Tag, You’re It! – Internet Jurisdiction “Enters the Chat”
One core subject every law student learns in their Civil Procedure course is “personal jurisdiction.” “Personal jurisdiction is the power of a court to make a decision about the party being sued in a legal suit. Simply put, a person or entity can only be sued in a legal jurisdiction if the jurisdiction has the power to compel the Defendant’s attendance.
This makes sense if we examine the meaning and origins of the word “jurisdiction” itself. Jurisdiction is a combination of two Latin roots: (1) juris, meaning “law”; and (2) dictio, meaning “to speak.” Taken together, jurisdiction is the authority, or power, to speak the law. In the United States, a court only has power to speak the law over a person who has a relationship to that geographic area in which that legal jurisdiction sits. For example, in custody cases, the child must have lived within the state of North Carolina for at least six months in order for a court in North Carolina to hear their case.
Of note, a court also must have “subject matter jurisdiction,” or, the power to hear a certain type of case – or subject- and speak the law. For example, a California state criminal court does not have the power to hear a North Carolina state criminal case, because a state court in California does not have the power to speak what North Carolina law is.
In sum, personal jurisdiction is a court’s power to hear and decide a case brought before it; if a court does not have personal jurisdiction, it cannot hear the case.
When does a court have personal jurisdiction?
Courts have developed several tests used to ensure that a court has personal jurisdiction over a case, but the case that establishes the most predominantly used test is International Shoe Co. v. Washington. In International Shoe, a shoe company was incorporated in Delaware but operated primarily out of Missouri. At a point, the company sent twelve to thirteen sales agents to sell shoes within Washington state. Eventually, the State of Washington sued International Shoe for not paying taxes. The company responded to the lawsuit by arguing that Washington state courts lacked jurisdiction over the company and, therefore, could not hear the case. The company reasoned that because it was incorporated in and operated out of Delaware and Missouri respectively, it did not have the necessary connection to Washington to place it under a Washington court’s power. The Supreme Court rejected this argument and found that the State of Washington did have personal jurisdiction because the company “had systematic and continuous contacts” within the state over a time period of several years. In other words, its business affairs in Washington, including contacts made by and through its multiple agents, created enough of a connection to bring a claim in the state. In summary, as illustrated in International Shoe, a state may have personal jurisdiction over a company or person if that entity has continuous and systematic contacts with the state.
The birth of a new personal jurisdiction era
Up until the 1980s, case law such as International Shoe had firmly established tests for personal jurisdiction, leaving little room for confusion. Fast forward to 1983: The Internet was born. The Internet presents a unique jurisdictional challenge because the Internet itself, at least at first glance, arguably has continuous and systematic contacts with every state. For example, Amazon is a website, and citizens in all 50 states order from and interact with Amazon; in addition, Amazon has contact with all 50 states through its delivery services. This contact is different than the contacts considered in International Shoe because Amazon is not making physical contact with each state in order to compel sales; rather, it is compelling sales through internet webpages and electronic advertisements. In other words, Amazon does not employ sales reps to show up at your front door and sell you products. As another example, the human user that commits a crime or wrong over the Internet easily has continuous and systematic contacts with every state, not to mention every country and continent with Internet access. The easy ability to have contact with anyone worldwide via the Internet creates a need for a reexamination of the original test, because it creates a broad net for authority of courts. Otherwise, any Internet user would be able to establish personal jurisdiction or be subject to personal jurisdiction in any state, thereby obliterating the purpose of courts not being able to have authority in all 50 states.
Interestingly, despite the Internet having been around for over forty years now, there still has not been an issue regarding personal jurisdiction and the Internet within North Carolina controversial enough to reach the Supreme Court.
So, how does North Carolina handle Internet jurisdiction?
A review of this case law showcases that North Carolina courts use one particular 4th Circuit case as precedent to answer how North Carolina handles Internet jurisdiction: ALS Scan, Inc. v. Digital Serv. Consultants, Inc. In ALS, a Maryland corporation sued a Georgia Internet service provider in Maryland state court for copyright infringement after the service provider allowed the corporation’s copyrighted photos to be posted by one of the provider’s website owners. The court held that Maryland did not have personal jurisdiction over the Georgia entity. In coming to its determination, the court created and applied the following rule:
A State may, consistent with due process, exercise judicial power over a person outside of the State when that person (1) directs electronic activity into the State, (2) with the manifested intent of engaging in business or other interactions within the State, and (3) that activity creates, in a person within the State, a potential cause of action cognizable in the State’s courts (Id. at 714).
This rule is best explained through an example. There is a haunted house in Alabama, McKamey Manor, to which many people are opposed. If a website owner from North Carolina were to post negative comments about the haunted house with the intent of dissuading people from visiting it, the courts in Alabama would not have personal jurisdiction over the website owner from North Carolina if the haunted house tried to bring the website owner to trial in Alabama for libel. Why? The website owner is not manifesting an intent of engaging in business within Alabama. Even more simply put, no monetary transactions are crossing over state lines into Alabama. Since the rule created in ALS contains an “and,” all three elements of the rule must be met for personal jurisdiction to be found. Thus, it does not matter that the website owner targeted an Alabama entity through electronic activity; nor does it matter that a potential cause of action arose. What matters is that the second element cannot be met: intent to engage in business within the State.
Nearly 20 years ago, Burleson v. Toback was brought before the United State District Court for the Middle District of North Carolina; this case illustrates North Carolina’s application of the rule created in ALS. In Burleson, a miniature horse trainer who trained horses to be guide animals sued a website company for making statements that discouraged the use of horses as guide animals. Since the website company specifically mentioned the plaintiff on its website, the plaintiff sued not only for libel, but also for interference with business relationships, arguing she lost business due to the website’s statements. The court found that the website’s contacts with North Carolina were not continuous and systematic enough to allow a court in North Carolina to have personal jurisdiction over the case. Applying ALS, the court specifically found the site’s activity to be “passive” in nature with the defendant having no intent to engage in business.
Moving forward…
Thus far, North Carolina has applied ALS to Internet jurisdiction cases that present themselves within the state. ALS clearly mirrors International Shoe’s intent for there to be continuous and systematic contacts within a state, but it also creates a safeguard to estop every case from being able to make it into the courts. Moving forward, North Carolina courts will likely continue to apply ALS unless or until the Supreme Court adopts a different rule. Yet, as more and more people work from home, order necessities, and make business deals through Internet services, North Carolina may be forced to re-evaluate its decision to apply ALS.
