GSB Vol. 11, No. 7, Pg. 21. Personal Jurisdiction in Georgia Over Claims Arising from Business Conducted Over the Internet.

Authorby Steven W. Hardy

Georgia Bar Journal

Volume 11.

GSB Vol. 11, No. 7, Pg. 21.

Personal Jurisdiction in Georgia Over Claims Arising from Business Conducted Over the Internet

GSB JournalVolume 11, No. 7June 2006Personal Jurisdiction in Georgia Over Claims Arising from Business Conducted Over the Internetby Steven W. HardyA long-time client makes a frantic phone call to you. He paid $10,000 to an online seller of furniture, but the seller never delivered the furniture. The seller is located in North Carolina and has no offices or employees in Georgia. Your client's only contact with the seller was through the seller's website. After your client complained, the seller posted some false statements about your client on the site. After some investigation, you conclude that you may be able to plead claims for breach of contract and for fraud, as well as a claim of defamation. Can you establish personal jurisdiction over the seller in Georgia?

Contract Claims

Subsection 9-10-91(1) of the Long Arm Statute provides for the exercise of personal jurisdiction over a party who "[t]ransacts any business within this state." This is the only subsection of the statute that applies to contract claims. The Georgia courts have held that the statute applies if a contract is negotiated face-to-face in Georgia, is signed in Georgia, or is performed in substantial part in Georgia.(fn3)

Only one case in the Georgia courts has discussed the application of the Long Arm Statute to a company doing business over the Internet. In Object Technologies, Inc. v. Marlabs, Inc., the Court held that a nonresident was not subject to the exercise of personal jurisdiction in a suit for breach of a contract for computer services advertised on the Internet and negotiated on the phone, through the Internet, and by mail and fax.(fn4)

Until recently, the holding of Object Technologies was consistent with the Georgia cases involving telephone and mail contacts. However, the Supreme Court opinion in Innovative Clinical and Consulting Services, LLC v. First National Bank of Ames significantly changed the law in this area.(fn5) Before Innovative Clinical, the Georgia courts had generally held that "[m]ere telephone or mail contact with an out-of-state defendant, or even the defendant's visits to this state, is insufficient to establish the purposeful activity with Georgia required by the 'Long Arm' statute."(fn6) The Supreme Court in Innovative Clinical overruled the cases that required physical presence or that "minimize[d] the import of a nonresident's intangible contacts with the State."(fn7) The Court held that the Long Arm Statute must be given a "literal construction" and that the statute "grants Georgia courts the unlimited authority [subject to constitutional due process constraints] to exercise personal jurisdiction over any nonresident who transacts any business in this State."(fn8)

The opinion in Innovative Clinical appears to have overruled Object Technologies. So long as a nonresident's contacts with Georgia satisfy the requirements of due process, the transaction of business in Georgia by any means should support the exercise of personal jurisdiction here. Therefore, the Long Arm Statute should not be an impediment to bringing a breach of contract claim against an out-of-state defendant based upon business transacted over the Internet with a person in Georgia.

Tort Claims (Other Than Defamation)

The holding in Innovative Clinical also changed the application of the Long Arm Statute to claims arising in tort. Before Innovative Clinical, the Georgia courts had held that subsection (1) of O.C.G.A. 9-10-91 applied only to contract claims.(fn9) The Court in Innovative Clinical overruled these cases for the same reason that it overruled the cases requiring more than telephone or mail contact in order to exercise personal jurisdiction - the limitation is not found in the statute.(fn10) Therefore, if a tort arises from the transaction of business in Georgia, then the courts may exercise personal jurisdiction over the defendant under subsection (1) of the Long Arm Statute.

Of course, not all torts arise from the transaction of business, so a plaintiff seeking to bring a tort claim against a nonresident defendant may have to proceed under one of the two subsections of the Long Arm Statute that expressly apply to tort claims.(fn11) In many cases, however, neither of these subsections would authorize the exercise of jurisdiction over a nonresident who committed a tort through communications over the Internet. Subsection 9-10-91 (2) applies only to claims arising from tortious acts committed within the state. It would not apply, for example, to a fraud claim based upon representations made by a person located outside the state of Georgia.(fn12)

Subsection 9-10-91(3) applies to tortious acts committed outside the state that cause injury within the state. However, this subsection applies only if the defendant "regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered in this state." This language has been a substantial limitation on Georgia residents seeking to bring tort claims against nonresident defendants. In fact, the Supreme Court in Innovative Clinical recognized that the Court of Appeals had properly held that the trial court did not have personal jurisdiction under subsection (3) because the nonresident defendant did not regularly conduct business in Georgia or otherwise engage in conduct that satisfied the requirements of that...

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