Personal Jurisdiction Quandaries in the 21st Century: Does Having a Website Expose You to Potential Lawsuits Nationwide?May 2016
Businesses, and individuals operating websites, sometimes ask, "Can I be liable for something published on my website, and given the worldwide availability of my website, can I be forced to defend myself in a court hundreds of miles away because of things said or things that happen as a result of my website?"
The first question was answered last October. We reported that courts have uniformly interpreted federal statute 47 U.S.C. §230(c)(1) to mean that a website operator generally cannot be liable for things that a third party posts on its website, but can be held liable for postings on its own website.
But, still to be addressed is the larger question, "Can a website operator be hauled into a court hundreds of miles away to defend against claims based on things that happen as a result of its website?"
The answer depends largely on the extent to which the website operator targets its website to persons and businesses in the place where a lawsuit is brought.
For businesses that use the internet to transact business, simply posting information on a website about a product or service is generally insufficient to confer jurisdiction where it would not otherwise lie. However, jurisdiction would likely exist if the website operator creates its website to target specific customers in that jurisdiction or if the transaction is more than simply offering the item or service for sale, but includes specific communications and representations to the consumer in that jurisdiction. Of course, if the website operator actually sells and ships a product to a consumer in another state, it likely can be brought to defend in that other state claims that pertain to the product, and possibly claims related to the internet site itself.
Calder v. Jones: The "Effects" Test
The most common theory under which courts consider exercising jurisdiction over an out-of-state defendant based on the harmful effects of the defendant's website is the "effects" test articulated by the U.S. Supreme Court in Calder v. Jones, 465 U.S. 783 (1984). In Calder, actress Shirley Jones was permitted to sue the defendant, the author and editor of an allegedly libelous National Enquirer article, in California, even though the defendant was from Florida. Id. at 790. The Court reasoned that, among other things, the out-of-state defendant "expressly aimed" its actions at California, where Jones lived and worked and where the magazine had the greatest circulation, and because "the brunt of the harm . . . was suffered in California." Id.
Since 1984, when Calder was decided, courts across the country have debated (and continue to debate) where to draw the line on permitting suits against out-of-state defendants whose out-of-state acts were "targeted" at the state in question, an issue somewhat muddied by the evolution of the internet.
Baldwin v. Fischer-Smith: Creation of a Libelous Website
A six-year-old decision from the Missouri Court of Appeals for the Southern District illustrates how Missouri courts consider the propriety of exercising personal jurisdiction over out-of-state defendants on the basis of the defendants' websites. In Baldwin, Arizona and Pennsylvania defendants allegedly libeled the plaintiffs, who operated Whispering Lane Kennel, by creating a website called "StopWhisperingLane.com." 315 S.W.3d 389, 392 (Mo. App. S.D. 2010). Acknowledging the lack of definitive, controlling authority, the court sided with a decision from the U.S. Court of Appeals from the Seventh Circuit, holding that because the defendants purposely targeted the plaintiffs in Missouri with the goal of causing harm in Missouri, a Missouri court could exercise jurisdiction over them. Id. at 396-97. The court was explicit, however, in limiting its holding to the facts in that case. Id. at 399.
Zippo Mfg. Co. v. Zippo Dot Com, Inc.: Interactivity of a Website
In Zippo Mfg. Co. v. Zippo Dot Com, Inc., Zippo Manufacturing Co. – the Pennsylvania-based manufacturer of Zippo lighters – filed a trademark claim in Pennsylvania against Zippo Dot Com, Inc., a California company that owned and operated a news website, regarding the use of the word "Zippo." 952 F. Supp. 1119, 1121 (W.D. Penn. 1997). The Pennsylvania court ultimately found that it could exercise jurisdiction over Zippo Dot Com, even though it was a California corporation, because it had contracted with approximately 3,000 individuals and seven internet access providers in Pennsylvania. Id. at 1126. In so holding, the court articulated what is now known as the "Zippo sliding scale" approach, which weighs the interactivity of a website when deciding whether jurisdiction exists. By interactivity, the court meant the extent to which the website invited exchange between the website viewer and operator. An interactive website is more likely than a passive website to confer jurisdiction. Id. at 1124.
Advanced Tactical Ordinance Systems, LLC v. Real Action Paintball, Inc.: Online Transactions
The interactivity of a website, however, by itself may not be enough to confer jurisdiction. A couple years ago, the U.S. Court of Appeals for the Seventh Circuit considered whether online sales from a website conferred personal jurisdiction over the website operator in an intellectual property dispute. In Advanced Tactical Ordinance Systems, LLC v. Real Action Paintball, Inc., the plaintiff, a paintball manufacturer, sued a competitor for trademark infringement in federal court in Indiana. 751 F.3d 796, 798-99 (7th Cir. 2014). The plaintiff was headquartered in Indiana, but the defendant was based in California. Id. The plaintiff argued that the defendant's sales to Indiana residents, coupled with interactivity of the defendant's website, made it subject to Indiana jurisdiction.
The Seventh Circuit rejected that argument and held that the Indiana federal court lacked personal jurisdiction over the defendant, even though the defendant fulfilled several orders of the allegedly infringing product for Indiana purchasers, knew the plaintiff was an Indiana company and that any harm would be felt in Indiana, and sent misleading email blasts to a list that included Indiana residents. Id. at 801-04. In so holding, the court explained, "The interactivity of a website is . . . a poor proxy for adequate in-state contacts. We have warned that [c]ourts should be careful in resolving questions about personal jurisdiction involving online contacts to ensure that a defendant is not haled into court simply because the defendant owns or operates a website that is accessible in the forum state, even if that site is 'interactive.'" Id. at 804 (citation omitted).
The court's decision in Advanced Tactical – a trademark infringement case – should not be taken as applying to breach of contract related to use of the website or injuries caused by products sold through the website. In Andra v. Left Gate Prop. Holding, Inc., 453 S.W.3d 216 (Mo. banc 2015), the Supreme Court of Missouri held that a Texas seller of vehicles on eBay was subject to jurisdiction in Missouri based on misrepresentations made about a particular vehicle. The seller shipped the vehicle and paperwork to a purchaser in Missouri and had several communications with the purchaser. In such a case, the interactivity of the website is directly connected to the claim over which the lawsuit is brought.
Lewis Rice Navigates Jurisdictional Waters
Lewis Rice has successfully defended its clients against lawsuits in inconvenient courts on numerous occasions. Below are a few summaries of cases involving a variety of websites—from news to retail—and various asserted claims, ranging from defamation to intellectual property disputes:
Others First, Inc. v. Better Business Bureau of E. Missouri & Illinois
In Others First, Inc. v. Better Business Bureau of E. Missouri & Illinois, No. 14-CV-12066, 2014 WL 6455662, at *1 (E.D. Mich. Nov. 17, 2014), Others First, a Michigan charity that had mailed solicitations for car donations to St. Louis customers, brought claims for defamation and tortious interference against the St. Louis Better Business Bureau (BBB). The BBB had posted a warning on its website urging caution when dealing with the charity in light of the charity's association with a for-profit fundraiser identified in some documents as the charity's founder who had previously been publicly "criticized for alleged improprieties in running similar programs" and also because of a possible conflict of interest on the part of an officer of the charity who resigned and then entered into his own, seemingly lucrative for-profit contracts with the charity. Id. at *2. The BBB refused to take down this warning.
Represented by Lewis Rice, the BBB moved to dismiss the claims against it in Michigan for lack of personal jurisdiction. Id. Others First argued that the Michigan federal court had jurisdiction over the BBB because Others First was located in Michigan, because the BBB placed phone calls and emails to Michigan residents in the course of its investigation, because the warning was posted on the internet, and because the BBB used Search Engine Optimization to ensure the prominence of the warnings to persons conducting an internet search. Id. at *5. The Michigan federal court first looked to the Calder effects test and concluded that personal jurisdiction did not apply because the primary focus and intended audience of the warning was St. Louis consumers, not Michigan consumers; because Others First did not limit its activities to Michigan; and because the phone calls and emails directed to Michigan were for purposes of investigation, not solicitation of business. Id. at *6-7. The court then applied the Zippo sliding scale approach and concluded that personal jurisdiction did not apply because although the BBB's website was somewhat interactive, the majority of the warning was simply to caution customers of doing business with Others First (and was not based on interactivity) and because Others First did not allege any interaction between the BBB and Michigan residents through the defendant's website. Id. at *7-8. The court therefore concluded that it lacked personal jurisdiction over the BBB, and dismissed Others First's claims. Id. at *9-10.
Johnson v. Gawker Media, LLC
In Johnson v. Gawker Media, LLC, No. 15-cv-1137, at *2 (E.D. Mo. Jan. 15, 2016), Charles Johnson, a controversial journalist and commentator, and his website Got News filed a lawsuit against Gawker Media and some of its reporters (collectively, "Gawker"), alleging claims of defamation, injurious falsehood, and invasion of privacy. Johnson, a resident of California, filed suit against Gawker, a Delaware corporation with its principal place of business in New York, in Missouri. Id. at *2, *4-5. Represented by the Washington D.C. office of Levine, Sullivan, Koch & Schulz, LLP and Lewis Rice, Gawker moved to dismiss for lack of personal jurisdiction or, in the alternative, for failure to state a claim upon which relief can be granted. Id. at *4. The plaintiffs argued that Gawker was subject to jurisdiction in Missouri because Gawker published allegedly defamatory articles on the internet that were viewable in Missouri and because Gawker allegedly targeted advertising to Missouri residents. Id. at *15. The court rejected the plaintiffs' arguments and held that it lacked jurisdiction over Gawker because the website was not particularly directed to Missouri residents, because the website did not offer items for sale, and because there was no evidence that any Missouri residents read or commented on the article at issue. Id. at *16. Furthermore, there was no evidence that the article was expressly aimed at Missouri any more so than any other state or the world as a whole. Id. at *17-18. In light of the foregoing, the court concluded it lacked personal jurisdiction over Gawker and dismissed the plaintiffs' claims. Id. at *20-21.
Mega Distrib. Int'l, Inc. v. Mattoon Rural King Supply, Inc.
In Mega Distrib. Int'l, Inc. v. Mattoon Rural King Supply, Inc., No. 15-cv-3639, at *1 (C.D. Cal. Dec. 1, 2015), Mega Distribution International, Inc. ("Mega") filed a trademark infringement lawsuit on May 14, 2005 against Mattoon Rural King Supply, Inc. ("Rural King") in the Central District of California. Mega, a corporate citizen of California, argued that the court had personal jurisdiction over Rural King, a corporate citizen of Illinois, because it had sold allegedly infringing products in California, because it maintained a website where consumers could purchase its products, and because Rural King allegedly "advertised" in California. Id. at *1-2.
Represented by Lewis Rice, Rural King moved to dismiss the lawsuit for lack of personal jurisdiction or, in the alternative, to transfer venue to the Central District of Illinois. Rural King argued that the court lacked jurisdiction over it because, among other things, its retail business was focused primarily in the Midwest, because its California internet sales of the disputed products were de minimis, and because it maintained no offices in California and did not expressly advertise to California residents. The court agreed, holding that it lacked jurisdiction over Rural King because there was no indication that Rural King specifically targeted California residents. Id. at *7. In so doing, the court found that Rural King's website fell within the middle of the Zippo sliding scale and that something more than de minimis sales was required in order to exercise jurisdiction based upon internet sales. Id. at *6. After holding that it lacked personal jurisdiction over Rural King, the court transferred the case to the Central District of Illinois, where Rural King's headquarters are located. Id. at *9.
Trademark cases like Zippo and Rural King raise difficult jurisdictional issues. In infringing a trademark, a company in a foreign state is arguably misappropriating a property right belonging to the in-state plaintiff. If through potential confusion created by the infringement, the foreign defendant is able to obtain customers that would have otherwise purchased from the plaintiff, potential arguments supporting jurisdiction exist, likely on the part of the misled consumer, but also on the part of the party whose trademark is infringed. Monster Energy Co. v. Wensheng, No. 15 C 4166, 2015 WL 5732050, at *6 (N.D. Ill. Sept. 29, 2015) (by "offering to sell" counterfeit product in violation of the Lanham Act in the state, defendant was subject to jurisdiction in the state). This could be especially true if the sales are in the jurisdiction where the plaintiff sues. See, e.g., Dakota Indust. v. Dakota Sportswear, 946 F.2d 1384 (8rh Cir. 1991) (sales of infringing products in the forum state).
Where Do We Go from Here?
As technology and the internet continue to evolve—and the law struggles to keep up—courts are less and less likely to find the mere existence of a website to be a sufficient basis to exercise jurisdiction over a defendant residing in another state. This means that if a website is passive and does not directly target somewhere or someone, courts will not likely hale an out-of-state defendant into court to defend its website. But, as the Baldwin court eloquently put it, "If you pick a fight in Missouri, you can reasonably expect to settle it here." 315 S.W.3d at 398.