Jurisdiction over Internet Businesses

Jurisdiction over Internet Businesses

If a court has the power to render a judgment against a person or business, it is said to have jurisdiction over that person or business. Generally, if a company has a store or office in a particular state or undertakes business activities in that state, the court in that forum will have personal jurisdiction over that company. Whether a court has jurisdiction over an Internet business is a bit more complicated. An Internet business is "located" on the Web, is theoretically available to users worldwide and "activity" within a forum is difficult to define with respect to Internet usage. An attorney at Erik S. Syverson in Los Angeles, California can answer your questions about jurisdiction over Internet businesses.

The Concept of Jurisdiction

Jurisdiction is the legal authority of a court to hear and decide a case. In order to enter an enforceable judgment, a court must have subject matter jurisdiction over the claims and personal jurisdiction over the defendant. There are two types of personal jurisdiction — general and specific. If the defendant has "systematic and continuous" contacts with the forum, the court usually has general jurisdiction over the defendant in all lawsuits, even if the suit is not related to the defendant's contacts with the forum. With specific jurisdiction, the claims are related to or arise out of the defendant's contacts with the forum.

"Long-arm" statutes, which most states have in place, allow courts to exercise jurisdiction over non-resident defendants when that defendant's contact with the forum meets the specific circumstances set forth in the statute.

Once the court finds that there is a basis for personal jurisdiction, the court must decide whether exercising jurisdiction over the defendant conforms to the due process requirements of the US Constitution. Due process is satisfied if the defendant has purposefully availed itself of the benefits and protections of the forum by establishing “minimum contacts” with that state, and the exercise of jurisdiction over the defendant does not offend "traditional notions of fair play and substantial justice."

Jurisdiction Over Internet Businesses

Courts have taken several approaches in determining whether online activities satisfy the jurisdictional requirements of minimum contacts and purposeful availment. The majority view is a sliding scale analysis that was developed in Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119 (W.D. Pa. 1997). Under the sliding scale test, there are three levels of Web sites or Web activity:

• Passive: If a Web site is passive in that it only provides information or advertises, a court will generally not find personal jurisdiction unless there are other activities within the forum
• Active: If a business uses a Web site to actively solicit business, sell products and enter into contracts with people who live in the forum, personal jurisdiction will likely exist
• Interactive sites: If the site is interactive and users can exchange information with the business, whether the exercise of personal jurisdiction is appropriate will be determined by looking at the level and type of interaction and other actions the business engages in within the forum

Factors to Consider

While many businesses see a Web site and the Internet as a way to reach potential customers across the US and even the world, it is important to consider the potential liability the company could face in multiple jurisdictions. Here are some issues to think about when setting up a Web site:

• Sites directed to only one location (for example, a site that says "We only represent clients in Minnesota") would probably not be sufficient for another state to have jurisdiction
• The more passive the site, the less likely it will support jurisdiction
• If the business has contacts with the forum in addition to the Web site, such as offices there or phone calls to people in the forum, jurisdiction is more likely
• Online sales or entering into contracts with consumers in a particular state is generally enough for jurisdiction
• Jurisdiction is more likely if the Web site is interactive
• Evidence that the business earned money from activities in the forum often leads to a finding of jurisdiction

Conclusion

As discussed above, an Internet owner's exposure to remote jurisdictional forums is a complicated legal issue. However, it is important to know where your business may be exposed to liability. If you have questions about jurisdictional issues and where your Internet business could be subject to liability, contact an attorney at Erik S. Syverson in Los Angeles, California.

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