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Just when it seemed that various forms of online conduct could give rise to legal jurisdiction in distant forums, a decision issued Nov. 26 by a California appellate court in the case Nam Tai Electronics v. Titzerprovides guidance in determining when conduct over the Internet subjects an individual or entity to jurisdiction in a particular state. ALLEGEDLY LIBELOUS INTERNET POSTINGS Nam Tai Electronics is a consumer electronic products manufacturer based in Hong Kong. Its stock is publicly traded on Nasdaq. Joe Titzer is an individual who lives in Colorado. Using seven different aliases, Titzer posted 246 messages on Yahoo Internet message boards, some of which deal with Nam Tai’s stock. To be able to post messages with Yahoo, Titzer was required to register an alias Yahoo ID and agree to Yahoo’s terms of service. The terms of service include an agreement not to post any content that is unlawful or otherwise objectionable. They also provide that the laws of California apply to the relationship between the person registering and Yahoo and that both agree to submit to the personal and exclusive jurisdiction of the California courts. Nam Tai argued that at least three of Titzer’s messages were false, defamatory and unlawful. In essence, the messages asserted that Nam Tai had colluded with other companies to win contracts in restraint of free trade and that Nam Tai was losing business to another electronics manufacturing firm. Thus, Nam Tai filed a complaint against Titzer in the trial court for Los Angeles County for libel and other causes of action. Titzer was personally served with the complaint in Colorado, and he thereafter sought dismissal of the case based on improper jurisdiction in California. The trial court agreed with Titzer, and “quashed” service of the complaint and dismissed the case. Nam Tai then filed its appeal. MESSAGES NOT SPECIFICALLY TARGETED TO CALIFORNIA On appeal, Nam Tai argued that jurisdiction over its case against Titzer was proper in California because he had affirmatively registered aliases and posted almost 250 messages on Yahoo’s “California-maintained” Web site. However, rejecting that argument as “miss[ing] the point,” the court of appeal stated “the issue is not whether the company that makes the Web sites available is incorporated or based in California.” Rather, “the determinative question is whether the Web sites themselves are of particular significance to California or Californians such that the user has reason to know the posting of the message will have significant impact in this state.” Here, the court of appeal found that there was no evidence to show that Titzer’s messages were directed specifically to Californians. The impact of this part of the decision, if followed by other courts, could be great. Many forms of online communications are not focused on recipients in a particular state. Therefore, generalized online conduct may not be sufficient to confer jurisdiction in a distant state. CHOICE OF VENUE AND LAW CLAUSE On appeal, Nam Tai also relied on the clause in the terms of service providing that disputes would be subject to jurisdiction in California and that California law would control the resolution of those disputes. While at first blush such reliance seems appropriate, the court of appeal held that the clause was not enforceable because it is “a typical adhesion contract, affording users who wish to register and post a message no opportunity to negotiate,” and because it “appears on its face to govern litigation between registered users and Yahoo — not registered users and third parties.” In terms of the opportunity to negotiate, the decision may not be entirely well considered, as potential users are free not to sign up and post messages with Yahoo. If they do not like Yahoo’s terms of service, they can find some other place on the Internet or elsewhere to express their views. To the extent the terms of service are ambiguous, that is another matter. Users presumably had no part in the drafting of the terms, and therefore, any ambiguity should not be construed against them. The terms of use should be clear as to the types of disputes, whether they be disputes against Yahoo, third parties, or both, that will be submitted to California courts and controlled by California law. LOOKING AHEAD The rules of Internet jurisdiction are continuing to be ironed out. It is becoming somewhat settled, for example, that the more active a Web site is in a location, the greater the likelihood that it will be subject to legal jurisdiction there. Thus, if a person in New York places a large online order with Amazon.com, which is based in Washington state, and she supplies her credit card number and other information from New York as part of that transaction, to the extent a dispute arises and a choice of venue contractual clause does not otherwise apply, it is highly likely jurisdiction over Amazon.com in New York would be appropriate. Now, as a result of the Nam Taicase, as an overlay to the jurisdictional rules that are being mapped out, jurisdiction in a particular state may fail with respect to generalized online conduct that does not have a nexus to that state. Eric J. Sinrod is a partner in the San Francisco office of Duane Morris, where he focuses on technology and litigation matters. His Web site is sinrodlaw.comand his firm’s site is Duane Morris. Mr. Sinrod may be reached by e-mail at [email protected].

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