Beware of Juisdiction Threat to E-Commerce

A legal concept under which companies with Web sites can be sued in any state – even states in which they did no business – has come back from the dead more times than Freddy Krueger. Those who don't want to see the Internet strangled by litigation can only hope that soon the courts will kill this concept forever.

The traditional concepts of jurisdiction are based on common sense assumptions about where things happen. The Internet, however, is both everywhere and nowhere. Some courts have seen this as a temptation to extend their jurisdiction everywhere. In 1996 a Connecticut court ruled that since a Web site could be accessed from any state, a company on the Web should expect to be haled into court in any state.

Defenders of the Internet have noted that this applies a more demanding concept of justice to the Internet than to ordinary business. Such a concept could stunt the growth of the Internet by encouraging mountains of litigation.

Too many courts have exercised this revolutionary concept of jurisdiction on the slenderest of grounds. In a 1997 case, for instance, a U.S. District Court in North Carolina assumed that North Carolinians had accessed an Illinois company’s Web site. The court then exercised personal jurisdiction because those assumed contacts were by definition related to the subject of the lawsuit.

In a decision handed down in June 1999, a Virginia federal court held that it could exercise jurisdiction over two Texas journalists in a defamation suit filed by a Virginia resident because the alleged defamatory communication was transmitted to an AOL Usenet server in Virginia. If followed, the Virginia courts would have personal jurisdiction over all AOL members worldwide.

Fortunately, just as the hero and heroine usually triumph in the final reel of a horror movie, courts are beginning to realize that traditional notions of fair play and substantial justice are still the best guides to setting jurisdiction. These courts are focusing more on the facts of the case and the obvious intent of the people involved, rather than on nebulous theories or mistaken assumptions about the Internet.

This year, for instance, a Louisiana court declined to exercise jurisdiction in a domain-name dispute between a bowling alley in Louisiana and one in Chicago. That court’s action displayed recognition of the rather obvious fact that few Chicago bowling alleys seek to lure customers away from Louisiana. Another 1999 case involved an Illinois restaurant and an Ohio restaurant with a Web site. The Illinois court declined to exercise jurisdiction, indicating that the judge realized few Illinois residents drive to Ohio for dinner. Other decisions have shown that more courts are recognizing that traditional notions of justice and fair play are the best guides to justice on the Internet.

Recent decisions have shown that traditional concepts of jurisdiction are also effective in keeping rascals from hiding in the mists of cyberspace and escaping their day in court. For the Pope's visit to St. Louis in 1999, the Internet Entertainment Group set up Web sites using the domain names “papalvisit.com ” and “papalvisit99.com.” Those sites, however, encouraged Web surfers to visit sites featuring distinctly impious activities for adults. When the Archdiocese of St. Louis sued, the Missouri court exercised jurisdiction, on the reasonable inference that Web sites about an event in Missouri may fairly be judged under Missouri law, and showing that the Web cannot be used as a smokescreen to hide from the law.

It is encouraging that courts in other nations are also beginning to shake off distracting notions about the new technology and are focusing on justice instead. In the United Kingdom, the man who ran Britain’s biggest Internet pornography operation got a jail term when a judge rejected the defense that British courts had no jurisdiction because the servers from the pornographic web sites were based in the United States. Such a notion is as absurd as saying that someone who had mailed a bomb from a post office in Maine to an intended victim in California could not be tried in California but only in Maine.

In March, a Japanese court reached a similar conclusion in a similar case, convicting a man of distributing smut via the Web, despite his contention that the Japanese courts had no jurisdiction because his server was in the United States.

The British and Japanese decisions in the porn cases, and some of the recent American cases cited above, show that courts are beginning to recognize that Internet enterprises must receive the same justice as any other endeavor. The traditional concept of jurisdiction, with a bit of stretching, is still the best way to provide justice and encourage growth on the Internet. When the law finally drives a stake through the idea that setting up a Web site makes you liable everywhere, everyone involved with the Internet should cheer – and hope that there’s no sequel.

BEWARE OF JURISDICTION THREAT TO E-COMMERCE