Ninth Circuit to Re-Examine Personal Jurisdiction Over Internet Sellers

On September 2, 2003, in a controversial decision, a three-judge panel of the Ninth Circuit Court of Appeals in California held that L.L. Bean's sales via the Internet were sufficient to establish general personal jurisdiction in California over the famous catalog clothing retailer. Gator.com Corp. v. L.L. Bean, Inc., 341 F.3d 1072 (9th Cir. 2003). The court reached this conclusion despite the fact that L.L. Bean is incorporated in Maine and has all of its facilities and employees in that state, and despite the fact that the allegations in the lawsuit were unrelated to L.L. Bean's sales via the Internet to customers in California. The Ninth Circuit panel held that L.L. Bean's Internet sales in California were sufficient to allow Gator.com to sue L.L. Bean in California seeking a judicial declaration that Gator.com's computer pop-up software did not infringe any L.L. Bean trademark or constitute an unfair trade practice.

On April 29, 2004, the Ninth Circuit decided to rehear the case en banc, meaning that all of the Ninth Circuit judges will participate in reevaluating the case. The decision to rehear the case results in immediate (although potentially temporary) decertification of the previously published opinion. The Ninth Circuit's action has thus raised the hopes of those companies that do business over the Internet that this act alone will not subject the companies to personal jurisdiction in the California courts.

L.L. Bean's Web site allows individuals to make direct purchases or engage in transactions via the Web site (as opposed to simply reviewing materials posted on the Web site). The operation of such "interactive" Web sites has grown rapidly in the past few years as the Internet has allowed sellers to reach a global marketplace for their goods. As a result, sales routinely take place over the Internet without the seller ever having set foot in the buyer's state or country.

Courts have traditionally relied on actual physical presence in, or contacts with, the forum in order to determine whether personal jurisdiction exists in that jurisdiction. With Internet sellers, the fundamental element of actual physical presence is usually lacking unless the seller happens to be located in that state or has other physical connections with the state to which the court can point, such as a warehouse, bank account, or sales representative in the jurisdiction. Similarly, incorporating in a state or designating an agent for service of process...