CASWELL BELL & HILLISON LLP
FRESNO, CALIFORNIA

WHERE TO SUE?  WEBSITES CAN AFFECT JURISDICTION

In a nation of 50 different systems of state courts and a highly interconnected national economy, the issue of when one state’s courts can assert jurisdiction over a nonresident person or business has always been fertile ground for litigation.  State legislatures have addressed the matter with laws that are the civil counterparts to the notion that criminals cannot escape the “long arm of the law.”

The Constitutional issue is whether the party has sufficient minimum contacts with California to enable its courts to exercise personal jurisdiction over him (or it) in a California court.  ”Long-arm statutes,” as they are known, do have their limits.  Essentially, nonresidents can be sued in the courts of any state where they have had such contacts inside the state that it is reasonable to conclude that they have submitted themselves to the authority of the courts in that state.  The principle is vague, but it has to be to cover the almost endless ways in which we conduct business.

Those issues still arise in the information age.  Just because a company’s website is accessible by customers in a given jurisdiction does not necessarily mean that the company can be sued there.  The emerging rule of law is that the more that a customer can have online interactions with a business based elsewhere, the more likely it is that if things go wrong the business can be forced to play an “away game” in court.

Close, but No Cigar

Examples make the point better than statements of rules of law.  A Vermont furniture store used a trucking company to deliver furniture to a customer in North Carolina.  When the buyer was injured during unloading, he tried to sue the furniture company in a North Carolina court.  In this case, the “long arm” was not long enough to reach the Vermont company.  The furniture had been bought and paid for in Vermont.  The only respect in which the store had any connection to North Carolina was that its website could be accessed there, like anywhere else.  But it was a passive site, giving information about products, but not allowing purchases through the site.

Caught by the “Long Arm of the Law”

At the other end of the spectrum are cases in which businesses could be sued in the states where their customers lived because the businesses had a more substantial online “presence” in those states.  For example, a California customer of a hotel run by a Nevada casino was able to haul the casino into a California court to defend allegations that it had imposed an energy surcharge on customers without notice.  Snowney v. Harrah's Entertainment, Inc. (2004) 116 Cal.App.4th 996.

The plaintiff alleged that nothing in the casino’s promotional activities, including its website, informed customers of the charge.  It was important to the ruling that the casino used an interactive website where out-of-state customers could get quotes and book rooms.  The court found that it was reasonable to require the Nevada hotel operators to defend themselves in California “based on their advertising in California, interactive Internet site, toll-free telephone number for hotel reservations, and other activities purposefully directed at California residents.” 

In addition, there was a close connection between the alleged wrong -- the misleading promotions -- and the casino’s website that targeted millions of California residents.

Even Non-Commercial Websites Can Lead to Jurisdiction

In Pavlovich v. Superior Court (2001) 91 Cal.App.4th 409, the defendant had posted a program called DeCSS on his web site.  The program had been designed to defeat an encryption-based copy protection system, known as the Content Scramble System, which is employed to encrypt and protect the copyrighted motion pictures contained on digital versatile discs, or DVDs.  At the time the defendant posted DeCSS on the Internet, he was a leader in the "open source" movement, the purpose of which was to make as much material as possible available over the Internet.

The defendant filed a motion to quash service of summons on the ground that the superior court lacked jurisdiction over his person.  Pavlovich  asserted that he was a student at Purdue University in Indiana at the time of the filing of the lawsuit, and that he had moved to Texas.  In opposition to the lawsuit, the defendant claimed to have no contacts with the State of California.  

The court ruled against the defendant, holding that California's long-arm statute reaches owners, publishers, and operators of Web sites when, in violation of California law, they make available for copying or distribution trade secrets or copyrighted material of California companies.  The plaintiff had a protected interest in the CSS software, which interest was violated by the actions of Pavlovich.

Added the court, “Pavlovich knew that California is commonly known as the center of the movie industry, and knew that Silicon Valley in California is one of the top three technology ‘hot spots’ in the country.  Pavlovich knew, or should have known, that the DVD republishing and distribution activities he was illegally doing and allowing to be done through the use of his Web site, while benefitting him, would injuriously affecting the motion picture and computer industries in California.”

© Caswell Bell & Hillison LLP          Attorneys and Lawyers, Fresno, California