29 November 2019

Personal Jurisdiction And Internet Transactions

In a recent case, the New Jersey Appellate Division addressed whether an Internet transaction between a New Jersey buyer and California seller exposed the seller to a New Jersey lawsuit...
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In a recent case, the New Jersey Appellate Division addressed whether an Internet transaction between a New Jersey buyer and California seller exposed the seller to a New Jersey lawsuit initiated by the buyer.

The case, Jardim v. Overley, involved the sale of a vintage car. The seller, Overley, is a California resident. On May 2, 2018, he listed a 1960 Buick Invicta for sale on the website, a marketplace used to list cars for sale. Overley explained in a certification that he is not in the business of selling cars and does not regularly conduct business over the Internet. The buyer, Jardim, is in the business of selling used cars and has an office in New Jersey. Jardim v. Overley, __ N.J. Super. __ (2019) (slip op. at 3–4).

On May 26, 2018, Jardim, through his business associate, e-mailed Overley and offered to purchase the car. In a series of e-mail and telephone communications over a two-day period, the parties negotiated and agreed on a purchase price. Once the price was set, the parties executed a bill of sale. Jardim arranged to have the car shipped from California to New Jersey, and on June 25, 2018, he received the car in New Jersey. Id. at 4–8.

When the car arrived, Jardim discovered that it was not in the condition Overley had advertised. He filed a lawsuit in the Law Division, alleging claims for breach of warranty, unjust enrichment, fraud, and consumer fraud. The trial court, however, dismissed Jardim's claims for lack of personal jurisdiction over the seller. It reasoned that the parties' contact was an isolated occurrence and that their negotiations did not create "sufficient minimum contacts with New Jersey to attach personal jurisdiction to Overley." Id. at 8–9.

The Appellate Division, in an opinion approved for publication, affirmed. First, the court explained that the touchstone of any personal jurisdiction analysis is the Due Process Clause of the Fourteenth Amendment. Under the Due Process Clause, a defendant must have "minimum contacts" with the forum "such that the maintenance of the suit does not offend 'traditional notions of fair play and substantial justice.'" Id. at 10 (quoting Int'l Shoe Co. v. Washington, 326 U.S. 310, 316–17 (1945)). In cases involving sales by non-resident defendants, a defendant must "purposefully avail" itself of the forum state, such that the defendant would "reasonably anticipate being haled into court" there. Id. at 11–14 (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958) and Bayway Ref. Co. v. State Util., Inc., 333 N.J. Super. 420, 429 (App. Div. 2000)).

Second, the Appellate Division canvassed how courts in other jurisdictions have applied these constitutional principles to personal jurisdiction issues arising from Internet transactions. Some courts, for example, use the "Zippo" sliding scale approach, which determines personal jurisdiction based on the defendant's level of interactivity and commercial purpose in using the Internet. Id. at 15–16 (quoting Zippo Mfg. Co. v. Zippo Dot Com, 952 F. Supp. 1119, 1124 (W.D. Pa. 1997)). Other courts avoid the Zippo court's formalism and instead apply traditional constitutional principles. Id. at 16–17.

Third, the Appellate Division noted the lack of New Jersey case law addressing personal jurisdiction arising from Internet transactions. Id. at 18–21 (discussing Lebel v. Everglades Marina, Inc., 115 N.J. 317 (1989), Halak v. Scovill, 296 N.J. Super. 363 (App. Div. 1997), and Ragonese v. Rosenfeld, 318 N.J. Super. 63 (Law Div. 1998)). Instead, the court found cases addressing personal jurisdiction from transactions on the website to be "instructive." Id. at 17–18. In that vein, it analogized this case to the Ninth Circuit's decision in Boschetto v. Hansing, 539 F.3d 1011, 1018–19 (9th Cir. 2008). In Boschetto, the Ninth Circuit affirmed the dismissal of a case for lack of personal jurisdiction where the defendant was a Wisconsin resident who sold a car on to a California resident in a "one-shot affair." Id. at 21 (quoting Boschetto, 439 F.3d at 1017).

As in Boschetto, the Appellate Division affirmed the trial court's dismissal of Jardim's case for lack of personal jurisdiction. The court emphasized that Overley's contact with New Jersey was a "one-shot affair": Overley was not in the business of selling cars; he never previously used the website; and he had not previously dealt with Jardim. Moreover, the court recognized that Overley's "mere awareness" that Jardim was located in New Jersey did not constitute "purposeful availment" of New Jersey. Id. at 22.

The Appellate Division affirmed on the facts without adopting the "Zippo" sliding-scale approach or opining on an "ideal analytic approach" to personal jurisdiction in Internet cases. Id. at 23. Thus, trial courts must continue to assess personal jurisdiction on a case-by-case basis. This approach is sound and consistent with the flexible nature of the Due Process Clause. It is reasonable to assume, therefore, that the case law in this area will continue to develop in a way that is as dynamic as the Internet itself.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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