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Personal Jurisdiction and Related Issues

Personal (or in personam) jurisdiction can be defined as the court’s power to compel a defendant to appear before it, to adjudicate claims made by or against the defendant, and to enforce any judgment entered in connection with such claims. In the absence of personal jurisdiction, a court may not exercise judicial power over a defendant. A court must dismiss a lawsuit upon discovery that personal jurisdiction does not exist. Any judgment entered by a court that is eventually found to lack personal jurisdiction is ineffectual and need not be honored by a court in a different jurisdiction.

A defense of lack of personal jurisdiction must be promptly raised since, unlike subject matter jurisdiction, personal jurisdiction can be waived. A defendant who fails to timely raise the defense is deemed to have acquiesced to the court’s jurisdiction and may not subsequently seek dismissal on jurisdictional grounds.

Initially, the limits of a court’s personal jurisdiction were strictly defined by territorial boundaries. That is, whether or not a court could exercise dominion over a person was determined exclusively by the geographic territory where the person could be physically found. See Pennoyer v. Neff, 95 U.S. 714 (1877). With technological advances in transportation and communications, the activities of individuals have become increasingly more likely to impact on jurisdictions well outside their immediate geographic region. To keep pace with technology, jurisprudence surrounding personal jurisdiction has gradually had to evolve in order to preserve an equitable and relevant judicial system.

The internet is the latest of such technological advancements which periodically require courts to rethink and adjust the framework used to delineate personal jurisdiction. It should come as no surprise that one of the primary reasons for the great success of the internet – the blurring, if not erasing, of geographic boundaries – also presents the greatest challenge to the formulation of a rational and fair framework for determining the jurisdictional reach of state and federal courts. What is more, the breakneck speed of internet adoption by individuals and businesses has left courts to their own devices to quickly develop a modified framework to accommodate a new breed of disputes making its way to the courthouse.

As with any hastily developed area of law, different courts have used different approaches to the problem resulting in competing theories. Although patterns have begun to emerge and some approaches have gained wider acceptance than others, this area of law remains very much in flux.

Jurisdiction in a Traditional Setting

The Two Step Analysis. In order for a court to determine whether it has personal jurisdiction over a defendant who resides outside of its geographic boundaries, the court must engage in a two step analysis. First, the court must determine whether there is an express statutory grant of authority which empowers it to exercise jurisdiction over the defendant. Second, if a statutory basis for personal jurisdiction exists, the court must determine whether the exercise of jurisdiction over the particular non-resident defendant would violate the due process guaranteed by the Constitution.

Statutory Authority. The most common source of statutory authority for the exercise of personal jurisdiction over a non-resident defendant is the "long-arm" statute of the state where the lawsuit is filed. Although on rare occasions jurisdiction is specifically conferred to a particular state or federal court by special-purpose statutes, long-arm statutes are, generally speaking, sufficiently broad to encompass a tremendous range of factual circumstances and are given broad interpretation. In fact, some states have enacted long-arm statutes which expressly obviate the need for conducting the first step of this analysis by permitting its courts to exercise personal jurisdiction over a defendant to the fullest extent permitted by the Due Process Clause of the Constitution. A good example of such broad long-arm statutes is California’s which reads in full:

A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States.

Cal. Code Civ. Proc. § 410.10 (2001)

Florida’s long-arm statute, although broad, is not nearly as expansive as California’s and, therefore, the first step of the analysis is necessary. Florida’s long-arm statute, codified under Section 48.193, reads, in relevant part, as follows:

(1) Any person, whether or not a citizen or resident of this state, who personally or through an agent does any of the acts enumerated in this subsection thereby submits himself or herself and, if he or she is a natural person, his or her personal representative to the jurisdiction of the courts of this state for any cause of action arising from the doing of any of the following acts:

(a) Operating, conducting, engaging in, or carrying on a business or business venture in this state or having an office or agency in this state.

(b) Committing a tortious act within this state.

(c) Owning, using, possessing, or holding a mortgage or other lien on any real property within this state.

(d) Contracting to insure any person, property, or risk located within this state at the time of contracting.

(e) With respect to a proceeding for alimony, child support, or division of property in connection with an action to dissolve a marriage or with respect to an independent action for support of dependents, maintaining a matrimonial domicile in this state at the time of the commencement of this action or, if the defendant resided in this state preceding the commencement of the action, whether cohabiting during that time or not. This paragraph does not change the residency requirement for filing an action for dissolution of marriage.

(f) Causing injury to persons or property within this state arising out of an act or omission by the defendant outside this state, if, at or about the time of the injury, either:

1. The defendant was engaged in solicitation or service activities within this state; or

2. Products, materials, or things processed, serviced, or manufactured by the defendant anywhere were used or consumed within this state in the ordinary course of commerce, trade, or use.

(g) Breaching a contract in this state by failing to perform acts required by the contract to be performed in this state.

(h) With respect to a proceeding for paternity, engaging in the act of sexual intercourse within this state with respect to which a child may have been conceived.

Fla. Stat. § 48.193 (2001).

Subsections (1)(a), (b), (f), and (g) are of particular relevance to the instant discussion insofar as they cover most situations likely to arise in the context of internet-related litigation. It should be noted that courts have demonstrated a tendency to interpret Florida’s long-arm statute quite broadly and therefore it is normally not a difficult task to establish that there is a statutory grant of personal jurisdiction. See e.g. Posner v. Essex Ins. Co., Ltd., 178 F.3d 1209 (11th Cir. 1999)(broadly interpreting Florida’s long-arm statute to mean that a defendant who commits a tort that causes injury in Florida is subject to personal jurisdiction under subsection (1)(b) regardless of where the act that caused the injury was completed.)

Constitutional Due Process. The second step of the analysis, determining whether personal jurisdiction is offensive to due process as guaranteed by the Constitution, is governed by the "minimum contacts" test first announced by the Supreme Court in International Shoe Co. v. Washington, 326 U.S. 310 (1945). Under International Shoe and its progeny, personal jurisdiction may exist only if the court determines that the defendant has "sufficient minimum contacts" with the forum state such that "maintenance of the suit does not offend traditional notions of fair play and substantial justice." Id. Just what exactly constitutes sufficient minimum contacts has been the subject of decades of judicial refinement but can be summarized by the following requirements from a few seminal cases:

the defendant must commit an act by which he or she "purposefully avails him or herself of the privilege of conducting activities with the forum state," Hanson v. Denckla, 357 U.S. 235, 253 (1958);

the conduct of the defendant with respect to the forum state must lead to the conclusion that he or she "should reasonably anticipate being haled into court there," Worldwide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980); and

personal jurisdiction over the defendant must be "reasonable" in view of factors such as the burden imposed on the defendant in having to litigate in a foreign state, the forum state’s interest in adjudicating the dispute, the plaintiff’s interest in obtaining convenient and effective relief, the interstate judicial system’s interest in achieving the most efficient resolution of the controversy, and the shared interest of the states in furthering fundamental social policies. Burger King v. Rudzewicz, 471 U.S. 462, 476-77 (1985).

In addition to the above requirements, in order to satisfy the minimum contacts test, a plaintiff must demonstrate that the contacts between the defendant and the forum state gave rise to the lawsuit and thus permit the court to invoke specific jurisdiction. Alternatively, if the plaintiff can prove that the defendant’s contacts with the forum state were "continuous and systematic", general jurisdiction can be established regardless of whether the contacts had anything to do with the subject matter of the lawsuit. Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 415-416 (1984).

Jurisdiction Over Activities on the Internet – Protecting Against Borderless Jurisdiction

Long-Arm Statute Considerations. As indicated above, Florida's long-arm statute is not a simple extension of the Due Process Clause of the Constitution and therefore the activities of the defendant must first be analyzed to determine whether they fit within those categorized by the statute as triggering jurisdiction over non-residents. In the internet context, this analysis is fairly straightforward and does not vary greatly from that necessary in other areas of the law.

Limiting this analysis to situations most likely to arise in internet-related litigation, Florida's long-arm statute generally provides that state courts have personal jurisdiction over a non-resident person or business who: (a) operates a business in the state; (b) has an office in the state; (c) commits a tort that causes injury in the state; (d) solicits within the state; (e) manufactures, processes or services products, materials, or things used or consumed within the state; or (f) breaches a contract by failing to perform an act required by the contract to be performed in the state.

At this time there do not appear to be any reported Florida state court cases which discuss in detail the application of the long-arm statute to activities conducted exclusively online. However, using history as a guide, it is reasonable to assume that internet-related activities will be treated as other types of commercial activity. The grounds for jurisdiction enumerated by the long-arm statute easily lend themselves to case-specific factual analysis. Furthermore, the historical tendency to interpret the long-arm statute broadly with regard to commercial activities should be expected to extend to internet-related activities.

Minimum Contacts and the Internet. Relative to the long-arm statute analysis, the determination of whether the exercise of personal jurisdiction over a non-resident defendant passes constitutional muster is fairly complicated. The ease with which "contacts" are created with multiple jurisdictions over the internet has raised the real risk of creating borderless jurisdiction. The seminal question which the courts are grappling to answer is, what constitutes "sufficient minimum contacts" in the realm of the internet?

The answer to this question has resulted in the formulation of two significantly different approaches. The first approach, typified by the opinion in Inset Systems, Inc. v. Instruction Set, Inc., 937 F. Supp. 161 (D. Conn. 1996), allows for extremely broad personal jurisdiction based solely on the availability of the defendant's website to citizens in the forum state. The second approach, which tracks its genesis to Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F.Supp 1119 (W.D.Pa. 1997), provides a much more reasoned approach which analyzes they type of contact generated by the defendant's internet presence in relation with the forum state. Not surprisingly, the Zippo approach has gained wide acceptance while the Inset approach has been severely criticized and marginalized.

Inset Systems – the Case for Broad Jurisdiction. The Inset case arose as a result of a domain name dispute between the owner of the federally registered trademark "INSET" and a business who acquired "INSET.COM" as its internet domain name. The defendant was a Massachusetts corporation without any employees or offices within the forum state of Connecticut and did not conduct business there on a regular basis. After the defendant moved to dismiss for lack of personal jurisdiction, the Inset court found that jurisdiction was proper based on the fact that the defendant operated an internet website which was accessible to the residents of Connecticut. The website in question was informational in nature and essentially functioned as an advertisement for the defendant. The Court estimated that the residents of Connecticut could access the website from any one of approximately 10,000 internet-equipped facilities in the state. The Inset court reasoned that "once posted on the internet, unlike television and radio advertising, the [internet] advertisement is available continuously to any internet user. [The defendant] has therefore, purposefully availed itself of the privilege of doing business within [the forum state]." Inset Systems, Inc. 937 F. Supp. at 164-165.

The essence of the Inset decision is the court's conclusion that the mere act of publishing a website, regardless of the level of interaction between the publisher and the end user, subjects an entity to personal jurisdiction everywhere the website may be accessed. The decision is remarkable in that the court focused its attention on the quantity and pervasiveness of the contacts between the defendant and the forum, but completely ignored the fact that the defendant made no attempt to target citizens of the forum. The fact that the defendant's website was completely informational and offered no interactivity with the end user, tantamount to an internet billboard, did not deter the court from issuing the highly criticized opinion.

As stated above, and for obvious reasons, the approach formulated by the Inset court has been severely criticized and has received minimal support. It should be noted, however, that the Inset decision is not completely devoid of followers as it has been cited approvingly in at least one other federal case and it has not been expressly overturned.

In Maritz, Inc. v. Cybergold, Inc., 947 F.Supp 1328 (E.D.Mo. 1996), the court relied on Inset in denying the defendant's motion to dismiss despite the fact that the defendant's entire contacts with the forum state (Missouri) consisted of the maintenance of a website with a server in California which was accessible "accessible to every internet-connected computer in Missouri and the world." Id at 1330. As was the case in Inset, the Maritz court concentrated on the fact that the defendant's website was accessible to large numbers of users in the forum state and by providing such access the defendant had purposefully availed itself of the privilege of conducting business in Missouri and therefore should reasonably expect to be haled into court there.

Zippo Manufacturing – the Sliding Scale. For the most part, the Inset approach has been marginalized by the majority of courts in favor of the more enlightened approach formulated by Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F.Supp 1119 (W.D.Pa. 1997).

In Zippo, a Pennsylvania plaintiff sued a California defendant for trademark infringement and dilution. The lawsuit was filed in federal court in Pennsylvania. The plaintiff was a manufacturer of, among other things, a famous line of tobacco lighters. The defendant was the operator of a website and internet news service linked to various domain names featuring the word "ZIPPO". The defendant's contacts with Pennsylvania occurred almost exclusively over the internet and consisted of contracting with approximately 3,000 Pennsylvania residents to allow them access to its online news service. The Pennsylvania subscribers accounted for approximately 2% of the defendants 140,000 subscriber base at the time of the lawsuit. At the outset of the case, the defendant filed a motion to dismiss for lack of personal jurisdiction.

Because the Pennsylvania long-arm statute allowed for the exercise of personal jurisdiction "to the fullest extent allowed under the Constitution of the United States", the only issue left for the Court to decide was whether personal jurisdiction over the defendant was constitutionally permitted. After analyzing the available case law, the court concluded that "the likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the internet." Zippo Manufacturing Co., 952 F.Supp at 1124.

Thus, in deciding that personal jurisdiction was proper, the court established a "sliding scale" approach to classifying internet web sites. Within this sliding scale, the Zippo court defined three distinct levels of websites based on their commercial nature and level of interactivity:

Commercial Websites: The court defined commercial websites as those used by defendants to enter into contracts with residents of foreign jurisdictions that involve the knowing and repeated transmission of computer files over the internet. Commercial websites are clearly used by defendants to transact business over the internet and in these situations personal jurisdiction in the foreign jurisdiction is always proper.

Passive Websites: The court defined a passive website as one in which the defendant has simply posted information that is accessible to internet users and does little more than make information available to those who are interested in it. A passive website alone is never sufficient grounds for the exercise of personal jurisdiction.

Interactive Websites: In the middle ground between commercial and passive websites, the court defined an interactive site as one where a user can exchange information with the host computer. In the case of defendants operating interactive websites, the exercise of personal jurisdiction is determined by the level of interactivity and commercial nature of the exchange of information that occurs on the website.

Since the Zippo opinion was first issued in 1997, the sliding scale test has been adopted by courts in the 2nd, 3rd, 4th, 5th, 6th, 7th, 8th, 9th 10th, 11th and D.C. Circuits. See Cuccioli v. Jekyll & Hyde Neue Metropol Bremen Theater Produktion Gmbh & Co., 150 F.Supp.2d 566 (S.D.N.Y. 2001); BancMortgage Fin Corp. v. Guarantee Title & Trust Co., 2000 U.S. Dist. Lexis 9025 (E.D. Pa. June 21, 2000); Jeffers v. Wal-Mart Stores, Inc., 152 F.Supp.2d 913 (S.D. W. Va. 2001); Mink v. AAAA Dev. LLC, 190 F.3d 333 (5th Cir. Tex. 1999); Noegen Corp. v. Neo Gen Screening, Inc., 109 F.Supp.2d 746 (E.D. Mich. 2000); MJC-A World of Quality, Inc. v. Wishpets Co., 2001 U.S. Dist. Lexis 13178 (N.D. Ill. August 22, 2001); Uncle Sam’s Safari Outfitters, Inc. v. Uncle Sam’s Army Navy Outfitters-Manhattan, Inc. 96 F.Supp.2d 919 (E.D. Mo. 2000); Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. Ariz. 1997); Soma Med. Int’l v. Standard Chtd. Bank, 196 F.3d 1292 (10th Cir. Utah 1999); Butler v. Beer Across Am., 83 F.Supp.2d 1261 (N.D. Ala. 2000); GTE New Media Servs., Inc. v. Ameritech Corp., 21 F.Supp.2d 27 (D.D.C. 1998).

Florida Cases. Florida, like the rest of the country, has embraced the Zippo sliding scale test. The first Florida case to follow Zippo's rationale was JB Oxford Holdings, Inc. v. Net Trade, Inc., 76 F.Supp. 2d 1363 (S.D.Fla. 1999). In JB Oxford, the court concluded that jurisdiction under Florida's long-arm statute was proper because the plaintiff alleged trademark infringement by defendant and the injury from trademark infringement occurs in the state where the trademark owner resides, which, in this case, was Florida. In conducting its constitutional analysis, the court determined that the defendant’s contacts with Florida included: (a) 3 interactive web sites accessible to Florida residents; (b) A national toll-free number listed on the web sites; and (c) a pending application to do business in Florida.

The JB Oxford court concluded that the combination of the interactive websites and the tenuous commercial activity directed by the defendant to Florida residents did not constitute sufficient "minimum contacts" and dismissed the case for lack of personal jurisdiction. Citing Zippo, the court stated that due process "requires contacts that illustrate purposeful availment of the privilege of conducting commercial activity in the forum – contacts that tie the defendant to a particular state, not those that merely link with equal strength the defendant to other states." JB Oxford, 76 F.Supp. at 1367.

The sliding scale test was also relied upon in the more recent case of Nida Corporation v. Ken Nida, 118 F.Supp. 2d 1223 (M.D.Fla. 2000). In the Nida case, a corporation residing in Florida sued a citizen of the state of California for trademark infringement. The parties stipulated that the contacts between the defendant and Florida consisted of sales of its products to Florida residents between 1995 and 2000 resulting in approximately $27,500 as well as a website maintained by the defendant which was accessible to internet-connected Florida residents. The parties also stipulated that the defendant's website was neither passive nor commercial and instead fell within the interactive middle-ground established by Zippo.

As in JB Oxford, the court concluded that jurisdiction in Florida over a citizen of California was proper under Florida's long-arm statute. However, unlike the JB Oxford case, the court in Nida held that the combination of an interactive website and sales of products to Florida residents over a five-year period constituted "contacts with the State of Florida comfortably in excess of the bare Constitutional minimum necessary to satisfy the Due Process Clause." Nida, 118 F.Supp. 2d at 1231.

Thus, the JB Oxford and Nida cases illustrate how Florida has initially defined the middle part of the Zippo sliding scale spectrum. Similarly, two other Florida cases have helped better define the two opposite extremes of the spectrum. The first such case, Kim v. Keenan, 71 F. Supp. 2d 1228 (M.D.Fla. 1999) alludes to the fact that in Florida, active commercial solicitation by a non-resident through an Internet website (i.e., operating a commercial website), can by itself, be sufficient to establish the required minimum contacts. Unfortunately, the court could not base its opinion on this because there was no evidence on the record that the subject website even existed at the time the alleged cause of action accrued. Kim v. Keenan, 71 F. Supp. 2d at 1234.

Finally, and most recently, in Miami Breakers Soccer Club, Inc. v. Women's United Soccer Association, 140 F. Supp. 2d 1325 (S.D.Fla. 2001), the court held that a website which advertised products for sale but which required customers to call a toll free number to make a purchase must be classified as passive and may not form the basis for establishing personal jurisdiction over a non-resident defendant. Echoing the words of the Zippo decision, the court declined to exercise personal jurisdiction over the defendant and stated that "because Florida residents cannot contract with the defendants through their web sites to make purchases, the Court finds that defendants' web sites are passive." Id. at 1329.

Practical Advise on Limiting Personal Jurisdiction. Although the law on personal jurisdiction and the internet is clearly still evolving, there a few lessons which can be learned from the cases and put into daily practice. Website operators generally have no desire to be haled into a foreign jurisdiction and are therefore interested in practical advise on what to do, and what not to do, in order to minimize their exposure to foreign jurisdictions. With that in mind, the following guidelines are offered to help website operators steer clear of potentially risk-laden internet activities:

The easiest way to acquiesce to foreign jurisdiction is to allow visitors to a website to enter into contracts for the purchase of goods or services without requiring the performance of some additional non-internet activity. Although commercial site operators strive to facilitate online purchases as much as possible, they should be aware that permitting the formation of a contract online is likely to lead to the exercise of jurisdiction by foreign courts.

If the formation of contracts is unavoidable, a website operator should minimize exposure by including a choice of forum clause in its terms of sale. Similarly, an arbitration clause may help an operator avoid costly litigation in a hostile jurisdiction.

If a website can be characterized as "interactive" and not "commercial", as defined by the Zippo decision, the chances of subjecting its operator to foreign jurisdiction can be reduced by minimizing the commercial appearance of the site. This can be accomplished by including entire sections of the website which are purely informational.

Similarly, the operator of an interactive website can reduce the chances of being haled into court in another state by making it less apparent that the website is directing itself to residents of other states. For example, use of a toll free number in connection with a web site could be viewed as evidence that the operator intends to target users located outside its jurisdiction.

A website operator concerned with exposure to foreign jurisdictions should maintain an accurate log of "page views" or "hits" which would permit the operator to determine on a later date what percentage of visitors to the website came from other states.

Finally, if the operator of a website has a concern with a particular jurisdiction, the website should include a mechanism to determine whether the viewer is located in such a jurisdiction and, if so, to restrict that viewer to non-commercial portions of the website.