[Section I is optional for anyone who has already taken jurisdiction]
Historically, the exercise of jurisdiction was largely territorial. As such, sovereign states and nations could generally exercise in personam jurisdiction over their residents and in rem jurisdiction over property within their borders. Pennoyer v. Neff is the most cited articulation of this principle. There, the Supreme Court held that courts in Oregon could not exercise personal jurisdiction over an individual who was neither domiciled in Oregon, nor served process in the state.
The takeaway from Pennoyer is simple enough: in our federal system, a state court’s exercise of personal jurisdiction largely ends at the state border. In some ways however, the Supreme Court’s pronouncement in Pennoyer already lagged behind a rapidly changing national economy. Twelve years before this decision, Leland Stanford drove the final spike of the intercontinental railroad at Promontory Point, Utah.* In the decades that followed, the railroad, and eventually, the automobile, revolutionized both individual mobility and commercial operations. Companies were increasingly selling products across state lines, relying on independent salesmen or mail carriers to deliver their goods. By the end of World War II, even the Supreme Court recognized that the bright-line, rule based world of Pennoyer no longer seemed compatible with an increasingly national economy.
In International Shoe, the Supreme Court brushed aside many traditional notions of territoriality. Rather than circumscribing personal jurisdiction to state borders, the Court made the limits of personal jurisdiction coextensive with due process. But what exactly are these constitutional limits? Here, the Court articulated a "minimum contacts" standard. Under this standard, courts look at whether a defendant has "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.’" Id. at 316 (emphasis added).
Is this a particularly illuminating standard? Judging by the multitudes of approaches that courts have adopted since International Shoe, it certainly seems that applying minimum contacts is more difficult than strict territorialism. For additional, and optional, reading on the minimum contacts doctrine after International Shoe, see Asahi Metal Indus. v. California, 480 U.S. 102, 109-114 (1987). For the purposes of our discussion, it is sufficient to know that most courts will find specific in personam jurisdiction if "there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws." Hanson v. Denckla, 357 U.S. 235, 253 (1958).
Much like how transportation revolutionized commerce in the late 19th and early 20th centuries, the information revolution has dramatically changed the global economy in the 21st century. Nonetheless, even as commerce moved increasingly to the Internet, courts have largely adhered to minimum contacts analysis. The results of applying traditional jurisdiction principles to the Internet have often been unpredictable, as illustrated by the cases that follow. In some ways, the traditional minimum contacts doctrine is both over-inclusive and under-inclusive for the Internet.
Minimum contacts analysis for online operators may seem over-inclusive because it potentially exposes companies to liability in every state where their websites are accessible. In one line of cases, courts have applied the jurisdiction analysis in Calder v. Jones,. 465 U.S. 783, 790 (1984). In that case, the Supreme Court looked at whether wrongful conduct was "intentionally directed" towards residents of the forum state. Id. While Calder involved print media, many courts have also applied this test to websites.
Taking the Calder test to the extreme, some courts have exercised personal jurisdiction over companies that simply operated a website accessible in the forum state. In one early example, a Connecticut district court held jurisdiction over a Massachusetts company for operating a website accessible in Connecticut. Inset Sys., Inc. v. Instruction Set, Inc., 937 F. Supp. 161 (D. Conn. 1996). The website, of course, was available to online users in every other state as well, id., effectively making the website owner subject to jurisdiction across the country. The Inset court did not seem troubled by this, and stated:
Inset Sys., 937 F. Supp. at 164-65.In the present case, [defendant] has directed its advertising activities via the Internet and its toll-free number toward not only the state of Connecticut, but to all states. The Internet as well as toll-free numbers are designed to communicate with people and their businesses in every state. Advertisement on the Internet can reach as many as 10,000 Internet users within Connecticut alone. Further, once posted on the Internet, unlike television and radio advertising, the advertisement is available continuously to any Internet user. ISI has therefore, purposefully availed itself of the privilege of doing business within Connecticut.
Recent courts generally look for more extensive contacts with a forum state than the Inset court. Instead of exerting personal jurisdiction over all website operators, courts distinguish between "interactive" and "passive" websites. Zippo Mfg. Co. v. Zippo Dot Com, 952 F. Supp. 1119 (W.D. Pa. 1997). Using this approach, courts are more likely to find personal jurisdiction over parties that operate interactive websites. Id.
Thus far, we have looked at cases involving websites that allegedly infringe copyright or trademark rights. What about e-commerce and online sales?
Perhaps unsurprisingly, companies have taken steps to control where they may be forced to litigate. To do so, one common tactic is a forum selection or binding arbitration clause. The increasing use of such contract terms is certainly not exclusive to e-commerce. See e.g. Carnival Cruise Lines v. Shute, 499 U.S. 585 (1991) (enforcing a forum selection clause on the back of a cruise ship ticket). In determining the enforceability of such terms, courts usually look at two distinct sets of issues. First, did the forum selection clause become part of a contract? If the answer is yes, the second inquiry is whether enforcing the forum selection clause would be unconscionable regardless.
The first question presents interesting questions for website operators. How exactly does a forum selection clause on a website become enforceable between the online user and the website operator?
Up to this point, we have seen how traditional jurisdiction principles can seem over-inclusive when applied to website operators. Could the current system of jurisdiction also be under-inclusive? Consider a trademark or copyright owner who is trying to sue the operator of a website that is clearly infringing their intellectual property. What if the website operator cannot be found, or is far away from the jurisdictional reach of any state?
The first part of the American Girl opinion illustrates the problem of a mysterious website operator. Id. at 878-92. There, the Wisconsin court’s personal jurisdiction reached neither the unknown website owner nor the registrar of the domain name. Id.
The second part of American Girl discussed an interesting legal option for the plaintiff. Id. at 882-83. Under Anti-Cybersquatting Consumer Protection Act (ACPA), a court can exercise in rem jurisdiction over a domain name “in the judicial district in which the domain name registrar, domain name registry, or other domain name authority that registered or assigned the domain name is located.” 15 U.S.C. § 1125(d)(2)(A). In other words, even if no U.S. court can reach the website operator; the district court where the registrar or registry is located may still seize the domain name of the alleged infringer, effectively blocking public access to the website. Id. Conveniently for plaintiffs, Verisign, Inc. is the registry for all domain names that use the top level domain ".com," and its servers are located in Virginia.
This provision of the ACPA is not without controversy. The Supreme Court has long held that courts cannot use in rem jurisdiction to runaround the minimum contacts requirement. Shaffer v. Heitner, 433 U.S. 186 (1977). Therefore, does the ACPA allow states to effectively exert personal jurisdiction over website owners with no minimum contacts to the state? One commentator explained the problem as follows:
Adam M. Greenfield, Reviving the Distinction Between in Rem and in Personam Jurisdiction by Way of the Anti-Cybersquatting Consumer Protection Act, 35 AIPLA Q.J. 29, 32-33 (2007)With serious rights still at stake, critics of the statute have questioned the constitutionality of its provision for the assertion of in rem jurisdiction. These criticisms proceed as follows: Under the terms of the statute, Congress has fully authorized the federal courts to assert in personam jurisdiction over those defendants that have violated the Act, including those domain name registrants that engage in cybersquatting. Only where the plaintiff cannot obtain jurisdiction on an in personam basis does the provision for in rem jurisdiction come into play. As scholars note, however, the Supreme Court has declared that all assertions of jurisdiction over non-resident defendants, including in personam actions to impose personal liability on the defendant and in rem actions to determine title to property, must be judged by the due process standard set forth in International Shoe Co. v. Washington. Because the same constitutional standard applies to both in personam and in rem proceedings, these scholars have concluded that the in rem proceedings of the ACPA cannot effect any constitutional expansion in the rights of trademark holders to obtain relief from registrants. All that can be constitutionally obtained by way of extending the jurisdiction of federal courts to reach foreign registrants under an in rem theory, these scholars contend, has already been obtained through the exercise of in personam jurisdiction.
Return to the Syllabus.
*STEPHEN E. AMBROSE, NOTHING LIKE IT: THE MEN WHO BUILT THE TRANSCONTINENTAL RAILROAD 365 (2001)