Article - Navigating murky waters: recent case law highlighting jurisdiction and the internet (January 2007)
- UEJF and LICRA v Yahoo! Inc (2006)
- e360 Insight v The Spamhaus Project (2006)
- Dedvukaj v Maloney (2006)
The issue of internet jurisdiction is relevant to a range of online disputes arising from online transactions, including sales contracts, copyright infringement and defamation for material published on the Internet. The borderless and ubiquitous nature of the internet challenges traditional notions and measures to resolve issues of jurisdiction, particularly which court in which country should hear a dispute. The conflict between law and technology, specifically the internet, arises from the fact that electronic transactions occur regardless of national boundaries. However, commercial laws depend on notions of territoriality. In a multinational setting, which is so often the backdrop to e-commerce disputes, the issue of jurisdiction is both highly complicated and contentious. This article examines three recent cases to determine whether there are any emerging trends or principles regarding when jurisdiction can be exercised in a cross-border online dispute.
It finds that the cases suggest that courts are still struggling to come to terms with the practical effect of jurisdictional issues that arise from online transactions and to develop remedies that are effective across borders. This includes the enforceability of foreign judgements, dealing with vexatious suits and determining the appropriate forum when consumers are involved.
In Association Union des Etudiants Juifs de France [(UEJF)] v Yahoo! Inc the French Tribunal de Grande Instance de Paris issued an interim court order in May 2000 that Yahoo! (a US company) use all means necessary to prevent French users from accessing its auction site which featured Nazi artefacts. Under French law it is illegal to publicly display, possess or sell Nazi paraphernalia. It was claimed that Yahoo! and Yahoo! France made available to French residents, either directly or through hyperlinks, Nazi-related material prohibited by French law. The parties brought claims in both France and the US and the case has been the subject of ongoing appeals.
In May 2000, the Tribunal de Grande Instance de Paris rejected the defendants’ call for the claim to be summarily dismissed on jurisdiction and standing grounds. The court found that, despite the fact that the activity complained of was only a small percentage of the auction sales services offered on the Yahoo! site, the display in France or selling to French residents Nazi memorabilia was a ‘wrong’ against France and consequently the court had jurisdiction over the dispute. The court made an interim order for Yahoo! to take all measures necessary to dissuade and make impossible access by French users to material on Yahoo!’s site which infringed the internal public order of France, particularly the selling of Nazi objects.
Yahoo! did not fully comply with the court’s order and renewed its jurisdiction and standing arguments while also claiming that full compliance with the court’s order was technically impossible. Yahoo! also argued that the <Yahoo.com> website was located in the US and the Nazi memorabilia in issue was protected by that country’s constitutional free speech protections. These arguments were again rejected by the French Tribunal de Grande Instance de Paris in November 2000. The court found that Yahoo! had failed to comply with the core provisions of their May 2000 order and gave them a further three months to comply, after which Yahoo! would be fined approximately US$13,000 each day until compliance with the order was achieved. Yahoo! did not appeal against these interim orders. At this stage no penalty has been imposed by a French court for breach of the May or November 2000 orders.
In December 2000 a complaint was lodged with a Californian district court requesting a declaration that the French court’s orders were not enforceable in the US. A decision, in which it was found that the court had jurisdiction over the UEJF and the Ligue Contre le Racisme et l’Antisémitisme (LICRA), was delivered in November 2001. The district court also found that there was an actual controversy causing a real and immediate threat to Yahoo! where enforcement of the French orders in the US would violate the First Amendment.
This decision was subsequently overturned by the majority of the Ninth Circuit Court of Appeals, who found that the district court erred in finding that it had personal jurisdiction over the UEJF and LICRA. US jurisdiction could only be obtained, and Yahoo!’s First Amendment claim heard, once the French parties ask a US court to enforce a French judgment. (This has not happened yet.)
The next round of the ongoing litigation between the parties was a decision delivered by all 11 judges of the Ninth Circuit Court of Appeals in January 2006. A majority of eight judges found that the district court had properly exercised personal jurisdiction over the defendants. They reasoned that personal jurisdiction could be exercised over the defendants as the French court orders required Yahoo! to take actions in California and to do so under threat of substantial penalty. Despite this, the action was dismissed by a bare majority (six out of 11 judges). This unusual result arose because three judges dismissed the action for lack of personal jurisdiction and three dismissed the case for lack of ripeness (readiness for litigation). Thus, while the majority of the court found that personal jurisdiction could be exercised by the American court, Yahoo!’s case was dismissed.
An appeal against the January 2006 decision was lodged in the US Supreme Court (the ultimate court of appeal in the US). However, the Supreme Court declined the writ of certiorari and chose not to intervene in the case.
To date, the litigation in this case spans around six years, two jurisdictions, multiple appeals and has spawned related criminal proceedings. The case is a key example of the complexity entailed in resolving cross-border jurisdiction issues arising from material presented online. It also acutely highlights the problems parties face in enforcing foreign judgments. The US Court of Appeals indicated in its January 2006 ruling that the French courts orders and penalties could not be enforced in the US. This is consistent with past US cases that have refused to enforce foreign judgments that will infringe a party’s constitutionally guaranteed right of free speech.
International law is not yet in a position where it can adequately resolve cross-border jurisdiction issues in private litigation. In addition to jurisdiction and choice of law issues, enforcement of foreign judgments is proving to be a significant stumbling block in achieving greater compatibility of domestic laws.
On 13 September 2006, US District Court Chief Judge Charles Kocoras, in the Northern District of Illinois, issued a default judgment against Spamhaus, a British non-profit anti-spam organisation, to pay e360 Insight, an Illnois email marketing company, over US$11.7 million in damages. The default judgment was issued in response to a claim by e360 Insight alleging Spamhaus’s tortious interference with existing contractual relations and prospective economic advantage. e360 Insight claimed that the damage it suffered arose from Spamhaus wrongly placing the company on the Register Of Known Spam Operations (ROKSO).
Spamhaus initially filed a response to the claim but subsequently decided not to fight the case. A default judgment was issued and the court did not hear any arguments from Spamhaus. It based the judgment solely on evidence supplied by e360 Insight and found that Spamhaus had wrongly placed e360 Insight on a blacklist of companies responsible for sending spam. In addition to damages, the court issued an injunction preventing Spamhaus from taking any action causing emails sent by e360 Insight to be blocked, delayed, interrupted or altered, including listing the plaintiff on the ROKSO. It was also ordered that Spamhaus publish a notice on its home page to indicate that e360 Insight was erroneously listed on the website as a spammer.
In response to the decision, Spamhaus published a notice on its website asserting that the US District Court in Northern Illinois had no jurisdiction over the British-based Spamhaus. Spamhaus conducts no business and it does not have any offices in the US. Spamhaus advised e360 Insight to refile the claim in a British court, where the plaintiff could prove jurisdiction and the rest of his claim. Spamhaus has not complied with the order and continues to assert that e360 Insight is a spammer and has placed links on its website to material it says shows the company sends spam.
In response to Spamhaus’s apparent failure to comply with the court order, e360 Insight filed a motion asking the District Court in Northern Illinois to suspend www.spamhaus.org until the order was complied with. Chief Judge Kocoras rejected the motion to suspend the spamhaus.org domain and noted that if it were to carry out the order it would be putting to an end all activities conducted by Spamhaus including its lawful online activities. Such a penalty is not proportionate to the gravity of the conduct.
The dispute is an example of the potential danger defendants face if they do not defend a claim filed against them, even if the jurisdiction of the court seized is questionable. ‘SLAPP lawsuits’ (Strategic Lawsuits Against Public Participation), which occur when litigation is commenced against a notionally weaker party with the intention of intimidating and silencing it by burdening it with the cost of the litigation, could have drastic consequences for defendants, even where the claim is vexatious. However, it should be noted that the facts in this case are unusual, in that it is asserted that the plaintiff deliberately presented false evidence to the court in order to have the claim heard in the US District Court in Illinois.
It is not possible for default judgements from the US to be enforced in the UK. For e360 Insight to receive an enforceable judgement in its favour it must re-file and reprove its case in a British court under British law.
In Dedvukaj v Maloney, the US District Court for the Eastern District of Michigan found that it could exercise personal jurisdiction over a New York defendant who had entered into a contract of sale with the plaintiff, a Michigan resident, for goods the plaintiff won on eBay.
The plaintiff, Dedvukaj, had successfully bid in two auctions conducted by the defendant through eBay for paintings by artist Itzchak Tarkay. There were a number of instances on the seller’s eBay webpages where it was claimed that the paintings were originals, and there were photos of what appeared to be the artist’s signature and an identification tag. Dedvukaj stated that he believed the paintings were originals and that this was verified by Maloney on the telephone. During the proceedings it was conceded by Maloney that he did not own the originals. After winning the auctions, the plaintiff and defendant communicated by email and telephone, verified the payment terms and Dedvukaj mailed a cheque to Maloney in payment for the paintings. Maloney subsequently cashed the cheque, however he never shipped the paintings. Instead, he offered a full refund to Dedvukaj. Dedvukaj refused this and demanded the fair market value of the originals.
District Court Judge Rosen noted that, in order for the court to exercise personal jurisdiction over the defendant, it must be authorised under Michigan’s long-arm statute and be in accordance with the due process clause in the Fourteenth Amendment. It was found that the defendant conducted business in Michigan when it communicated with the plaintiff in Michigan, accepted the plaintiff’s winning bids, confirmed the shipping charges to Michigan and accepted payment through the mail from Michigan. In these circumstances it was found that jurisdiction did arise under the long-arm statute as, among others, it was a transaction of business conducted within Michigan and there was a contract of services to be rendered in Michigan.
The exercise of personal jurisdiction must not violate the due process provisions in the US Constitution. For this to occur, it must be shown that the defendant purposefully availed himself of the forum state, that the action must arise from the defendant’s conduct in that state, and that the exercise of jurisdiction over the defendant is reasonable.
The defendant’s argument, that all bidding on eBay is random and fortuitous because the seller cannot control who bids on the item, was unsuccessful and it was found that in the circumstances, Maloney had purposefully availed himself of the jurisdiction. Factors that influenced the court in reaching this finding included the fact that the winning bid was accepted from Michigan and the intentional nature of communications between the defendant and the Michigan-based plaintiff. Comments were also made by Judge Rosen that suggested that he found it difficult to find that personal jurisdiction did not exist, considering Maloney was a ‘knowledgeable seller [who] has entangled itself with eBay for its own promotion and success.’
For sellers on eBay the decision means that, where they have begun communicating with the auction winner about finalising the sale transaction — for example — on details of delivery and payment and the seller fails or allegedly fails to perform, they may find themselves defending an action in the jurisdiction where the buyer is located.
Judge Rosen also noted that sellers on eBay avail themselves of the benefits of the internet, particularly the expanded marketplace available, so that sellers should not be able to exploit these opportunities without accepting the associated legal responsibilities.
It is widely acknowledged that in order for e-commerce to flourish both businesses and consumers need to be confident relying on online technology to complete a transaction. A key component in developing this confidence is creating a predictable legal environment in which electronic transactions can take place. This includes addressing the complicated issue of jurisdiction.
Internationally, the law has not yet arrived at a consistent or even preferred method for dealing with jurisdiction issues arising from cross-border electronic transactions. The principles of private international law are relied upon to resolve these issues. Accordingly, each state has developed its own method for determining jurisdiction and choice of law rules and these are often in conflict with methods used in other states. The result poses rather inconvenient legal barriers for parties in a cross border dispute. A party may find themselves defending claims in unexpected and unfamiliar environments or worse still may not be able to enforce a judgment if the other party does not have assets in that jurisdiction and a foreign court refuses to enforce the judgment. This leads to situations where parties are engaging in lengthy, complicated and expensive legal battles without ever resolving the matter. A key example of this is the litigation between Yahoo! and UEJF and LICRA discussed above.
Defendants may also find themselves with a massive damages order against them as a result of a default judgment in a foreign jurisdiction. In the case of e360 Insight v The Spamhaus Project the judgement was for over $US 11.7 million. This does not mean, however, that the defendant will be required to comply with the order. In this situation the plaintiff will have to get the judgment enforced in the state where the defendant has its assets. This is not likely to occur where the court that issued the judgment did not properly exercise jurisdiction.
Dedvukaj v Maloney highlights that sellers may be subject to jurisdiction in the buyer’s forum where the buyer is from the US and where the seller has among other things:
- Communicated with the buyer about the performance of the contract;
- Accepted the plaintiff’s offer; and
- Has accepted payment from the buyer.
These are actions frequently undertaken by a seller in the course of concluding a contract with the buyer and sellers should be aware that these actions have been found in the US as being sufficient to find that the seller availed him or herself on the buyer’s forum.
Prashanti Ravindra wrote this article while she was a Senior Research Consultant at Galexia.
 The issue of internet jurisdiction has been discussed in other recent Internet Law Bulletin articles: Saadat, M, Jurisdiction and the internet following Gutnick, Internet Law Bulletin vol 8 no 9, 2006, page 124 and Svantesson, D, Internet jurisdiction in the People’s Republic of China, Internet Law Bulletin vol 9 no 8, 2006, page 98.
 Association Union des Etudiants Juifs de France v Yahoo!, Inc, 22 May 2000.
 Association Union des Etudiants Juifs de France v Yahoo!, Inc, 20 November 2000.
 Yahoo! Inc v La Ligue Contre le Racisme et l'Antisemitisme 169 F Supp 2d 1181, 7 November 2001. The First Amendment of the US Constitution protects the right to free speech.
 Yahoo! Inc v La Ligue Contre le Racisme et l'Antisemitisme 379 F 3d 1120, 23 August 2004.
 Yahoo! Inc v La Ligue Contre le Racisme et l'Antisemitisme 433 F 3d 1199, 12 January 2006.
 e360 Insight v The Spamhaus Project US District Court, Northern District of Illinois Case No 06 C 3958, 13 September 2006, <www.spamhaus.org/archive/legal/Kocoras_order_to_Spamhaus.pdf>.
 e360 Insight v The Spamhaus Project, case no. 06 C 3958, Chief Judge Kocoras, US District Court, Northern District of Illinois, 19 October 2006, <http://www.icann.org/legal/spamhaus/denial-proposed_order-19oct06.pdf>.
 Dedvukaj v Maloney 447 F Supp 2d 813, District Court Michigan, 2006.
 International Shoe v Washington 326 US 310, 1945.