Intellectual Property Law

Electronic Contracts and Jurisdiction under State Long-Arm Statutes

By Martha L. Arias

United State (US) Federal Courts undertake international and interstate party cases (diversity cases) such as those related to e-commerce.  Whether federal courts have personal jurisdiction over a particular defendant is determined by the law of the forum state.   States' jurisdictional and long-arm statutes include several rules to determine personal jurisdiction, i.e., defendant's physical presence or defendant's systematic and continue business in the forum state are ordinary rules to assert personal jurisdiction over a particular defendant.  Given the thriving of e-commerce activities and electronic transactions nowadays, a common question is whether electronic contracts are sufficient to assert personal jurisdiction under state long-arm statutes. 

Commonly, federal courts in diversity cases first consider whether a particular defendant has physical presence in the forum state; if this is not the case, long-arm statutes are considered.  US state long-arm statutes confer jurisdiction to the forum state under different theories such as "transacting business" in a regular basis, minimum contacts, etc.  Yet, only case law answers the concrete question of whether electronic contracts afford personal jurisdiction under a state long-arm statute. 

New York Federal Courts find personal jurisdiction over defendants conducting electronic contracts via Internet where "a non-domiciliary computer network service subscriber had an on-going contract with service to sell a product via the internet." Mason Tayler Med. Prods. Corp. v. Qwikstrip Prods, (N.Y. Dist. Court, 2000).  Thus, if X.com, a company located outside New York, has a permanent contract with a service company (it could be a company offering server services) in New York to sell products in that state, X.com is considered transacting business in New York under its long-arm statute.  In Mason Tayler the N.Y. district court also held that electronic communications or contracts made through electronic means such as telephone, fax, or via Internet, do not constitute "transacting business" for jurisdiction purposes. Instead, these electronic means are merely a "conduit to establish a contract" and are insufficient to provide a basis for jurisdiction. 

In CompuServe v. Patterson, 89 F.3d 1262, Ohio's Sixth Circuit Court found personal jurisdiction over the defendant under Ohio's long-arm statute.  The court held that the defendant had "purportedly avail" himself to Ohio courts by entering into electronic contracts over the Internet governed by Ohio law. 

In Reliance Nat'l Indem. Co. v. Pinnacle Cas. Assur. Corp, 160 F. Supp. 2d 1327 (M.D. Al. 2001), the Alabama court held that e-mails, letters, and phone calls can constitute minimum contacts for jurisdictional purposes.  Thus, it could be inferred that e-commerce contracts celebrated through e-mail in Alabama constitute minimum contacts with that state and therefore afford personal jurisdiction over defendants.  In this particular case, however, the court did not find personal jurisdiction over the defendant because the e-mails were not directly addressed to the defendant but they were forwarded to the defendant by third parties. 

One of the most interesting cases on personal jurisdiction and electronic contracts is the case of Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997).  In Zippo, the Pennsylvania court held that when a defendant usually conducts business over the Internet and enters into contracts over the Internet with residents of foreign jurisdictions, personal jurisdiction over this defendant is proper.  Thus, personal jurisdictions may be found on e-commerce companies systematically conducting business and entering into e-contracts with Pennsylvania's residents. 

Finally, most state long-arm statutes assert personal jurisdiction over defendants when their actions cause tortious consequences within its state.  Thus, the majority of federal courts assert personal jurisdiction over out-state defendants when these enter into electronic contracts with state residents and tortious consequences arise.  Examples of these states are New York, Columbia, Georgia, among others.

After reading the above cases we may conclude that federal courts may assert personal jurisdictions over out-of-state defendants that conduct electronic contracts, under the state long-arm statute, and particularly, under the tortious consequence doctrine.  Litigants, however, must carefully analyze the particular facts of their case and the state doctrine applied by their respective federal court. 

Full post as published by IBLS Internet Law Blog on August 04, 2008 (boomark / email).