Newsletter

In a nation of 50 different systems of state courts and a highly interconnected national economy, the issue of when one state’s courts can assert jurisdiction over a nonresident person or business has always been fertile ground for litigation.

State legislatures have addressed the matter with laws that are the civil counterparts to the notion that criminals cannot escape the "long arm of the law." But "long-arm statutes," as they are known, do have their limits. Essentially, nonresidents can be sued in the courts of any state where they have had such contacts inside the state that it is reasonable to conclude that they have submitted themselves to the authority of the courts in that state. The principle is vague, but it has to be to cover the almost endless ways in which we conduct business.

In the business world, conventional arguments over the application of long-arm statutes have involved questions such as whether a party sought to be sued had an office or personal representative in the forum state, or whether a contract was signed by the parties in that state. Those issues still arise, but in the information age, courts increasingly have had to adapt the rules to business conducted over the Internet. Just because a company’s website is accessible by customers in a given jurisdiction does not necessarily mean that the company can be sued there. The emerging rule of law is that the more that a customer can have online interactions with a business based elsewhere, the more likely it is that if things go wrong the business can be forced to play an "away game" in court.

Close, but No Cigar
Examples make the point better than statements of rules of law. A Vermont furniture store used a trucking company to deliver furniture to a customer in North Carolina. When the buyer was injured during unloading, he tried to sue the furniture company in a North Carolina court. In this case, the "long arm" was not long enough to reach the Vermont company. The furniture had been bought and paid for in Vermont. The only respect in which the store had any connection to North Carolina was that its website could be accessed there, like anywhere else. But it was a passive site, giving information about products, but not allowing purchases through the site.

When an Oklahoma resident bought a laptop computer from a Georgia company, then returned it for repairs, never to see the laptop again, he was unable to sue the company in Oklahoma. The customer had learned about the computer from the Georgia company’s website, but he had ordered it by telephone and had not used the website to make the transaction.

Caught by the "Long Arm of the Law"
At the other end of the spectrum are cases in which businesses could be sued in the states where their customers lived because the businesses had a more substantial online “presence” in those states. A dog breeder in Illinois could make a similar Oklahoma business defend a lawsuit in Illinois because the Oklahoma business operated an interactive website and also used chat rooms to reach potential customers all over the country.

A California customer of a hotel run by a Nevada casino was able to haul the casino into a California court to defend allegations that it had imposed an energy surcharge on customers without notice. The plaintiff alleged that nothing in the casino’s promotional activities, including its website, informed customers of the charge. It was important to the ruling that the casino used an interactive website where out-of-state customers could get quotes and book rooms. In addition, there was a close connection between the alleged wrong—the misleading promotions—and the casino’s website that targeted millions of California residents.