2. General Jurisdiction.3. Specific Jurisdiction.

E-Commerce: Who Has Jurisdiction? Page Two 2. General Jurisdiction. In the cases involving the Internet, general jurisdiction has been accorded less attention thus far than has specific jurisdiction (see below) although general jurisdiction may gain importance as e-commerce evolves. A nonresident who is subject to general jurisdiction in a given forum can be compelled to defend any type of action there, even if the action is unrelated to any contacts with the forum. Understandably, the criteria for application of general jurisdiction under constitutional due process limitations are strict. Such jurisdiction can apply only if the defendant's contacts with the forum are "systematic" and "continuous" enough that the defendant might reasonably anticipate defending any type of claim there.(10) Given such strict requirements, it is not surprising that to date there has been no finding of general jurisdiction based solely on the fact that Internet advertising reaches into the forum.(11) Indeed, if one is conducting so much activity in the forum that general jurisdiction is proper, whether jurisdiction can be based upon a website should be moot. 3. Specific Jurisdiction. A forum can have specific jurisdiction over a defendant whose contacts with the forum relate to the particular dispute in issues. In 1945, the U.S. Supreme Court held that personal jurisdiction over a non-resident defendant by a forum state requires only that "he have certain minimum contacts with it, such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'"(12) Existence of the required "minimum contacts" is determined under a three-part test: (1) the defendant must purposefully direct his activities or consummate some transaction with the forum state or a resident thereof or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum and thereby invokes the benefits and protections of its laws; (2) the claim must be one arising out of or relating to the defendant's forum-related activities; and (3) the exercise of jurisdiction must comport with "fair play and substantial justice," i.e., it must be reasonable.(13) A leading example of "purposeful direction" in the context of more traditional media was found where Florida residents wrote and edited an article in the National Enquirer which defamed a California resident. The Enquirer had its largest circulation in California, and California was the focal point of both the story and the harm suffered. These factors led the U.S. Supreme Court to conclude in Calder v. Jones that there was sufficient evidence that the defendants' actions were "aimed at California" and would be expected to have a potentially devastating effect on the California resident, hence the defendants could have reasonably foreseen being brought into court in California.(14) The test of "purposefully availing" oneself of the privilege of conducting business in the forum can be met if a party reaches beyond one state to "create continuing relationships and obligations with citizens of another state."(15) For example, taken alone, a single contract between a resident of the forum state and an out-of-state party may not establish sufficient minimum contacts to support personal jurisdiction. However, if there are multiple contacts such as telephone calls and mail into the forum state, the total contacts can collectively form a basis for jurisdiction over a nonresident who is never physically present in the forum.(16) The principle of purposeful availment was applied by the U.S. Supreme Court to a defendant franchisee who resided in Michigan and allegedly breached their contract with Burger King, a Florida franchisor.(17) The defendant had not been present in Florida in any way, but the Court found that he had sufficiently availed himself of the jurisdiction through a combination of elements. Defendant was a knowledgeable businessman who not only solicited the franchise arrangement but actively negotiated its terms by communicating with Miami; moreover, the franchise agreement was a high value, long-term, and closely supervised arrangement, which selected Florida law to determine disputes. Franchise payments under the agreement were to be sent to Miami, and failure to make those payments was the basis of the plaintiff's claim. Finally, the franchise documents were to be construed under Florida law. An extension of purposeful availment is the "stream of commerce" doctrine articulated, in World-wide Volkswagen Corp. v. Woodson,(18) where the actual result was to find insufficient facts to support jurisdiction under the doctrine. In World-wide, defendants were a New York car dealer and its regional distributor, who sold a car to plaintiffs in New York. After being later injured in an accident in Oklahoma, plaintiffs attempted to sue the dealer and distributor, as well as the car manufacturer and importer, in Oklahoma. The Court held that whatever "stream of commerce" the car had entered, it left that stream at the point of its purchase by plaintiffs in New York. The plaintiffs' subsequent decision to remove the car from New York could not provide a basis of jurisdiction over the retailer and distributor, who had had no voice in the decision and procured no benefit from it.(19) The stream of commerce doctrine has been understandably applied with great restraint. For instance, in Asahi Metal Industry Co. v. Superior Court,(20) the Supreme Court unanimously held that the assertion of jurisdiction by a California court over a Japanese company being sued as a third party by a Taiwanese component parts manufacturer seeking contract indemnification would be unreasonable and, therefore, unconstitutional. The defendant manufactured tube valve assemblies, which it sold to the Taiwanese company that manufactured the tube used in a tire sold to Honda which burst while the plaintiff (who had settled out) was riding a Honda motorcycle in California. The Court split on whether the Japanese defendant's use of the stream of commerce was sufficient to constitute "purposeful availing" and thus provide the requisite "minimum contacts." Conceding that the Japanese defendant was aware that its product might well be used in a motorcycle purchased in California, Justice O'Connor (for herself and three other justices) found "mere awareness" insufficient. Instead, the defendant in some fashion had to purposefully direct its action toward the forum state.(21) She cited examples such as designing a product for a market, advertising, establishing channels for advice to customers in the forum or using a distributor as a sales agent in the state.(22) Of the remaining justices, four thought that the "regular and anticipated flow of products from manufacture to distribution to retail sale" in a forum sufficient to constitute purposeful availment.(23) Justice Stevens separately viewed the test as one based upon "the volume, the value, and the hazardous character of the components."(24) 10. International Shoe Co. v. Washington, 326 U.S. 310, 318 (1945) ("International Shoe") (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). 11. See, e.g., Grutowski v. Steamboat Lake Guides & Outfitters, Inc. 1998 WL 9602 (E.D. Pa.), ___ F. Supp. 2d _____; McDonough v. Fallon McElligott, Inc., 40 U.S.P.Q.2d 1826 (S.D. Cal. 1996); IDS Life Insurance Co. v. Sun America, Inc., 1997 W.L. 7286 (N.D. Ill. 1997). These cases reject general jurisdiction over a defendant based on advertising on the Web, where the matters complained of had nothing to do with the Web presence or the advertising. In California Software, Inc. v. Reliability Research, Inc., 631 F. Supp. 1356 (C.D. Cal. 1986), defendants wrote messages to several California companies via a bulletin board and communicated with three California residents via telephone and letters, allegedly denigrating plaintiffs' right to market software. The Court held that general jurisdiction could not be based on the "mere act of transmitting information through the use of interstate communication facilities," where defendant had no offices in California and did not otherwise conduct business there except to communicate with California users of the national bulletin board; 631 F. Supp. at 1360 (the court did find specific jurisdiction). In Panavision International, L.P. v. Toeppen, 938 F. Supp. 616 (C.D. Cal. 1996), aff'd 141 F.3d 13-16 (9th Cir. 1998) discussed at length infra at notes 47-51 and accompanying text, the federal court rejected general jurisdiction in California over an Illinois defendant who used a California company's trademark in a website address in order to compel the plaintiff to buy out his domain rights, but found specific jurisdiction. 12. International Shoe, 326 U.S. 310, 316 (1945). 13. Core-Vent v. Nobel Industries AB, 11 F.3d 1482, 1485 (9th Cir. 1993) (citing Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 1987)). 14. Calder v. Jones, 465 U.S. 783, 789 (1984). 15. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 473 (1985) (quoting Travelers Health Assn. v. Virginia, 339 U.S. 643, 647 (1950)). See also McGee v. International Life Insurance Co., 355 U.S. 220, 222-23 (1957). 16. Burger King Corp., supra, 471 U.S. at 476. Once a nonresident has either purposefully directed activities to the forum state or has purposefully availed himself of the privilege of conducting activities in the forum, the question of fairness must be considered. The Supreme Court has articulated five separate "fairness factors" that may require assessment to determine whether or not specific jurisdiction should apply. These factors include: 1. The burden on the defendant of defending in the forum; 2. The forum state's interest in adjudicating the dispute; 3. The plaintiff's interest in obtaining convenient and effective relief; 4. The interstate judicial system's interest in efficient resolution of controversies; and 5. The shared interest of the states in furthering substantive social policies. In Burger King, the Court specifically rejected "any talismanic jurisdiction formula"(id. at 485), disclaiming that its decision would support assertions of jurisdiction over any party to a contract in the other party's home state. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980). 17. Burger King Corp. v. Rudzewicz, 471 U.S., 462 (1985). 18. 444 U.S. 286 (1980) ("World-Wide"). 19. In dissent, Justices Marshall and Brennan argued that the defendants did indeed benefit from the existence of Audi dealerships and repair facilities throughout the United States, including Oklahoma, and that such indirect benefit, like that identified in Gray, ought suffice, at least in light of the fact that cars are intended to be driven from one place to another. 20. 480 U.S. 102 (1987). 21. Id. at 103. 22. Id. 23. Id. at 117. 24. Id. at 122.