Minimum contacts in cyberspace: the classic jurisdiction analysis in a new setting.

• Author: Gray, Tricia Leigh
• Position: Report

1. INTRODUCTION

   Because no special law yet exits to address jurisdiction issues on the Internet, courts have been forced to apply traditional analyses of jurisdiction to cases in this new environment. Our traditional notions of jurisdiction have made a relatively smooth transition into cyberspace. Historically, jurisdictional requirements have centered on the locus and the activity of the parties as a means of determining which state's law to apply. (1) With the advent of the Internet and the new frontier of cyberspace, established ideas about where and how interactions take place must be re-considered in this unconventional, online environment. These sorts of issues affect a court's jurisdiction over parties interacting in cyberspace.

   Surprisingly, our conventional notions of jurisdiction have adapted well to this new cyber-environment. This is illustrated by the report of the American Bar Association, which extends support to the minimum contacts analysis to determine jurisdiction over on-line parties. (2) Cyberspace has expanded the arena for interactions of all sorts, (3) and has provided another forum in which parties can reach out to each other from different locations, and possibly create the minimum contacts necessary for personal jurisdiction. (4) Traditional principles of jurisdiction are adaptable to cyberspace because they consider the physical location of the parties and the conduct they direct at the forum state. (5) These factors remain crucial to our current analysis of jurisdiction in cyberspace. (6)

   Individuals and corporations continue to exist in real space, and continue to do business from one state, while targeting other states. We should continue to use the physical status of the parties as a starting point for jurisdictional analysis. This approach makes sense, because the application of the minimum contacts test to Internet jurisdiction simply extends the amenability to suit that already exists for parties. No new rules are necessary, because although the Internet is a new forum, parties, as always, exist in a physical space. The report of the American Bar Association and a review of current caselaw support this proposition.

2. THE MODERN CHALLENGE: PERSONAL JURISDICTION AND THE INTERNET

   1. The Report of the American Bar Association

      An important, and largely on-target, reexamination of the issue of jurisdiction in cyberspace began with a report by the American Bar Association, published in July 2000. (7) The report, titled ACHIEVING LEGAL AND BUSINESS ORDER IN CYBERSPACE: A REPORT ON GLOBAL JURISDICTION ISSUES CREATED BY THE INTERNET, is the cumulative effort of multiple sections of the bar, working groups, and international commentators. (8) Cyberlaw jurisdiction is discussed in both global and domestic forums. (9) The report tends to be more successful when considering domestic jurisdiction problems.

      The goal of the ABA's report is to promote a legal infrastructure that will provide guidance to the new area of cyberlaw and the jurisdiction of courts over Internet-related litigation. (10) Despite its global overtones, the report's analysis stays squarely in the American traditional context of jurisdiction, which is rooted firmly in physicality and minimum contacts. (11) The anatomy of American jurisdiction in the new Internet environment is preserved by the ABA's report. (12) A less conventional approach would seem too far a departure from the caselaw that has already developed, which is discussed below. The notion of "minimum contacts", derived in 1945, has become and will likely remain the benchmark of jurisdiction in cyberlaw cases. (13)

      The idea that the minimum contacts standard will continue to underwrite our jurisdictional analysis is reassuring for our domestic cases, but troubling for cases with international parties. The Constitution of the United States and its requirements of Due Process is unique, and is obviously not adopted in other countries. The Int'l Shoe standard of minimum contacts does not competently address concerns of jurisdiction over foreign defendants. (14) In a case with international parties, the physicality requirement of jurisdiction remains crucial. However, exercising jurisdiction over a foreign defendant is a complex matter, not simply solved by an exercise of jurisdiction based on purposeful availment. New international law must be developed to legislate the very complicated problem of global lawsuits arising from the Internet. At this point in time, the American minimum contacts analysis is inappropriate for jurisdiction in an international setting. Jurisdiction laws of other countries should be scrutinized, and an international committee should determine the best combination of methods to use for a jurisdictional analysis of online parties in an international setting.

      The ABA report constructively comments on the state of the current American jurisdictional law, or the state of the law at the time the report was released (in July 2000). (15) It does offer some new insight into an appropriate approach to on-line jurisdictional analysis, while maintaining the integrity of American jurisdiction. (16) It is particularly helpful with specific admonitions to businesses, offering advice on how to help limit their liability to consumers.

      1. Federal Jurisdiction

         The global nature of the Internet is unsuitable for supervision of each state's courts. The Internet is the appropriate domain of federal regulation. The ABA report agrees with this proposition, stated in a federal district court opinion that suggests the Internet should be the province of federal jurisdiction and regulation, rather than the subject of each state's application of the law. (17) As the report is the product of an effort to regulate substantive law from the perspective not only of the United States, but of certain European and Asian countries, this more generalized approach is clearly suitable. (18)

      2. Importance of Physical Location

         Where the parties exist in physical space continues to be a crucial component of jurisdictional analysis. (19) The new frontier of cyberspace has not changed the importance of location of the parties, but has expanded the geographic area throughout which these parties can readily interact. For instance, residents of Vermont can purchase inflatable alligators from Florida, and Florida residents can buy Vermont maple syrup on the Web. This creates a legal relationship between two residents of different jurisdictions.

         The ABA report correctly maintains that the analysis for jurisdiction should begin at the conventional standpoint: where the parties exist in physical space. (20) As discussed below, most, if not all, American courts have applied this customary component to their analysis of jurisdiction in Internet cases. (21) Jurisdiction in Internet cases has largely followed precedent and traditional analysis. (22) This trend is a reliable way to frame guidelines for Internet jurisdiction; the analysis is familiar and readily applied by the courts. The ABA properly supports this inclination.

         An overview of preliminary jurisdictional guidelines for the Internet is included in the report of the ABA. (23) These default rules are rooted in decisions of our recent case law and traditional ideas about jurisdiction. Both users and sellers are encouraged to identify the state in which they reside, so that the other party can be put on notice. (24) Although this rule makes sense from a legal perspective, it is hard to imagine that many consumers, and even many businesses, understand the rationale behind posting their home state. In this way, the report fails make a suggestion that has application to unsophisticated Web users. Even though many consumers include their home state information in forms that they fill out on the Web, most are unaware that their physical location affects their amenability to suit, or that such information is gathered for legal purposes. (The suggestion that businesses also post their home state information is discussed below.)

         The default rules also suggest that more than one nation-state may be able to assert personal and prescriptive jurisdiction over Internet transactions, just as they have over physical transactions. However, every party on the Internet should be subject to both personal and prescriptive jurisdiction in at least one state. (25) Parties should be amenable to suit in at least one state. These suggestions follows traditional notions of jurisdiction, and are sensible.

      3. Targeting of a Forum State

         The ABA report reflects the current caselaw in its recommendation that passive web sites, i.e., web sites that do not seek out traffic and merely offer information, should not be subject to jurisdiction solely on the basis that they were accessible in the forum state. (26) This assertion follows the common logic, and is very reasonable. If the web site does not target the forum state, and the claim is based solely on accessibility, an exercise of jurisdiction is not proper. Recent American caselaw supports this contention, as discussed below. (27)

         One reason for this reluctance to subject passive websites to suit is to encourage individuals to share information in the forum of cyberspace, without fear of litigation in a foreign environment. (28) In fact, the report goes so far as to say that absent an interactive site which accepts offers from buyers, the seller should not be subject to jurisdiction in the buyer's home state based on one sale. (29) It is then proposed that the buyer could be described as having "targeted" the seller, and should be amenable to suit in the seller's home state. (30) This would be a departure from traditional jurisdictional principles. Presently, it does not seem like a feasible alternative, as sellers are still generally thought of as having more bargaining power. (31)

      4. Liability of Web Site Sponsors

         The ABA guidelines also suggest situations in which sponsors of web sites should be...