Internet Jurisdiction

Having a worldwide presence for a business is a dream shared by many businesses. Not too long ago, only large businesses like Coca-Cola, IBM and other behemoths could dream the dream of a worldwide presence. Now, the Internet is the great equalizer. With a website, every business can speak to the world. Businesses everywhere are swarming to the Web.

When only the IBMs of the world could reach the world, the possibility that a company could be required to answer in a court in a different state or country didn't seem so horrible. Now, much smaller businesses that likely can't afford interstate or international counsel face the same possibility. One thing that you may want to consider is whether your website, which people can view from anywhere in the world, may subject you to being hauled into a court on the other side of this country or the world.

The biggest problem in this area is that the answers are so unpredictable because the law is still developing. While a company can do certain things to minimize the risk of it being forced to litigate in a distant court, there is no perfect sure-fire inoculation from risk.

Jurisdiction

In the United States, the Constitution and state statutes give courts power over persons and entities. We call this power "personal jurisdiction." When a court has "personal jurisdiction," it has the power to decide a controversy. The parties have no choice when a court chooses to exercise the jurisdiction that it may have.

Long before the word "Internet" was common, courts had established a two-step process for deciding whether they could assert personal jurisdiction over a distant defendant. Our system requires this because courts may not exercise jurisdiction that goes beyond the Constitution's requirement of "due process" and "traditional notions of fair play and substantial justice." Put another way, nobody should be required to answer in a distant court unless it seems fair to subject them to that burden.

The first step is for the court to look to a state's "long-arm statute." As the name of these laws connotes, a "long-arm statute" is a law that addresses the types of cases a state would like to have the power to reach outside of its borders with the "long-arm" of its law. In most cases this step is inconsequential because most "long-arm statutes" are written to assert long-arm jurisdiction to the limits of the Constitution's notions of due process. Therefore, now we're left with a constitutional analysis. How far does the Constitution go?

A court can get to the constitutional limit either by asserting what's called "general jurisdiction" or "specific jurisdiction." For there to be "general jurisdiction" with an out-of-state defendant, the court must find that the defendant's activities in the state are "substantial" or "continuous and systematic." Later, this column will address whether a website that originates in another state meets these requirements.

For specific jurisdiction, a court looks to see whether the defendant has done something to purposefully avail itself of the privilege of conducting activities in the court's state. If the answer to this question is "yes," then the court asks whether the claim arises from these activities in this state. If the answer is again "yes," then the court will assert jurisdiction if it believes that asserting it is fundamentally fair. Even without the new scenarios created by conducting business over the Net, these rules have always been easier to explain than apply.

The Internet Twist

Now with Internet, courts have to grapple with scenarios involving websites. The essence of the question is whether just having a website subjects a company to jurisdiction everywhere. Is a website, without more, enough for a court to assert general jurisdiction over a company? The argument for this is that since anybody anywhere can access a website at any time, then having a website means that the contact with every state is "substantial" or "continuous and systematic." Even if that's not quite true, another argument is that merely having a website is a basis for specific jurisdiction.

The answers that you get to these issues depend on which cases you read. The minority view is that a website, without more, is enough for a distant state to assert jurisdiction. The problem with this view is that it has no rational limits. It could mean that every website owner risks being hauled into court anywhere. Taken to its limits, it could follow that having an 800 number or a national magazine advertisement subjects a company to jurisdiction everywhere.

Most courts that have examined these issues have adopted what some call the "website plus" test. These cases say that you need a website plus something more to have jurisdiction. The leading case asserting this view is Bensusan Restaurant Corp. vs. King. In this case, the court endorsed the view that: "Creating a site, like placing a product into the stream of commerce may be felt nationwide--or even worldwide--but, without more, it is not an act purposefully directed toward the forum state."

What has befuddled courts is what the "something more" needs to be. Looking at the reported cases, I'm hard pressed to find a clear pattern in the decisions.

Some base their decision on the defendant doing business on the Net and selling products in the forum's state. These seem to be cases where a state is most likely to assert long-arm jurisdiction. Others focus on information exchange between computers. In these cases, a court is likely to find that it has jurisdiction if the information exchange involved its state. The third category involves websites that passively provide information and advertisements. Courts are least likely to assert jurisdiction in these cases.

The essential fact may turn out to be the defendant's intent. If the defendant is found to have purposely directed his activities to the forum state in some substantial way, the court is likely to find that it has jurisdiction over the defendant.

Handling this Uncertainty

As long as there is substantial uncertainty on these issues of Internet-related jurisdiction, your best bet is to deal with the issue by contract. Parties to a commercial transaction like a website purchase can generally make an enforceable agreement regarding jurisdiction. This means that the owner of a website can tilt the jurisdiction issue in their favor.

What they need to do is create an agreement called "Terms and Conditions of Website Use." The basic idea is that when somebody uses the website, their action in using it signifies their acceptance of the terms and conditions. Prominent among these conditions is that all disputes will be settled in the home court of the website owner.

While this suggestion raises its own set of unique and somewhat unsettled legal issues, it's the best that you can do in this uncertain legal environment. It's a must do for every website.