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Internet Is Clouding the Laws of Jurisdiction
by Martin Paskind

Let's suppose that years ago you went into the plumbing business, unclogging sewers at 2 a.m. This work was hard and didn't pay all that well. So to improve your lot in life and being in New Mexico, you invented adobe plumbing fixtures.  Now your company's sinks, vanities, toilets, bathtubs and showers, all made of adobe, sell nationally and internationally.

In the beginning, your business, Adobeworks International, or AWI, was local. Then you discovered the Internet. Since then, orders by the thousands arrive from such faraway places as Malaysia, neighboring places like Colorado and practically everywhere else.

So, there you are, contemplating the anticipated luxuries of your retirement when Joe Coolidge bursts into your office and exclaims: "They're suing us in Malaysia and Denver! What can we do?"

Making Mush
Coolidge reveals that water makes mush of adobe. All over the globe, AWI's fixtures turned to mud. Unhappy customers can't wait to get to their lawyers. Coolidge is your vice president of engineering and product development. You ask him why he didn't bring the subtle effects of moisture on adobe to your attention. "Ummmm," he replies. "Well, gee."

Then you call your lawyer, Flatmus McStickler. "Flatmus," you say, "people are suing me. I'm desperate. My business is on the edge. What can I do?" McStickler replies: "First you must pay me a large retainer. Then I will give you my advice, and you must follow it." You agree, and with tears welling up in your eyes, you hand over the money. "My advice is for you to get all your money, put it in a suitcase and move to Serbia," says McStickler. "Have a nice day."

Wait Up
"Hey, wait a minute!" you shout. "Why should I do that? That's dumb advice!" So Stickler offers to explain, and for this, he will charge his hourly rate. In the days of yore, Flatmus says, jurisdiction was a simple idea. If the king's soldiers and sheriffs could make people do as the king wanted, then the king had jurisdiction. If opponents such as dukes and earls objected and had more soldiers and sheriffs, they could run off the king's men and the king wouldn't have jurisdiction.

"We overturned all this," says McStickler. "We became organized into 50 states, each with its own laws and practices." Then, since power wasn't the only ways of determining jurisdiction anymore, we had to find a way to chase people who broke laws in another state. Long-arm statutes were enacted in each state to solve this problem by applying due process.

The result was a morass of often incomprehensible and inconsistent judicial decisions. These decisions stuck it to business people and others for about five decades. "Under long-arm statutes, people in Colorado and other states could sue Adobeworks if plaintiffs could prove a connection between AWI and the foreign state," says Flatmus. That depends, he says, on proof that a company did business in that state.

A Nickel's Worth
"What about all those foreigners?" you cry. "AWI never did a nickle's worth of business in Malaysia or anywhere like that."  "Yes, you did," says Flatmus. "Your Internet site allowed people in Malaysia -- from their homes -- to order adobe fixtures from you. You did business with them. Malaysia is wet, and adobe fixtures turned to mud there. You wronged a whole bunch of foreigners. Maybe Afghanistan would be a better place for you than Serbia."

McStickler, perhaps, goes a little too far. International law is uncertain. At the interstate level, however, courts prove willing to uphold their own power when companies challenge jurisdiction.

Yellow Pages
A Missouri court, for example, upheld jurisdiction when it found that citizenry accessed an out-of-state Website 131 times. Ameritech was subjected to out-of-state jurisdiction because its Internet yellow pages generate advertising income everywhere.  Velocity Powerboats Inc. found itself in an Illinois courtroom for telling people about a boat show and providing a link to information.  Other Web activities that established jurisdiction include running a hotel-reservation service, encouraging people to send e-mail, and selling subscriptions to electronic publications.

Legal developments over the last two or three years make it clear that you don't have to do much on the Internet to wind up in court hundreds or thousands of miles away.

McStickler said: "There won't be enough left after my fees to pay all those airline tickets, hotel bills and restaurant checks to get all your people to court. Maybe the Congo would be a better idea than Afghanistan."

International aspects of these issues remain undeveloped. Still, just as the law of jurisdiction followed the spread of nationwide commerce, you can expect the law to follow development of international commerce as well. This will happen because Malaysia, on the Internet, is no farther away than Colorado.

If you're curious, check T.P. Vartanian's "It's a Question of Jurisdiction," 8:6 Business Law 22 (July/August 1999). The article cites cases mentioned in this column and a good many more.


Martin Paskind is an Albuquerque lawyer. His practice emphasizes legal services to small businesses. Questions or comments can be mailed to him in care of the Albuquerque Journal, P.O. Drawer J, Albuquerque, N.M. 87103. This column is not intended to provide legal advice to any specific person, or with respect to any particular problems or situations. Paskind's columns are available online at www.abqjournal,com/biz/pask/default.htm For advice on specific problems and circumstances, contact your attorney.

 

 

 

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