Introduction and Background: A Court's Power to Adjudicate
To understand what courts and commentators are saying about the rules
regarding the scope of courts' "personal jurisdiction" over participants
in Internet transactions requires (unfortunately, perhaps) disentangling
a number of closely-related and oft-commingled legal doctrines, all of
which speak to the same, fundamental question: What is the scope (and derivation)
of a court's power to hear particular disputes and to compel the individuals
involved to obey its commands? To illustrate, consider the prototypical
Alice, a resident of Place1, has suffered some injury to person or property. She believes that, under the law of Place2, she is entitled to some form of compensation from Bob, a resident of Place3, for this injury. Alice files suit against Bob in Place4, asking the court in Place4 to compel Bob to deliver that compensation.
Place1 through Place4 might, for example, be different countries, or different States within the United States, or different counties within a particular State. Regardless, the question Alice must ask herself -- can the court do what she wants it to do, viz. compel Bob to compensate her for the injury she has suffered? -- is generally broken down into the following components(2):
Personal jurisdiction Personal jurisdiction refers to the Place4 court's ability to exercise dominion over the parties to this lawsuit so that it can compel their obedience to its judgment in the case. Our legal system (and most others) recognize certain limitations on any court's power to compel defendants to appear and defend themselves.(3) It is a fundamental principle of US law(4) that a court cannot validly act if it does not have personal jurisdiction over the parties to the suit. If the court in Place4 cannot, in accordance with these various limitations, exercise personal jurisdiction over Bob, it must dismiss Alice's lawsuit; if it nonetheless goes ahead and hears the case and issues a judgment, that judgment is not entitled to respect by other courts elsewhere (see "Enforcement of Judgments, below).
Subject matter jurisdiction Courts are not only restricted in terms of the persons over whom they can exercise power, they may be restricted in terms of the kinds of disputes that they can adjudicate. Courts are creatures of statute -- the legislature vests them with power, and may condition that grant of power on their ability to hear only certain kinds of disputes. The U.S. federal courts, for example, have had their subject matter jurisdiction limited in this way; the Constitution, in Article III Section 2 clause 1, provides that federal courts can only hear a specified range of cases, most importantly those (a) "arising under this Constitution, the Laws of the United States, and Treaties made," and (b) "between Citizens of different States."(5) Similarly, many States have specialized courts (traffic court, small claims court, etc.) along with courts of so-called "general jurisdiction" empowered to hear all lawful claims.
As is the case for personal jurisdiction, subject matter jurisdiction is necessary for a court to act in a valid manner; courts that do not have subject matter jurisdiction over the particular dispute brought to it must dismiss such claims when they are presented before it. Thus, even if our Place4 court possesses personal jurisdiction over Bob, it may not be able to grant Alice the relief she seeks because it may lack subject matter jurisdiction over the claim that Alice has made; if Alice's claim arises under, say, the law of defamation and she has filed suit in Newark traffic court, the court must dismiss the suit, inasmuch as the legislative grant of authority covered only certain matters (traffic disputes) and no others.
Venue Even if the court that Alice has chosen can exercise personal jurisdiction over Bob and has subject matter jurisdiction over Alice's claim, it may be the "wrong" forum because of additional restrictions imposed on precisely where Alice needs to file her lawsuit -- so-called "venue" rules. These are, generally speaking, designed to protect defendants against being sued in "inconvenient" places.(6) Thus, the law of Place4 may provide that lawsuits of the kind Alice has brought can only be heard in the court of the county in which Bob resides, or the county in which the events giving rise to the injury occurred.(7)
Venue rules are not "fundamental" in the same way that rules regarding personal jurisdiction and subject matter jurisdiction are; that is, while a court is directed not to hear cases brought in the wrong venue (and, generally, is directed to transfer the suit to the correct venue), judgments issued in such cases are not considered null and void in the way that judgments issued in cases where the court lacked jurisdiction are.
Choice of Law If (and only if) the court that Alice has chosen determines (a) that it can exercise personal jurisdiction over Bob, (b) that it possesses subject matter jurisdiction over Alice's claim, and (c) that it is a proper forum under the venue rules governing such claims, it must then decide what body of law to apply to the dispute -- the so-called "choice of law" problem. There may be a number of plausible candidates -- the law where Alice lives, where Bob lives, where the court sits, the transaction that is the basis of Alice's claim arose, etc. Alice, as noted, believes that she is entitled to relief under the substantive law of Place2; she now needs to persuade the court in Place4 that, under its own choice of law rules and principles, it should apply the law of Place2 to the dispute she has brought to it.
Enforcement of Judgments Finally, if Alice has obtained a judgment against Bob (for money damages, say), she then will enlist the support of the Place4 court in enforcing her judgment against Bob. This may be a complex undertaking if, for example, neither Bob nor his assets are physically located within the boundaries of Place4. In that case, Alice may need to take evidence of her favorable judgment to a different jurisdiction -- one where Bob has assets, for example -- and seek to have that jurisdiction honor the judgment she has obtained and enforce it against those assets.
In the United States federal system, this problem is dealt with by the
"full faith and credit clause" of the Constitution; each State, in other
words, is bound to respect and enforce judgments duly entered by courts
in other States (unless the party against whom enforcement in sought (Bob)
can demonstrate that the original judgment is somehow infirm, because,
for example, the court issuing it lacked either personal jurisdiction over
Bob or subject matter jurisdiction over Alice's claim). Internationally,
however, things are considerably more complicated; there is nothing equivalent
to a "full faith and credit clause" applicable to relations between sovereign
nations, and while some countries have bi-lateral treaties obligating them
to reciprocally honor each other's judgments, more frequently this problem
is dealt with by reference to principles of international "comity": "A
valid judgment rendered in a foreign nation after a fair trial in a contested
proceeding will be recognized in the United States so far as the immediate
parties and the underlying cause of action are concerned."(8)
The focus of this discussion is on the first of the above-listed doctrines, namely the rules regarding the assertion of personal jurisdiction.(9) Under US law, determining whether a court may exercise personal jurisdiction over a defendant requires a two-fold inquiry.
First, is there a legislative grant of authority authorizing the court to exercise jurisdiction over the defendant?
If Alice has filed her suit in State court, we look first to
the statutes of the State in which the court is located. All States have
statutory grants providing that their courts can exercise personal jurisdiction
over their own residents; in addition, all have additional provisions --
"long-arm statutes" -- providing that their courts may assert personal
jurisdiction over non-residents as well, in certain circumstances. A typical
example is New York State's long-arm statute (NY C.P.L.R §302:
§302. Personal jurisdiction by acts of non-domiciliaries
(a) Acts which are the basis of jurisdiction. As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any non-domiciliary, or his executor or administrator, who in person or through an agent:
1. transacts any business within the state or contracts anywhere to supply goods or services in the state; or
2. commits a tortious act within the state, except as to a cause of action for defamation of character arising from the act; or
3. commits a tortious act without the state causing injury to person or property within the state, except as to a cause of action for defamation of character arising from the act, if he
(i) 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 the state, or
(ii) expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce; or
4. owns, uses or possesses any real property situated within the state.
Note section 302(a)(3) -- even if the defendant's tortious act occurred outside NY, the court may exercise personal jurisdiction over the defendant in certain circumstances (discussed more below).
If Alice has filed her suit in federal court, we look first to see if any provision of federal law permits the court to exercise personal jurisdiction over the defendant; some federal statutes, for example, provide for nationwide service of process, thus authorizing the court to exercise personal jurisdiction over any defendant located within the United States. If no such specialized federal law provision exists, the Federal Rules of Civil Procedure direct the federal court to look to the "long-arm" statute of the State in which the court is located to determine whether or not it has personal jurisdiction over the defendant; that is, assuming that Congress has not specifically provided for rules of personal jurisdiction applicable to the case at hand, the default rule in federal court is that the court looks to see if the defendant would have been subject to personal jurisdiction in the local State court; if so, the federal court may exercise personal jurisdiction over the defendant, and if not, it may not do so.
Second, does the exercise of personal jurisdiction over the defendant contravene the Constitution?
If there is statutory authorization for the court's exercise of personal jurisdiction over a defendant, that exercise must then be examined to see whether or not it contravenes constitutional limitations. In 1877, in the landmark Pennoyer v. Neff(10) decision, the Supreme Court held that the Due Process Clause of the 14th Amendment constrains States in the exercise of personal jurisdiction over non-residents. The Court enunciated two rigid and simple territorial due process constraints: (1) "every State possesses exclusive jurisdiction and sovereignty over persons and property within its territory;" and (2) "no State can exercise direct jurisdiction and authority over persons or property without its territory."
These principles may have been adequate in the 19th century, when occasions for exercising personal jurisdiction across State lines were relatively infrequent, as a consequence of limitations of communications and transportation technology. But by the middle of the 20th century, in response to evolution of those technologies and in one of the better-known examples of judicial re-interpretation of a constitutional phrase, the Court re-configured these due process constraints so as to base them not on territorial presence but on a kind of "virtual" presence.(11) In International Shoe v. Washington,(12) the Court held that courts may exercise personal jurisdiction over out-of-state parties if those parties have "certain minimum contacts with [the state] such that maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Courts must consider both the amount of the party's contacts with the state and the relationship between the contacts and the claims when determining whether the court can exercise personal jurisdiction over that party.
Summarizing the immensely complex body of law that has arisen to explicate
the meaning of that "minimum contacts" standard, for the exercise of jurisdiction
over a defendant to comport with due process,
(1) there must be "some act by which the defendant purposefully avails [itself] of the privilege of conducting activities with the forum state" Hanson v. Denckla, 357 U.S. 235, 253 (1958);
(2) the plaintiff must show "either that the defendant's contacts with the forum are continuous and systematic, or that the suit arises out of or is related to those contacts," Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 415-16 (1984);
(3) the defendant's conduct and connection with the forum state must be such that "he should reasonably anticipate being haled into court there," WorldWide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980); and
(4) the exercise of personal jurisdiction must be "reasonable." Burger King Corp. v. Rudzewicz, 471 U.S. 462, 476-77 (1985).(13)
Note point (2) above; plaintiff must show either that the defendant's
contacts are "continuous and systematic," or that the suit "arises
out of those contacts." The former situation is referred to as "general
jurisdiction"; if Bob has "continuous or systematic" presence in New York,
he is amenable to suit there even for claims that do not arise out
of the activity constituting that presence; if, for example, he maintains
an office in New York from which he conducts business, he is subject to
personal jurisdiction in New York even for claims that have nothing to
do with the activity taking place in those offices. On the other hand,
if his contact with New York falls below the "continuous or systematic"
threshold, he may still be subject to jurisdiction in New York as long
as he has some lesser contact with New York and Alice's claim
arises out of that contact ("specific jurisdiction").
Determining whether activity taking place on the Internet constitutes the necessary "minimum contacts" between a defendant and the forum state is problematical for a number of reasons. Most notably, consider the requirement that the defendant must "purposefully avail" him/herself of the "privilege of conducting activities with the forum state" before a court may exercise jurisdiction over him/her. Assume, in our hypothetical, that Alice resides in New York (and files suit against Bob there), while Bob resides in California; assume further that Bob has never been to New York, nor has he ever done business (in the ordinary sense) with New Yorkers. Bob does, however, have a World Wide Web page (for himself, or for his business). Bob's web page is, of course, accessible to residents of New York; indeed, we may assume that Bob's web page has been "visited," on thousands or hundreds of thousands of occasions, by New Yorkers. Has Bob "purposefully availed" himself of the privilege of doing business in New York?
One could reasonably say that he has; after all, he certainly knows (or should know) that his web page will be accessed by New Yorkers, and by purposefully placing information in that medium one might say that he has purposefully "entered" New York (and should, therefore, "reasonably anticipate being haled into court there"). On the other hand, Bob might point out that there is no way that he could possibly set up a web site and exclude New Yorkers (or residents of any particular jurisdiction). If the act of setting up the web page does constitute "purposefully availing" himself of the privileges of doing business in New York, it would logically follow that the act of setting up the web page constitutes "purposefully availing" himself of the privilege of conducting business anywhere his web page can be accessed, viz., any State (or, for that matter, any country on the globe). It would surely strike the millions of individuals and businesses who have been rushing to set up a web presence as "unreasonable" to suggest that this one act has subjected them to the personal jurisdiction of every court in the country and perhaps the world.
The courts, not surprisingly, are struggling to come up with a coherent doctrine of personal jurisdiction for Internet transactions. It is probably far too early to suggest that concrete rules have yet emerged. The leading cases are summarized in the attached. A few general themes appear to be emerging.
1. Presence on the World Wide Web is not sufficient, in and of itself, to support the exercise of general jurisdiction over non-resident defendants. See. Jolly v. Weber Hotels, 977 F. Supp. 327 (D NJ 1997).
2. Some courts will read the due process constraints "liberally," sustaining exercises of jurisdiction on the basis of little more than the accessibility of defendant's (foreign) web page to residents of the forum State.
Cases generally applying the broadest possible view of Internet contacts, and sustaining exercises of personal jurisdiction on the basis of the accessibility of defendant's web sites to residents of the forum state, include Bunn-O-Matic Corp. v. Bunn Coffee Service Inc., 1998 U.S. Dist. LEXIS 7819 (C.D. IL 1998), Inset Systems, Inc. v. Instruction Set, Inc., 937 F. Supp. 161 (D. Conn. 1996), Maritz, Inc. v. CyberGold, Inc., 947 F. Supp. 1328 (E.D. Mo. 1996), and Minnesota v. Granite Gates Resorts, Inc., 568 NW 2d 715 (Minn. Ct. App. 1997).
3. A "sliding scale" for the evaluation of Internet contacts, under which the "likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet," has been endorsed by a number of courts in recent months, and may be in the process of becoming a generally-accepted standard for evaluating the exercise of personal jurisdiction based on contacts over the Internet. As set forth in the case of Zippo Manufacturing Company v. Zippo Dot Com, Inc., 952 F.Supp. 1119 (W.D.Pa., Jan 16, 1997):
"At one end of the spectrum are situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper. E.g. Compuserve, Inc. v. Patterson, 89 F.2d 1257 (6th Cir.1996). At the opposite end are situations where a defendant has simply posted information on an Internet Web site which is accessible to users in foreign jurisdictions. A passive Web site that does little more than make information available to those who are interested in it is not grounds for the exercise personal jurisdiction. E.g. Bensusan Restaurant Corp., v. King, 937 F.Supp. 296 (SDNY 1996). The middle ground is occupied by interactive Web sites where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Website. (emphasis supplied).
Top [case summary]
2. For excellent general treatments of this complex subject, see Dan Burk, "Federalism in Cyberspace," 28 U Conn L Rev 1095 (1996) and Henry H. Perritt, Jr., "Jurisdiction in Cyberspace," 41 Vill. L. Rev. 1 (1996).
3. Restrictions on the court's exercise of personal jurisdiction over plaintiffs are negligible; after all, the plaintiff -- Alice, in our prototypical case -- has initiated the suit by choosing Place4 as the jurisdiction in which to file, and the court's power over her can and is easily justified on the theory that she has thereby consented to the exercise of court's power over her.
4. Note that this outline deals exclusively with an analysis of these issues under United States law.
5. The full text of this clause reads:
"The judicial power shall extend to all cases, in law and equity, arising under this constitution, the laws of the United States, and treaties made, or which shall be made under their authority; to all cases affecting ambassadors, other public ministers and consuls; to all cases of admiralty and maritime jurisdiction; to controversies to which the United States shall be a party; to controversies between two or more states, between a state and citizens of another state, between citizens of different states, between citizens of the same state, claiming lands under grants of different states, and between a state, or the citizens thereof, and foreign states, citizens or subjects."
6. See Howard Fink & Mark Tushnet, Federal Jurisdiction: Policy and Practice (1984), at 407, 428-29.
7. For example, for lawsuits in the federal courts, the general federal venue statute, 28 USC §1391, provides that lawsuits may be brought only in "(1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is commenced, if there is no district in which the action may otherwise be brought" whenever the court's subject matter jurisdiction is founded on "diversity of citizenship" -- i.e., where the court's jurisdiction is founded on the constitutional grant (see note 5) allowing federal courts to hear cases "between Citizens of different States." In all other cases, the suit may be brought in "(1) a judicial district where any defendant resides, if all defendants reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought." There are specialized venue rules for particular kinds of federal actions that override these general venue rules in federal court; for example, 28 USC §1400 provides special venue rules in copyright and patent cases, requiring copyright cases to be brought "in the district in which the defendant or his agent resides or may be found" and patent cases to be brought "in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business."
8. Restatement (Second) of Conflict of Laws §98 (1971). See Perritt, supra note 2, at 58-64.
9. As Professor (now Dean) Henry Perritt has noted, the differentiation of these into five subtopics is itself a relatively recent phenomenon, dating back no further than the middle of the last century. In early English common law, not to put too fine a point on it, there was but a single question: were Bob or his assets located physically within the dominion circumscribing the court's power? If so, the court could exercise personal jurisdiction over Bob, the court would apply its law to the action and enforce its judgment against Bob or those assets; if not, Alice would have to look elsewhere for relief. Some scholars, myself included, believe that as disputes over conduct taking place on the Internet increase in frequency, as they surely will, we may be returning to that relatively "primitive" condition; that is, precisely because of the overwhelming complexity of applying these diverse rules to Internet conduct, the inquiry may return to a relatively simple set of questions: does Bob have assets within the jurisdiction of the court or not?
10. Pennoyer v. Neff, 95 U.S. 714 (1877).
11. As Prof. Burk has noted, the personal jurisdiction problems posed by virtual commerce and Internet telepresence "are in many ways the culmination of a long evolution of legal doctrine occasioned by changing technology. Traditionally, jurisdiction over the person was premised on the physical presence of the individual in the forum; this continues to be a viable jurisdictional basis. However, increased physical mobility due to automobiles and other modern transportation placed this jurisdictional basis under severe strain, as did disputes over 'virtual' entities such as corporations that have no physical situs, and over "virtual" properties such as stocks and debts that similarly lack physical form." Burk, supra note 2, at 1107.
12. International Shoe v. Washington, 326 U.S. 310 (1945).
13. The Supreme Court has also offered a list of five jurisdictional "fairness factors" that may require a separate assessment, especially when the defendant's contacts with the forum are attenuated. Burger King, 471 U.S. at 477. These include the inconvenience to the defendant of defending in that forum, the forum state's interest in adjudicating the dispute, the plaintiff's interest in obtaining convenient and effective relief, the interstate judicial system's interest in efficient resolution of interstate conflicts, and the shared interest of the states in furthering substantive social policies. Id. See generally Burk, supra note 2, at 1110-1119.