many diversity of citizenship cases and the concomitant right of an
out of state person or company to remove state court cases brought against them to the
federal courts. Accordingly, federal courts do, in fact, exert some policing pressure to
limit the zeal of state courts to hear cases against all out of state defendants - no matter
how remote.
Consequently, the focus of this presentation shall be upon federal, not state,
Internet cases. As we shall see, the cases discussed suggest the following “rules of
thumb:”
1.
If your client operates a Website in a state, your client can be sued
2.
If your client operates in a state a Website which is merely a
in that state.
“passive” Website, providing information to all comers without interactivity, the odds are
pretty good that your client cannot be ultimately subject to jurisdiction in a foreign
jurisdiction.
3.
If your client operates an interactive Website which develops a
dialog with a potential plaintiff in a foreign state, or sells something to that foreign
plaintiff, your client likely will be subject to jurisdiction in that foreign state.
4.
If your client operates a Website or service which sells services to,
or directs advertising or a “stream” of commerce towards a number of citizens in a
foreign state - and there is a citizen of that foreign state who has a complaint against your
client which the courts of that state otherwise could not hear for want of jurisdiction; a
citizen to whom your client did not direct messages or the “stream of commerce” - even
that citizen likely can sue your client in that foreign state.
5.
If your client does a tortious act on or through its Website which
has a foreseeable impact or effect on a company or other citizen of a foreign state, your
client likely can be sued by such injured persons in such foreign state.
6.
As indicated above, if your client sells something to a citizen of a
foreign state, that citizen likely can sue your client in either your client’s home state or in
the citizen’s foreign state; however, if that foreign citizen is a deadbeat and fails to pay,
or otherwise commits a breach of contract, your client likely will have to sue that citizen
in the citizen’s foreign home state; not in the home state where your client does business.
Some legal analysis to support these conclusions follows.
B.
Federal Jurisdictional Principles.
The modern law of personal jurisdiction holds that in order to be subject to
jurisdiction in a forum, a defendant need have sufficient “minimum contacts” with the
forum that it is fair to sue him there.
“[D]ue process requires only that in order to subject a
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defendant to a judgment in person and, if he be not present
within the territory of the forum, he have certain minimum
contacts with it such that the suit does not offend
‘traditional notions of fair play and substantial justice.’”
International Shoe v. Washington, 326 U.S. 310 (1945). The International Shoe court
found that “continuous and systematic” activities of the defendant in the forum state
would support so-called “general jurisdiction” tantamount to “doing business” under state
law jurisdictional statutes. See, International Shoe, 326 U.S. 310 at 317.
The problem is knottier in the case of so-called “special” or “long-arm”
jurisdiction, because the foreign defendant may not generally be subject to any old suit in
a foreign state, but, because of some specific activities which have impact in the foreign
jurisdiction, still may be dragged into court there to defend himself against those specific
charges.
Some limitations on such long-term jurisdiction were set forth in Hanson v.
Denckla, 357 U. S. 235 at 253 (1958),
“The unilateral activity of those who claim some
relationship with a nonresident defendant cannot satisfy the
requirement of contact with the forum State.
The
application of that rule will vary with the quality and nature
of the defendant’s activity, but it is essential in each case
that there be some act by which the defendant purposefully
avails itself of the privilege of conducting activities within
the forum State, thus invoking the benefits and protections
of its laws.”
In Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985), the court allowed a
contract suit by a Florida franchisor to proceed in Florida against a Michigan franchisee,
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concluding that the parties’ negotiations, contract terms and course of dealing made it
reasonably foreseeable to the Michigan franchisee that he might have to litigate in
Florida.
In negligence tort cases, the case of Asahi Metal Industry Co. v. Superior Court of
California, 480 U.S. 102 (1987), suggests that when a foreign defendant puts a product
into the “stream of commerce” and the product winds up in a foreign state, the foreign
defendant is subject to special or long-arm jurisdiction in that forum state, provided the
defendant has directed marketing efforts towards the foreign state.
The case of Calder v. Jones, 465 U.S. 783 (1984) suggests that intentional
tortfeasors may be subject to jurisdiction in a forum state provided that their intentional
conduct had a foreseeable impact or effect in the forum state.
In general, the factors appropriate to determining the reasonableness of subjecting
a foreign defendant to jurisdiction in a forum state are set forth in World-Wide
Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980), which looked at five main factors:
I.
The burden on the defendant;
II.
The forum state’s interests;
III.
The plaintiff’s needs;
IV.
The judicial systems’ interests; and
V.
Social policy.
C.
Internet Jurisdiction.
What does all this federal law have to do with Internet jurisdiction? A lot, it turns
out, because these are the principles by which the “minimum contacts” via the Internet
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with the forum state - requisite to determining that jurisdiction exists in the forum state must be evaluated.
Rather than attempt to digest and analyze every reported state and federal Internet
jurisdiction case, let us instead look at a few illustrative cases to indicate how these
general principles are being applied in Internet cases.
1.
Action-Specific Conduct as Jurisdictional Basis.
A leading Internet active conduct case is Compuserve, Inc. v. Patterson, 89 F.3d
1257 (6th Cir. 1996). In Compuserve, a Texas resident contracted with Compuserve in
Ohio for Compuserve to offer his “shareware” for sale.
Compuserve successfully
obtained jurisdiction over Patterson in Ohio. The appellate court reasoned that Patterson
had directed his commercial activity at and through Compuserve in Ohio, and thus
subjected himself to jurisdiction there in an action for a declaratory judgment of noninfringement.
Similarly, in Panavision International, L.P. v. Toeppen, 141 F.3d 1316 (9th Circuit
1998), a domain name/cybersquatting case, the court found, in upholding jurisdiction for
Panavision in California, that the Illinois defendant had directed his activity towards the
California plaintiff, and in fact, had attempted to extort $13,000 from Panavision to
encourage the Illinois cybersquatter to relinquish Panavision’s own name to it. (Note:
The new federal anti-cybersquatting law, 15 U.S.C. §1125(d), would now be available to
Panavision.)
2.
Active General Conduct as Jurisdictional Basis.
The case of Mieczkowski v. Masco Corporation, 997 F. Supp. 782 (E.D. Texas
1998), represents an interesting application of the foregoing principles because it allowed
suit in Texas for a crib death there caused by a bed made by the defendant, a company
based in North Carolina, sold from a Washington D. C. store to a Virginia resident, who
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moved the bed to North Carolina and sold it used t the plaintiffs there. The plaintiffs then
moved the bed to Texas, where the accident occurred. The Masco court, in upholding
jurisdiction, found no specific or long arm jurisdiction whatsoever, but held that since the
defendant had systematically marketed and sold a substantial number of beds to Texas
residents over the Internet, the North Carolina resident was subject to general jurisdiction
in Texas, even though there had been no actual Texas marketing or sales to the plaintiffs
in Texas.
In accord with Masco is Zippo Manufacturing Company v. Zippo Dot Com, Inc.,
952 F. Supp., 1119 (W. D. Pa. 1997) in which a Pennsylvania cigarette manufacturer
successfully asserted long-arm jurisdiction over a California-based Internet news service.
The news service had a substantial number of paying subscribers in Pennsylvania.
By contrast, however, had the Masco furniture company been the plaintiff trying
to recover the price of the bed, the result probably would have been the opposite, with no
jurisdiction being found. See, Pres-Kaps, Inc. v. System One, Direct Access, Inc., 636
So.2d 1351 (Fla. App. 1994), review denied, 645 So. 2d 445 (Fla. 1994), a rare state case
denying long-arm jurisdiction.
“When a consumer logs onto a server in a foreign
jurisdiction, he is engaging in a fundamentally different
type of contact than an entity that is using the Internet to
sell or market products or services to residents of foreign
jurisdictions. The Pres-Kaps court specifically expressed
concern over the implication of subjecting users of ‘online’ services with contracts with out-of-state networks to
suit in foreign jurisdictions.”
Zippo, supra, 952 F.Supp. 1119 At 1125.
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3.
“Passive” Website as Jurisdictional Basis.
Generally, if a Website is not interactive, but merely informational in nature, the
courts have been unwilling to support long-arm jurisdiction in foreign fora. In Cybersell,
Inc. v. Cybersell, Inc., 130 F3d (9th Cir. 1997), an Arizona Internet commercial firm was
denied jurisdiction over a Florida Webpage construction company.
“Cybersell FL did nothing to encourage people in Arizona
to access its site, and there is no evidence that any part of
its business (let alone a continuous part of its business) was
sought or achieved in Arizona. To the contrary, it appears
to be an operation where business was primarily generated
by the personal contacts of one of its founders. While those
contacts are not entirely local, they aren’t in Arizona either.
No Arizonan except for Cybersell AZ ‘hit’ Cybersell FL’s
website. There is no evidence that any Arizona resident
signed up for Cybersell FL’s web construction services. It
entered into no contracts in Arizona, made no sales in
Arizona, received no telephone calls from Arizona, earned
no income from Arizona, and sent no messages over the
Internet to Arizona. The only message it received over the
Internet from Arizona was from Cybersell AZ. Cybersell
FL did not have a ‘800' number, let alone a toll-free
number that also used the ‘Cybersell’ name.
The
interactivity of its web page is limited to receiving the
browser’s name and address and an indication of interest signing up for the service is not an option, nor did anyone
from Arizona do so. No money changed hands on the
Internet from (or through) Arizona. In short, Cybersell FL
has done no act and has consummated no transaction, nor
has it performed any act by which it purposefully availed
itself of the privilege of conducting activities, in Arizona,
thereby invoking the benefits and protections of Arizona
law.”
Cybersell, Inc., 130 F.3d 414 at 419 (9th Cir. 1997). Accord, Bensusan Restaurant Corp.
v. King, 937 F.Supp. 295 (S.D. NY 1996), affirmed 126 F.3d 25 (2d Cir. 1997), which
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held that the owner of “The Blue Note” jazz club in New York could not bring suit in
New York against the owner of a Missouri jazz club of the same name just because the
Missouri club owner maintained a passive Website containing general information about
his Missouri club. The Bensusan court reasoned that the defendant had neither targeted
his Web advertisements at New York, nor purposefully entered into the “stream of
commerce” there. (Note: Inset Systems v. Instruction Set, Inc., 937 F. Supp. 161 (D.
Conn. 1996) found that general Internet advertising was sufficient solicitation to allow
jurisdiction; most federal “passive” site cases are to the contrary, however.)
D.
Conclusion.
The foregoing analysis, while not exhaustive, suggests that companies - other than
consumers - which do business via the Web and/or which direct systematic
advertisements towards a forum state are likely to be subject to jurisdiction there.
Tortfeasors whose actions are directed towards or which foreseeably impact or affect
specific individuals in a forum state are likely to be subject to suit there.
On the other hand, consumers merely buying on the Internet are likely immune
from suit in foreign jurisdictions, but may have the right to sue their suppliers.
Finally, operators of passive, non-interactive Websites have little reason to fear
out-of-state lawsuits, unless they are deemed to target their advertisements or commercial
speech at identifiable groups within a particular foreign state.
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