Where Can You Sue an Internet Business?

Thanks to the wonders of e-commerce, the world is at your fingertips. Need a new fridge? It's just a few clicks and a truck ride away. Time to spruce up your business wardrobe? You can find clothes, get fit to your size, and be styling within days. It's tough to beat the simplicity and convenience of online shopping. As long as everything goes as planned, that is.

If only things were so simple. The refrigerator arrives, but it won't fit through your front door. The clothes are poorly made, or just aren't your vibe. Now, suppose the seller refuses to provide a refund. If you want your money back, you'll have to fight it out in court. A costly court battle in a distant state makes no sense if you got just a few hundred (or even a couple thousand) bucks on the line.

When it comes to cyber squabbles, the first—and often most important—question is: Where can you to sue? The short answer is: It depends on the facts. In particular, where you're allowed to sue (sometimes called the "forum state") often comes down to which state courts can assert personal jurisdiction over your opponent.

We explain the basics of personal jurisdiction and how it applies to cyber disputes. We'll include several examples, including actual court cases over online business deals gone bad.

Personal Jurisdiction: The Basics

To hear a case, a court must have personal jurisdiction over the parties, both the plaintiff (the one who's suing) and the defendant (the party being sued). In a nutshell, personal jurisdiction means the power to issue a decision that binds the parties to a case.

Generally speaking, a court can exercise personal jurisdiction over a party who:

• consents to it
• is present within the forum state, or
• has enough contacts with the forum state that exercising personal jurisdiction is fair.

Consent to Personal Jurisdiction

When you're the plaintiff, you consent to personal jurisdiction by filing suit in a state's courts. If you're the defendant, you can consent by showing up in court and participating in a lawsuit without objection.

You also might consent to personal jurisdiction by signing or otherwise agreeing to a contract with language that looks something like this: "The parties agree that any dispute over the terms or performance of this contract will be heard in the state courts of [state name]."

Where might you have agreed to contract terms like this? In what's commonly referred to as a "clickwrap agreement" or "clickwrap contract." When you create an online account with a merchant, you have to click "I Agree" to certain terms and conditions of use. The language might be buried there. Or when you make an online purchase, you might have to agree to contract terms there.

Physical Presence Within the State

With few exceptions, physical presence in a state is enough to subject a defendant to personal jurisdiction there. For example, suppose a defendant lives or has their main place of business in Nevada. They can be sued in Nevada courts for almost any kind of case, including over an internet transaction.

This rule probably also applies to a party who's temporarily in the state. Say the defendant visits Nevada for a weekend of gambling. If the plaintiff can serve them with lawsuit papers while they're at the poker table, Nevada can exercise personal jurisdiction.

Minimum Contacts With the State

Since at least the early 20th century, it's been common for companies to do business across state lines. And in today's connected world, people and businesses sell their products and enter into commercial transactions all over the country. The law has adapted to changing business practices so that courts can reach beyond their borders to hold nonresidents accountable for harms they cause.

To do this, courts use the "minimum contacts rule." When a person or business in one state is found to have sufficient contacts with another state, courts in that other state can reach across state lines and subject nonresidents to personal jurisdiction. Stated a bit differently, a person or business having enough contacts with a state can be dragged into that state's courts even though they don't live or have their main place of business there. (See International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).)

Usually, any substantial contacts or activity within a forum state will support personal jurisdiction. Here are some of the most common types of contacts that can suffice:

• regularly soliciting business in the state, including advertisements
• earning substantial revenue by selling goods or services in the state
• having employees or agents in the state
• maintaining an office, warehouse, or other physical presence in the state
• owning property in the state
• making contracts in the state
• doing something in the state that harms a person or business there
• causing a motor vehicle accident in the state, and
• engaging in some other persistent course of conduct in the state.

Minimum contacts can be tricky when the internet is involved. Courts have said it's unfair to subject every website owner to personal jurisdiction in every state simply because the site can be seen there. Similarly, sites that only post information without allowing user interaction or product sales (sometimes called "passive sites") aren't likely, by themselves, to support personal jurisdiction.

Can I Sue an Online Seller in My State's Small Claims Court?

It depends on personal jurisdiction. When your fight is with a person or business that calls your state home? Yes, they'll have to answer in your state courts, including small claims court, for online transactions. Likewise, if the seller is found to have consented to personal jurisdiction, you can haul them into court on your home turf.

Out-of-State Sellers and Minimum Contacts

But if the seller is out of state and hasn't consented, personal jurisdiction likely will depend on whether they have enough contacts with your state to support personal jurisdiction. When the seller's only foray into your state was your purchase, or if yours was one of just a small handful of transactions in the state, sufficient contacts are almost certainly lacking. You won't be able to sue in your home state's courts, including small claims court.

Take a look at the list of contacts above. If you can convince a court that the seller meets two or three of them, chances are you're in luck. In particular, focus on these:

• soliciting and advertising for in-state sales
• revenue from in-state sales
• making contracts in the state, and
• causing harm in the state.

Courts tend to focus heavily on these factors when out-of-state sellers try to deny minimum contacts. When some or all of them cut in your favor, that should be enough to force the seller to answer in your state's courts.

These contacts can—but don't have to be—internet-based. When a company advertises and solicits by sending mailers or catalogs into a state, those count toward the required minimum contacts. If a seller has sales reps who phone or visit in-state customers, those are contacts as well.

Can a Website Itself Be a Contact?

Yes. To base personal jurisdiction in your state's courts on a website, you must show that the site is "interactive." This means you need to be able to interact with the website's owner through the site by, for example:

• ordering samples or product information
• chatting with a person or an artificial intelligence bot
• entering into contracts
• buying and paying for products or services, and
• returning or exchanging purchases.

When you're hanging your personal jurisdiction hat—so to speak—on a website, the key is to show that the seller regularly and continuously engages in business through the site in your state. As mentioned above, a few isolated transactions won't be enough.

Case Decisions Involving Internet-Based Personal Jurisdiction

A Passive Website Alone Isn't Enough

In Nutrition Physiology Corp. v. Enviros Ltd., 87 F. Supp. 2d 648 (N.D. Tex. 2000), the defendant—a United Kingdom company—operated an information-only website. The site didn't allow users to interact by asking for information or ordering products. It just described the defendant and its products. Given its passive nature, the website wasn't enough to support the exercise of personal jurisdiction by Texas courts.

Causing an Injury in the State

When online activity causes injury in a state, the responsible party can be hauled into court in the state where the injury happened. Sometimes, though, the connection between an activity and a claimed injury isn't always clear. In those cases, courts ask whether:

• the allegedly harmful activity was "purposefully directed" at the resident of the forum state, or
• the person causing the harm otherwise had enough contacts with the state.

What If an Online Seller Sues You?

The same personal jurisdiction rules that apply to online sellers—including the minimum contacts rule—apply to online buyers. The good news is, courts agree that if your only contact with a cyber-merchant's home state is an occasional purchase, that by itself won't be enough to support personal jurisdiction.

Here's an example. A Florida company operated an airline reservation website. When a New York user didn't pay for an online ticket purchase, the company sued the user in Florida. Because the user's only contact with Florida was this one electronic purchase, personal jurisdiction in Florida courts wasn't appropriate. Pres-Kap, Inc. v. System One, Direct Access, Inc., 636 So.2d 1351 (Fla. App. 1994).

If you get sued in a different state over an online purchase, don't try to sort out personal jurisdiction on your own. Unless you can convince the seller to drop the suit, at a minimum you'll have to file a motion to dismiss in the court where the suit is pending. You'll want an experienced lawyer to handle the heavy lifting, including the legal research, drafting, and arguments in court.

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