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E-Commerce News
"Gripe Site" is Interacitve for Jurisdictional Purposes; Bad Day for a Spammer
April 26, 2006
"GRIPE SITE" IS INTERACTIVE FOR JURISDICTIONAL PURPOSES
An Arizona based internet "gripe site" that allows users to post messages, make donations, and purchase books provides enough interaction to allow an Illinois based federal court to exercise jurisdiction, according to a recent decision from the federal court for the Northern District of Illinois.
The defendants in the case, Arizona residents, operate a site called the "Rip Off Report." The site allows consumers to make postings about companies that have provided inadequate service. An Illinois based consulting firm was the target of a number of posts, including posts charging it with cheating clients, and another accusing it of operating a porn club for pedophiles. Not surprisingly, the Illinois company eventually sued the Website for defamation. In response, the defendants argued that the Illinois federal court lacked jurisdiction over them.
In deciding whether it had jurisdiction, the court needed to assess whether the site was "passive" or "interactive." Previous cases have held that a "passive" Website is not subject to jurisdiction in any state in which a user happens to log on. On the other hand, "interactive" Websites effectively invite users to log on, and courts have found that in such a circumstance, operators can reasonably expect to be sued in jurisdictions where users reside.
The court here found that the "Rip Off Report" was a far cry from passive Web sites. Visitors could post comments, to which the defendants occasionally replied. The site solicited online donations, and in fact received donations from nearly 50 Illinois residents. Also, over a dozen Illinois residents purchased a "how to" book on consumer griping from the Web site.
In addition to the online contacts, the plaintiffs presented evidence of offline contacts that supported their position that the Illinois court retained jurisdiction. The defendants communicated with two Illinois law firms in an attempt to establish a business relationship. The defendants actually referred clients to one of the firms.
The fact that the site solicited comments from Illinois residents, combined with its operators reaching out to the Illinois law firms, established "continuous and systematic" contacts with Illinois. As a result the court denied the motion to dismiss for lack of jurisdiction.
The "passive/active" test is not perfect, but it looks like the analysis that courts prefer.
The defendant in the case was Christopher Smith, a spam operator who used e-mail to promote such must have products as cable television descramblers, online college degrees, and "generic Viagra."
Evidence in the case showed that, for a period of 213 days in 2003, Smith used America Online's computer network to transmit unsolicited bulk e-mail, in violation of Virginia's Computer Crimes Act. The Virginia statute imposes statutory damages of $25,000 per day for each day that a violation took place. In this case, the total damage award came to $5.3 million, plus AOL's attorneys' fees.
The court also enjoined Smith from future involvement in connection with commercial e-mail marketing.
Anyone who feels sorry for Mr. Smith may now raise their hand... Anyone?
This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.