A Court’s ability to exercise jurisdiction over an out of state business is determined by an array of federal cases which have interpreted the limits of the Constitution over the years. In a world where online consumption and business transactions are exceeding traditional “brick and mortar” consumption, DotComs who transact with consumers across all 50 states are also seeing lawsuits brought in every jurisdiction across the nation. The question for DotComs getting sued then becomes whether they would be subject to a Court’s jurisdiction even though there is no physical presence in that particular state or jurisdiction where the Court resides.
Our Los Angeles Business Litigation Attorneys were recently asked to defend a Los Angeles based DotCom against a lawsuit for copyright infringement filed in Idaho Federal Court. Our client had no physical presence in Idaho, had very few consumer transactions in Idaho and thus, pursuant to Constitutional “minimum contacts” requirements, the Los Angeles DotCom should not be subject to suit in Idaho.
Minimum Contacts – The Court’s power to exercise personal jurisdiction over a non-resident defendant is limited by both the applicable state personal jurisdiction statute (long-arm statute) and the Due Process Clause. See Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1110 (9th Cir. 2002); see also Sher v. Johnson, 911 F.2d 1357, 1360 (9th Cir. 1990). However, as the Ninth Circuit recognized, the Idaho Legislature intended to exercise all of the jurisdiction available under the Due Process Clause. See Lake v. Lake, 817 F.2d 1416, 1420 (9th Cir. 1987). Thus, resolution depends upon the issue of due process. See Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1155 (9th Cir. 2006).
Due process requires that, in order for a non-resident defendant to be haled into court, that defendant must have certain “minimum contacts” with the forum state such that the traditional notions “‘of fair play and substantial justice’” are not offended. See Sher, 911 F.2d at 1361 (quoting International Shoe Co. v. Washington, 326 U.S. 310, 320 (1945)). Additionally, “the defendant’s ‘conduct and connection with the forum State must be such that the defendant ‘should reasonably anticipate being haled into court there.’” Id. (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980)). The focus is primarily on “the relationship among the defendant, the forum, and the litigation.” See Shaffer v. Heitner, 433 U.S. 186, 204 (1977).
General v. Specific Jurisdiction – States may exercise general or specific jurisdiction over non-resident defendants. See Helicopteros Nacionales de Colombia S.A. v. Hall, 466 U.S. 408, 414-15 (1984). General jurisdiction can be asserted when the defendant’s activities in the forum state are “continuous and systematic” or “substantial.” See Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 445, 447 (1952); see also Lake, 817 F.2d at 1420. To find specific jurisdiction, the Court looks to the three-part test as applied in Lake, 817 F.2d at 1420.
Legal Standard for the exercise of General Jurisdiction – General jurisdiction exists if a DotCom’s contacts with the foreign jurisdiction are considered “continuous and systematic,” Helicopteros, 466 U.S. at 416, and the exercise of jurisdiction satisfies “traditional notions of fair play and substantial justice.” See Reebok Int’l Ltd. v. McLaughlin, 49 F.3d 1387, 1391 (9th Cir. 1995). “The standard for establishing general jurisdiction is fairly high and requires that the defendant’s contacts be of the sort that approximate physical presence.” See Bancroft & Masters, Inc. v. Augusta Nat’l Inc., 223 F.3d 1082, 1086 (9th Cir. 2000) (internal citation and quotation marks omitted); see also Gates Learjet Corp. v. Jensen, 743 F.2d 1325, 1331 (9th Cir. 1984). Several factors to consider when determining general jurisdiction include: “whether defendant makes sales, solicits or engages in business in the state, serves the state’s markets, designates an agent for service of process, holds a license, or is incorporated there.” See Bancroft & Masters, Inc., 223 F. 3d. at 1086. Moreover, “engaging in commerce with residents of the forum state is not in and of itself the kind of activity that approximates physical presence within the state’s borders.” Id.
Legal Standard for the exercise of Specific Jurisdiction – When specific jurisdiction is asserted, a three part test applies: (1) the non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (2) the claim must be one which arises out of or relates to the defendant’s forum-related activities; and (3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable. See Lake, 817 F.2d at 1421. The plaintiff bears the burden of satisfying the first two prongs of the test. See Sher, 911 F.2d at 1361. If the plaintiff fails to satisfy either of these prongs, personal jurisdiction is not established in the forum state. If the plaintiff succeeds in satisfying both of the first two prongs, the burden then shifts to the defendant to “present a compelling case” that the exercise of jurisdiction would not be reasonable. See Burger King Corp. v. Rudzewicz, 471 U.S. 462-, 476-78 (1985).
The Ninth Circuit has adopted a three part test to determine whether a company has “purposefully directed its activities in the forum state. This test adopted from the Supreme Court’s decision in Calder v. Jones, 465, U.S. 783 (1984) requires a showing that defendant (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state. Id. Thus, the Calder Test requires a further analysis of facts and law in determining the ability of a Court to exercise jurisdiction.
Following the above analysis and by weaving facts and law together, our Los Angeles Litigation Attorneys were able to procure a report and recommendation from the assigned District Court Judge that the case at issue in Idaho should be dismissed for lack of personal jurisdiction against the Los Angeles based DotCom entity. It is important to mention that the facts supported a dismissal, however, it is critical that the motion to dismiss be well presented and organized so that the District Court is walked through the step-by-step analysis of Constitutional law and the facts at issue.