Net Jurisdiction

It seems like a simple enough question: "If my company has a website, and a dispute arises from something having to do with that website, in what courts may my company be expected to defend itself if it's sued?"

My clients expect a simple answer like, "Oh, only in the state and federal courts in your home state." Yeah, right.

More often than not, the answer is--come on, let's say it together, "It depends." If your think it was a simple question, read on.

Internet Jurisdiction

The Internet has befuddled traditional legal boundaries. It used to be that if you did business in Texas, your lawyer would tell you to comply with Texas and federal law. If you did business in Venezuela, your attorney prepared a dos and don'ts list having to do with Venezuelan law.

Basically, a company could expect to have to defend itself in the courts of its geographic location.

That's way too easy today. Companies conduct traditional business internationally and this requires compliance with various customs regulations, international laws and treaties. They also do e-business.

The reality is that doing business over the Net subjects you to a host of completely unfamiliar laws. This is tough on you as well as your e-commerce lawyer who has to figure out what laws apply to whatever it is that you're doing.

Jurisdiction 101

The truth of the matter is that the answer to what laws apply and in what court might you have to respond to a proceeding against you largely depends upon the unique facts and circumstances of your case. Before a court can determine the outcome, it would need to determine that it has "jurisdiction" over the case. Jurisdiction means that a court has the power to decide the case. A judgment rendered without jurisdiction is void.

In the United States, determining whether personal jurisdiction exists is a two-step process. First, the court must assess the particular facts and circumstances of your situation. Then, it must decide whether the exercise of control over the case by that particular court would comply with the Due Process Clause of the United States Constitution.

Facts and Circumstances

In examining the unique facts and circumstances of each case, a court will examine whether or not it has one of two types of jurisdiction: "general" or "specific."

A court needs, among other things, at least general or specific jurisdiction to render a decision in a case.

General Jurisdiction

A court may exercise general jurisdiction you when you're physically present in a court's forum. As a generalization, a court may also exercise general jurisdiction if you're not physically present in a court's forum, but conduct routine business in the forum.

So, what's "routine business?"

Let's say that you're an anti-frost-bite-keep-your-toes-warm snow boot company located in Maine and you sell and ship ninety percent of your inventory to Denver, Colorado. With these facts, it would probably be fair to say that you conduct continuous and systematic business in Denver, Colorado. It follows then that you should anticipate having to answer in a Colorado court if your Denver customers consistently suffer from frost-bite on their toes after skiing.

Yes--even if it is more expensive for you. Even if it is less convenient for you. And even if you have never stepped a frostbitten toe in Denver, Colorado yourself.

Specific Jurisdiction

Generally, a court may exercise specific jurisdiction when a lawsuit arises out of specific activities that occur within that court's forum. These might include transacting business, committing a tort (assault and battery, and negligence are examples), or committing a tort outside of a court's forum, which results in injuries within a court's forum.

In case you're wondering how can you possibly commit a tort in one place which causes injury in another? The answer is very easily.

Let's just say your company manufactures rollerblades in California. Further, let's say that you direct advertising for these rollerblades to potential customers in California for the annual competition that takes place in Nevada. You know that your customers plan to use their new blades in the Nevada competition.

Now, during the competition, several of your customers are injured because the rollers on the blades don't live up to your guarantee of "Use 'em, abuse 'em, on Nevada bricks, on Nevada rocks, tough tricks, hard knocks." You could conceivably be sued in Nevada--where the competition took place--although the tort--the negligent manufacturing of rollerblades-took place in California.

Due Process

Generally, due process is satisfied where you have enough minimum contacts with a forum so that requiring you to defend your interests there would not "offend traditional notions of fair play and substantial justice." Further, the minimum contacts with the state must be such that you could reasonably expect to be called into court there.

In determining whether minimum contacts exist, a court will generally consider several factors. For example, what's the burden placed on you as a defendant to defend yourself in a certain forum? What's the forum's interest in deciding the case? The court will also factor in the plaintiff's convenience, fairness to the plaintiff; efficiency; and social implications.

With a list of factors like that, you can see why it can be hard to predict what a court will do with a specific situation.

Personal Jurisdiction and the Internet

This brings us back to the Internet. The unique twist with the Net is that the court will focus on the amount of purposeful online and traditional interactions that you have in a particular forum.

It's unlikely that a court would subject a nonresident of a certain state to general personal jurisdiction based exclusively on posting a website. In other words, just because you have a website doesn't mean that you should necessarily expect to have to defend yourself anywhere where the website can be accessed.

At this time, case law concerning personal jurisdiction and online activity is not settled. However, it's instructive to draw analogies to traditional means of conducting business to determine where you might find yourself if you have to defend your company based on some aspect of its online activity.

Email

Courts have held that one or two mere snail mails or phone calls won't, by themselves, allow a court to exercise jurisdiction. Even a single sale via mail order isn't generally sufficient to allow a court to exercise jurisdiction. While snail mail and telephone calls may be considered in a grocery list of factors contributing to jurisdiction, one or two distinct contacts by themselves won't amount to "minimum contacts."

Similarly, then, if your company sends email around the world, you don't necessarily need to pack your bags tonight for Cairo. One email sent from your company's website will probably not amount to a "minimum contacts." One purchase from your company's website from a foreign land will also probably not amount to a "minimum contact."

Advertising

Generally, neither a nationally broadcast commercial nor a print advertisement appearing in a newspaper distributed nationally will, by itself, rise to a level of "minimum contacts"sufficient to create grounds for jurisdiction. However, as the volume of sales in a certain geographic location connected to the advertising increases, so too does the ability of a court in that location to exert jurisdiction.

ewise, a mere website accessible internationally would probably not create international jurisdictional against you. Still, as sales tied to the website in a specific geographic location increase, there is a more substantial likelihood that your company should anticipate jurisdiction against it in that location.

E-commerce

There is at least one area of online activity where, at least in theory, the online and traditional results should differ when it comes to a making a jurisdictional determination.

The corner store in My Town, USA will likely fall under the jurisdiction of the My Town, USA state and federal courts based on the physical location of the storefront.

Unlike the location of a storefront, however, the location of a Web server shouldn't necessarily factor into the jurisdictional equation.

For example, let's imagine that www.fruitbasket.com is a website for a gourmet fruit basket company based in the heart of Florida. The website is hosted on a server in Georgia. The majority of sales and deliveries of fruit baskets is in the New England area. The company could logically expect to have to defend itself in Florida--where it is located--and in the New England area--where it sells and delivers its products.

However, the company really has no reason to expect to answer in a Georgia court. No advertising in Georgia. No sales in Georgia. No deliveries in Georgia.

Is this all confusing? Of course, it is.

The simple advice is get good e-commerce counsel and post "Terms and Conditions of Website Use" of your site. This contract between you and your Web surfers can reduce your risk of being dragged into court far, far away.