Cases Which Hold That Internet Contacts are Insufficient to Convey Jurisdiction

Courts have dismissed cases for lack of jurisdiction in several cases involving on-line issues. Some of these cases display a healthy concern for the fact that, if jurisdiction is too readily asserted in cyberspace, it may threaten the development of what promises to be the most democratic medium that the world has ever known.

In Pres-Kap, Inc.v. Sys. One, Direct Access, 636 So.2d 1351 (Fla. App. 1994), review denied, 645 So.2d 455 (Fla. Sup. Ct. 1994), a Florida company which operated an airline reservation database sued a user in Florida, even though the user lived in New York. The court ruled that the user's only contact with Florida was by electronically accessing the database, and that this contact was insufficient for a finding of jurisdiction.

In Hearst Corporation v. Goldberger, 1997 WL 97097, the publisher of Esquire Magazine brought an action in New York federal court for trademark infringement against the owner of a web site called Esqwire.com. The only information at the Esqwire site was (i) an announcement that Goldberger, the site's operator, plans to offer legal support services to attorneys over the World Wide Web, and (ii) updates on the progress of the litigation with Hearst. (As of this writing, the site provides contact information for Mr.Goldberger and a copy of the decision in the litigation.) The Court found that Goldberger's site was analogous to an advertisement in a national magazine, which, though available in fifty states (and in the case of a web site, world-wide), is not targeted toward the residents of any particular jurisdiction. Therefore, the Court held that Goldberger did not "transact business" in New York or have sufficient contacts with New York to confer personal jurisdiction. The Court compared and contrasted this case with several other Internet jurisdiction cases. It distinguished the case on the facts from several cases in which jurisdiction was found to exist. Addressing other cases in which jurisdiction was found on the basis of Internet contacts, such as Inset Systems, Inc. v. Instruction Set, Inc., 937 F. Supp. 161 (D. Conn. 1996), Maritz, Inc. v. CyberGold, Inc., 947 F. Supp. 1328 (1996), and Heroes, Inc. v. Heroes Foundation, 958 F. Supp. 1 (D. D.C. 1996) (see Cases Finding Jurisdiction on the Basis of Internet Contacts), the Court simply declined to adopt their reasoning. The Hearst Court stated that it believed that the jurisdictional analysis in such cases would improperly expand jurisdiction, allowing World Wide Web contacts alone to create jurisdiction in any and every court throughout the world.

Satterlee Stephens Burke & Burke LLP represented the defendant in a landmark case which established that simply having an on-line presence that can be accessed in a particular forum does not enable the courts in that forum to exercise general jurisdiction. In McDonough v. Fallon McElligott, Inc., et. al., Civil Case No. 95-4037 (S.D. Ca. August 5, 1996), the plaintiff argued that the defendant, a Minnesota advertising agency, was subject to personal jurisdiction in California solely because it maintained a World Wide Web site that was accessible in California. The defendant had no other ties to California. The court stated that "[b]ecause the Web enables easy world-wide access, allowing computer interaction via the web to supply sufficient contacts to establish jurisdiction would eviscerate the personal jurisdiction requirement as it currently exists; the Court is not willing to take this step."

A similar case decided at about the same time was Bensusan Restaurant Corp. v. King, 937 F. Supp. 295 (S.D.N.Y. 1996), aff'd, 126 F.3d 25 (2d Cir. 1997). In this case, a Missouri club called the Blue Note was sued by the operator of the New York jazz club of the same name. The Missouri Blue Note maintained a web site which provided information about the Missouri club, but did not provide any means to buy tickets or merchandise online (one had to call the Missouri club directly to buy tickets). The operator of the New York Blue Note alleged that the Missouri club's web site infringed upon the New York club's trademark rights, and sued the Missouri Blue Note in the Federal District Court for the Southern District of New York. The judge dismissed the case, finding that the Missouri Blue Note operator "had done nothing to avail himself of the benefits of New York." The judge found it significant that the Missouri operator had not targeted any sales or promotional activities at the New York market. Instead, the judge noted that the web site requires Internet users to "take[] several affirmative steps" in order to access the information from the Web. The court therefore ruled that to assert jurisdiction in this case would violate the Due Process clause of the Constitution. The case has been affirmed on appeal. Many cases have followed the reasoning of the McDonough and Blue Note cases, including Patriot Systems, Inc. v. C-Cubed Corporation, 21 F. Supp.2d 1318 (D. Utah 1998) (passive web site which only displays information insufficient jurisdictional basis) and some of the other cases discussed in greater detail below.

Drawing upon the Zippo Court's "sliding scale" of different levels of interactivity (see Cases Finding Jurisdiction on the Basis of Internet Contacts), the Court in Blackburn v. Walker Oriental Rug Galleries, Inc., 999 F. Supp. 636 (E. D. Pa. 1998) found that the web site at issue there was simply a passive web site, like the site in the Blue Note case, and therefore declined to exercise jurisdiction. In this case, the defendant's web site simply displayed graphic and text descriptions of rugs, which the plaintiff contended infringed upon his copyrights in his own rug web site. The only thing interactive about the defendant's web site was the ability to send e-mail to the defendant; there was no ability to purchase rugs or engage in any other type of transaction. Accordingly, the Court endorsed the approach of Zippo, Hearst and other cases and declined to assert jurisdiction over what it considered to be a passive web site, finding that "[c]reating a web site may be felt nation or even world wide, but without more, it is not an act purposefully directed toward the forum."

The Ninth Circuit applied strikingly similar reasoning in Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997). This dispute was over the rights to the trademark "Cybersell" by two web-based companies of the same name, one in Arizona and one in Florida. The Court found that the Florida company "has conducted no commercial activity over the Internet in Arizona. All that it did was post an essentially passive home page on the web. . .. While there is no question that anyone, anywhere could access that home page and thereby learn about the services offered, we cannot see how from that fact alone it can be inferred that Cybersell FL deliberately directed its merchandising efforts toward Arizona residents." Since there was nothing additional to connect the Florida company to Arizona (there were no clients in Arizona, and no evidence that anyone in Arizona other than the plaintiff had ever even looked at the site), the Court determined that it lacked jurisdiction.

Another recent case which reaffirms the principle that a mere presence on the Internet which passively provides users with information or advertising is an insufficient basis for jurisdiction is Weber v. Jolly Hotels, 977 F. Supp. 327 (D.N.J. 1997). In this case, a personal injury plaintiff attempted to persuade the court to assert jurisdiction over an Italian hotel chain on the basis of the ads placed by the hotel on the World Wide Web. Citing the Hearst case, the court found that since the hotel did not conduct any business over the Internet, it had not established the minimum contacts with New Jersey which would subject it to jurisdiction.

Oddly enough, Weber is not the only case in which a seemingly low-tech hotel operator has been involved in these high-tech issues. A similar result was seen in SF Hotel Company, L.P. v. Energy Investments, Inc. 985 F. Supp. 1032 (D. Kan. 1997). The defendant had no operations in Kansas, but the Kansas-based plaintiff sued in Kansas for alleged infringement of one of its trademarks. The plaintiff sought to base jurisdiction on the defendant's passive web site which provided general information about the defendant's hotel, and was not interactive. Jurisdiction was found to be lacking.

A particularly interesting case is American Libraries Association, et. al., v. Pataki, et. al., 969 F. Supp. 160 (S.D.N.Y. 1997). Whereas all of the other cases discussed here involve issues of personal jurisdiction (i.e., whether a court has the power to adjudicate a given dispute based upon its ability to assert authority over the parties involved), the ALA case considered the question of whether a state could assert subject matter jurisdiction in the realm of the Internet, or whether the regulation of the Internet was uniquely the preserve of the federal courts and lawmakers.

In the ALA case, just six days before the Supreme Court's much-heralded decision striking down on the Communications Decency Act on First Amendment grounds in Reno v. ACLU, 117 S. Ct. 2329 (1997) (see our page on Obscenity and Pornography on the Net), a New York federal court enjoined the enforcement of a New York penal statute (New York Penal Law § 235.21(3)) which had been modeled on the federal CDA. With the Supreme Court's ruling on the CDA pending, the Court declined to consider the First Amendment issues, enjoining the statute as unconstitutional under the "dormant" Commerce Clause (which gives the federal government the exclusive right to regulate interstate commerce). The court found that:

1. The law represented an unconstitutional projection of New York law into conduct that occurs wholly outside New York (since, for example, an Internet message from a person in New Jersey to a person in California might pass through a computer in New York without the originator's intent or knowledge, due to the Internet's "packet switching" architecture).
2. The law's burden on interstate commerce exceeded any benefit it held for New York.
3. The Internet "is one of those areas of commerce that must be marked off as a national preserve to protect users from inconsistent legislation."

The court concluded that "the Commerce Clause ordains that only Congress can legislate in this area."

However, just five days after the ALA ruling, a New York State court considered a related issue in the Lipsitz case. The New York Attorney General sought to enforce consumer fraud laws against a New York-based company that sold magazine subscriptions over the Internet. Since the defendant was based in New York, and since the laws in question were directed only at preventing consumer fraud in New York and were "not an attempt to regulate speech on the Internet or create an Internet regulatory scheme," (as in the ALA case), the court held that the statutes could be enforced without running afoul of the Commerce Clause. For more on this case, see Cases Finding Jurisdiction on the Basis of Internet Contacts.

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Cases Finding Jurisdiction on the Basis of Internet Contacts

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