MANTRAS AND REALITIES
Margaret Stewart
Habits are hard to break. When a court determines that an assertion of personal jurisdiction is unconstitutional, it inevitably produces a litany of actions that the defendant did not undertaken within the geographical confines of the state: the defendant did no business in the state, had no office in the state, had no agent for service of process or employees in the state, had never been in the state, entered into no contract in the state etc. etc. In other words, the defendant never “purposefully avail[ed] itself of the privilege of conducting activities in the forum State.”[1] While it is no longer true that the state asserting jurisdiction must itself have the power to enforce a judgment that it renders,[2] courts frequently seem trapped in an assumption implicit in International Shoe Co. v. Washington[3]: jurisdiction is proper when the defendant served with process outside the state had previously been present in the state and her actions there are related to the claim brought against her. Absent such past physical presence, the mantra goes, jurisdiction is not proper.
The reality, however, is much different. In three different situations, the Supreme Court has recognized that an assertion of jurisdiction over a never-present defendant may comport with due process; even though the defendant did not purposefully choose to conduct activities in the state, it nonetheless may have “invok[ed] the benefits and protections of [the state’s] laws.”[4] One of those situations is sufficiently fact-specific that it provides no useful analogy for more than a handful of cases involving the internet and jurisdictional conundrums posed by it.[5] Two others, however, do provide yard sticks by which jurisdictional assertions may be measured (though there may be a need to translate feet into meters).
Beginning with Gray v. American Radiator & Standard Sanitary Corp.,[6] indirect economic benefit, accruing to a parts manufacturer when the final product was purchased by a consumer in the forum, arguably subjected the parts manufacturer to an assertion of jurisdiction there when a claim was brought by the consumer injured in the forum.[7] While the Supreme Court originally seemed to put its imprimatur on the theory,[8] four Justices later questioned whether, absent any activity by the defendant directed specifically at the forum, due process would be satisfied.[9] Of interest in the context of the internet, however, was the apparent agreement of the entire Court that if a defendant did manifest an intent to serve a specific geographic market, related claims could be brought there against it, even if it had never been physically present in the forum. What market does a commercial web site “seek to serve”?
The second of the relevant theories was explained in Calder v. Jones.[10] While the foreseeability of an unintended consequence in the forum is insufficient to support jurisdiction,[11] the intentional causation of an effect in the forum does permit an assertion of jurisdiction on a related claim. Calder was a libel action brought by Shirley Jones against not only the publication that printed the story but also against the Florida writer and editor, who had not been in California and who did not control the distribution on the publication. The Court held that they had, however, acted intentionally and with knowledge that the impact of their action would be felt in California, the focal point of the litigation. They had “targeted” the state. What states are “targeted” by a commercial web site?
The first reported federal district court case thought the answer to both questions was obvious: the World Wide Web targets any state in which a web site is accessible.[12] The difficulty, of course, is that the result would subject a site author to jurisdiction anywhere in the U.S. (or the world) where his site was accessed and allegedly caused injury, a result the Court had indicated was objectionable in other contexts.[13] A second district court case attempted to limit jurisdictional exposure by concentrating on the nature of the web site.[14] A passive web site did not target any market by virtue of its posting (as opposed to by virtue of its content); a site that permitted business to be done through it did target fora in which business thus solicited was done. Interactive sites (e-mail capable, for example), needed to be assessed individually.
As long as a company offers to do business anywhere in the U.S. or the world, it may initially seem reasonable to subject it to jurisdiction where its offer or the business done causes injury.[15] It is critical, however, to demonstrate that business is done in the forum if the claim does not arise out of the offer per se.[16]
The difficulty with a blithe assumption that jurisdiction over a company doing business via a web site with residents of a forum is proper in that forum is discussed in a report of the American Bar Association’s Section of Business Law, Committee on Cyberspace Law.[17] Historically, power was assumed to reside with the seller in at least all commercial transactions with consumers. The seller defined the market and the terms of the sale; the buyer was solicited by the seller and as a practical matter confined to the numbers of sellers who had independently decided to serve the market in which the consumer lived. The internet, however, may well change that dynamic. Small sellers eager to utilize the convenience of the technology in the geographical market they already serve may be found by distant buyers and offered the opportunity to sell their products in locales they would never have reached via conventional methods. Should the seller, then, be forced to choose between turning down the opportunity to make the sale and subjecting itself to possible distant litigation?[18] Here, perhaps, the nature of the technology should be determinative. It is, after all, a world wide web. Acknowledging this reality, many sites attempt to limit access to a specified portion of the world wide market, which raises separate practical issues about the efficacy of such attempts and the location of buyers. It also, of course, defeats at least in part the romance of the technology; the markets a seller decides not to serve may well be those most in need of increased access to goods and services.
Whatever the details of a jurisdictional scheme capable of governing cyberspace may turn out to be, one thing has become increasingly accepted: the scheme does not need to create a new reality, or even a new mantra. The existing ability of courts to exercise jurisdiction over defendants never physically present in the forum state can be tweaked to cover a technology that allows those defendants to interact with the forum through a different medium. People exist in space, not cyberspace, and it is, as always, their location that is of jurisdictional relevance.
1
[1] Hanson v. Denckla, 357 U.S. 235, 253 (1958).
[2] This was the rationale for limiting the situations in which jurisdiction was permissible under then-current public [international] law norms at the time of the Supreme Court’s first critical jurisdiction decision, Pennoyer v. Neff, 95 U.S. 714 (1877).
[3] 326 U.S. 310 (1945).
[4] 357 U.S. 235, 253 (1958).
[5] In Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985), the Court upheld Florida’s exercise of jurisdiction over the Michigan franchisee of Burger King, a Florida corporation, in a claim brought by Burger King for breach of contract. The Court reasoned that, while merely entering into a contract with a forum citizen would be insufficient to support jurisdiction over the contracting party in the forum, when the contract was solicited and negotiated by the out of state party, was long term, of high value, and closely supervised, and when the contract itself specified that it was to be interpreted in accordance with Florida law, the Michigan franchisee had manifested an intent to affiliate himself with a Florida company sufficient to satisfy Hanson. CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996), is the high-tech parallel, in which the parties cooperated in the sale of software created by Patterson. However, most disputes addressed by courts involving the internet do not feature long term arrangements between acquainted parties.
[6] 22 Ill.2d 432, 176 N.E.2d 761 (1961).
[7] As a practical matter, such jurisdiction was necessary to make the ability of the consumer to sue the parts manufacturer, even in the absence of privity of contract, realistic. The consumer would be unlikely to travel to a distant forum when the claim could be brought against the forum-based seller; that seller, in turn, would sue the product manufacturer, who would (finally) sue the parts manufacturer. Avoiding this chain of law suits necssitated being able to sue everyone in the forum where the good was purchased and allegedly caused injury.
[8] World-wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980).
[9] Asahi Metal Industry Co. v. Superior Court, 480 U.S. 102 (1987). The issue was not dispositive, as the entire Court agreed that an assertion of jurisdiction on the facts before it would be unreasonable and hence unconstitutional.
[10] 465 U.S. 783 (1984).
[11] 444 U.S. 286 (1980).
[12] Inset Systems, Inc. v. Instruction Set, Inc., 937 F.Supp. 161 (D.Conn. 1996). In a breathless opinion, the court noted that the site was accessible to 10,000 people in Connecticut continually.
[13] Justice Brennan’s dissent in World-wide included an argument that each Audi dealership benefited economically in all states from the presence there of other Audi dealerships that could and di service Audis purchased elsewhere. While indirect, the benefit seems no more far-fetched from that which accrues to the parts manufacturer when a consumer purchases a finished product. However, the theory would mean that a defendant could potentially be subject to jurisdiction in every state with respect to every car it sold; Gray exposed the defendant to jurisdiction in only one state with respect to each part sold. Even that potential exposure, however, was too much for the four Justices in Asahi, who were concerned that the decision by a distributor to serve a national or world-wide market would expose the parts manufacturer to jurisdiction anywhere within that market.
[14] Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119 (W.D. Pa. 1997).
[15] Absent sales, the injury caused by the offer is most likely to be to a regulatory regime, i.e. national laws designed to protect potential investors in securities, and the claim most likely, therefore, to be brought by an arm of government. Private parties may also bring such suits, however, as demonstrated by the famous French case against Yahoo! for offering Nazi memorabilia for sale on its .com auction site. The case is discussed in Yahoo! Inc. v. La Ligue Contre le Racisme et l’ Antisemitisme, 2001 WL 640418 (N.D. Cal.)
[16] Two relatively recent cases make precisely this point. GTE New Media Services, Inc. v. BellSouth Corp. et al., 199 F.3d 1343 (D.C. Cir. 2000); Millennium Enterprises, Inc. v. Millennium Music LP, 33 F.Supp.2d 907 (D.Or. 1999).
[17] Achieving Legal and Business Order in Cyberspace: A Report on Global Jurisdiction Issues Created by the Internet, 55 the Business Lawyer 1801 (2000).
[18]Id. at 1829-31.