In every case involving a foreign entity, counsel should perform an analysis as to whether the court has personal jurisdiction over that entity. Mass./Fed. R. Civ. P. 12(b)(2). With the increased use of the internet, issues have emerged about how a website impacts this jurisdictional issue. This summary addresses the issue but it should be noted that the analysis should be done on a case-by-case basis.
As an initial matter, to invoke personal jurisdiction over a defendant, a court must be satisfied that a plaintiff has established: 1) that the defendant is subject to the jurisdiction’s long-arm statute and 2) that the defendant has the minimum contacts with the jurisdiction to satisfy the constitutional requirements of “fair play” and “substantial justice.” If the plaintiff cannot satisfy both of these requirements, a motion to dismiss for lack of personal jurisdiction should be granted.
In BroadVoice, Inc. et al. v. TP Innovations, LLC et al., 733 F. Supp. 2d 219 (D. Mass) (Judge Stearns, Aug. 27, 2010), a Massachusetts-based company and its executives (one a Massachusetts resident) sued a Texas resident who created a website on which he posted negative statements about their business practices. For example, the Texas resident posted that the Massachusetts executive had engaged in criminal activity. The Texas resident designed his website to allow visitors to post their own comments in a “public forum.” He also encouraged visitors to file complaints about the company and the executives with various state and federal agencies.
In Sportschannel New England v. Fancaster, Inc., 2010 WL 3895177 (D. Mass) (Judge Gertner, Oct. 1, 2010), the plaintiff sought a declaration that it was not infringing on a New Jersey company’s registered trademarks. The New Jersey company operated a website that featured sports-related video clips. Visitors to the website could contact the New Jersey company, vote for favorite clips and register to receive emails and updates.
The core question in each case – one that the Supreme Court and the First Circuit have not yet squarely addressed – was whether out-of-state parties “purposefully avail” themselves of Massachusetts law merely by creating websites that are accessible to Massachusetts residents. To answer the question, both judges followed several other jurisdictions in adopting a sliding scale approach, under which the likelihood of personal jurisdiction is “directly proportionate” to the level of interactivity of the website. Under this approach, websites are classified as being:
- “Commercially active” – selling products or entering into commercial transactions over the Internet (a likely basis for jurisdiction);
- “Interactive” – allowing the exchange of information between the host computer or other users (a possible basis for jurisdiction); or
- “Passive” – merely posting information (an unlikely basis for jurisdiction).
In both BroadVoice and Sportschannel, the judge dismissed the case after concluding that the websites in question were “interactive” but that important factors weighed against a finding of personal jurisdiction. First, the judges noted that the interactive aspects of the websites were not commercial in nature because they did advertise any goods or services to Massachusetts residents. Second, the websites were not specifically targeted for use by Massachusetts residents.
Even more recently in Chase v. Gist, 2012 WL 1581682 (D. Mass) (Judge Saylor, May 3, 2012), the plaintiff alleged that he enrolled in a writing course offered by the University through its online “distance-learning” program and taught by a defendant professor. While in the class, the plaintiff allegedly filed a grievance with the University alleging that the defendant’s conduct infringed his First Amendment right to free expression. The defendant then dropped Chase from the course. According to the court:
In sum, because defendants' distance-learning program is not directed at Massachusetts any more than it is at the world at large, plaintiff's participation in that program is not sufficient to meet the minimum requirements for the exercise of jurisdiction, either under the Massachusetts long-arm statute or the Due Process Clause.
But there are situations where the various “Gestalt” or component factors tip in favor of jurisdiction. In Suk Jae Chang v. Wozo, LLC, 2012 WL 1067643 (Mass. Super. Ct.) (Judge Casper, March 28, 2012), denied a motion to dismiss in a case where the plaintiff was alleging damages arising out of responding to social media advertising.
The Gestalt factors also tip in favor of jurisdiction. Adknowledge’s burden of appearing from Missouri is not overly onerous, especially in light of the fact that Adknowledge has offices not only in Missouri but also in New York. Massachusetts has a significant interest in resolving disputes about the propriety of the conduct of Massachusetts businesses, including conduct jointly undertaken by Massachusetts business such as Wozo and Tatto working in concert with out-of-state businesses such as Adknowledge. Both Chang’s interest in obtaining convenient and effective relief and the judicial system’s interest in obtaining the most effective resolution of Chang’s claims recommend a single action in this Court rather than separate actions against Adknowledge in a separate forum and against Wozo and Tatto here. The final factor, the common interest of all sovereigns in promoting substantive social policies, is not to the contrary.Likewise, in LaFond v. Saloman N. Am., Inc., 29 Mass. L. Rptr. 419 (Mass. Super. Ct.)(Mass. Sup. Ct. Dec. 20, 2011), the Superior Court denied the defendant’s motion dismiss and rejected its personal jurisdiction argument. It stated as follows:
Salomon S.A. has not visited Massachusetts to market, promote, or solicit sales of its products, including the binding that allegedly caused LaFond's injury. Salomon S.A. does maintain a website, www.salomon.com (“Website”), which is accessible (presumably all the time) in Massachusetts. The Website includes information on Salomon products, but U.S. consumers may not purchase such products directly through the Website. If a consumer wishes to purchase a Salomon product, however, the Website includes a search function whereby said consumer can locate area retail stores that sell Salomon-branded products. Counsel for LaFond avers in an affidavit that she conducted such a search on the website and located fifty-six Massachusetts retailers that sell Salomon products.
Advice for Clients
Clients, both business entities and individuals, facing potential issues related to personal jurisdiction have some strategic decisions to make. For potential defendants, such as retailers and hosts or users of social media and advertising websites, a conscious decision might be made to limit the jurisdiction to which they sell or “target.” While it is impractical, if not impossible, to limit the near universal access to websites, the courts appear to recognize this in their sliding scale. Thus, it might be possible for a retailer to limit its shipping to certain jurisdictions. Some websites, such as alcohol manufacturer websites and social media websites, use age verification questions; jurisdiction verification questions might similarly be employed. Of course, for every verification method, there is little means to verify that the user is being honest.
Additionally, potential defendants sometimes must make an early decision about whether the jurisdiction selected by the plaintiff might be better than their personal forum. Different jurisdictions have different interest rates, different substantive laws, different jury pools and different judges. Related to this is the cost factor. A defendant might question whether it makes practical sense to have a case dismissed in one jurisdiction, only to have it re-filed in a nearby jurisdiction; a motion to dismiss might only postpone the inevitable. Finally, the defendant will typically have to provide an affidavit in support of the motion to dismiss, which affidavit will include information about its business practices and locations – something that takes up valuable resources and could bind it to a position in that, and other, matters.
For potential plaintiffs, some of the above cost considerations must too be considered. Selecting the wrong jurisdiction could result in re-filing and starting over with new counsel. A plaintiff would also want to perform an analysis of the selected jurisdiction’s laws concerning potential counterclaims and cross-claims, not to mention any applicable rules concerning contribution and indemnity, joint liability and apportionment of fault. Finally, whenever the plaintiff tries to haul a defendant out of its own jurisdiction, there is a follow-along argument that is often raised by the defendant: that the chosen venue is inconvenient because the documents, witnesses and information are in the defendant's home forum, so that the case should be dismissed or transferred to the defendant’s home forum.