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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