Michigan

Could a Michigan Business Be Subject to the Jurisdiction of a Different State's Courts Because of Its Website?

Many Michigan businesses have an Internet presence. For these businesses, the Internet provides an unprecedented and potentially unlimited opportunity to market their goods and services to possible customers all over the country and even the world. But, this can also be a double-edged sword. There are a whole host of complexities that are introduced when businesses conduct relationships and sales with far away customers over the Internet. Many of these complexities can be explored on the very interesting and informative website of the World Intellectual Property Forum.

One of these complexities is determining which state's court system has jurisdiction over a dispute between parties who are located in different states, and whose relationship was formed over the Internet. Generally speaking, a court of one state cannot require a defendant from another state to submit to its jurisdiction unless certain requirements are met. Although each state's particular version of these requirements vary, the landmark case on this issue in the Federal court system is United States Supreme Court case of International Shoe Co. v. Washington.

Under the International Shoe case, a defendant is subject to a state's jurisdiction if he/she (1) has agreed to submit to that state's jurisdiction; or (2) has sufficient minimum contacts with the state "such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice." Basically, that means that the defendant has committed some act or undertaken some transaction in the state or has purposefully availed himself/herself of the privileges of conducting business in that state.

What does all of this mean for companies conducting business over the Internet? Well, American courts have by and large ruled that simply because someone has a website that is accessible in a particular state does not necessary subject that person to the legal jurisdiction of that state's courts. But, if a business intentionally and repeatedly uses the Internet to conduct business in another state, even if it has no physical presence in that state, such activity might be enough to cause that business to be subject to the legal jurisdiction of that state.

If that weren't bad enough, these issues become even more thorny if an American company uses the Internet to conduct business in a foreign country. In my next post, I'll discuss some of those issues.

Full post as published by Michigan Business Lawyer Blog on July 09, 2008 (boomark / email).