Readywebsiteliability_honegger.indd

5. Website Liability
Dr. Peter Honegger, Attorney at Law, Niederer Kraft & Frey, Zurich Personal Jurisdiction Revised
“Dot Com repeatedly and consciously chose to process Pennsylvania residents’ applications and to assign them Joseph Story1), one of the most respected legal schol- passwords. Dot Com knew that the result of these con-tracts …”9) ars and Justices of the United States Supreme Court of the 19th century, summarized the law of person- “We conclude that this court may appropriately exercise al jurisdiction in very categorical terms as follows: personal jurisdiction over the Defendant…”10) “Jurisdiction, to be rightfully exercised, must be founded Similarly, in Industrial Quick Search11) the District Court for South- either upon the person being within the territory, or the ern District of New York, held that Industrial Quick Search, having thing being within the territory, for, otherwise, there can be decided to create an interactive website that enables it to transact business in New York, was subject to personal jurisdiction under No sovereignty can extend its process beyond its own CPLR § 302(a)(1) because the cause of action for infringement territorial limits, to subject either persons or property to its arouse directly out of the use of an allegedly infringing website.
Quite differently, the same court declined to exercise personal Legal developments since Story’s day completely rede- jurisdiction over Siemens Austria, a subsidiary of Siemens Ger- fi ned this simple (but clear) concept of personal jurisdic- many, in “Ski Train Fire in Kaprun”12). In this case a wrongful death tion. In International Shoe3) the U.S. Supreme Court ruled action was brought by relatives of passengers killed on one of that due process requirements are satisfi ed when in per- Siemens’ ski trains in Kaprun, Austria. Siemens Austria main- sonam jurisdiction is asserted over a nonresident defen- tained a website that allowed customers in New York to place dant that has certain “minimum contacts“ with the forum.
orders for rail vehicles and other products. The court held that there was no showing that the accident in Kaprun had a substan- Since International Shoe, “minimum contacts“ has sup- tial nexus with Siemens’ Austria’s transactions over the Internet.
planted strict territoriality. This notwithstanding, some U.S. courts became particularly hostile to claims based solely on “There is no contention in this case that the accident in website access in the U.S. In BellSouth4) the court ruled that Kaprun, Austria “arises from” or shares a “substantial “access to a website refl ects nothing more than a telephone nexus with” Siemens Austria’s … transactions over the call by a District resident to the defendants’ computer servers” which, by itself, is no suffi cient basis for personal jurisdiction.
“… Siemens Austria’s motion to dismiss the case against it for lack of personal jurisdiction must be granted.”14) The core question of this paper is the following: “Can personal jurisdiction be exercised by U.S. courts based on a foreign defendant’s website activity?” Passive Websites
Other courts found that the maintenance of a website does not Transacting Business
subject foreign corporations to personal jurisdiction. In Cyber-sell15) the Ninth Circuit, relying on Zippo, held that the likelihood The law of personal jurisdiction over websites and their that personal jurisdiction can be constitutionally exercised is administrators is still unsettled. In Zippo5) the court noticed directly proportionate to the nature and quality of commercial that the Internet makes it possible to conduct business activity that an entity conducts over the Internet. The court found throughout the word entirely from a desktop and that, with that it had no personal jurisdiction over Cybersell that had con- this global revolution looming on the horizon, the develop- ducted no commercial activity over the Internet in Arizona. All ment of the law concerning the permissible scope of “per- that it did was post an essentially “passive home page” on the sonal jurisdiction based on Internet use is in its infant stages”.
web. The court added that Cybersell did nothing to encourage In Burger King6) the U.S. Supreme Court observed that jurisdic- people in Arizona to access its site, it entered into no contracts tion could not be avoided “merely because the defendant did not in Arizona, made no sales in Arizona, received no telephone physically enter the forum state.” The court particularly noticed calls from Arizona, earned no income from Arizona, sent no that transacting business by wire communications is a basis messages over the Internet to Arizona, and that no money for fi nding personal jurisdiction over nonresident defendants: changed hands on the Internet from or through Arizona.16) “It is an inescapable fact of modern commercial life that a Employing a similar analysis, the Fifth Circuit in AAAA17) held that substantial amount of commercial business is transacted defendant AAAA maintained a website that was found “passive”, solely by mail and wire communications across state lines, as it did not allow consumers to order or purchase products, and thus obviating the need for physical presence within a that it had no personal jurisdiction over defendant for this reason: State in which business is conducted.”7) “Essentially, AAAA maintains a website that posts informa- The most decisive approach U.S. courts have taken on personal tion about its products and services. While the website jurisdiction based on Internet use is Zippo8), a trademark infringe- provides users with a printable mail-in order form, AAAA’s ment case. Zippo Dot Com ran a news website requiring users toll-free telephone number, a mailing address and an to fi ll out an online application, submit payment information and electronic mail (“e-mail”) address, orders are not taken submit a password. Zippo Manufacturing Co. sued Zippo Dot through AAAA’s website. This does not classify the website Com for trademark infringement in Pennsylvania. The court as anything more than passive advertisement which is not analyzed the contacts of Zippo Dot Com with the forum and grounds for the exercise of personal jurisdiction.”18) held that it was subject to personal jurisdiction in Pennsylvania: “AAAA’s website does not allow consumers to order or pur- erators. In Healthgrades.com31), defendant operated a website chase products and services on-line.”19) that rated home health care providers. Northwest Health Care “In this case, the presence of an electronic mail access, Alliance was unhappy with is negative rating on Healthgrades.
a printable order form, and a toll-free phone number on a com’s website and brought action against Healthgrades.com. website, without more, is insuffi cient to establish personal The court held that Healthgrades.com had purposefully inter- jected itself into the Washington state home health care market In another case, Sage Group21), the Fifth Circuit found that ad- through its intentional act of offering ratings of Washington vertisements placed in publications which circulate in the U.S. medical service providers. The court particularly noted that: were generally insuffi cient to establish personal jurisdiction and “… the brunt of the harm allegedly suffered by plaintiff that Sage Group’s operation of a website containing company occurred in Washington – where plaintiff is incorporated and product information and links to its U.S. subsidiaries also did not provide suffi cient grounds for the exercise of personal The effects, therefore, of defendant’s out-of-state con- jurisdiction. Likewise, the Fourth Circuit in Motivation22) held duct were felt in Washington.”32) that the fact that Motivation operated a website did not prove purposeful availment of the forum and there was also no evi- A similar effects test was recently applied by the Fifth Circuit dence in the record that any North Carolina entity purchased in Fielding Borer33), a case that is of interest even though it products from the website or purchased products because of does not involve a website. Here Thomas Borer, a former the website. The website of Motivation was found purely pas- Swiss ambassador to Germany and Shawne Fielding, his wife, sive and personal jurisdiction over Motivation was denied.23) brought a suit for libel and other charges against Hubert Burda Media, Bertelsmann and Gruner & Jahr in Texas. The court Similarly, the Tenth Circuit in SCB24) declined to exercise ju- found that Fielding and Borer had shown neither signifi cant risdiction over Standard Chartered Bank (SCB), an English circulation nor certain harm in the forum state and added: Bank. Plaintiff Soma Medical International that held an ac- “The brunt of the harm of alleged libel was not suffered count with SCB brought action against the bank for fraudu- in Texas and the Publishers did not meaningfully direct lent transfer of funds. The court rejected to grant personal their activities toward Texas. The district court correctly jurisdiction over SCB holding that plaintiff had failed to carry concluded that it lacked specifi c jurisdiction.”34) its relatively light burden of making prima facie showing that SCB’s website was anything more than a passive website.25) Electronic Brochure
“Finally, we cannot conclude that SCB’s maintenance of a passive website, merely providing information to interested viewers, constitutes the kind of purposeful availment of the Passive websites that serve as an “electronic brochure”, benefi ts of doing business in Utah, such that SCB could ex- creating visibility of a foreign company’s brand, may subject pect to be hauled into court in that state. We therefore affi rm the company to personal jurisdiction in the U.S. In particular, the district court’s dismissal of all claims against SCB for lack accomplishments and developments posted on a foreign company’s website can be used against it when assessing personal jurisdiction over it. In Dassault Aviation35) a fl ight at- Something more
tendant, Ms Anderson, brought a product liability claim against Dassault Aviation, a French corporation. The Eighth Circuit considered the fact that Dassault Aviation and its U.S. subsid- The Ninth Circuit in Rio27) made a distinction pursuant to which iary in Little Rock, Arkansas, shared a website indicating their even passive websites in conjunction with “something more” may pride in the Arkansas facility and its importance to their suc- subject foreign defendant’s to personal jurisdiction. In that case, cess by noting on their website that the Little Rock completion a Costa Rican corporation maintained Internet gambling websites center was one of the best-equipped and most effi cient facili- and had also run advertisements for its gambling website in Las ties anywhere. The court further noted that the website that Vegas. The court held that Rio’s actions in Nevada, including its was operated and administered jointly by Dassault Aviation radio and print advertisements, demonstrated an insistent mar- and its subsidiary Dassault Falcon Jet (www.dassaultfalcon.
keting campaign directed toward Nevada and that the purposeful com) included a “time line” that represented the following: availment requirement for the exercise of personal jurisdiction was satisfi ed.28) The “something more” test reads as follows: “Major expansion brings Dassault Falcon Jet Little Rock to almost half a million square feet – and boosts the “… operating even a passive website in conjunction with center’s production capacity to over 60 new aircraft com- “something more” – conduct directly targeting the forum – is pletions per year. Little Rock is now the main completion suffi cient to confer personal jurisdiction.”29) center for all Falcon jets worldwide.”36) In this context another decision, Sinatra30), is of interest even The court further held that the time line also reported that though not involving a website. In this case, the court exercised the Little Rock facility employed more workers than any personal jurisdiction over a Swiss Clinic that misappropriated single Dassault Aviation plant in France. It concluded that: Frank Sinatra’s name through a series of advertisements aimed at California residents and thereby caused injury in California. The “This is not a situation in which Dassault Aviation simply placed the jet at issue “into the stream of commerce” Ninth Circuit confi rmed that the Clinic had directed its activities which fortuitously swept it into Arkansas.”37) at California by using Sinatra’s name in an effort to promote its business. The relevant activities included (1) the misappropriation “We conclude that Dassault Aviation has suffi cient of the value of Sinatra’s name through interviews conducted in contacts with Arkansas to support an Arkansas court’s Switzerland between Clinic employees and media reporters; (2) assertion of personal jurisdiction over it.”38) the Clinic’s California advertising efforts to attract patients; and Unfortunately for foreign defendants, efforts to market (3) the Clinic’s knowledge of Sinatra’s residence in California.
to the American consumer over the Internet may open them up to liability should a claim be fi led in the U.S.
Effects Test
The Ninth Circuit that has endorsed the Zippo approach also em-ploys an “effects test” for tort actions against foreign website op- Courts addressing the issue of whether personal jurisdic- tion can be constitutionally exercised over a defendant look to the “nature and quality of commercial activity that an entity conducts over the Internet.”39) The Zippo decision 15) Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 417-20 (9th Cir. categorized Internet use into a spectrum of three areas: At the one end of the spectrum, there are situations where a defendant clearly does business over the Internet by entering into contracts with residents of other states which “involve the 17) Mink v. AAAA Dev. LLC, 190 F.3d 333 (5th Cir. 1999) knowing and repeated transmission of computer fi les over the Internet.” 40). In this situation, personal jurisdiction is proper.41) At the other end of the spectrum, there are situations where a defendant merely establishes a passive website that does nothing more than advertise on the Internet. With pas-sive websites, personal jurisdiction is not appropriate.42) 21) Quick Techs., Inc. v. Sage Group PLC, 313 F.3d 338, 345 (5th In the middle of the spectrum, there are situations where a defen-dant has a website that allows a user to exchange information with 22) Yates v. Motivation Indus. Equip. Ltd., 38 Fed. Appx. 174, 178- a host computer. In this middle ground, “the exercise of jurisdiction is determined by the level of interactivity and commercial nature of the exchange of information that occurs on the Website.”43) Courts found that the reasoning of Zippo is persua- 24) Soma Medical International v. Standard Chartered Bank, 196 sive and adopted it in other Circuits.
1) Joseph Story (1779-1845): Professor at Harvard Law School (1829- 45), Associate Justice of the U.S. Supreme Court (1811-1845), 27) Rio Properties, Inc. v. Rio Intern. Interlink, 284 F.3d 1007 (9th author of twelve volumes of Commentaries codifying United States law. Joseph Story presided over the famous Amistad case, the “genesis of justice”, in 1841. He is considered today “the foremost 2) Joseph Story, Commentaries on the Confl ict of Laws 539 (Arno Press 30) Sinatra v. National Enquirer, Inc. and Clinique La Prairie S.A., Inc. 1972) (1834); Personal Jurisdiction Over Foreign Defendants in the United States and England, in: John Fellas, Transatlantic Commercial Litigation and Arbitration, Oceana Publications, Inc., 31) N.W. Healthcare Alliance Inc. v. Healthgrades.com, Inc., 50 3) International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) 4) GTE New Media Servs. Inc. v. BellSouth Corp., 199 F.3d 1343, 33) Shawne Fielding, Thomas Borer v. Hubert Burda Media Inc., et al. (5th Cir. 2005) http://www.ca5.uscourts.gov/opinions/pub/04/04-10297-CV0.wpd.pdf 5) Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119, 6) Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476, 105 S.Ct. 2174 35) Anderson v. Dassault Aviation, 361 F.3d 449 (8th Cir. 2004), 8) Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119 39) Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F.Supp. 11) Thomas Publishing v. Industrial Quick Search, Inc., 237 F.Supp.2d 41) Id., citing CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 12) In re Ski Train Fire in Kaprun, Austria on Nov. 11, 2000, 230 F.Supp. 42) See Id., citing Bensusan Restaurant Corp., v. King, 937 F.Supp. 13) Plaintiffs argued that Siemens Austria had various contacts with 295 (S.D.N.Y. 1996), aff’d, 126 F.3d 25 (2d Cir. 1997) the U.S., inter alia, based on English training that Siemens Austria provided for its employees. In this respect, the court used very clear 43) Id., citing Maritz, Inc. v. Cybergold, Inc., 947 F.Supp. 1328 “Plaintiffs’ attempt to make a prima facie showing of general jurisdic-tion by New York courts based on English language courses for its employees, one United States patent, and a smattering of contacts in Massachusetts and Puerto Rico – verges on the frivolous.” Id. at

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