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Thelen Reid Brown Raysman & Steiner LLP
A
California court has held that communications over the Internet
can support the exercise of jurisdiction over out-of-state
entities. The recent appellate court case, Hall
v. LaRonde (Second Appellate District, August 7, 1997),
illustrates a trend in courts across the nation to cite
the increased scope of Internet communications as justification
for requiring corporations and individuals to defend litigation
in distant states where they otherwise do no business.
The appellate court in Hall reversed a lower court's
dismissal of a breach of contract action brought by a California
software developer against a New York entity. According
to the court, the defendant had no physical contacts with
California; all communications between the two entities
-- including, apparently, transmission of the subject software
module itself -- were performed by electronic mail or by
telephone. The court acknowledged the existence of
an earlier case holding that jurisdiction cannot be maintained
over an out-of-state purchaser merely because it does business
with a seller located in California, if the purchaser has
no physical presence in California and all communications
with the seller were conducted by means of "out-of-state
agents or interstate mail and telephone." Interdyne
Co. v. SYS Computer Corporation, 31 Cal.App.3d 508,
511-12 (2d Dist, 1973). But the Hall court joined
a growing number of courts around the country citing to
the increased power and speed of Internet communications
as justifying a more expansive view of personal jurisdiction.
"Much has happened in the role that electronic communication
plays in business transactions since Interdyne was
decided 20 years ago," said the court. "The
speed and ease of such communications has increased the
number of transactions that are consummated without either
party leaving the office. There is no reason why the
requisite minimum contacts [for jurisdiction over an out-of-state
party] cannot be electronic." Hall, at
3.
The past year has seen a small explosion of opinions from
courts around the country discussing whether Internet contacts
are sufficient to support the exercise of jurisdiction over
out-of-state defendants. In some of those cases, the
reference to Internet communications appears to be a makeweight;
other contacts between the parties, such as the interstate
delivery of goods or services or execution of a contract
between the parties, would justify jurisdiction over the
defendant without any reference to the Internet. Indeed,
this is probably true of the Hall case itself.
But in areas such as trademark infringement or defamation,
courts have stressed the increased power and reach of the
Internet to support jurisdiction over distant defendants.
The results do not always appear well-founded.
In one trademark infringement case based on a Web page,
the court cited to the total number of citizens in the forum
state subscribing to Internet services to demonstrate the
extent of the defendant's "contacts" with the
forum state, ignoring the fact that only a few of those
Internet customers were likely ever to have visited the
site. Inset Systems, Inc. v. Instruction Set, Inc.
937 F.Supp. 161 (D.Conn. April 17, 1996). Other
courts have drawn a distinction between a Web page and other
types of nationwide advertising based on the perceived greater
power of Internet communication -- for example, the fact
that Web pages can be accessed 24 hours a day, and that,
unlike publications in periodicals, they persist over time
rather than appearing in only a single, ephemeral issue
of a publication. See e.g., Heroes, Inc. v. Heroes
Foundation, et al., 958 F.Supp. 1 (D.D.C., December
19, 1996). There is plainly a view among some judges
that companies taking advantage of the worldwide reach of
the Internet to solicit business must also expect to defend
cases in distant jurisdictions when their Web pages run
afoul of local laws or impair local rights.
The law of the Internet is still young, and it is too early
to tell the extent to which courts in general will base
the exercise of personal jurisdiction purely on "passive"
Web pages, for example, absent other more traditional contacts.
This will remain an area to watch for any company doing
business over the Internet.
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For more information about the issues covered in this report, please contact Karl D. Belgum in our San Francisco office at 415-369-7310 or at kbelgum@thelen.com or contact your Thelen attorney. For more information about Thelen's Construction and Government Contracts Department, click here.
©1997 Thelen Reid Brown Raysman & Steiner LLP
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