Personal Jurisdiction Based On Web-Based Activity
For Web-based businesses, issues of personal jurisdiction in U.S. courts represents a challenge. “Personal jurisdiction” is the power of a court to exercise authority over a defendant. If the court has personal jurisdiction, it can exercise authority; lacking personal jurisdiction, it cannot.
If a Website creator is subject to personal jurisdiction, he must appear and defend a lawsuit, even if this means doing so in a distant state, or else he will be subject to a valid, enforceable judgment. For a Website creator in New Jersey, the cost of appearing and defending a suit in Colorado may be prohibitive, but the consequences of failing to appear equally grim.
Traditionally, personal jurisdiction was based on the defendant residing in or performing some act in a state. If a Lansing, Michigan, resident smashes his neighbor’s car, the neighbor can sue him in Michigan. If he drives to Dayton, Ohio, and there smashes a local’s car, the local can sue him in Ohio, because of what he did in Ohio. (See generally Wright)
Business dealings forced an expansion of these rules. In International Shoe Co. v. Washington, 326 U.S. 310 (1945), the United States Supreme Court established the modern concept of “long-arm jurisdiction,” ruling that a company that sent salesmen throughout Washington was subject to personal jurisdiction there, although it had no place of business, agent, corporate officers, or other traditional assets there. The Court ruled that if a business had “minimum contacts” which showed that it was taking advantage of the privilege of doing business in the state, then it could be required to defend lawsuits in that state. Since then, a range of cases has tested the limits of minimum contacts.
As Wolf explains, in cases in which the defendant’s contacts with the jurisdiction are entirely over the Internet, the courts have generally used a “passive/interactive” distinction for deciding jurisdiction questions. As Wolf explains, “a strictly passive, informational Web Site will not give grounds to assert jurisdiction”; “financially-motivated, interactive [Internet] contacts with a foreign state will give rise to personal jurisdiction.” (Wolf)
So, assume that our Lansing resident creates a Web page advertising his restaurant, “Lansing’s,” giving location, hours, and stating “reservations required,” but not giving an e-mail address or a toll free number, only its local, 517-area-code number. A “Lansing’s” restaurant in Minneapolis sues in a court in Minnesota, claiming trademark infringement. A court following the “interactive/passive” distinction would not require the Lansing defendant to appear in Minnesota court, ruling that it had no personal jurisdiction.
But assume the Michigan business uses it Website to advertize “The Lansing’s Restaurant Cookbook”; that it actively e-mails solicitations to potential customers in Minnesota; that it takes orders from Minnesota customers via e-mail and has cookbooks shipped to these customers in Minnesota; and that it provides a toll-free number accessible from Minnesota. This is “interactive” business, and on these facts, the Minnesota court will quite probably assert jurisdiction over the Michigan restauranteur. The Minnesota plaintiff can sue in Minnesota.
By passive posting, as in the first hypothetical, the Michigan resident has not availed itself of the privilege of doing business in Minnesota. Minnesota courts do not acquired personal jurisdiction. In the second hypothetical, the business is actively interacting with Minnesota residents, availing itself of the privilege of doing business, and is subject to personal jurisdiction.
However, Wolf states only a general rule, and there are potential exceptions. Wolf hints at one basis for an exception, in noting that one of the cases he cites, Minnesota v. Granite Gate Resorts, Inc. , 568 N.W.2d. 715 (Mn. App. 1997), was a criminal case. Generally, there is a higher standard for criminal jurisdiction than for civil matters. So assume that instead of posting news of his restaurant, the Lansing resident posts free but shocking “news” items defaming the owners of the Minnesota “Lansing’s.”
If the Minnesota “Lansing’s” alleges that these posting were a malicious and deliberate attempt to damage its business, and alleges that it has suffered because of the effects of these posting, this might be sufficient to warrant a court to assert personal jurisdiction, even if the Michigan resident asserts that his posting is entirely passive under the test Wolf suggests. Compare McGee v. Universal Life Insurance Corp., 355 U.S. 220 (1957).
International Shoe v. Washington, 326 U.S. 310 (1945).
McGee v. International Life Insurance Co., 355 U.S. 220 (1957).
Minnesota v. Granite Gate Resorts, Inc. , 568 N.W.2d. 715 (Mn. App. 1997).
Wolf, Christopher. “Standards for Internet Jurisdiction.” FindLaw. 1999; accessed Feb. 14, 2007, from <http://library.findlaw.com/1999/Jan/1/241482.html>.
Wright, Charles Allan. The Law of the Federal Courts
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