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Judges feeling their way on web-based jurisdiction

Focus seen shifting from ‘interactivity’ to ‘targeting’

Lawyers investigating whether an out-of-state defendant’s operation of a website provides a basis for suing the party in local federal court will find few bright-line rules coming from decisions issued in the 1st Circuit.

A survey of recent opinions by both 1st U.S. Circuit Court of Appeals and U.S. District Court judges in the circuit demonstrates that the question of specific personal jurisdiction based on internet activity is highly fact-intensive.

Boston attorney Robert R. Pierce recently succeeded in obtaining the dismissal of a copyright infringement action filed against a Kentucky building supply company in Massachusetts federal court. In Photographic Illustrators Corporation v. A.W. Graham Lumber, LLC, U.S. District Court Chief Judge Patti B. Saris rejected the plaintiff’s argument that the court could exercise jurisdiction based on the defendant’s operation of a website that had resulted in the sale of a single $21.99 shovel to a Massachusetts resident.

Pierce senses a trend developing in terms of how judges are deciding whether due process permits the exercise of personal jurisdiction.

While some judges used to give a lot of weight to the interactivity of the defendant’s website, more and more the emphasis is on whether there is evidence that the defendant actually targets the forum state, Pierce said.

“It’s not about whether you can buy [the defendant’s products] in any particular state; it’s whether that state is being targeted,” he said.

Courts are having a difficult time coming up with a practical framework for dealing with the issue of web-based jurisdiction, said professor Tanya J. Monestier of Roger Williams University School of Law in Rhode Island.

“Jurisdiction is very territorially based and the internet is not,” Monestier said. “Courts are struggling to use these very traditional frameworks in the internet age.”

Meanwhile, Boston business litigator Sarah P. Kelly said the 1st Circuit’s law on the issue is not as clear as it is in other circuits.

“What is clear is that a website that just transmits information to all 50 states is not going to be enough for personal jurisdiction,” she said.

$21.99 shovel

In Graham Lumber, Pierce defended a family-owned lumber business in Flemingsburg, Kentucky.

The plaintiff, Photographic Illustrators, is a Massachusetts corporation that provides various photographic services, including the photography of consumer products for catalogs and other advertising.

In October 2015, the plaintiff sued Graham Lumber for copyright infringement in U.S. District Court in Boston. The suit alleged the defendant used a number of the plaintiff’s images of lighting fixtures on its website without authorization.

When the defendant moved to dismiss, the plaintiff argued the court could exercise specific personal jurisdiction based on the defendant’s operation of a website.

Saris analyzed the jurisdiction issue under the 1st Circuit’s three-part test for determining whether a defendant has sufficient minimum contacts with the forum state to satisfy due process. The test requires an examination of “relatedness,” “purposeful availment” and “reasonableness.”

The evidence in Graham Lumber showed that only a small fraction of the defendant’s sales are through its website and more than half of all internet sales are to in-state customers. Pierce pointed out that more than 99 percent of Graham Lumber’s overall sales are in Kentucky.

“What do they do to target Massachusetts? The answer is nothing other than simply having a website,” Pierce said.

In fact, the defendant’s records revealed only one sale to a Massachusetts customer: a single shovel for $21.99, plus $16.99 in shipping fees.

Saris found that sale irrelevant for purposes of the jurisdictional analysis because it occurred two weeks after the plaintiff filed its lawsuit.

It is possible that the balance would have been tilted toward a finding of personal jurisdiction had the plaintiff been able to show a sale to a Massachusetts resident prior to its lawsuit, Kelly said. But she added that it still would have been difficult for the plaintiff to show how the sale of a shovel “related to” its cause of action.

“Here, the lawsuit isn’t about purchases of shovels, [but] about the actual pictures on the website,” Kelly said, adding that the calculus would certainly change if it were shown the defendant had sold 10,000 shovels in Massachusetts through its website.

“You cross a line, and the line is that your website allowed you access to, and the privilege of, conducting business in Massachusetts,” she said. “If you’re going to benefit from our laws in making sales in the commonwealth, then you’re going to be subject to suit here.”

“Jurisdiction is very territorially based and the internet is not. Courts are struggling to use these very traditional frameworks in the internet age.”

— Professor Tanya J. Monestier, RWU School of Law

No sliding scale

On the issue of purposeful availment, the plaintiff in Graham Lumber relied on the seminal case of Zippo Manufacturing Company v. Zippo Dot Com, Inc. In the 1997 decision, a federal judge in Pennsylvania formulated a sliding-scale for determining whether certain internet activity serves as a basis for personal jurisdiction.

Under Zippo, a court is less likely to find jurisdiction in a case involving a passive website where the defendant has simply posted information that is accessible to users in other states. On the other hand, jurisdiction is more likely to be found where the defendant operates a highly interactive commercial site clearly aimed at doing business over the internet.

In Graham Lumber, the plaintiff argued that, under Zippo’s sliding-scale test, jurisdiction arose because the defendant offered goods for sale to out-of-state users of its website.

But Pierce said the Zippo standard, with its emphasis on the interactivity of a defendant’s website, has been drawn into question in the last 10 years.

The 1st Circuit never expressly accepted the Zippo test. But it did set a guidepost in a 2005 case, McBee v. Delica Co., Ltd., concluding that the mere existence of a website that gives information about a company and its products is not enough to subject an out-of-state defendant to personal jurisdiction.

In Graham Lumber, Saris wrote that she shared the concern expressed by U.S. District Court Judge F. Dennis Saylor IV in a 2014 case, Media3 Technologies, LLC v. CableSouth Media III, LLC, that “without some limiting principle with regard to purposeful availment, the simple fact that virtually every business now has a website would eviscerate the limits on personal jurisdiction.”

Ultimately, Saris said, she did not need to resolve the purposeful availment question because she found the exercise of specific personal jurisdiction in Graham Lumber would not be reasonable under the 1st Circuit’s so-called “gestalt” factors, which include consideration of the burden on the defendant of appearing in the forum state.

“I find that there is a substantive social policy against exercising personal jurisdiction in this case because it would hale the defendant into court in a distant forum merely because its website is accessible in every state,” Saris concluded. “It would have the adverse effect of discouraging small mom-and-pop retailers, such as the defendant, from creating websites for their local customers for fear of opening themselves up to copyright litigation across the nation.”

Targeting trend?

Graham Lumber was one of at least three cases decided this year in the 1st Circuit addressing the issue of web-based jurisdiction.

In April, Saris applied a “targeting” test in a personal injury case in which the parties disputed web-based jurisdiction.

Mukarker v. City of Philadelphia, et al. (Lawyers Weekly No. 02-158-16) involved a Massachusetts resident injured in a fall at Philadelphia International Airport.

In granting the defendants’ motion to dismiss the premises liability action for lack of personal jurisdiction, Saris rejected the plaintiff’s argument that the municipal airport purposefully availed itself of the privileges of conducting activities in Massachusetts by operating a passive website that merely provided traveler information.

“Plaintiff provides no evidence that the Airport deliberately targeted Massachusetts through its website or otherwise,” Saris wrote.

Underscoring how jurisdictional factors can weigh differently depending on the case is a January decision issued by the 1st Circuit. In A Corp. v. All American Plumbing, Inc. (Lawyers Weekly No. 01-019-16), the 1st Circuit affirmed a dismissal granted by U.S. District Court Judge Rya W. Zobel.

The case involved a trademark dispute between Massachusetts and Arizona plumbing companies. The plaintiff argued that the U.S. District Court in Massachusetts had specific personal jurisdiction by virtue of the Arizona defendant’s operation of an interactive website that used a trademark the plaintiff claimed was confusingly similar to its own.

The 1st Circuit concluded that the plaintiff failed to satisfy both the relatedness and purposeful availment prongs of the due process inquiry for specific jurisdiction. Any lost business suffered by the plaintiff’s Arizona franchisee as a result of the alleged confusion in marks was too tangential to support jurisdiction in Massachusetts, the court found.

With respect to purposeful availment, the 1st Circuit noted that the defendant’s website offered no “genuine” interactive features, such as a mechanism that would allow Massachusetts residents to order goods or services.

A 2013 legal malpractice case from Rhode Island shows that personal jurisdiction may be triggered when a defendant’s website expressly solicits business across the country.

In Dennett v. Archuleta, et al. (Lawyers Weekly No. 52-003-13), a Rhode Island client hired Texas attorneys to pursue medical-malpractice claims. The client later sued the attorneys in Rhode Island federal court for legal malpractice.

The defendant attorneys moved to dismiss, but in determining personal jurisdiction, U.S. District Court Judge William E. Smith found it significant that the lawyers created a website offering to “represent [clients] regardless of where [they] live” and to handle claims in all 50 states.

“Defendants made themselves out to be a nationwide law firm representing clients throughout the country,” Smith wrote. “With the benefits of a nationwide law practice come certain risks.”

Monestier said targeting with a website can take many forms. In addition to making express offerings of products or services to customers in particular states or all 50 states, as the law firm in Dennett did, websites may offer “click here” functions for users according to their state, Monestier said.

She added that lawyers would want to look to whether a defendant purchased Google ad words or hired a search engine optimization service to help drive out-of-state traffic to their websites.

“That would probably suffice for purposeful availment,” she said.

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