Earlier this month, I was a panelist on a webinar on Personal Jurisdiction From E-Communications: Social Media, Email, IM and Cloud Computing along with Mark McGrath of Sheppard Mullin.
Our panel focused on the evolving landscape of personal jurisdiction in the online world starting with the advent of the internet to leading up to the world of cloud computing.
We started with a discussion of how the Supreme Court’s core decisions still provide useful guideposts for this fact-intensive inquiry, even as the cases shift from the physical to the digital world. The discussion started with International Shoe, which was heralded as a watershed decision in its day in 1945, decided at the dawn of interstate commerce with individuals and goods traveling farther and faster than ever before, leaving a trail of disputes in their wake. From there, we took the audience on a brief tour of Worldwide Volkswagen, Asahi, McGee International, Calder v. Jones, and Burger King – all of which still affect the ways litigants frame their position and way the courts analyze the issue in terms of minimum contacts, foreseeability, and purposeful availment (among others).
After the history lesson, we discussed Zippo Manufacturing, Inc. v. Zippo Dot Com – the early internet case wherein the District Court for the Western District of Pennsylvania developed a “sliding scale” test for the evaluation of websites. On one end of the spectrum were “passive” websites that simply provided information without permitting the purchase of goods or the otherwise inserting the business into a specific forum state. On the other side of the spectrum are the interactive websites that purposefully inject themselves into the forum states with their commercial activity, including the sale of goods through the online portal. Many websites occupy the middle ground, leaving the courts to step in to weigh the minimum contacts.
We then discussed how courts across the country have either embraced or rejected the sliding scale framework. Many courts rely on Zippo and its insight on the ways commercial activity occurs as well as how internet activity makes various tortious activity possible, from copyright and trademark infringement to defamation.
Other courts have cast the decision aside as a relic of the first days of the internet when the technology was “new”, which is hardly the case today as millions of businesses and individuals have websites and communication through websites is no longer a novel activity. Those courts also criticize Zippo for overemphasizing the role of the website in the examination of “minimum contacts” often to the exclusion other types of contacts, i.e. meetings, phone calls, letters and emails.
Mark then explained how social media has been discussed in cases. One main observation was that the use of social media to promote business interests is an insufficient basis for a court to exercise jurisdiction. He also described the limited instances where social media usage compelled a finding of personal jurisdiction over a defendant.
Mark then shifted the discussion to e-communications in tort law. He covered how various torts have been affected by websites and social media, using the “effects test” under Calder v. Jones as a starting point. That test looks to the forum where the effect of the tort is felt and where the defendant aimed his actions. In many ways, e-communications have made the ability to commit defamation and copyright and trademark infringement far easier given the ability to reach audiences far beyond the tortfeasor’s location. Courts have set general thresholds requiring specific efforts to connect the action with the forum state, but the outcomes still vary widely.
I then analyzed contract cases from New York to Hawaii, examining the effect of e-communications in that area. Emails, by and large, are the most frequent type of e-communications featured in these cases. One of the main themes in these cases is that the length of the contractual relationship played a substantial role in whether the court would exercise jurisdiction. For example, one-off deliveries of good or sales of off the shelf products were unlikely to create the minimum necessary contacts for jurisdiction, but the service contracts stretching over longer periods of time — months or years — were far more likely to generate the email traffic and exchange of information sufficient to summon the defendant into the forum state.
Finally, we addressed the recent significance of cloud computing on the jurisdiction analysis. Because cloud computing services often serve data in multiple locations and in locations that the end-users (including potential parties) may not know about, there are few helpful guideposts in existing e-communications case law. While the general themes of Supreme Court jurisprudence can still be applied, I noted that the Zippo test was inadequate because cloud cases often do not have the interaction between plaintiff and defendant through an online medium or connection to identifiable locations. A defendant can act on information without knowledge and his actions taking place in any forum state, and in some instances he is unaware of the identity of the plaintiff.
We then discussed how case involving data servers are closer comparable cases for cloud computing issues. I referenced the recent MacDermid case where the District of Connecticut exercise personal jurisdiction over a Canadian defendant on trade secret issues because she accessed her former employer’s email server, which was located in Connecticut. The federal government has also used the fact that government servers are located in Virginia in order to exercise jurisdiction over various types of defendants. Earlier posts have addressed these issues in detail: Cloud Computing, Social Media, and Other Internet-Based Data Transmissions Could Give Rise to Personal Jurisdiction in Distant Forums and The Internet Flows Through…Virginia: Federal Prosecutors Use Server Location to Extend Their Reach.
Unfortunately though, some cloud computing cases leave open the possibility that there are no suitable forums where a plaintiff could establish the minimum contacts necessary to satisfy the due process. Specific legislative solutions may be necessary to assist elusive defendants that can remain hidden in the clouds spreading across several forum states. While the panel acknowledged these new challenges for litigants and courts, we emphasized that the basics don’t change: consider facts carefully, plead your jurisdictional foundation generally to leave open for a variety of potential positions, seek jurisdictional discovery, and pursue a motion to change venue under forum non conveniens to reduce the impact of litigating the case in a remote location.