Commercial Division Blog
Posted: April 22, 2014 / Categories Commercial, Jurisdiction
Website, Without More, Insufficient to Create Personal Jurisdiction in New York
On April 7, 2014, Justice Schmidt of the Kings County Commercial Division issued a decision in Steinmetz v. Energy Automation Systems, Inc., 2014 NY Slip Op. 50566(U), analyzing the jurisdictional implications of having a website.
In Steinmetz, the trial court decided motions to dismiss by two Better Business Bureau entities. Part of its analysis included whether having a website made an out-of-state defendant subject to personal jurisdiction in New York. The court explained:
In analyzing personal jurisdiction in the internet context, many New York courts have adopted the sliding scale of interactivity, formulated in Zippo Manuf. Co. v Zippo Dot Com, Inc. (952 F. Supp. 1119, 1125-26 [WD Pa 1997]), according to which websites are classified as (1) interactive a defendant provides goods and services over the internet or knowingly and repeatedly transmits computer files to customers in other states; (2) middle ground permits the exchange of information between users in another state and the defendant, and (3) passive makes information available to users. In this regard, it has been held that exercising personal jurisdiction over the owner of an internet website accessible in New York, required that the site be highly interactive and more than mere presence on the internet. Stated otherwise, personal jurisdiction cannot be based upon a website where it is informational only and, thus, passive in nature. When a website is passive plaintiffs may have to prove something more to justify the exercise of personal jurisdiction—that is, plaintiffs must show that defendant purposefully (albeit electronically) directed his activity in a substantial way to the forum state. Accordingly, such a passive website, without more, cannot be used as the basis for the assertion of long-arm personal jurisdiction. In fact, as the Paterno court pointed out, Grimaldi held that if the foreign corporation maintains an informational Web site accessible to the general public but which cannot be used for purchasing services or goods, then most courts would find it unreasonable to assert personal jurisdiction over that company.
The Paterno court also noted that while Grimaldi concluded that passive Web sites, when combined with other business activity, may provide a reasonable basis for the assertion of personal jurisdiction the other business activity must be substantial and connected to the claim asserted. Thus, the rulings of Paterno and Grimaldi recognize websites which are classified as either interactive or middle ground. As alluded to above, when websites are interactive, they knowingly transmit goods or services to users and if made available to New York residents, the activities can be sufficient for obtaining personal jurisdiction over a defendant. Middle ground websites, as noted above, exist where a user can exchange information with the host computer, and where the exercise of jurisdiction in these cases is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site. In this regard, where a website falls somewhere in the middle ground, the jurisdictional inquiry requires closer evaluation of its contact with New York residents.
(Internal quotations and citations omitted) (emphasis added).