Courts are increasingly being asked to decide when website operators are subject to personal jurisdiction in a particular state, a potentially vexing problem because websites generally lack a specific location and can be accessed from almost anywhere on the globe.
In June 2020, the U.S. Fourth Circuit Court of Appeals, in UMG Recordings, Inc. v. Kurbanov, answered the question one way by adopting an expansive view of personal jurisdiction. The court held that certain common web-based advertising activities subjected a Russia-based website operator to personal jurisdiction in Virginia. Specifically, the defendant was alleged to have posted free content on his website, and rather than profit directly from end-users, sold advertising space on the site to third-party advertisers. He was then sued in Virginia, a forum where the website was frequently accessed. If the Fourth Circuit’s approach were adopted more widely, any website operator would potentially be subject to personal jurisdiction for claims in any forum where their website is frequently accessed.
On August 17, 2020, however, in AMA Multimedia, LLC v. Wanat, the U.S Ninth Circuit Court of Appeals in San Francisco adopted a different approach. Addressing a similar fact pattern to UMG Recordings, the court held it could not exercise personal jurisdiction over a Poland based website operator that provided adult video content to a global audience, some of which was based in California. Although the AMA Multimedia court determined that UMG Recordings was distinguishable, the Ninth Circuit’s decision creates a potential split among the circuits. Until the issue is resolved, website operators remain at risk of being forced to defend lawsuits in any jurisdictions where they have a substantial number of users.
To exercise jurisdiction over out-of-state defendants, courts typically must have specific jurisdiction, which requires a relationship among the defendant, the forum state, and the litigation that arises out of contacts the defendant himself creates with the state. Walden v. Fiore, 571 U.S. 277 (2014). Before the U.S. Supreme Court stated that jurisdictional framework in Walden, courts analyzing jurisdiction over website operators typically used an “interactivity” test that considers the degree of interaction between a website and its users. Zippo Mfg. Co. v. Zippo Dot Com, Inc. The Zippo court held that, where a website does business over the internet or contracts with residents of a foreign jurisdiction, the exercise of jurisdiction over the website is proper. By contrast, the Zippo court held that “passive” websites, or those that merely post information that is accessible to out-of-state viewers, are not subject to jurisdiction in the states in which users access them. For websites in the “middle ground,” or those where users can exchange information with the host computer, the court examined the level of interactivity and commercial nature of the exchange of information that occurs on the site to determine whether exercising jurisdiction would be proper. It’s a fact-intensive analysis that does not provide a bright-line rule.
Since the U.S. Supreme Court’s decision in Walden, however, courts have started to deviate from the interactivity test they previously applied to websites, and instead have applied the general standards of personal jurisdiction to the internet context. For example, the Fourth Circuit in UMG Recordings found that the dispute at issue arose out of the defendant’s contacts with Virginia. The plaintiff record companies sued the Russia-based operator of a website allegedly used to pirate music. The Fourth Circuit found that exercising specific jurisdiction over the website operator in Virginia was proper because the site derived its revenue through the use of third-party advertising brokers, who “geo-targeted” unique advertisements to visitors, including those from Virginia. The court also cited the website’s (1) large Virginia user base; (2) registration of domain names with a U.S. based registrar with a Virginia based administrator; (e) decision to host its servers with a company with technical infrastructure in Virginia; and (4) registration of a Digital Millennium Copyright Act agent with the U.S. Copyright Office. The website owner’s intention to have purposeful contacts with Virginia is undeniable.
Issued just months after the Fourth Circuit’s contrary decision in UMG Recordings, the Ninth Circuit’s decision in AMA Multimedia creates considerable uncertainty and a potential split in the circuits on the circumstances in which an overseas website operator can be sued in a particular state of the United States. The narrower approach adopted by the Ninth Circuit, that requires the website operator to direct specific conduct at the state where the lawsuit is filed, and the more expansive approach adopted by the Fourth Circuit, which effectively subjects website operators that engage in the common practice of geo-targeted advertising to jurisdiction in any state where they have a significant number of end-users, are headed for a clash in other circuits and potentially the U.S. Supreme Court. While the Ninth Circuit attempted to distinguish UMG Recordings on its facts, it remains an open question which approach will be adopted by other courts.