Hunt & Associates P.C.

Does the Internet Highway Lead to Court in a Distant State?

As businesses increasingly market and sell goods and services through the internet, they should consider the risk that their website activities may subject them to litigation in other states.  Individuals who buy and sell through such internet sites as eBay may also face a possible risk of litigation in a foreign court.  Litigation of any kind is expensive enough without the additional burdens and costs which defending in a distant court can impose irrespective of the merits of any claim.  Moreover, since any presence on the internet is, in a sense, a presence everywhere, how can a business or individual predict the scope of their exposure to litigation outside of the state in which they reside or actively do business more traditionally?

There is case law which defines the outer parameters of what use of the internet will and will not result in the assertion of personal jurisdiction over an out of state seller using the internet.

For instance, can a website advertising the name of a local nightclub in Missouri result in personal jurisdiction over the owner by courts in New York when a New York resident asserts that the name of the Missouri nightclub violates a registered trademark?  The Second Circuit held that New York couldn’t constitutionally assert personal jurisdiction over the Missouri defendant without more.  Bensusan Restaurant Corp. v. King, 126 F.3d 25 (2nd Cir. 1997)  Is an individual’s sale of a single antique car to a California resident over eBay alone sufficient for California courts to assert personal jurisdiction over a non-Californian?  The Ninth Circuit has held that it isn’t.  Boschetto v. Hansing, 539 F.3d 1011 (9th Cir. 2008)

Conversely, where an out of state business enters into thousands of contracts with individuals in Pennsylvania through seven internet access providers, that business is subject to personal jurisdiction in Pennsylvania.  Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119 (W.D. Pa. 1997)

These cases are a sampling of those discussed at greater length in a recent article by Alan L. Farkas entitled “Trimming the Claws of the Internet’s Jurisdictional Reach” in the Tort Trial & Insurance Practice Law Journal, volume 46, Issues 3 & 4, Spring – Summer 2011 published by the Tort Trial & Insurance Practice Section of the American Bar Association.  The gist of the article is that while passive or incidental use of the internet for business or other purposes will generally not, of itself, result in subjecting a person to personal jurisdiction in other states, a commercial website used to conduct a volume of business will usually result in a finding of personal jurisdiction.

As the article well explains and documents, the courts seem largely consistent in deciding cases at the two extremes of internet use noted above, but encounter significant difficulties articulating a coherent premise for decision in the gray area between these poles; most notably in the realm of interactive websites.  The ultimate legal question is whether the defendant purposefully availed itself of the privilege of doing business in the foreign state and had the personal contacts with that state needed to assert personal jurisdiction over it consistent with constitutional due process.

Mr. Farkas notes that the decision in Zippo remains the most influential and lucid judicial analysis at the moment.  In Zippo, he notes, the court articulated a sliding scale ranging from commercial, to interactive, to passive.  While many courts have adopted the Zippo court’s analytical framework, some have been unwilling to embrace it fully.  Consistent with the court’s reasoning in Zippo, Mr. Farkas anticipates that courts will look closely at the defendant’s activities on the website itself to determine whether or not jurisdiction over a foreign defendant is constitutionally proper.  In short, there is little certainty and a need to exercise informed judgment in considering any particular case which presents such a problem.

© 01/18/2012 Lawrence B. Hunt of Hunt & Associates, P.C.  All rights reserved.

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2 Responses to Does the Internet Highway Lead to Court in a Distant State?

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