Reprinted From December issue of the Connecticut Lawyer: This is the second in a year-long series of articles by the authors appearing in the Connecticut Lawyer]Introduction
One of the fundamental changes created by the World Wide Web is the way it encourages people to disregard geography. Most people search based upon topics of interest and content, while ignoring geography. As every e-Business understands, this brings with it both increased opportunity and increased competition.
From a legal perspective, a loss of geographic awareness creates a need to be aware of jurisdictional issues. There is a growing tendency to think of the Internet as having created entirely new jurisdictional problems. In this article, we will discuss the application of established law of jurisdiction as it relates to an e-Business.
Personal Jurisdiction
The inquiry as to whether personal jurisdiction exists begins with an analysis of whether authorization for service of process is established under a state’s long-arm statute and whether it comports with the due process requirements of the Fourteenth Amendment. For the purposes of this article we assume that the reader is familiar with these issues.
When a cause of action arises from the defendants conduct within a forum state, personal jurisdiction is specific. Personal jurisdiction is defined as “general” when a cause of action does not arise out of a defendant’s activities in a forum state, but rather from requisite “minimum contacts.” The Fourteenth Amendment does not require that the defendant be physically present in the state. Nonetheless, established jurisprudence requires that there must be “minimum contacts” between the defendant and the forum state. In defining “minimum contacts” the Supreme Court has required that the defendant have “purposely availed itself of the privilege of conducting activities within the forum state.” Thus, the defendant “should reasonably anticipate being haled into court there.” The Fourth Circuit has written that the “touchstone of the minimum contacts analysis remains that an out-of-state person have engaged in some activity purposefully directed toward the forum state.”
For those causes of action where the conduct in question did not occur within the forum and general jurisdiction is relied upon, the minimum contacts between the defendant and the forum jurisdiction must be continuous and systematic. By contrast when the cause of action arises from the defendant’s conduct within the forum or actions directed at the forum and specific jurisdiction is relied upon, continuous and systematic contact is not required, BUT, “the fair warning requirement inherent in due process still demands that the defendant ‘purposely’ directed its activities at the forum.”
Web’s Impact on Personal Jurisdiction
How does the existence of a Web site on the Internet effect personal jurisdiction? Courts have recognized that the mere placement of an advertisement or an article in a national magazine does not confer general jurisdiction upon each forum in which the magazine is sold. Logic argues that a passive Web page that acts like an advertisement or article in a national publication should receive the same treatment. Courts that have addressed this issue have generally reached this same conclusion and held that “the placement of a Web site on the internet with knowledge of the possibility that the site might be accessed in [the forum state] is not an act directed toward the forum state for purposes of due process.” As one court noted, with the “indefinable and infinite nature of the Internet, the accessibility of the World Wide Web by anyone with a laptop computer and access to a telephone line, any other finding would be both unconstitutional and egregiously impractical for purposes of judicial economy.” Thus, the use of passive advertising on the Internet should not form the basis for general jurisdiction. Generally, the inclusion of an email address to respond (whether automated or not) does not render an otherwise passive Web site active.
Controlling law regarding personal jurisdiction for an e-Business reveals two bright lines with grey areas in between.
The Bright Line Tests
Passive Web Site as Basis for General Jurisdiction.
A Web site that posts information, such as an advertisement or an article without permitting an on-line purchase of product or services generally will not form the basis for a claim of general jurisdiction.
Interactive Web Site as Basis for Specific Jurisdiction.
A Web site that permits a visitor to purchase a product or service on-line without further off-line activity can form the basis for special jurisdiction related to the transaction completed through that Web site.
The Grey Area
Interactive Web Site as Basis for General Jurisdiction.
Should the publication of Web pages that permit complete on-line sales create the basis for general jurisdiction? We believe that Web pages should be viewed the way we view other contacts with a forum state. That is, courts should look at the number of sales and the extent of the contacts. Thus, a continuous and systematic sale of goods or services by any means in a forum state, such as via a Web site, can create general jurisdiction.
Passive Web Site as Basis for Specific Jurisdiction.
Are there times when a passive Web site can form the basis for specific jurisdiction? The best answer can be found in the treatment by courts of publication cases. Courts hold that there can be personal jurisdiction resulting from a national publication of an advertisement or an article where: (1) a nonresident purposefully directs activities or comments at a forum state; (2) the claim arises from the forum related activity; and (3) the exercise of jurisdiction comport with fair plan and substantial justice.
The U.S. Supreme Court has found that when a newspaper that is in the business of gathering information, selling subscriptions, and deriving a significant advertising revenue within a forum state, publishes an article about a person that it knows is a resident of that forum state, that state will be deemed to have personal jurisdiction to hear a libel action related to an article published in that newspaper. The Supreme Court found that the defendant’s intended conduct was calculated to cause injury in the forum state because it described activities in California by a California resident: “California is the focal point both of the story and of the harm suffered.” The same type of analysis should be applied to information published on a Web site. If the publisher engages in intentional conduct calculated to cause injury in another forum, then that forum should have specific jurisdiction over that matter.
How to Lessen the Risk of Personal Jurisdiction
Despite the apparent ease at which an e-Business can find itself haled into an unwanted forum merely via the operation of a Web site, there are many things the e-Business can do to reduce its exposure to personal jurisdiction in the forum.
An e-Business can reduce its exposure to personal jurisdiction in an undesirable forum significantly by preventing access to its Web site by residents in the forum. For example, an e-Business that conducts business primarily in the mid-west may prevent residents of eastern states from visiting the Web site. While difficult to conduct perfectly, such restrictions may be implemented using geotracking (see www.quova.com) and filtering technologies, monitoring the internet protocol (IP) addresses associated with visitors to the Web site, and refusing access to visitors using IP addresses located in, or designated as operating in, an undesirable forum. As technology improves, the ability to prevent access to a Web site from specific geographic areas, IP addresses, etc. will improve and increase a e-Business’s control over access to its Web site.
If visitors to an e-Businesss Web site cannot be granted or denied access to the Web site on a selective basis, the e-Business still can reduce its chances of being sued in an unwanted jurisdiction by limiting the amount of activity the visitor to the Web site can engage in at the Web site. As discussed above, if a Web site is passive or does not otherwise allow a visitor to conduct business on the internet, exercising personal jurisdiction over the Web site from another jurisdiction is difficult. Thus, a Web site intended primarily to provide information may want to avoid using functions or features that might turn the Web site into more than a merely passive Web site, such as inviting visitors to join mailing lists, allowing visitors to submit questions or other requests, requesting visitors to provide email adresses, etc.
In cases where a e-Businesss Web site is used as more than a passive conduit or channel of information, the e-Business still can reduce its risk of a ruling against it regarding personal jurisdiction in a particular forum if the e-Business does not conduct transactions with residents of the forum. The e-Business that sells its products primarily in the mid-west may prevent residents from eastern states to purchase products, even though those residents can still access and use its Web site for informational purposes. This solution works well for an e-Business that sells its products in a limited geographic area. However, an e-Business that sells its products in wider geographic areas may not want to prevent visitors to its Web site from purchasing its products via its Web site. This e-Business still can limit its risk of a finding of personal jurisdiction by including a forum selection provision in a sales or other agreement that a visitor to the Web site must agree to prior to being allowed to purchase products. For example, the e-Business from the previous examples may require that any purchaser of its products agree to personal jurisdiction and venue in Colorado and that the state and federal courts of Colorado are the only courts in which the visitor may bring an action. Moreover, the e-Business may require that Colorado’s laws be used to interpret and govern the agreement and any litigation between the e-Business and the visitor.
In some cases, an e-Business may be able to work such forum selection, choice of law, and liability limitation provisions into a terms of use agreement or other “click-wrap” agreement that a visitor to its Web site must agree to before being allowed to use the Web site or conduct business on the Web site. For example, the Web site www.amazon.com requires people to submit disputes to arbitration in Seattle, Washington. The terms of use agreement for the employment Web site www.monsterboard.com limits personal jurisdiction to Boston, Massachusetts. The Web site www.questionexchange.com, which operates as an online helpdesk for open source technologies, requires a user to click on an “I Accept” button to signify the user’s agreement to pursue claims only in the United States District Court in Massachusetts or the Superior Court for the Commonwealth of Massachusetts, Suffolk County.
Myles H. Alderman, Jr. is a partner in the Hartford law firm of Alderman & Alderman. He is a member of the executive committee of the CBAs Commercial Law and Bankruptcy Section and a member of its Business Law Section. Scott B. Allison is Associate General Counsel at Iwon.com, a leading Web portal.