Long Arm of the Law Reaches Across the Net — Sometimes

Getting sued is bad enough. It’s expensive and disruptive to your business. Getting sued out-of-state is worse: there are travel costs and potentially much higher legal fees.

Let’s say you’re a local business owner who’s just put up a Web site on the Internet. Under what circumstances might you have to defend a lawsuit in another state? Two recent cases addressed the question of jurisdiction over out-of-state defendants. In each case, their only contact with the state in which they were sued was through their Web site. The site operator’s intent and conduct was critical to the outcome.

In Bensusan Restaurant Corp. v. King, 1996 U.S. Dist. LEXIS 13035 (S.D.N.Y., Sept. 9, 1996), the owner of the famous “Blue Note” jazz club in New York filed suit in federal court in New York against a Missouri operator of a club of the same name for trademark infringement.

In April, 1996, King set up a Web site with a Missouri Internet service provider to advertise his small Blue Note jazz club in Columbia, Missouri. The site contained information about the club, a schedule and ticket ordering information. If tickets were ordered, they had to be picked up at the club; they wouldn’t be mailed.

Bensusan argued that New York courts should have jurisdiction over King because King’s Web site was accessible by anyone in New York connected to the Internet. But the court concluded that this was not enough to exercise personal jurisdiction. The court focused on the affirmative steps someone in New York had to take to access the Missouri club’s Web site, and noted that one had to actually visit the club to pick up tickets. This suggested that the information contained on the Web site was really directed toward jazz lovers in Missouri.

The fact that someone could learn about the club by accessing its Web site was not equivalent to advertising, promoting, selling or otherwise making an effort to target its product to New York, the court concluded. Had King taken such active steps and availed himself of the benefit of doing business in New York, it would not have been unreasonable to find jurisdiction, according to the court.

A different result was reached in Maritz, Inc. v. CyberGold, Inc., No. 4:96CV01340 ERW, 1996 U.S. Dist. LEXIS 14978 (E.D. Mo. August 19, 1996). In this case, Maritz, a Missouri corporation, sued California-based CyberGold in federal court in Missouri for trademark infringement. CyberGold moved to dismiss the suit for lack of personal jurisdiction because it claimed its only contact with Missouri was the accessibility of its Web site there.

The purpose of CyberGold’s site was to solicit e-mail addresses from Internet users, including those in Missouri, in order to forward to them advertisements in their selected areas of interest. The court noted that apart from its Web site being accessed 311 time by Missouri users (including 180 times by Maritz), CyberGold had no other contacts with the state of Missouri.

Did this constitute the necessary “minimum contacts” for a Missouri court to exercise personal jurisdiction?

The court focused on CyberGold’s intent and conduct. If a Missouri resident requested information from CyberGold’s Web site, it was automatically and indiscriminately sent. CyberGold sought to gain customers wherever they might reside. The fact that CyberGold transmitted information to Missouri users approximately 131 times was viewed by the court as evidence that CyberGold purposefully availed itself of the privilege of conducting business in Missouri. Therefore, the Court concluded, it was not unreasonable that CyberGold should be subject to jurisdiction in Missouri courts.

Junk E-mailer Stuffed

Anyone with an e-mail address has experienced watching their inbox fill up with unsolicited advertisements of Get Rich Quick schemes, miracle cures, and other electronic detritus, often as the online billing clock ticks away.

In Cyber Promotions, Inc. v. America Online, Inc., C.A. No. 96-5213 (E.D. Pa. 1996), Cyber sued AOL in federal district court over whether the Constitution’s First Amendment guarantees Cyber the right to send unsolicited e-mail advertisements to AOL subscribers over the Internet and whether AOL has the right to block those e-mail ads from reaching its members.

The lawsuit was sparked by AOL’s retaliatory “e-mail bombing” of Cyber after Cyber refused AOL’s demand to stop sending mass e-mail ads to its subscribers. AOL’s retaliation consisted of returning to Cyber in a mass transmission all unsolicited e-mails sent to undeliverable AOL addresses in order to disable Cyber’s e-mail capability. As a result, two of Cyber’s Internet service providers terminated their relationship with Cyber and a third refused to enter into a services arrangement with Cyber.

The Supreme Court has consistently ruled that the First Amendment guarantee of free speech is only a shield against abridgment of that right by governmental conduct. It provides no protection against merely private conduct. (See Hudgens v. NLRB, 424 U.S. 507, 513 (1976); and Hurley v. Irish-American Gay Group of Boston, 115 S.Ct. 2338, 2344 (1995)).

In the present case, the parties agreed that AOL was a private, non-governmental company. Nevertheless, Cyber argued that AOL’s function as an online provider that makes its e-mail facilities available to the public causes it to have a status akin to a governmental or municipal entity. Therefore, Cyber argued, AOL’s conduct vis-à-vis Cyber amounted to state action.

The District Court disagreed, concluding that because AOL did not exercise any exclusive public function and did not act with any state assistance or in concert with the state, its blocking of Cyber’s e-mail was not state action. Therefore, the First Amendment did not prevent AOL from blocking Cyber’s unsolicited e-mail advertising to AOL members.

Attorney Eric Freibrun specializes in Computer law and Intellectual Property protection, providing legal services to information technology vendors and users. Tel.: 847-562-0099; Fax: 847-562-0033; E-mail: [email protected].