Which Stream to Follow: Why the Eleventh Circuit Should Adopt a Broader Stream of Commerce Theory in Light of Growing E-commerce Markets

• Citation: Vol. 20 No. 2
• Publication year: 2010

Which Stream to Follow: Why the Eleventh Circuit Should Adopt a Broader Stream of Commerce Theory in Light of Growing E-Commerce Markets

Christopher M. Porterfield

Introduction

The Due Process Clauses of the Fifth and of the Fourteenth Amendments[1] "limit[] the power of . . . court[s] to exert personal jurisdiction over a nonresident defendant."[2] Due process in the personal, or in personam, jurisdiction context requires that, absent consent to suit or physical presence in the forum state, a defendant "have certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.'"[3] As the U.S. Supreme Court noted in World-Wide Volkswagen Corp. v. Woodson:[4]

The concept of minimum contacts . . . perform[s] two related, but distinguishable, functions. It protects the defendant against the burdens of litigating in a distant or inconvenient forum. And it acts to ensure that the [s]tates, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system.[5]

In assessing whether a particular exercise of personal jurisdiction comports with due process, courts focus on "the relationship among the defendant, the forum, and the litigation."[6] Further, the exercise of personal jurisdiction satisfies due process when a defendant's contacts with the forum state "proximately result from actions by the defendant himself that create a ‘substantial connection' with the forum [s]tate."[7]

In cases where the defendant is a business entity, such as a corporation, courts utilize the "stream of commerce" theory in assessing whether a nonresident-defendant enterprise has sufficient minimum contacts with the forum state such that the court may properly exercise personal jurisdiction over that defendant.[8] The Supreme Court's most recent case on the stream of commerce theory, Asahi Metal Industry Co. v. Superior Court of California,[9] produced only conflicting plurality opinions regarding the quantity and the quality of contacts a nonresident business (in this case a manufacturer) must have with a forum state to be constitutionally amenable to suit there.[10] This absence of controlling authority regarding the stream of commerce analysis has led to conflicting decisions in the lower federal courts, including within the Eleventh Circuit Court of Appeals. [11] Some courts have, in the absence of a Supreme Court majority opinion, declined to cite Asahi and have instead continued to apply the foreseeability-based stream of commerce analysis from the Court's earlier decision in World-Wide Volkswagen.[12]

This lack of guidance, and the resulting disparate treatment of the stream of commerce theory in the lower courts, becomes more important when considered in light of burgeoning Internet-based product and information markets "as courts struggle to apply old doctrines to dynamic technology." [13] The quantity of Internet related cases will likely grow exponentially in the coming years, just as the worldwide Internet user population has grown in recent years.[14] In 1981, the Internet linked fewer than 300 computers.[15] By 1993, that number exceeded 1,000,000 computers; in 1996, an estimated 9,400,000 computers connected to the Internet.[16] The number of worldwide Internet users has recently grown even more dramatically.[17] In 2000, analysts projected the worldwide Internet population at 349,000,000 users.[18] Analysts further expect that figure to increase to over 490,000,000 users by 2002.[19] By year-end 2005, there could be over 765,000,000 Internet users connected worldwide.[20] While this increase in Internet activity has led to a substantial increase in Internet-related litigation, courts have yet to clarify the issue of when personal jurisdiction over a defendant is proper based on the defendant's Internet contacts with the forum.[21]

Part I of this Note will review the history of the stream of commerce theory of personal jurisdiction.[22] Part II will discuss the lower courts' treatment of personal jurisdiction in cyberspace in the absence of Supreme Court guidance.[23] Part III will suggest why the Eleventh Circuit should adopt the broader stream of commerce standard advocated by Justice Brennan in Asahi to adapt personal jurisdiction jurisprudence to the realities of online product and information markets in 2003.[24]

I. Evolution of the Stream of Commerce Theory of Personal Jurisdiction

A. Personal Jurisdiction Generally

The Supreme Court and the lower courts generally apply a three-part analysis in determining whether to assert specific personal jurisdiction over a defendant.[25] First, the defendant's contacts with the forum state must relate to the plaintiff's cause of action; for example, the cause of action must "arise out of" the defendant's contacts with the forum.[26] Second, the defendant's contacts must involve "some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum . . . , thus invoking the benefits and protections of its laws."[27] Third, the defendant must have sufficient contacts with the forum "such that [the defendant] should reasonably anticipate being haled into court there."[28] Once the court finds that a defendant has sufficient minimum contacts with the forum state to be amenable to suit there, the court must still determine whether subjecting the defendant to personal jurisdiction would be fair and reasonable under the circumstances.[29] The Supreme Court has set out five factors courts must consider in assessing the fairness and reasonableness of the exercise of personal jurisdiction.[30] These factors are:

[T]he burden on the defendant [in litigating in a distant forum,] the interests of the forum [s]tate, . . . the plaintiff's interest in obtaining relief[,] the interstate judicial system's interest in obtaining the most efficient resolution of controversies[,] and the shared interest of the several [s]tates in furthering fundamental substantive social policies.[31]

If analysis of these factors suggests that jurisdiction would be fair and reasonable under the circumstances, the court may constitutionally subject the defendant to personal jurisdiction. [32] Conversely, if, according to these factors, the court finds the exercise of personal jurisdiction unfair or unreasonable, the court may not subject the defendant to personal jurisdiction in the forum.[33] According to the Court in Burger King Corp. v. Rudzewicz, "minimum requirements inherent in the concept of ‘fair play and substantial justice' may defeat the reasonableness of jurisdiction even if the defendant has purposefully engaged in forum activities."[34]

B. The Stream of Commerce Theory

The U.S. Supreme Court first considered the stream of commerce theory of personal jurisdiction in World-Wide Volkswagen Corp. v. Woodson,[35] although state courts gave birth to the theory.[36] In World-Wide Volkswagen the plaintiffs, New York residents, purchased an Audi automobile from a New York retailer and, while passing through Oklahoma, suffered severe burns following a rear-end collision with another car.[37] The plaintiffs brought a products-liability action in Oklahoma state court "claiming that their injuries resulted from [a] defective design" that placed the Audi's gas tank toward the vehicle's rear.[38] The plaintiffs included as defendants the automobile manufacturer, importer, regional distributor, and retailer.[39] The regional distributor and the retailer challenged jurisdiction in the Oklahoma court claiming that the exercise of personal jurisdiction over the nonresident defendants violated the Due Process Clause of the Fourteenth Amendment.[40] The trial court rejected the defendants' challenge to jurisdiction, and the Oklahoma Supreme Court affirmed.[41] The U.S. Supreme Court granted certiorari and reversed, holding that the New York distributor and the retailer had not purposefully availed themselves of the benefits and the protections of the Oklahoma forum; thus, personal jurisdiction over them would not be proper.[42] The Court focused on the "total absence of those affiliating circumstances that are a necessary predicate to any exercise of state-court jurisdiction," stating:

[Defendants] carry on no activity whatsoever in Oklahoma. They close no sales and perform no services there. They avail themselves of none of the privileges and benefits of Oklahoma law. They solicit no business there either through salespersons or through advertising reasonably calculated to reach the [s]tate. . . . In short, [plaintiffs] seek to base jurisdiction on one, isolated occurrence and whatever inferences can be drawn therefrom: the fortuitous circumstance that a single Audi automobile, sold in New York to New York residents, happened to suffer an accident while passing through Oklahoma.[43]

The plaintiffs argued that it was "foreseeable" that the Audi purchased in New York would cause injury in Oklahoma because an automobile is mobile by design.[44] The Supreme Court rejected the plaintiff's argument, noting that "foreseeability alone has never been a sufficient benchmark for personal jurisdiction under the Due Process [C]lause."[45] The Court explained that if foreseeability (that a manufacturer's product would find its way to the forum state) were the criterion, "[e]very seller of chattels would in effect appoint the chattel his agent for service of process. His amenability to suit would travel with the chattel."[46]

In rejecting the argument that foreseeability alone is enough to acquire personal jurisdiction over a nonresident defendant, the Court noted that foreseeability is not "wholly irrelevant" to a due process analysis.[47] The Court held:

[T]he foreseeability that is critical to due process analysis is not the mere likelihood that a product will find its way into the forum [s]tate. Rather, it is that the defendant's...