the law(s) of cyberspace

The Law(s) ofcyberspace Personal Jurisdiction

and the Internet

by Robert H. Wilson Your business’s web site may make it possible for an unhappy customer to sue you in

any one of the 50 states-but then again, maybe not, depending on the site’s content

and purpose.

T he internet has transformed the manner in which many lodging

companies transact business, both between customers and in business- to-business exchanges. Whereas toll-f%ee reservation systems were the focus just a decade ago, today’s lodging companies make use of the internet, the worldwide web, and e-mail. Changes in the way companies do business will continue as existing technologies are expanded and refined, and as new technologies are created. The internet has allowed lodging businesses to reach customers or potential customers via their web sites, and has proved to be a boon to both hotels and their customers. Travelers, for instance, can check on different properties, amenities, locations, prices, promotions, and brands when making decisions about their lodging plans. They can also obtain information

about competing brands in the same location to help them decide where to stay.

For their part, lodging operators are able to provide potential guests with a vast amount of information about the property, locations of other related or same-brand properties, hyperlinks to other sites, and a variety of promotional and market- ing information. The ability to stay in touch with customers and to build brand loyalty can be enhanced through the effective use of the internet. In many cases guests can

Robert 23. WiZson,J.D., is at-z associate professor of real estate,jnance, and law in the department of hotel, restaurant, and travel administration at the University of Massachusetts-Amherst [email protected])~.

0 2000, Cornell University

October 2000 l 55

make or cancel reservations on line without requiring an employee’s assistance. In other situations, guests can obtain information over the internet, and then call toll-free reservation lines to make or cancel reservations.

All of that said, this article does not explain how to use the internet to improve information flow to customers. Instead, I discuss a gray area of law that is growing around the use of the internet-namely, court jurisdiction for disputes between guests and firms that happen to have an internet presence.

Hotels almost inevitably end up in litigation with some of their guests, despite the best of intentions on both sides. Many such cases have been chronicled by Cornell Quar- ter+.’ The typical types of litigation with guests usually involve a guest who has been injured in some way or has been attacked by an inter- loper in the hotel or its environs. The injured guest then sues the hotel owners, employees, and management company to recover for their injuries based on the negligence of the owners or managers that caused or failed to prevent the injury.

Finding a venue. A key element in bringing a lawsuit is to determine what court has jurisdiction to hear the case. For instance, violations of a state law can be heard only in that

’ For example, see: Denney G. Rutherford and Jon P. McConnell, “Understanding and Manag- ing Your Liability for Guest Safety,” Cornell Hotel and Restaurant Administration Qmzrterly, Vol. 27, No. 4 (February 1987), pp. 58-63; Denney G. Rutherford and Jon P. McConnell, “De Facto Security Standards: Operators at Risk,” Cornell Hotel and Restaurant Administration Quarler/y,Vol. 31, No. 4 (February 1991), pp. 107-l 17; John E.H. Sherry,“Innkeepers May Still Lose Liability Suits Despite Compliance with Statutory Re- quirements,” Cornell Hotel and Restatmnt Admin- icrration Quarterly, Vol. 36, No. 2 (April 1995), pp. 18-19; and John E.H. Sherry, “Property Owners May Be Liable for Defective Products Offered to Guests by a Third-party Tenant,” Cornell Hotel and Restaurant Administration Quar- terly, Vol. 38, No. 2 (April 1997), pp. 18-19.

state’s court (and not that of another state or a federal court), and the same principle holds for alleged violations of federal law. This legal concept, known as personal jurisdiction, gives a specific court the power and right to hear the facts of a case and to render an opinion. Although injured guests often seek to sue a distant hotel in the courts of the guest’s home state (as a matter of convenience), the question of jurisdiction often prevents the guest from doing so. Indeed, the rules of jurisdiction are relatively straightfor- ward based on a long series of U.S. Supreme Court decisions about where cases may be heard.

When a guest seeks to establish the venue of a case to the guest’s home state, a typical argument is that the hotel is doing business in that state by soliciting business there (e.g., through advertising, travel agents, promotions). This argument looms even larger should the hotel be doing business via the internet and the worldwide web. In such an instance, the issue ofjurisdiction becomes much more problematic.

The questions that this paper examines are as follows: Does a court obtain jurisdiction (the power to decide a case) over a nonresident corporation or person if that company or individual maintains an internet web site that is viewable in the injured guest’s home state? Does it make any difference how exten- sive the web site is? Is a completely interactive web site different from a web site that only provides information and is not interactive? Most state and federal courts are just now having the opportunity to decide the complex questions that are being raised relating to courts’jurisdiction over cases where one or more of the parties makes use of the internet and e-mail.

A series of recent cases in a variety of state and federal courts, some involving hotels, have dealt with the

issue ofjurisdiction and the internet. Yet because different state and federal courts are wrestling inde- pendently with what amounts to an untested issue, those courts’ decisions seem to be leading to different conclusions even when applying the law to a set of similar facts. Ulti- mately, the U.S. Supreme Court will need to decide some of the fundamental issues. Until then, the absence of uniform law makes it difficult for hotel owners and management companies to plan for and to safeguard against unexpected legal claims.

The remainder of this article studies some cases, issues, and theo- ries dealing with jurisdiction and the internet. I review several related cases involving hotels and discuss findings of different courts. Finally, I offer a simple suggestion to help ensure that a company knows in advance what jurisdiction will apply in the event of disputes with its guests or customers.

Personal Jurisdiction The concept known as “personal jurisdiction” is the right of a court to decide to hear and decide a case on the merits. When a court has personal jurisdiction over the defendant, the court has the ability to consider the issues and subject matter of the case, and has the power to issue binding judgments. A judg- ment rendered by a court without proper personal jurisdiction over the defendant, however, is invalid and is not enforceable, if challenged. As a result, the issue of personal jurisdiction is a key component to any lawsuit and especially in a lawsuit where the defendant is a nonresident.

The court always has jurisdiction over the plaintiff, as the plaintiff has chosen to file a lawsuit in a particular court. Jurisdiction is said to be either general or specific, as de- scribed in the following excerpt.

56 EORNM HOTELANDRESTAURANTADMINISTRATIONQUARTERLY

It has been said that when a state exercises personal jurisdiction over a defendant in a suit arising out of or related to the defendant’s contacts with the forum, the state is exercising “specific jurisdiction” over the defendant.. .When a state exercises personal jurisdiction over a defendant in a suit not arising out of or related to the defendant’s contacts with the forum, the state has been said to be exercising “general jurisdiction” over the defendant. Even when the cause of action does not arise out of or relate to the foreign corporation’s activities in the forum state, due process is not offended by a state’s subjecting the corporation to its in personam jurisdiction when there are sufficient contacts between the State and the foreign corporation.”

Nonresident defendants who do not voluntarily agree to the jurisdiction of a particular court are protected by the due-process clause of the 14th Amendment to the U.S. Constitution.3 In an historic 1877 U.S. Supreme Court case the standard was set for questions of due process,4 which I explain in a following section.

When attempting to establish personal jurisdiction, “the courts will apply the law of the state where the action is brought, and will use a two-step analysis to determine whether personal jurisdiction is proper. Under the two-step analysis, the court must first determine whether jurisdiction is proper under the forum’s long-arm statute. Ifju- risdiction is available under the long-arm statute, then the court

’ Helicopteror Nacionales de Colombia, S.A. u Hall et al., 466 U.S. 408,1984, at pp. 414415.

3 World- Wide Volkswagen Corp. v. Woodson, 444 U.S. 286,1980, at p. 291.

4 Pennoyer v. IVeJ 95 U.S. 714 (1878). The traditional method of challenging the personal jurisdiction of a particular court occurs by the defendant filing a motion to dismiss the case based on the lack ofjurisdiction. By tiling and arguing this motion, the defendant submits to the jurisdiction of the court only for purpose of allowing the court to decide if personal jurisdiction exists

must take the second step in the analysis and determine whether the exercise of personal jurisdiction over the defendant comports with due process under the U.S. Constitution.“5

Long-arm Statutes In many cases the intent and

Each state has laws called“long-arm statutes” that allow the state courts

type of act&i@ found on a

to exercise personal jurisdiction over nonresident individuals or

firm’s web site will resotve, nonresident businesses, under certain circumstances. The particular in part, the issues regardinfl statutes that determine whether a state has jurisdiction over a nonresi- personal jurisdiction. dent defendant can differ from one state to another. Many long-arm statutes provide jurisdiction over anyone who is conducting any type of business within the state, while others provide more protection to nonresidents. A court must first determine that the court can exercise jurisdiction based on their state’s long-arm statute. At the same time, the constitutional requirements of due process must also be satisfied.

Due Process If it is determined that the state’s long-arm statute does provide personal jurisdiction over a defendant, the court must analyze the issue of due process. A 1945 federal case (International Shoe Co. II. Washington) solidified the concept that due process requires that a person or business must have “certain minimum contacts with it [the forum state] such that the maintenance of the suit does not offend traditional no- tions of fair play and substantial justice.“6 The court points out that where the activities are “continuous and systematic” they may be substantial enough to allow a court to

5 Michael J, Dunne and Anna L. Musacchio, “Jurisdiction over the Internet,” Business Lawyer, Vol. 54 (November 1998). p. 386.

6 International Shoe Co. u Washington, 326 U.S. 310,1945, at p. 316.

October 2000 l 57

exercise general jurisdiction.’ Where the activities are not sufficient to allow for general jurisdiction, if minimum contacts are present, a court will be able to find specific jurisdiction. By exercising “the privilege of conducting activities within a state, it enjoys the benefits and protection of the laws of that state.“”

The International Shoe court established that if the activities are substantial and continuous, the court could find that general jurisdiction exists, even though that is more difficult to establish than is specific jurisdiction. The court could also find the less-demanding specific jurisdiction if the minimum- standard test was met. Finally, if the court found that there was basically no contact between the nonresident and the forum state, then personal jurisdiction would not exist over the nonresident, and the court would dismiss the case.

The courts are most likely to find personal jurisdiction when the defendant has taken steps to “purposefully avail” itself of the ability to conduct business within a state. In another federal-court case, Burger King Corp. v. Rudzewicz, the court outlined the following test for the concept of purposeful availment:

The “purposeful availment” requirement is satisfied when the defendant’s contacts with the forum state “proximately result from ac- tions by the defendant himself that create a ‘substantial connection’ with the forum state,” and when the defendant’s conduct and connection with the forum are such that he “should reasonably anticipate being haled into court there.‘19

The minimum-contacts standard continues today, still based on the International Shoe decision. The con- cepts of “purposeful availment” and

’ Ibid. *International Shoe Co. v, Washington, p. 319. 9 Burger King Corp. v. Rudzewicz, 471 U.S. 462,

1985, at PP. 474-475.

forseeability and predictability are also important standards found in all of the cases involving jurisdiction and the internet. Several pre- internet cases provide the jumping- off point for a line of cases involving the internet and the question of jurisdiction, as I explain next.

Zippu’s Sliding Scale When trying to determine whether personal jurisdiction exists over a nonresident defendant, we have seen that certain minimum contacts with the state must exist. When all or some of those minimum contacts result from internet activity, the personal jurisdiction question can be complex. At this time, the most widely followed and quoted case involving internet activities and personal jurisdiction is a 1997 case, Zippo Mfg. Co. v. Zippo Dot Corn, Inc.,‘O which created a framework for analyzing internet and online personal jurisdiction cases. The Zippo case is being adopted by many federal circuit courts when deciding personal-jurisdiction internet cases within their circuits-but not all of them, as I point out in a moment.

Zippo Manufacturing sued Zippo Dot Corn, citing “violation of the Zippo trademark because of Dot Corn’s use of the word ‘Zippo’ in the domain names it holds, in numerous locations in its web site, and in the heading of internet newsgroup messages that have been posted by Dot Corn subscribers.“” Zippo claimed trademark infringement and sued Zippo Dot Corn in the Western District of Pennsylvania (a federal court). Zippo Dot Corn argued that the court did not have personal jurisdiction over it, as it was a California company, its employees all were located in Califor- nia, and it had few if any contacts

?Zippo Mh. Co. u Zippo Dot Corn, Inc., 952 F.

SUPP. ” zippo, p. 1122.

with Pennsylvania aside from its internet activities.

In reaching its decision, the Zippo court established a sliding scale to gauge the intent and type of internet activity found on a firm’s web site (i.e., active, interactive, or passive). The sliding scale allows a court to categorize internet activity to help it decide whether to exercise jurisdiction over a nonresident individual or business. In analyzing the case, the Zippo court said:

The likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the internet. This sliding scale is consistent with well-developed personal-jurisdiction principles. At one end of the spectrum are situations where a defendant clearly does business over the internet. I f the defendant enters into contracts with residents of a foreign jurisdiction that involves the knowing and repeated transmission of computer files over the internet, personal jurisdiction is proper. At the oppo- site end are situations where a defendant has simply posted information on an internet web site, which is accessible to users in foreign jurisdictions. A passive web site that does little more than make information available to those who are interested in it is not grounds for the exercise of personal jurisdiction. Interactive web sites where a user can exchange information with the host computer occupy the middle ground. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the web site.”

After establishing the concept of a sliding scale to gauge intended internet activity, the court found that the Zippo Dot Corn web site was more than a passive web site. It was also more than an interactive site where information could be

‘* Zippo, p. 1124.

5% CORNEJJ HOTEL AND RESTAURANT ADMINISTRATION QUARTERLY

exchanged with residents of Penn- sylvania. The court found that Zippo Dot Corn was conducting business over the internet, that Zippo conducted electronic commerce in Pennsylvania over the internet, and that electronic business was the in- tentional availment of conducting business in Pennsylvania. The jurisdiction requirements set forth in pre-internet cases were clearly met, that is, that nonresident defendants must (1) have “minimum contacts” (from the International Shoe case) with the forum state and (2) “purposefully avail” (from the Burger King case) themselves of conducting business in Pennsylvania for the court to exercise personal jurisdiction.

Applying the sliding scale. As noted above, the Zippo court established that, when trying to resolve internet and personal-jurisdiction questions, there are three categories of companies: those maintaining passive web sites, those doing business over the internet, and those with an interactive web site. I next review some important cases in each category and present the courts’ rulings for each. After that I review some cases that came before the Zippo ruling in which the courts used entirely different standards to reach their conclusions.

Passive Web Sites: No Nonresident Jurisdiction With regard to passive web sites, courts have generally declined to establish nonresident jurisdiction. An example is found in a 1999 case, Mink v. AAAA Development, in which a federal court had to decide the question of personal jurisdiction over defendant AAAA Develop- ment, a nonresident Vermont company. Plaintiff Mink was a resident of Texas, where the original suit was filed.‘” AAAA had a national adver-

‘3Mink v AAAA Dw. LX, U.S. Court of Appeals for the Fifth Circuit, 190 E3d 333.

tising campaign and maintained a web site (viewable in Texas) that posted information about its products and services. The web site contained AAAA’s telephone numbers, its e-mail address, and a form to be completed and mailed in by the customer. No orders were taken over the internet and no business was conducted through the site. This was a case of first impression for the Fifth Circuit (that is, the court had not previously consid- ered the issue), and the court adopted the Zippo court’s reasoning. The Texas court ruled that AAAA had “established a passive web site that does nothing more than advertise on the internet. With passive web sites, personal jurisdiction is not appropriate.“”

Another 1999 case, this one in the Tenth Circuit, also dealt with the question of personal jurisdiction and the internet.‘” Soma, a Delaware corporation, attempted to obtain personal jurisdiction in Delaware over the Standard Char- tered Bank, an international bank incorporated in Great Britain, with its main office in Hong Kong, as part of a lawsuit alleging breach of contract and negligence. Standard Chartered Bank filed a motion for dismissal based on the Delaware court’s lack of personal jurisdiction over the bank. The bank’s was a passive web site, allowing for the transmittal of information, but viewers could not transact business there. Information was posted on the site and available for viewing. The court adopted the Zippo logic to determine that the passive web site maintained by Standard Char- tered Bank was not sufficient to allow a court to exercise personal jurisdiction over a nonresident defendant.

I4 Mink v. AAAA Dev. UC, at p. 337. ‘~.%wm Med. hf’l. “. Srandard ad, U.S. COWI

of Appeals for the Tenth Cmuit (1999).

The Zippo court established

that there are three categories

of companies on the internet:

those maintaining passive web

sites, those doing business

over the internet, and those

with an interactive web site.

October 2ooO l 59

Doing Business over the Internet: Personal Jurisdiction Applies I believe that the case of CompuServe ti Pulterson is one of the most important internet personal-jurisdiction

If your Web Me Can be cases decided to date.” Where the z+po court set a framework for

viewed in Connecticut, you decisions with its three-point sliding scale, the CompuServe case is the classic and most-cited example of

are liable to be hauled a company “doing business” over the internet. In this case,jurisdiction

into court there. is based entirely on the internet contacts that defendant Patterson had with plaintiff CompuServe. Patterson was conducting a business over the internet and dealt with CompuServe over the internet. When CompuServe and Patterson became involved in a dispute, CompuServe (an Ohio company) sued the nonresident Texan in an Ohio court. Patterson asked for a motion to dismiss the Ohio lawsuit based on the Ohio court’s lack of personal jurisdiction.

To determine personal jurisdiction over Patterson, the court con- sidered the following points.

First, the defendant must purposefully avail himself of the privilege of acting in the forum state or causing a consequence in the forum state. Second, the cause of action must arise from the defendant’s activities there. Finally, the acts of the defendant or consequences caused by the defendant must have a substantial enough connection with the forum to make the exercise of jurisdiction over the defendant reasonable.‘7

The court found that Patterson sent his software via the internet to CompuServe in Ohio for Compu- Serve to market, sell, and distribute to Patterson’s customers and potential customers. The case provides a clear example of a nonresident defendant conducting business in

the forum state that allows the forum state to exercise personal jurisdiction.

interactive Web Sites: Case-by-case Considerations In most instances it is difficult for a court to determine whether it should exercise personal jurisdiction in cases regarding interactive web sites. The generic Zippo scale may not apply, and so a review of the facts is paramount in determining personal jurisdiction in cases involving interactive web sites.

No jurisdiction. Cybersell v. Cybersell was a case of first impression for the Ninth Circuit, a district that includes California and Ari- zona.18 The case involved trademark infringement, the internet, and two companies from different states. The question before the court involved whether personal jurisdiction can be exercised over the nonresident defendant based on internet activity. Cybersell, Inc., an Arizona company that advertised its commercial services over the internet, had regis- tered the name “Cybersell” as a service mark in 1995. Cybersell, Inc., a Florida company, was a father- and-son business selling strategic- management consulting services over its web site to any interested customers, and which used a logo with the name “Cybersell” on the web site. The Florida-based web site advertised and promoted Cybersell, provided hyperlinks to other sites, and provided a direct e-mail connection to its own server in Florida. Except for the interactive hyperlinks and the direct e-mail connection, it was a passive site (as measured by the Zippo-court standard). The Arizona-based Cybersell brought suit in federal district court in Ari- zona to prevent Florida’s Cybersell

i6ContpuServe, hc. v. Pattevson, 89 E3d 1257 (U. S. Court of Appeals for the Sixth Cir., 1996)

” Comp~rServe, Inc. v. Patterson, at p. 1264.

” Cybmell, Inc. v. Cybed, Inc. et al., 130 E3d 414; (U.S. Court of Appeals for the Ninth Circuit, 1997).

60 IllKNEll HOTEL AND RESTAURANT ADMINISTRATION QUARTERLY

from using the logo “Cybersell.” In response, the Florida company claimed that the court lacked personal jurisdiction.

In its analysis of the jurisdiction question, the court adopted the sliding-scale test used in the Zippo case, and determined that no personal jurisdiction existed in the matter. Although this was not a case of a completely passive (information only) web site, neither was it a case where Florida’s Cybersell was actu- ally doing business in Arizona over the internet. The court found that the level of interactivity and the commercial nature of the information exchanged on the Cybersell web site were not sufficient to establish personal jurisdiction.

The “Availability” Test While many courts are adopting the Zippo sliding scale as the basis for reviewing minimum contacts to establish jurisdiction, other courts are adopting a theory established before the sliding scale was intro- duced. This theory suggests that if a web site is available in the state, then that state’s courts have jurisdiction over the web-site owner in court. As a result, not all circuits of the U.S. District Courts are following the same line of reasoning regarding jurisdiction and the internet.

In Inset Systems v. Instruction Set, the U.S. District Court in Con- necticut took the position that personal jurisdiction exists over a nonresident company if the company maintains a web site that is available to the residents of Connecticut.19 Simply stated, by that court’s reasoning in its pre-Zippo decision, personal jurisdiction is available against any nonresident company in any state or location where its web site is viewable. Courts following this line of thinking would find that

personal jurisdiction would be present whenever a nonresident company maintains a web site that transmits advertising and information to the court’s district or state.

In another case decided prior to the Zippo ruling, the federal court for the Eastern District of Missouri rendered a decision which found that the transmission of an interactive web site into the state by a defendent named CyberGold was sufficient to confer jurisdiction.

Although CyberGold characterizes its activity as merely maintaining a “passive web site,” its intent is to reach all internet users, regardless of geographic location. Defendant’s characterization of its activity as passive is not completely accurate. Through its web site, CyberGold has consciously decided to transmit advertising information to all internet users, knowing that such information will be transmitted globally. Thus CyberGold’s contacts are of such a quality and nature, albeit a very new quality and nature for personal jurisdiction jurisprudence, that they favor the exercise of personal jurisdiction over defendant. This factor suggests that defendant is purposefully availing itself to the privilege of conducting activities in Missouri.20

Room for confusion. Those two federal district courts in two different circuits ended up making personal-jurisdiction decisions that are contrary to the decisions of the federal circuits that are now following the Zippo framework. Not all federal district courts have decided internet-jurisdiction cases, so other cases with conflicting outcomes are possible.

Hotels, the Internet, and Personal Jurisdiction What follows is a review of some cases decided in federal courts involving hotels, the internet, and personal jurisdiction. Readers are

l9 Inset Systems, Inc. v. Instruction Set, Inc., 937 F. Supp. 161,1996.

Z”Maritz, Inc., v. CyberGold, Inc., 947 E Supp 1328, 1996, at p. 1334.

cautioned against predicting jurisdiction questions by analyzing just these and other lodging-related cases. Instead, a reading of lodging cases in conjunction with a review of other internet cases would be more revealing as to what a particular court might conclude. Note also that complaints need not specifically involve the operation of an internet site, as in the first case below.

Broussard v. Deauville Hotel. Broussard, a Louisiana resident, injured himself in a slip-and-fall acci- dent in a Miami, Florida, hotel and sued the hotel-operating company in a Louisiana court. The defendant filed a motion for dismissal based on lack of personal jurisdiction. The plaintiff said that jurisdiction was proper as the defendant maintained a web site that contained advertise- ments, property promotions, a toll- free telephone number to make reservations, and an (unlinked) e-mail address. Reservations could not be made using this web site. Other than the web site, which was available in Louisiana as elsewhere, the defendant had no contact with Louisiana. The court found that personal jurisdiction over the defendant did not exist; that the web site was passive in nature, not interactive; and that the web site did not satisfy the due-process “minimum contacts” requirement.21

Decker and Decker v. Circus Circus. The plaintiffs, claiming that they were injured at the Las Vegas Circus Circus hotel as a result of the hotel’s negligence, sued Circus Cir- cus in a New Jersey court. The defendant was a Nevada corporation with its only place of business in Nevada. The defendant filed a motion to dismiss based on the New Jersey court’s lack of personal jurisdiction. The plaintiff alleged that the

*’ Broussard u. Deauville Hotel Resorts, Inc., Civil Action No. 98-3157 (U.S. District Court for the Eastern District of Louisiana, 1999).

October 2000 l 61

To minimize the risk of being

dragged into a distant court,

businesses should include

a forum-selection clause

on their web sties.

Nevada hotel had the following contacts with the state of New Jersey and therefore had met the minimum-contacts test: a single national advertisement aired in the New York-New Jersey area, advertising in national magazines, mailings of promotional activity to people in New Jersey who request information and to former New Jersey guests, and the maintenance of an internet site where customers can make reservations.

In this case the court stated that it could have accepted jurisdiction based on the following reasoning:

Personal jurisdiction can be exercised over a defendant which maintains an internet site where customers can transact business. A court may exercise personal jurisdiction over a defendant based on the existence of an internet site in two situations: (1) where the site is used to actively transact business; and (2) where a user can exchange information with the host computer. In the first situation, the court will exercise personal jurisdiction because the defendants are entering into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the internet. In the second circumstance, the exercise of personal jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the web. It is clear that any customer can reserve a room through the web site. This activity is certainly commercial in nature. Moreover, by making reservations available on the internet, the defendants have effectively placed their hotel and its services into an end- less stream of commerce. Under the “stream of commerce” theory, a forum state may exercise jurisdiction over a nonresident corporation “that delivers its product into the stream of commerce with expectation that they will be purchased by consum- ers in the forum state.“z2

In its final ruling, however, the court refused to accept personal

jurisdiction as a result of a forum- selection clause on the defendant’s internet site, an effective safeguard that I will discuss momentarily.

Romero v. Holiday Inn. A Penn- sylvania resident was injured in a Holiday Inn i cht, Holland. The plaintiff, ro, was scalded by hot water while-taking a shower and, when he moved quickly to avoid the hot water, he slipped and fell, fracturing his nose and causing other injuries. Romero filed his lawsuit in the Eastern District of Pennsylvania. The defendant filed a motion to dismiss for lack of personal jurisdiction. The court noted that the Utrecht Holiday Inn had no connections with Pennsylvania, other than maintaining an interactive web site that allowed a customer to make a reservation. Al- though the court found that an interactive web site existed, the court did not follow the minimum- contact requirements to determine whether personal jurisdiction should be extended to the defendant. Instead, the court used a line of reasoning that is not present in the other internet cases cited here, namely, that the interactive web site was no different than a toll-free reservation number, and as a result, did not confer personal jurisdiction. In its 1998 decision the court stated:

There is one additional, potentially relevant fact: the availability of internet reservations. Internet reservations, however, are not additionally significant where toll-free telephone reservations are offered. Like 800- number service, an internet connection allows a consumer to contact a hotel chain for reservations directly and without charge. The distinction of using a computer hooked to a telephone or data line is not relevantly different from using a handset connected to that same

*’ Decker and Decker v. Circur Circus Hotel, 49 F. Supp. 2d 743 (U.S. District Court of New Jersey, 1999), at p. 748.

62 CORNELL HOTEL AND RESTAURANT ADMINISTRATION QUARTERLY

line; one is in writing and one is by voice-a distinction without difference in this context. So also, web- site reservations, a more modern version of toll-free reservations, do not change the resultz3

Weber v. Jolly Hotels. New Jersey resident Weber was injured while staying in a hotel in Italy owned by the defendant, an Italian company that also owns hotels in Holland, France, Belgium, and New York. It does not conduct any business in New Jersey. The defendant did maintain a completely passive, non- interactive web site. The defendant filed a motion to dismiss for lack of personal jurisdiction. The court closely followed the Zippo case and determined that the existence of a passive web site was not enough to confer personal jurisdiction.24

Specifying a Jurisdiction A complete examination of legal strategies that might be used to prevent a company fi-om being dragged into a distant court based on the maintenance of a web site is beyond the scope of this article. One easy safeguard exists, however, and that is to include a forum- selection statement on the web site. By using a hotel’s web site, a guest would be agreeing to the ground rules governing the web site’s use, much the way a credit-card customer agrees to the provisions of its use merely by swiping the card. A forum-selection clause stipulates in advance what jurisdiction will be

*s Romero v. Holiday Inn, Utrecht, Holland, Civil Action 98-2192 (U.S. District Court for the Eastern District of Pennsylvania, 1998), p. 4. Note that this case was decided in federal court for the Eastern District of Pennsylvania, while the Zippo case was decided in the state’s Western District. Since one federal court is not bound by the decisions of the federal courts in other jurisdictions, the Zippo court and the Romem court came to different conclusions about jurisdiction even though both cases involved interactive internet sites and both cases were heard in Pennsylvania.

24 Weber ujolly Hotels, 977 E Supp. 327 (D.N.J. 1997).

used should a legal dispute arise. By using the web site, a customer agrees to the stipulation.

Forum-selection clauses are in- cluded in most commercial contracts, and internet sites can also contain a forum-selection clause that will predetermine which courts will be available to settle litigation between the parties. That is exactly what occurred in the Circus Circus case. The casino’s web site contained a forum-selection clause. In uphold- ing the validity of the clause, the Circus Circus court cited several precedents, including the following:

.However, the defendant’s internet site contains a forum-selection clause requiring that by making a reservation over the internet, customers agree to have their disputes settled in Nevada state and federal courts. This forum-selection clause ought to be enforced. See: Carnival Cruise Lines v. Shute, 499 U.S. 585, 111 S. Ct. 1522, 113 L. Ed. 2d 622 (1991). “A clause establishing ex ante the forum for dispute resolu- tion has the salutary effect of dis- pelling any confusion about where suits arising from the contract must be brought and defended, sparing litigants the time and expense of pretrial motions to determine the correct forum and conserving judi- cial resources that otherwise would be devoted to deciding those motions.” See: Carnival, 499 U.S. at 593-94, citing Stewart Organiza- tion, Inc. v. Ricoh Corp., 487 U.S. 22,33, 108 S. Ct. 2239, 2246, 101 L. Ed. 2d 22, p. 748-a concurring opinion.25

The United States Supreme Court, which decided the Carnival case cited in the Circus Circus case, found that forum-selection clauses are enforceable. The Carnival forum-selection clause was printed on the back of the tickets issued to cruise customers, and was not nego- tiated. The court noted that the cruise line has a valid interest in limiting the locations where it may

be sued, and that if the cruise line was not attempting to discourage or limit claims by passengers, then the forum-selection clause was permis- sible and enforceable. The Carnival forum-selection clause in question contained, in part, the following language:

3. (a) The acceptance of this ticket by the person or persons named hereon as passengers shall be deemed to be an acceptance and agreement by each of them of all of the terms and conditions of this Passage Contract Ticket.

8. It is agreed by and between the passenger and the Carrier that all disputes and matters whatsoever arising under, in connection with, or incident to this Contract shall be litigated, if at all, in and before a Court located in the State of Florida, U.S.A., to the exclusion of the Courts of any other state or country.

Courts’ Future Directions As I indicated above, different circuits in the federal court system have issued contrary rulings and decisions based on similar sets of facts. Many courts follow the rea- soned and measured approach of the Zippo case to determine the question of personal jurisdiction and the internet. Other courts have adopted the position that if an internet site is available in a state, then the web-site owner is intending to avail itself of the opportunity of doing business in the state and should expect to be drawn into that state’s courts and to fall under their jurisdiction. When such discrepan- cies and contradictions exist among the different federal circuits, the U.S. Supreme Court will ultimately choose to hear and decide a case involving the internet and personal jurisdiction. Only when we finally have a Supreme Court decision will the situation of achieving different conclusions with the same facts be ended. CQ

October 2ooO l 63

the law(s) of cyberspace

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