Nov 30 (Reuters) – Here is a jurisdictional curiosity, courtesy of the 9th U.S. Circuit Court of Appeals.
If an online retailer delivers physical products to California, Arizona, Nevada or other states in the 9th Circuit, the business can be sued in that state, even if the online seller is not incorporated or headquartered on the West Coast.
But if the purchaser used a nationwide online payment platform like Shopify to complete the transaction, the platform can’t be forced into court in the 9th Circuit, even if both the purchaser and the online merchant are based in a 9th Circuit state.
That’s the upshot of a 9th Circuit decision on Tuesday in a knotty case of first impression. Class action plaintiff Brandon Briskin, a Californian, purchased fitness apparel from the website of a California-based retailer. Unbeknownst to Briskin at the time, Shopify (SHOP.TO) processed the transaction. He alleged that Shopify violated California consumer laws by secretly collecting confidential data from him and other California purchasers, then reselling that information, in the form of “consumer profiles” to merchants and other business partners.
The 9th Circuit ruled that California did not have jurisdiction to hear Briskin’s claims against Shopify’s Canadian parent and two U.S.-based subsidiaries. Judges Consuelo Callahan, Bridget Bade and Daniel Bress reasoned that under the test established by the U.S. Supreme Court in 1984’s Calder v. Jones, Briskin could not show that Shopify – a nationwide platform — expressly aimed its conduct at California.
“The fact that a broadly accessible web platform knowingly profits from consumers in the forum state is not sufficient to show that the defendant is expressly aiming its intentional conduct there,” Bress wrote for the unanimous panel. “The platform is indifferent to the location of either the merchant or the end consumer. No one has alleged that Shopify alters its data collection activities based on the location of a given online purchaser. It did not prioritize consumers in California or specifically cultivate them.”
That’s a marked contrast with the 9th Circuit’s ruling earlier this year in Herbal Brands, Inc. v. Photoplaza, Inc. In that case, as I told you in July, the 9th Circuit allowed Herbal Brands to proceed in Arizona with trademark infringement claims against several New York-based Amazon resellers because the online retailers delivered physical products to consumers in Arizona.
Those deliveries, the appeals court reasoned, were specifically aimed at Arizona, so Herbal Brands satisfied the requirements of the Calder test. (The Amazon retailers, you may recall, filed a petition earlier this month for Supreme Court review of the 9th Circuit ruling.)
During oral arguments last August in the Shopify case, Briskin’s lead appellate counsel, Nicolas Sansone of Public Citizen, pointed to the 9th Circuit’s Herbal Brands precedent. (Herbal Brands was decided after both Briskin and Shopify filed their appellate briefs, so the decision was not addressed until oral argument.) Sansone asserted that Shopify, like the Amazon vendors in the Herbal Brands case, deliberately exploited the vast California market, signing up more than 80,000 California merchants to use its payment processing services and obtaining reams of valuable data from California purchasers.
But in Tuesday’s decision, the 9th Circuit said Herbal Brands is distinguishable because that case focused on the delivery of physical products, not online services. The Herbal Brands ruling, the court said in its Shopify opinion, harkened back to pre-internet precedent holding that the distribution of products into a particular forum can be sufficient to establish that forum’s jurisdiction.
Shopify and other nationwide internet payment platforms do not deliver physical products. They simply provide a service, facilitating online payments from consumers to merchants. So, according to the 9th Circuit, the proper precedential framework is not Herbal Brands but is instead a series of cases analyzing jurisdiction over defendants that offer interactive online goods and services.
All three of the key decisions cited by the 9th Circuit arose from cases against websites that posted photos and videos. In 2011’s Mavrix Photo, Inc. v. Brand Technologies, Inc., the 9th Circuit ruled that California courts had jurisdiction over Mavrix’s copyright infringement claims against an Ohio-based celebrity gossip website because Brand Technologies deliberately exploited the California market for celebrity photos. The site made its money from advertisers, the court said, and at least some advertisers directly targeted California residents. Those California-focused ads, according to the court, were evidence that Brand was aiming its conduct at the state.
But in a 2020 ruling in a copyright case against a Polish adult video site that also made money from geotargeted ads, the 9th Circuit said Nevada did not have jurisdiction because the ads did not specifically target Nevadans, who constituted only a small percentage of the site’s viewers, but were tailored for every jurisdiction in which viewers were located.
In a third case, Will Co. v. Lee, the 9th Circuit ruled that a Hong Kong video hosting site was subject to U.S. jurisdiction because its servers were based in Utah and because it targeted U.S. customers by adopting technology that speeded up their downloads.
The 9th Circuit said that under the framework of those three cases, Briskin could not show that Shopify’s platform had a California-specific focus or that Shopify was directly targeting California purchasers. The court acknowledged Briskin’s argument that its reasoning would allow Shopify and other online payment platforms to elude lawsuits in nearly all of the states in which they conduct business. But the judges said consumers can sue in the jurisdictions in which these companies are based or incorporated.
“Although Briskin’s objection is not without force, our law has long recognized that as a matter of due process, web-based platforms cannot be subject to specific jurisdiction in any forum from which they are accessible,” Bress wrote.
Briskin counsel Seth Safier of Gutride Safier declined to comment on the 9th Circuit decision.
Shopify lead counsel Moez Kaba of Hueston Hennigan said in an email statement, “We appreciate the 9th Circuit’s thorough opinion affirming our legal arguments on this matter of first impression.” It’s important, he added, “that long-established, traditional limits on the exercise of personal jurisdiction are applied fairly to online businesses.”
Read more:
Amazon resellers ask Supreme Court to clarify where online businesses can be sued
It’s getting easier for plaintiffs to pick where to sue internet retailers
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Reporting By Alison Frankel
Our Standards: The Thomson Reuters Trust Principles.
