Introduction
Short History
Post-Burger King Cases
Jurisdiction determines the location of the court where someone can be sued. In the United States, the law of jurisdiction evolved from three jurisdictional concepts: in personam, in rem and prescriptive jurisdiction. Personal jurisdiction is the exercise of judicial authority over an individual or legal entity. In rem jurisdiction is the exercise of judicial authority over property, real or personal (tangible or intangible) located in the State asserting jurisdiction. Prescriptive jurisdiction is the exercise of State authority to regulate local conduct, transactions and activities. The law of jurisdiction thus justifies the use of judicial power against persons, things and transactions, and sets the limits of that power.
The United States has not (nor could it due to the Fourteenth Amendment of the United States Constitution) codified the law of jurisdiction. Consequently, the courts, mainly the United States Supreme Court, have evolved concepts to measure the legitimate exercise of judicial power over parties to particular litigation. The central standard of measurement is "minimum contacts" defined as whether a foreign defendant has had "sufficient contacts" with the forum state to justify the court's exercise of power. Justification to exercise jurisdiction derives from the subsidiary questions of whether the exercise of jurisdiction over the foreign defendant is reasonable and does not offend due process.
The Internet and electronic transactions have generated increased interest in the subject of jurisdiction from legal academics and legislators. That interest is premised mainly on the false assumption that the Internet, and the parties that use it, do not have physical locations. They exist somewhere in "cyberspace," an ether cloud without a physical address. Hence, the question has arisen: without knowing the physical location of the parties or the transactions, or based solely upon digital contacts, how is jurisdiction to be determined under existing legal principles?
A select and short history of the development of the American law of jurisdiction follows to identify the constellation of concepts surrounding this important legal question. The discussion contains links to briefs of the main cases to enable the reader to evaluate the interpretation given here. The overriding principle is that the area of law is mainly unprincipled because the terms that govern jurisdiction such as "contacts," "reasonableness" and "fairness" are terms not capable of objective measurement. These terms reduce the law to what the judge says it will be in any given case based on metaphysical (not subject to verification) principles or subjective preferences.
In 1887, Pennoyer v. Neff, 95 U.S. 714 (1877) established the fundamental principle that individual state jurisdiction arises from, and is limited to, its territorial boundaries. Under this view, states have exclusive jurisdiction over the persons and property within their borders. Conversely, states lack jurisdiction over persons or property outside their borders. It follows that the laws and process of one state do not run into the laws and process of another state because that other state is a sovereign power.
In Pennoyer's time, a court obtained personal jurisdiction over a person only by serving process upon the person while he was physically present in the state. A court obtained in rem jurisdiction over nonresident owned property located within the state by attaching the property prior to entry of judgment and by finding that the plaintiff had satisfied the requirements of the forum state's service of process statute, usually a requirement to publish notice of the litigation. The nonresident's liability was limited to the value of the attached property. Consequently, a state lacked any authority over persons and things located physically outside the state's territory. In addition, the enactment of the Fourteenth Amendment gave nonresident defendants an alternative ground to dispute the jurisdiction of foreign states by claiming that the assertion of jurisdiction violated the person's individualized due process rights.
The Pennoyer theory of personal jurisdiction limited state court authority to the physical boundaries of the state. Under this view, the United States was an alliance of sovereign, albeit federated, states. Each state was independent from the federal government and from other state governments, except for those powers the states explicitly ceded to the federal government under the United States Constitution. The Pennoyer model of jurisdiction contained clear rules and worked well during an economic period where litigation often did not cross state lines.
However, in the late 18th and early 19th centuries, the federalist model of jurisdiction upon which Pennoyer was built no longer reflected political and commercial reality. The interstate movement of goods and persons placed pressure on states to provide a way for their citizens to sue nonresidents in local courts. Pennoyer had the effect of prohibiting states from exercising personal jurisdiction over persons physically located outside their territorial boundaries.
In response, states enacted long arm statutes permitting local courts to exercise personal jurisdiction over nonresidents provided the exercise of jurisdiction did not violate the Fourteenth Amendment of the United States Constitution. This development departed significantly from Pennoyer that had limited remote service of process to in rem proceedings where the nonresident defendant owned property within the state asserting jurisdiction.
Now, the test of jurisdiction was not physical presence of the person or physical presence of the property within the state but rather the amorphous test of whether the exercise of jurisdiction outside the boundaries of the state offended due process rights protected by the Fourteenth Amendment. Since due process means notice and an opportunity to be heard, the jurisdictional test was reduced to the niceties of factual assertions. Simply put, state courts wanted expansive powers to exercise jurisdiction over anyone doing business in the state and wanted to give its citizens injured by nonresidents the option to sue locally and force the nonresident to litigate in a foreign forum. Neither Pennoyer nor a restricted notion of federalism was going to hinder that objective.
Consequently, in 1927, Hess v. Pawloski, 274 US 352 (1927), the United States Supreme Court upheld a Massachusetts statute deeming that nonresidents using the roads of Massachusetts consented to be sued in that State. The Massachusetts statute also provided that the use of the road resulted in the appointment of a State official as the motorist's agent to accept process on the nonresident's motorist's behalf in case of subsequent motor vehicle litigation started by a Massachusetts resident against the out-of-state motorist.
This consent was not real, but constructive, since the driver did not have actual notice of the legal effects of using the Massachusetts roads. No driver in Hess's time would have realized the legal consequences of using a Massachusetts's highway, that is, consenting to be sued in that state and appointing an agent to receive process of service. The Hess decision accommodated the reality of the growing interstate movement of persons and goods and the social costs of motor vehicle accidents.
In 1945, in Washington v. International Shoe Co.,326 US 310 (1945), the Supreme Court undercut the first pillar of Pennoyer, that the proper exercise of jurisdiction was limited to cases where the person was served with process while physically present in the forum state. In International Shoe, the Court held that a state may sue a nonresident foreign corporation provided the corporation has "minimum contacts" with the forum state and provided that the exercise of jurisdiction does not violate notions of justice and fair play. International Shoe, at least for legal persons, replaced the requirement of "physical presence" with the requirement of "regular and systematic activities" within the forum state. Corporations are legal fictions; hence, they lack physical presence within Pennoyer's meaning of the term. A state court does not violate due process by exercising jurisdiction over a nonresident corporation that has significant business within the state though incorporated and headquartered elsewhere.
Subsequently, in 1977, in Shaffer v. Heitner, 433 US 186 (1977), the Supreme Court undercut the second pillar of Pennoyer, that a state court had in rem jurisdiction over nonresident owned property located within the forum state so long as the court attached the property prior to entering its judgment in the case. Collapsing the distinction between personal and in rem jurisdiction, since the sole objective in both instances is to get jurisdiction over the person, Justice Marshall attempted to unify the law of jurisdiction by using the "minimum contacts" standards in all cases where nonresidents contested the exercise of jurisdiction. Hence, location of property alone in the forum state did not satisfy the "minimum contacts" test. Rather, the nonresident property had to bear a relationship to the lawsuit; the property alone could not provide a basis for jurisdiction except in cases affecting the property itself such as title disputes.
However, in 1980, the Supreme Court in World-Wide Volkswagen Corp. v. Woodson, 444 US 286 (1980), limited the application of the "minimum contacts" test. In that case, a New York Volkswagen dealer sold a car to New York residents. The New York couple relocated to Oklahoma where they were involved in an automobile accident that seriously injured the wife and child. The purchasers filed suit in Oklahoma under its long arm statute claiming defective automobile design. The Supreme Court held that the defendant corporations did not have minimum contacts with the State of Oklahoma because they limited their advertising, sales and business to the New York tri-state area. The sole fact that the product sold - an automobile - was readily movable in commerce did not subject the defendants to the jurisdiction of courts outside the area of where they conducted business. World-Wide Volkswagen Corp. draws an important line to limit the breadth of the "minimum contacts" test and stop its general, and unprincipled, language from covering any nonresident defendant.
In 1982, in Insurance Corp. of Ireland, Ltd., v. Compagnie des Bauxites de Guinee, 456 US 694 (1982), the latter company brought an action in 1975 in a United States District Court in Pennsylvania against domestic and foreign insurers, to recover payments due under insurance policies. The foreign insurance companies, the excess insurers, raised a variety of defenses, one of them being lack of personal jurisdiction. For lack of personal jurisdiction, they argued: "If a court does not have jurisdiction over a party, then it may not create that jurisdiction by judicial fiat. Until a court has jurisdiction over a party, that party need not comply with orders of the court. Failure to comply, therefore, cannot provide the ground for a sanction."
The Supreme Court rejected that argument based mainly upon the recalcitrant and persistent offensive behavior of the excess insurers. To establish jurisdiction, Compagnie des Bauxites requested discovery from the excess insurers in 1976. The excess insurers objected on grounds of burdensomeness. Subsequently, over a period of several years, the excess insurers raised technical objections to later discovery requests or flatly failed to comply with court-ordered discovery. The District Court in 1979, four years after the start of litigation, imposed jurisdiction as a sanction under Rule of Civil Procedure 37(b), subsection 2(A) for failure to make or cooperate in discovery. The District Court also found independent grounds for jurisdiction under "minimum contacts" and under the terms of the insurance contract.
The Supreme Court upheld the sanction. The Court first noted that a defendant may ignore a complaint, risk the entry of a default judgment and then challenge that judgment on jurisdictional grounds. Second, the Court stated that a defendant may submit to the jurisdiction of a court for the limited purpose of challenging personal jurisdiction. In that event, the defendant must abide the rules of court and the court's decision on the jurisdictional issue. The Supreme Court, under the facts of this case, held that the sanction imposed under Rule 37(b) was just and did not constitute an abuse of discretion. Implicit in the decision is the finding that the excess insurers either waived the defense of lack of personal jurisdiction or were estopped from asserting that defense because of their defiant and inconsistent behavior in lower court.
Unlike subject matter jurisdiction, based upon Article III of the United States Constitution, personal jurisdiction is an individual right based upon the Fourteenth Amendment. The right-holder, therefore, may waive that individual right and submit to the jurisdiction of a forum court, or a forum court may estop the right-holder from asserting the defense of lack of personal jurisdiction.
In 1984, the Supreme Court in Helicopteros Nacionales de Columbia, S.A. v. Hall, 466 US 408 (1984), contracted the concept of "minimum contacts" and held that the State of Texas did not have jurisdiction over a Colombian corporation because the contacts between the foreign corporation and the forum state were inadequate. Helicopteros de Columbia (Helicol) was a Colombian corporation headquartered in Bogota. The company provided transportation for oil and construction companies doing business in South America. A Helicol helicopter carrying four United States citizens crashed in Peru killing all passengers. The survivors of the decedents brought wrongful death actions in the State of Texas.
The decedents were employed by a Peruvian entity (Consorico) and were working on a pipeline in Peru. Consorico was formed by Williams-Sedco-Horn, a Texas based company, for the sole purpose of obtaining a contract with a Peruvian state-owned oil company. The law of Peru forbid construction of pipelines by foreign corporations. In 1974, the joint venture Consorico/WSH entered into a contract with Helicol to provide helicopters to move personnel and equipment into and out of the construction area. The chief executive officer of Helicol visited Houston to negotiate the contract. In addition, during the period 1970-77, Helicol purchased 80% of its helicopter fleet, spare parts and accessories from a Texas company. The Texas company also trained Helicol's pilots and provided technical assistance to Helicol managers and mechanics.
Despite these fairly substantial contacts, the Supreme Court found that they did not provide "minimum contacts" to support the assertion of personal jurisdiction. The Supreme Court, because the litigation did not arise out of Helicol's activities in Texas, required that, to assert jurisdiction, Helicol had to have had systematic and continuous contacts with the State of Texas, such as that equivalent to physical presence in the State. Since Helicol's contacts fell short of that standard, the Supreme Court (Justice Brennan dissenting) declared that the exercise of Texas jurisdiction over Helicol violated the constitution. However, as the next case, demonstrates, it is not clear whether the Supreme Court would reach that same judgment today.
In 1984, the Supreme Court in Calder v. Jones, 465 US 783 (1984) formally adopted the "foreign effects" test to ratify a State's assertion of jurisdiction over nonresident defendants. In that case, the National Enquirer, a Florida corporation with its principal place of business in Florida, had published an allegedly defamatory article about Shirley Jones, a California resident. Ms. Jones and her husband filed a complaint based on libel and other torts against the National Enquirer, its local distributor, the newspaper's editor (Calder) and the journalist (South) in California State Court. The defendants were served by process in the mail. California's long arm statute states that jurisdiction exists if it comports with Due Process.
South wrote the story in Florida using California sources contacted by telephone. His personal contacts with California were substantial as he visited that State for business purposes and had news sources in that State. Calder edited and approved the story in Florida. His personal contacts with California were essentially nil (one visit for pleasure and another visit to appear in unrelated litigation). The National Enquirer sold about 600,000 copies of its paper in California accounting for about 10% of its total sales.
The Court found that South and Calder expressly aimed their Florida conduct at the California resident Jones knowing that the story could harm her reputation in that State. That "express aiming" together with the knowledge that the story might harm the forum resident and the substantial revenue the newspaper obtained from the forum state, established jurisdiction even though the act of writing, editing and printing the story took place in Florida. The "effects" of the Florida conduct were felt in California where they were directed.
The Court rejected the argument that First Amendment considerations must play a role in determining jurisdiction when the nonresident defendants are members of the press. The Court (Rehnquist writing) stated that the First Amendment protections applied to the substantive claim and would not be double counted on the procedural claim, especially when the standards for establishing jurisdiction were already imprecise.
In 1985, the Supreme Court in Burger King v. Rudzewicz, 471 US (1985), expanded the powers of state courts to exercise jurisdiction over nonresident defendants by distinguishing between "general" and "specific" jurisdiction. General jurisdiction, which gives courts plenary powers over the person and property of the nonresident as if that person were physically present in the forum state, requires that nonresident defendants have systematic and continuous contacts with the forum state. By contrast, specific jurisdiction, which gives courts limited powers over the nonresident defendant, requires that the nonresident defendant have had only limited but targeted contact with the forum state. This targeted contact, mainly to obtain an economic benefit, demonstrates that the nonresident defendant purposefully initiated contact with the forum and therefore should anticipate being subject to process in that state. The court coined a new term "purposeful availment" to serve as the litmus test for specific jurisdiction. Thus, in Burger King, the Supreme Court required Michigan franchisees, a small partnership, to litigate in Florida where Burger King, a large corporation with substantial financial resources, was headquartered. Florida had a long arm statute extending jurisdiction to nonresidents breaching contracts in Florida. The franchise contract executed by the Michigan partners provided that the contractual relationship was established in Florida, governed by Florida law and required the franchisees to make payments in Florida. Because the Michigan franchisees contacted Burger King to inquire about obtaining a franchise, the Court found that the nonresidents had "purposefully availed" themselves of the benefits of Florida by directing efforts toward that state for economic gain. Even though the Michigan franchisees had their restaurant in Michigan, resided there and lacked real bargaining power with Burger King, the Court held that, because the franchisees initiated contact with the Florida-based company and knew that the Miami office retained authority over the relationship, Florida's assertion of jurisdiction over them did not violate due process requirements and was reasonable.
In 1987, the Court in Asahi Metal Industry Co., Ltd. v. Superior Court of California, 480 US 102 (1987), clarified that the act of introducing a product into the stream of commerce knowing that it might end up in any jurisdiction cannot support the assertion of personal jurisdiction over the product's manufacturer. The Court corrected a line of lower court cases, the progeny of World-Wide Volkswagen Corp., resting jurisdiction on the foreseeability that a product would end up in a particular jurisdiction. The decision, though based on unusual facts, thus protected product manufacturers, domestic and foreign, from the risk of being subject to suit anywhere in the United States, simply by engaging in commerce.
In Asahi, a California resident injured in a motorcycle accident sued the tire's manufacturer, Cheng Shin, a Taiwan corporation. Cheng Shin filed a cross-complaint for indemnification against Asahi, a Japanese corporation, that sold tire valve assemblies to Cheng Shin. The latter settled the primary lawsuit with the California resident, leaving open only the indemnification claim between the Taiwan and Japan corporations. The Supreme Court of California found jurisdiction "solely on the basis of ultimately realized foreseeability that the product into which the component was embodied would be sold all over the world including California." The United States Supreme Court rejected that view: foreseeability alone is an insufficient basis for the assertion of jurisdiction.
The Court, relying upon Burger King, found that Asahi never did any act purposefully directed toward California. It neither maintained offices nor advertised in California. Additionally, "It did not create, control, or employ the distribution system that brought its valves to California." Moreover, California had little interest in resolving the indemnification claim between two foreign corporations, the claim of its citizen having been previously settled. Under these circumstances, the Court held that it would be unreasonable to require Asahi to submit to the jurisdiction of California. It would be more reasonable for the indemnification claim to be settled in Japan or Taiwan.
In 1990, contrary to the language of Shaffer v. Heitner, the Supreme Court clarified that jurisdiction was not determined in all cases by a single test. In Burnham v. Superior Court, 495 US 604 (1990), the Supreme Court held that instate service of process upon a transient nonresident satisfied due process requirements. The "minimum contacts" test did not apply because no court had ever questioned its jurisdiction over a person physically present in the forum state. Neither the duration nor nature of the nonresident's visit was relevant to the valid exercise of jurisdiction. The Burnham court restored the Pennoyer territorial view of jurisdiction over natural persons served with process in the forum state. Although Burnham carved out a narrow exception to Heitner, it did not displace the dominant position of the "minimum contacts" test for purposes of determining the valid exercise of judicial authority over nonresidents as subsequent cases have demonstrated.
Arguably, in 1991, the Supreme Court in Carnival Cruise Lines v. Shute, 499 US 585 (1991), issued its latest decision on personal jurisdiction, even though that case dealt with the enforcement of a contractual forum selection clause. In Carnival Cruise, the Court enforced a forum selection clause found included among three pages of terms attached to a boarding ticket for a cruise ship vacation, thus compelling the individual Oregon litigant to sue in Florida against the world's largest cruise ship company.
The Supreme Court cases demonstrate: (1) if the nonresident knowingly targets the forum for economic advantage or to cause economic harm, personal jurisdiction is likely to be found based on marginal contacts provided the litigation is related to the contacts, (2) if the nonresident merely introduces a product into the stream of commerce that foreseeably may end up in the forum state, jurisdiction is likely to be denied, unless the nonresident has committed an act purposefully directed toward the forum state, (3) in-state service of process upon a transient nonresident is valid, and (4) a nonresident who enters the forum state to contest the exercise of personal jurisdiction probably cannot obtain process immunity and is subject to the Catch-22 of being subject to jurisdiction resulting from in-state service of process. The decision in Helicopteros is an aberration that probably would not survive the Burger King "purposeful availment" test.
Cases decided since Burger King have found "purposeful availment" on the slimmest of facts to enable courts to assert "specific" jurisdiction over nonresident defendants. These cases use the language of Burger King without reference to its facts. In Burger King, specific jurisdiction was predicated upon a comprehensive franchise agreement covering a period of years and involving detailed contract terms. Specific jurisdiction now is found on sending a letter to a forum state resident. E.g., Meade Instruments, Corp. v. Reddwarf Starware LLC, 47 U.S.P.Q. 2d 1157 (D.C. Cal. 1998)(sending of two cease and desist letters sufficient contact to justify assertion of specific jurisdiction over nonresident defendant). Importantly, courts have used the "purposeful availment" standard to resolve jurisdictional issues arising from electronic transactions or conduct in "cyberspace." Courts draw the line between "passive" and "interactive" Web sites. Personal jurisdiction over nonresidents generally is found only where the Web site is interactive and seeking a commercial benefit from a target group. In theory, the benchmark remains minimum contacts. In reality, the benchmark is money. If the nonresident causes economic harm to a forum resident, obtains or seeks to obtain economic benefit from forum residents, then invariably the courts find the assertion of jurisdiction to be consistent with constitutional requirements.
In 1996, in CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir. 1996), CompuServe, a resident of Ohio, filed an action for a declaratory judgment in the federal district court of Ohio against Patterson, a resident of Texas. Patterson was a CompuServe subscriber who provided shareware to other CompuServe subscribers by entering into a Shareware Registration Agreement with CompuServe. From 1991 through 1994, Patterson electronically transmitted 32 master software files to CompuServe. These files then were stored on CompuServe's system in Ohio and made available for download by other CompuServe subscribers. Patterson also advertised his software for sale on the CompuServe system. Users of shareware are supposed to pay a fee to the author of the software. CompuServe began to market similar products. Patterson, an attorney, believed that CompuServe's marketing of these products violated his common law trademarks and constituted deceptive practices. CompuServe changed the names of its competing software titles but Patterson continued to complain and seek a financial settlement of his claims.
The Sixth Circuit stated, "This case presents a novel question of first impression: Did CompuServe make a prima facie showing that Patterson's contacts with Ohio, which have been almost entirely electronic in nature, are sufficient, under the Due Process Clause, to support the district court's exercise of personal jurisdiction over him?" The Court answered in the affirmative. Ohio's long arm statute gave Ohio courts the authority to assert jurisdiction over nonresidents transacting any business in Ohio to the extent permitted by the federal constitution. The court then applied the three part specific jurisdiction test: (1) the nonresident purposefully avail himself of the privilege of acting in the forum state or causing a consequence there, (2) the cause of action arises out of the nonresident's local activities and (3) the exercise of jurisdiction must be reasonable. The Court found that Patterson had purposefully contracted with Ohio-based CompuServe to market his products in other states and use CompuServe as his distribution center and that it was reasonable to subject him to suit in Ohio, because he chose to employ an Ohio based computer network service.
Patterson deliberately established contact with CompuServe in Ohio. He made contracts governed by Ohio law, sent software files continuously to Ohio and advertised his software on CompuServe's system. Patterson's relationship with CompuServe was as software provider and marketer. The Sixth Circuit concluded that Patterson transacted business in Ohio. The Court ignored the de minimus sales, $650, that Patterson made through the CompuServe system in Ohio. Patterson therefore had purposefully availed himself of CompuServe's Ohio-based services to market his software. The court found that the litigation, trademark infringement claims, was related to Patterson's business activities in Ohio. His trademarks were created in Ohio and violations of his trademarks, at least in part, would have occurred in Ohio. Lastly, the Court found that Patterson was an entrepreneur who should have anticipated litigation in Ohio. He therefore was not entitled to protections ordinarily accorded a consumer in a distance transaction.
In Zippo Manufacturer v. Zippo Dot Com, 952 F. Supp. 1119 (D.C.W.D. Pa. 1997), Zippo Dot, a California corporation, provided Internet news services. It had contracts with seven Internet Access Providers (IAP) located in Pennsylvania to permit Pennsylvania residents convenient access to its new services. Pennsylvania subscribers made up about 2% of Zippo Dot's customer base. Zippo Dot used the name Zippo in its web site.
Zippo Manufacturer, a Pennsylvania corporation, manufactured tobacco lighters and owned the registered trademark "Zippo." Thus, the litigation. Zippo Manufacturer maintained that Zippo Dot was doing business in Pennsylvania and infringing and diluting its protected trademark name of "Zippo." A complaint was filed in the US District Court for the Western District of Pennsylvania and process was served by the state's long arm statute.
The district court found that it had personal jurisdiction over Zippo Dot, the California corporation, under the theory of specific jurisdiction. That theory requires purposeful contacts with the forum state, litigation arising out of those contacts, plus no hardship on the nonresident company. Zippo Dot did not have offices, representatives or any physical presence in Pennsylvania; rather, Zippo Dot contracted with local service providers and with Pennsylvania consumers. It thus made money for Pennsylvania businesses and made money from Pennsylvania residents, but only to a limited extent since the Pennsylvania subscription was 2% of the customer base.
The district court reasoned that Zippo Dot targeted the forum state, the litigation arose out of its activities there and that it would be convenient for Zippo Dot to litigate in a foreign jurisdiction. The decision is consistent literally with prior case law since courts have watered down the concept of "deriving benefits" from the forum state. A nonresident with any contact with the forum state enjoys the hypothetical benefits of police and fire protection and the like. Here, Zippo Dot actually made money, a real benefit, and had concrete contacts with citizens of the state. The second part of the test is more problematic. Zippo Dot did not litigate with either its IAP contractors or its Pennsylvania customers, but rather with an unexpected third party tobacco lighter company. Thus, the mere use of its name in Pennsylvania, not its actual underlying business transactions, satisfied the requirement that the litigation arise out of its contacts with the forum state. Whether Zippo Dot was disadvantaged by litigating in a foreign forum was not disclosed by the record.
In 1997, in Bensusan Restaurant Corporation v. King, 937 F. Supp. 295 (1996), aff'd 126 F.3d 25 (2nd Cir. 1997), Bensusan, owner of the New York "Blue Note," sued King, owner of the "Blue Note in Missouri. The complaint, alleging trademark infringement and dilution and unfair competition, was filed in the federal court in New York. King had created a web site containing information about his club such as general information, upcoming events, and how to purchase tickets. Anyone in the world having a computer and Internet access could see his web site provided they found it.
The New York long arm statute recognized jurisdiction under two circumstances (1) when the nonresident committed a tort in New York and the cause of action is based on that tort, or (2) the nonresident committed a tort outside the state that caused injury in the state if that consequence were foreseeable and the nonresident derived revenue from the interstate event.
The district court found that it lacked personal jurisdiction over King and the Second Circuit affirmed. King did not maintain systematic and regular contact with the State of New York as required by International Shoe; nor did King purposefully contact New York as required by Burger King. He merely published a document that technically could be viewed by New York residents provided they took affirmative action to hunt down his site and he also took care to disclose that his club was completely unrelated to the New York Blue Note. Both courts rejected the theory that King had committed a tort outside the state that caused injury to a New York corporate citizen.
In 1997, in Cybersell Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997), Cybersell AZ sued Cybersell FLA of service mark infringement. Cybersell AZ had registered the mark "Cybersell" with the Patent and Trademark Office. Cybersell FLA used the name Cybersell on its Web site until it was informed of Cybersell AZ's service mark registration. Cybersell FLA changed the name of its site eventually to Websolvers though one page still contained the greeting, "Welcome to Cybersell." The Ninth Circuit affirmed the District Court of Arizona's dismissal of the complaint for lack of jurisdiction. The Ninth Circuit explicitly rejected the Cybersell AZ argument that since "cyberspace" is without borders, and that Web sites are designed for use by any person on-line, a nonresident that maintains a Web site necessarily subjects itself to the jurisdiction of any forum where the Web site may be accessed. Rather, the Court relied upon the traditional "contacts" test.
Here, the Ninth Circuit found that Cybersell FLA lacked any contact with Arizona. It did not sell products to Arizona residents; it did not target Arizona residents; it did not receive any hits on its Web site from Arizona except for hits generated by Cybersell AZ and it did not send or receive mail to or from any Arizona resident, excepting the plaintiffs. Without more, the existence of a Web page, though accessible by Arizona residents, did not constitute adequate contact with the forum to establish the requirements of specific jurisdiction and to satisfy the protections of the due process clause.
In 1998, in Panavision Int'l v. Toeppen, 141 F.3d 1316 (9th Cir. 1998), the Ninth Circuit Court of Appeals found that, under the "effects test," California had personal jurisdiction over an Illinois resident. The nonresident, Toeppen, registered Panavison's trademarks as his domain names and then attempted to sell the domain registrations to Panavision. The Court reasoned that California had specific jurisdiction over Toeppen. First, the requirement of purposeful availment was satisfied by the "effects" of Toeppen's actions in Illinois upon Panavision in California. Toeppen knew that Panavision was headquartered in California. Panavision "felt" the harm of Toeppen's conduct in California because its principal office was located there. And, although Toeppen never entered California, did business with anyone in California, or registered the domain names in California, the Court found that his non-California conduct had "effects" in California adequate to support the exercise of personal jurisdiction.