By Peter Busch
This article appears on Page 7.
Determining the existence of personal jurisdiction in litigation involving the Internet is often extremely problematic. Business is conducted and information flows over the Internet, with individuals having no contact except through wires (or airwaves) connected to servers connected to computers, all of which may be maintained and operated by different entities in different places, and with the participants often having no idea where the other participants are physically located.
The objective of this article and self-study test is to examine where potential Internet defendants are located and where causes of action arise for purposes of determining personal jurisdiction. Readers will learn about the traditional tests for personal jurisdiction, the new test developed for Internet suits and a method of analyzing novel jurisdictional issues related to the Internet.
Fundamentals of Personal Jurisdiction
Personal jurisdiction, simply stated, is the power of the court to bind the defendants. It is acquired by means of service of process in accordance with statutory and due-process requirements. Ziller Electronics Lab GmbH v. Superior Court, 206 Cal.App.3d 1222 (1988). More to the point, it is limited by constitution and statute. In California, by statute, local courts can exercise jurisdiction "on any basis not inconsistent with the Constitution of this state or the United States." Code of Civil Procedure Section 410.10.
The traditional bases for personal jurisdiction, set forth 130 years ago, are (1) service on someone physically present in the forum state; (2) service on someone domiciled in the forum state or (3) service on someone who has "consented" to jurisdiction either by actually agreeing to jurisdiction or by making a general appearance in the case. Pennyer v. Neff, 95 U.S. 714 (1877).
With improvements in transportation and communications, these traditional bases were supplemented by jurisdiction over defendants with "minimum contacts" with the forum state - sufficient contacts so that jurisdiction over the absent, nonconsenting, nonresident defendant would not offend "traditional notions of fair play and substantial justice." International Shoe Co. v. State of Washington, 326 U.S. 310 (1945). Determining whether these minimum contacts exist in any given case requires a factual inquiry turning on such factors as the extent of the defendant's activities in the forum state, the extent to which the lawsuit arises from activities or contacts in the forum state, the availability and the location of witnesses and documents, the relative costs and burdens to the litigants of litigating in the forum state as opposed to an alternative, available forum and any state interest in providing a forum for the case. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980).
Jurisdiction acquired by virtue of such minimum contacts can be "general," allowing jurisdiction over any claim against the defendant, or "specific," allowing jurisdiction only with respect to the particular action. General jurisdiction is established when the defendant's contacts with the forum state are so "substantial, ... continuous and systematic" that they fairly substitute for physical presence or domicile in the forum state. Vons Companies Inc. v. Seabest Foods Inc., 14 Cal.4th 434 (1996).
When a defendant's contacts with the forum state are not so continuous and systematic that they create general jurisdiction, the defendant may still be subject to specific jurisdiction if the claim against the defendant is sufficiently closely connected to the defendant's contacts with the forum state. The test for specific jurisdiction examines (1) whether the defendant has purposefully established contacts with the forum state, (2) whether the cause of action against the defendant arises from or is related to the defendant's forum-state contacts and (3) whether the forum's exercise of personal jurisdiction comports with "fair play and substantial justice." Burger King Corp. v. Rudzewicz, 471 U.S. 462 (1985).
Mere foreseeability of causing injury in the forum state is insufficient; the defendant must reasonably foresee being haled into court there. It is appropriate for a court to exercise jurisdiction on the basis that the effects of tortious conduct are felt in the state, but only if the defendant expressly aimed the conduct at the forum state. See Imo Industries Inc. v. Kiekert AG, 155 F.3d 254 (3rd Cir. 1998). The greater the intensity of the defendant's conduct in the forum state, the lesser the relationship required between those contacts and the plaintiff's claim.
To what extent has a person who posts offers, statements or information on the Internet subjected himself or herself to jurisdiction wherever they are accessed?
The California Supreme Court first approached these issues in Pavlovich v. Superior Court, 29 Cal.4th 262 (2002). The defendant, Matthew Pavlovich, a Texas resident, posted on the Internet illegally obtained source codes that could be used for decryption and copying of encrypted DVDs. At the time he posted the information, he was a student in Indiana. He had never lived, worked, solicited or done business or owned property in California. He knew an organization licensed the technology at issue, but he did not know that organization was located in California.
The organization in question, the plaintiff DVD Copy Control Association, brought suit against Pavlovich in California, charging him with misappropriation of trade secrets. The company opposed Pavlovich's motion to quash on the ground that Pavlovich knew that his actions would adversely affect California businesses because the motion picture, consumer electronics and computer industries were heavily present in California. The trial court and the Court of Appeal concluded that jurisdiction was proper, but the California Supreme Court reversed. The Supreme Court rejected the notion that the presence of an affected industry in the forum state, standing alone, could be a basis of jurisdiction because that would cast far too wide a jurisdictional net. Nor could jurisdiction be premised on a conclusion that the defendant should have known that others would use the misappropriated technology to do harm to Californians.
The court emphasized that its holding was narrow. Because the only evidence suggesting that Pavlovich aimed his conduct at California was that he knew that affected industries were in California and because that knowledge alone is not sufficient, there could be no jurisdiction.
The more interesting point was the Supreme Court's acknowledgement, with apparent approval, of an analytical framework for addressing Internet jurisdiction issues, which it described as a "sliding scale": "At one end of the spectrum are situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper. At the opposite end are situations where a defendant has simply posted information on an internet Web site which is accessible to users in foreign jurisdictions. A passive Web site that does little more than make information available to those who are interested in it is not grounds for the exercise of personal jurisdiction. The middle ground is occupied by interactive Web sites where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site." Pavlovich, quoting Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119 (W.D. Pa. 1997).
The Supreme Court did not directly adopt this framework as the law of California. However, it did note that Pavlovich's posting of the decryption information was a passive posting that could not by itself subject him to California jurisdiction, especially with no evidence that any California resident even accessed the information.
If nothing else, this sliding-scale calculus is useful as a method to sort cases involving the Internet for jurisdictional analysis. A Boston resident concluding an online transaction for the sale of a treadmill with a San Diego resident most likely has subjected herself to California jurisdiction, should that sale go bad, notwithstanding that she has never set foot in California. Likewise, when she posts defamatory material on the Internet concerning the San Diego resident, at least if she knows her target lives in California, she will have subjected herself to suit in California. If, however, she merely posts information concerning a particular treadmill, a San Diego resident who read that information before purchasing the product from a third party probably will not be able to sue the Boston resident in California, absent something more linking her to this state. And if she has only posted links through which one could access defamatory material posted by a third party about a California resident, those links are probably going to be an insufficient basis for California jurisdiction. The boundaries within what the court called the "middle ground" will inevitably be defined slowly and incrementally as courts resolve individual cases.
The process has begun. For example, advertising vehicles over the Internet and providing an online credit application does not create jurisdiction when it is a one-time transaction completed through telephone and mail communications. Shisler v. Sanfer Sports Cars Inc., 146 Cal.App.4th 1254 (2006). A Nevada hotel's Web site resulted in personal jurisdiction in California when it allowed users to make reservations and touted its proximity to California. Snowney v. Harrah's Entertainment Inc., 35 Cal.4th 1054 (2005). More cases surely will come along to help define the limits of California's jurisdiction involving this new technology.
Time for Reassessment?
We are left to wonder whether Internet jurisdiction should be dealt with by simply adapting the old precedents. The alternative would be to reassess the fundamental constitutional assumptions.
When Pennoyer was decided in 1877, intercontinental train travel was brand new, and there was no telephone. When International Shoe was decided in 1945, automobile travel was not much swifter than trains, and commercial airlines were in their infancy. Though telephone communication was available, documents needed to travel physically. Even when World-Wide Volkswagen was decided in 1980, although people and documents could cross the county in hours by jet, overnight delivery systems were just arriving, and facsimile and e-mail were unknown.
The relative inconvenience of defending oneself on the other side of the continent compared to the other end of a state the size of California has shrunk to almost nothing. And the inconvenience of a person in Reno, Nev., defending an action in Truckee is far less than that faced by someone in Bakersfield who is sued in Crescent City.
In his dissent in World-Wide Volkswagen, Justice William J. Brennan wrote that the older cases had become "obsolete" and were based on a paradigm "that is not today's world." Even in the relatively ancient environment of 1980, Brennan suggested that the proper constitutional test ought to focus on the contacts among the forum state, the action, and the parties' contacts with the forum state, not just the defendant's contacts.
So long as there was no actual prejudice of a constitutional dimension in defending in the forum state, Brennan argued that it no longer made sense to give a defendant an effective veto over where litigation concerning the defendant's actions or products could occur. Is it time, given the further advances in transportation and communication, for the higher courts to give Brennan's dissenting views another look?
Peter Busch is a San Francisco County Superior Court judge.