Bensusan Restaurant Corp. v. King, 126 F.3d 25, 44 U.S.P.Q.2d (BNA) 1051 (2nd Cir. 1997).

PERSONAL JURISDICTION - INTERNET - TRADEMARK - LONG-ARM STATUTE - MINIMUM CONTACTS -WORLD WIDE WEB - WEB PAGE - DUE PROCESS - INTERSTATE COMMERCE

New York's long-arm statute does not reach a Missouri defendant whose only connection to New York is an Internet web page that advertises a Missouri music club with predominantly local patrons.

SUMMARY

Plaintiff, a New York resident, owns and operates a well known jazz club in New York under the name "The Blue Note." Defendant, a Missouri resident, owns and operates a small music club in Columbia, Missouri also called "The Blue Note." In 1996, Defendant created a web page, accessible to anyone via the Internet, which advertised the Missouri club and provided a phone number for ordering tickets. Although patrons could order tickets over the phone, they had to claim the tickets in person at the Blue Note box office in Missouri. Defendant's web page also contained a disclaimer noting that its club was not affiliated with Plaintiff's club of the same name, located in New York. Following the creation of this web site, Plaintiff brought suit in the District Court for the Southern District of New York, alleging trademark infringement and dilution based on Defendant's use of the name "The Blue Note." Defendant moved for dismissal under F.R.C.P. 12 (b)(2) for lack of personal jurisdiction. Plaintiff argued that jurisdiction was appropriate under New York's long-arm statute, N.Y.C.P.L.R. § 302, because Defendant maintained a web page that was accessible to New York residents.

In granting Defendant's motion to dismiss, the district court noted that personal jurisdiction over an out-of-state defendant is determined by the law of the forum state and that New York's long-arm statute recognizes personal jurisdiction over an out-of-state defendant in two relevant situations. First, jurisdiction can be established under N.Y.C.P.L.R. § 302 (a)(2) when the defendant commits a tortious act in New York. Second, jurisdiction can be established under N.Y.C.P.L.R. § 302 (a)(3)(ii) for tortious acts committed outside of New York. Additionally, the district court noted that New York's long-arm statute, like all statutes, is limited by the Due Process Clause of the United States Constitution.

The district court held that New York's long-arm statute did not reach the Defendant. Under N.Y.C.P.L.R. § 302 (a)(2), the district court found that the purchase of tickets based on the information provided on the web page would not constitute a tortious act in New York because such a purchase would ultimately occur in Missouri and not in New York.

Additionally, the district court held that N.Y.C.P.L.R. § 302 (a)(3)(ii) did not reach the defendant. The district court noted that to establish jurisdiction under § 302 (a)(3)(ii): (1) a defendant should have "reasonably expected" the act in question to have consequences in New York and (2) a defendant's business must derive "substantial revenue" from interstate commerce. The district court reasoned that because Defendant's business was primarily local, Defendant did not draw income from interstate commerce. The district court also found that, while it was foreseeable that New York residents might view the web page, the local character of the club made it unreasonable for Defendant to expect his advertisement to have consequences in New York.

The district court additionally found that even if New York's long-arm statute did reach Defendant, Due Process concerns would defeat jurisdiction based on the "minimum contacts" test provided in traditional jurisdictional analysis. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980). The district court found that Defendant's web site did not establish "minimum contacts" in New York, as Defendant did not direct the web site at residents of New York and did nothing to "purposely avail himself of the benefits of New York."

Plaintiff appealed the decision to the United States Court of Appeals, Second Circuit.

ISSUE & DISPOSITION

Issue(s)

Disposition

AUTHORITIES CITED

Cases Cited by the Circuit Court

• Harvey v. Chemie Grunenthal, G.m.b.H, 354 F.2d 428 (2d Cir.1965).
• Feathers v. McLucas, 15 N.Y.2d 443 (2d Cir. 1965).
• United Bank of Kuwait v. James M. Bridges, Ltd., 766 F. Supp. 113 (S.D.N.Y. 1991).
• Kramer v. Vogl, 17 N.Y.2d 27 (N.Y. 1966).

  Cases Cited by the District Court

• Asahi Metal Indus. Co. v. Superior Court, 480 US 102 (1992).
• Burger King Corp. v. Rudzewicz, 471 US 462 (1985).
• Worldwide Volkswagen Corp. v. Woodson, 444 US 286 (1980)
• International Shoe Co. v. Washington, 326 US 310 (1945).
• CompuServe Inc. v. Patterson, 89 F.3d 1257 (6th Cir.1996).
• Fox v. Boucher, 794 F.2d 34 (2d Cir.1986).
• American Eutectic Welding Alloys Sales Co. v. Dytron Alloys Corp., 439 F.2d 42 (2d Cir.1971).
• Shea v. Reno, 930 F.Supp. 916 (S.D.N.Y. 1996).
• Independent Nat'l Distributors, Inc. v. Black Rain Communications, Inc., No. 94 Civ. 8464, 1995 WL 571449 (S.D.N.Y. Sept. 28, 1995).
• Taurus Int'l Inc. v. Titan Wheel Int'l Inc., 892 F.Supp. 79 (S.D.N.Y.1995).
• Hertz Sys., Inc. v. Hervis Corp., 549 F.Supp. 796 (S.D.N.Y.1982).

Other Sources Cited by the Circuit Court

• §§ 32(1) and 43(a) of the Lanham Act, 15 U.S.C. §§ 1114(1) & 1125(a).
• § 3(c) of the Federal Trademark Dilution Act of 1995, 15 U.S.C. § 1125(c).
• Report of the Administrative Board of the Judicial Conference of the State of New York for the Judicial Year July 1, 1965 through June 30, 1966, Legislative Document (1967) No. 90.

  Other Sources Cited by the District Court

• U.S.C.A. Const. Amend. 14 (Due Process Clause).
• Fed. R. Civ. P. 12(b)(2).
• N.Y.C.P.L.R. § 302 (a)(2).
• N.Y.C.P.L.R. § 302 (a)(3)(ii).
• Richard S. Zembek, Comment, Jurisdiction and the Internet: Fundamental Fairness in the Networked World of Cyberspace, 6 Alb.L.J.Sci. & Tech. 339 (1996).

RELATED SOURCES

• Felix C. Pelzer, Uncharted Territory: Personal Jurisdiction in the Internet Age, 51 S.C. L. Rev. 745 (Summer 2000).
• Warren E. Agin, Coping With Personal Jurisdiction in Cyberspace: Liability Report of the ABA Subcommittee on Internet Law, 53 Consumer Fin. L.Q. Rep. 86 (Spring 1999).

COMMENTARY

State of the Law Before Bensusan.

In 1945, the Supreme Court established that a district court has personal jurisdiction over an out-of-state defendant where (1) the defendant has "minimum contacts" with the hailing court's state and (2) that the maintenance of the suit does not "offend traditional notions of fair play and substantial justice." International Shoe Co. v. Washington, 326 US 310, 316, (1945). Several notable decisions have applied this test and established guidelines for what constitutes "minimum contacts" and what will offend "fair play and substantial justice."

Courts have only recently begun to apply these doctrines to situations where a party's use of the Internet has been the basis for establishing "minimum contacts." Thus, the law regarding personal jurisdiction for actions on the Internet remains under development. In fact, Bensusan was one of several in an initial wave of decisions discussing this issue. Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997) (finding that the use of an allegedly infringing logo on the defendants web page was not enough to establish personal jurisdiction over an out-of-state defendant); CompuServe v. Patterson, 89 F.3d 1257 (6th Cir. 1996) (finding that a Texas defendant contracting with an Ohio computer network service to sell computer software in Ohio via that service was subject to personal jurisdiction in an Ohio action seeking declaratory judgment of trademark infringement); Heroes, Inc. v. Heroes Foundation, 958 F.Supp 1 (D.D.C. 1996) (finding that a charitable organization based in New York advertising a toll-free number over the Internet and in newspapers to solicit donations from residents of Washington D.C. was subject to personal jurisdiction Washington, DC in an alleged trademark violation); Panavision International, L.P. v. Toeppen, 938 F. Supp. 616 (C.D. Cal. 1996) (finding that an Illinois defendant who registered Internet domain names that were likely to violate the trademark rights of a California corporation and then offered to sell the domain names to the corporation was subject to personal jurisdiction in California); State v. Granite Gate Resorts, Inc., No. C6-95-7227, 1996 WL 767431 (D. Minn. Dec. 11, 1996) (finding that personal jurisdiction existed over a defendant whose only contact with the forum state was a "passive" web page advertised gambling services).

Effect of Bensusan on Current Law

The United States Court of Appeals for the Second Circuit affirmed the district court's finding that the acts in question all occurred in Missouri and therefore did not give rise to jurisdiction under N.Y.C.P.L.R. § 302(a)(2). The circuit court also affirmed the district court's second finding that jurisdiction was not established under N.Y.C.P.L.R. § 302(a)(3)(ii) because of the local character of the defendant's business. The court noted that the intent of the legislature in section 302(a)(3)(ii) was to exclude a "non-domiciliary whose business operation was of a local character." The circuit court did not address the Due Process arguments discussed in the district court opinion.

The effect of this decision seems very limited, as the circuit court did not affirm the district court's "minimum contacts" argument. However, the circuit court's decision does indicate a level of activity below which personal jurisdiction cannot be established: a passive web site simply advertising a local service and directed at a local audience does not establish national jurisdiction, at least not if the defendant is geographically remote. This decision seems to offer some assurance that local businesses are free to use the Internet to promote their business without subjecting themselves to jurisdiction in every state.

More generally, the court's opinion successfully applies traditional jurisdictional doctrines, suggesting that courts encountering jurisdictional challenges in claims arising out of actions on the Internet need not establish new law. The "minimum contacts" standard of International Shoe, along with the accompanying doctrines, continue to control the resolution of jurisdiction disputes, including those on the Internet.

The Supreme Court has not addressed this issue, and the lower courts have not developed any standard applications. However, when the Court does address this issue the standard it establishes will likely incorporate some interpretation of International Shoe.

Unanswered Questions

At what point is a business is considered "local"? In this case the Defendant's business was clearly local, but the decision creates a need for subsequent opinions to clarify the parameters of "local."

Both the district and circuit court opinions look at the defendant's actual business to determine if it is local, not just at the defendant's web-based business. Can the content of the web-page be an indicator as to how "local" a business is? Should it be the only indicator where jurisdiction is only sought through a defendant's Internet activity?

Prepared by:

• Louis T. Somma, 02