70 The Alabama Lawyer 379 (2009). Internet Transactions and Communications: Expanding or Contracting Traditional Notions of Personal Jurisdiction?.

• Author: BY ANNE SIKES HORNSBY

The Alabama Lawyer

2009.

70 The Alabama Lawyer 379 (2009).

Internet Transactions and Communications: Expanding or Contracting Traditional Notions of Personal Jurisdiction?

Internet Transactions and Communications: Expanding or Contracting Traditional Notions of Personal Jurisdiction?BY ANNE SIKES HORNSBYBuying and selling via electronic transactions over the Internet are completely commonplace occurrences in most Americans' business and personal lives. We take for granted the ease, convenience and simplicity afforded by conducting commerce and communications from our homes and offices at any time of the day. But when a conflict arises over those communications or transactions, and leads to potential or actual civil litigation, what is the proper and fair place for resolving the dispute? Do courts need new guidelines and rules in the electronic age, or is justice better served by adherence to traditional principals of personal jurisdiction? Courts across the country are struggling with these issues, and both practitioners and their clients can benefit from consideration of the factors that courts are using and adapting to decide questions of personal jurisdiction pertaining to electronic communications and commerce.

A court's jurisdiction over a party or person has long been subject to a legacy of judicially-created standards, requiring determinations of what constitutes "minimum contacts," "purposeful availment" and other due process standards in cases whose names most lawyers recall from law school - International Shoe, Burger King, Worldwide Volkswagen and Helicopteros, to name a few. As technology has expanded our methods of communicating and transacting business, this jurisprudence has been applied in ways that some scholars and practitioners describe as vague, unwieldy and unpredictable. In the age of the Internet, video-conferencing, virtual communications and online contracting, how are courts determining whether they have the authority to adjudicate disputes with out-of-state parties conducting business via the Internet, and how can parties avoid being haled into courts in far-away or inconvenient jurisdictions? Likewise, from the plaintiff's perspective, what should in-state residents consider when trying to litigate disputes with non-residents who may challenge an Alabama court's jurisdiction?

Overview of procedure, sources of law

Before addressing the current cases attempting to apply jurisdictional precedent to the myriad patterns created by the meteoric rise of Internet use for business and personal matters, it is worth visiting the basics. Any trial court's jurisdiction, state or federal, is limited by its home state's long-arm statutes. While Alabama and most other states have provided personal jurisdiction and long-arm provisions which extend to the maximum allowed by the Due Process Clause of the Fourteenth Amendment, some states' statutes are promulgated in other terms. For the lawyer possibly contesting jurisdiction in a foreign forum, or for a person or business entity conducting transactions outside of Alabama, it is worth first looking to the particular state statute or rule of civil procedure to see if its language provides a differently stated view of its state's reach or specifies certain kinds of conduct which might subject the party to the state's jurisdiction, sometimes referred to as enumerated act statutes. Alabama retained such a statute in its Rule 4(a) until August 1, 2004, when it completely rewrote its rules to eliminate the "laundry list" approach and utilize only the "catch all" clause now contained in Rule 4.2(b).(fn1)

Another threshold consideration is the possible procedural routes to challenging or asserting jurisdiction. First, failure to raise personal jurisdiction, as opposed to subject matter jurisdiction, can easily forever waive a party's right to contest it. A party must clearly preserve challenges to personal jurisdiction in any litigation, making only special, limited appearances in the contested jurisdiction to guard against any question of waiver. The challenge is framed as a Rule 12(b)(6) motion to dismiss, or the home state equivalent of that federal and Alabama rule. A plaintiff initially states the basis for jurisdiction in the complaint, which is presumed true. If a defendant objects and makes a prima facie case of lack of personal jurisdiction, the burden shifts to the plaintiff to prove those facts. Bracewell v. Nicholson Air Service, Inc., 748 F. 2d 1499, 1503 (11th Cir. 1984). Since any court analysis of personal jurisdiction is highly fact-specific, some courts have ruled it reversible error to deny preliminary discovery on jurisdictional facts. E.g., Lakin v. Prudential Sec., Inc., 348 F. 3d 704 (8th Cir. 2003). Depending on the case, a party might prefer to simply defend on the merits or prosecute in a less convenient forum to avoid the delay and expense of a jurisdictional battle that could include expensive discovery, and where success may simply result in litigation in a different forum. Alternatively, it may choose to engage in jurisdictional discovery for other strategic purposes, perhaps getting an early look into an adverse party's operations and resources.

Second, review of a court's jurisdictional ruling dismissing a party is a final order and appealable as such, but a denial of a motion to dismiss on jurisdiction grounds is not, and must go up either on a certified question or writ of mandamus. The ruling is reviewed de novo in either case. A party may not be permitted to supplement the record on review, however, so it is important to create a thorough record at the trial court level, despite the preliminary nature of the litigation.

Traditional personal jurisdiction analysis

The standards set by International Shoe, decided in 1945, and its progeny, continue to control judicial jurisdictional analysis and application throughout the technology boom to the last half of the 20th century and the first decade of this one. The rule is both seemingly straightforward and yet, some argue, vague, and responsible for confounding judicial opinions in this area. For a court to exercise jurisdiction over a nonresident defendant, that defendant must have sufficient purposeful contacts with the forum state in order to satisfy traditional notions of fair play and substantial justice; otherwise, the protections of due process of law are violated. See, e.g., International Shoe v. Washington, 326 U.S. 310, 316 (1945). Because the maximum reach of courts is set by the home state's long-arm statute and constitutional boundaries, the standards for determining whether a court has personal jurisdiction over a nonresident defendant are the same in both state court and federal courts. See Kittle Heavy Hauling v. Rubel, 647 So. 2d 743, 744 (Ala. 1994). Basically, the fact-intensive inquiry is directed at determining whether a nonresident defendant has sufficient minimum contacts with the forum, and, if so, whether exercising jurisdiction over that defendant would be fair and reasonable. The burden of establishing that a court has jurisdiction falls on the plaintiff, whose jurisdictional allegations in a complaint are accepted as true unless challenged by a defendant with supporting evidence.

Personal jurisdiction breaks down further into two categories: general and specific. General jurisdiction - the kind necessary to hear claims that did not arise out of a defendant's contacts with the forum state - may be exercised when a defendant has such "continuous and systematic" contacts with a forum state that it would be reasonable and just for that defendant to be haled into court there, even though the claim does not relate to those contacts. See Helicopteros Nacionales De Colombia, S.A. v. Hall, 466 U.S. 413, 415 (1984); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). Most jurisdictional challenges related to Internet transactions, but certainly not all, involve facts which are insufficient to establish general jurisdiction's "continuous and systematic" contacts mandate, particularly when such contacts are based on the sale of a product. See Seymour v. Bell Helmet Corp., 624 F. Supp. 146, 148 (M.D. Ala. 1985) (quoting Helicopteros: "mere purchases, even if occurring at regular intervals, are not enough to warrant a State's assertion of in personam jurisdiction over a nonresident corporation in a cause of action not related to those purchases").

Specific jurisdiction, on the other hand, permits courts to exercise jurisdiction over a party where the cause of action arises out of the nonresident's contacts with the forum state, so long as the exercise of that jurisdiction comports with due process. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985). The touchstone for the specific jurisdiction due process requirement is "purposeful...