Issue # 4: The Potential for Universal Jurisdiction
One of the primary advantages of Internet marketing and sales is the ability to reach potential customers anywhere in the world. Unfortunately for e-commerce businesses, this reach often works in both directions, so that a customer in a distant jurisdiction may be able to sue the retailer far from its base of operations. The defense of such a suit generally begins with the e-commerce business’s challenge to personal jurisdiction.
Generally, a court’s resolution of such a challenge involves a two-step inquiry: (1) a determination of whether the particular facts and circumstances of the case fall within the reach of the forum state’s long-arm statute and (2) a determination of whether the exercise of personal jurisdiction over the e-commerce business would be consistent with the Due Process Clause of the United States Constitution. In many jurisdictions, the analysis of these two issues flows together, such that the Due Process consideration becomes determinative.
The Due Process Clause prohibits a court from exercising personal jurisdiction over a defendant unless the defendant has "certain minimum contacts" with the forum state "such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Int’l Show Co. v. Washington, 326 U.S. 310, 316 (1945). In addressing the exercise of personal jurisdiction over a defendant whose contact with the forum state occurs primarily over the Internet, many jurisdictions have adopted the "sliding scale" approached formulated in Zippo Manufacturing Company v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997).
In Zippo, the district court concluded that jurisdiction certainly should be exercised when one proactively enters a jurisdiction via the Internet but that jurisdiction should be exercised when one merely posts information on the Internet which may or may not be viewed by residents of a particular jurisdiction. As to the great mass of cases resting in the "middle ground," the court held that "the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site." Thus some sort of practice, purposeful availment must occur on the part of the e-commerce business in order to be subject to personal jurisdiction in a distant jurisdiction. However, some states are "single act" states, in which even a single transaction completed over the Internet may subject the e-commerce business to personal jurisdiction in that state.
Note: Some of this material appears in Jonathan D. Frieden & Sean P. Roche, Legal Issues of the Online Retailer in Virginia, 13 Rich. J. L. & Tech. (forthcoming Summer 2006).
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"Common Issues Faced by E-Commerce Businesses" is a seven-part series appearing each Tuesday afternoon on E-Commerce Law. Readers are reminded that all of the information on this site is provided for informational purposes only and is not intended to be a substitute for legal counsel. No one should act or refrain from acting on the basis of any content included on this site but should instead seek the appropriate legal advice on the particular facts and circumstances at issue from a properly licensed attorney.
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