The Ninth Circuit’s Approach
The Ninth Circuit recently held in Herbal Brands, Inc. v. Photoplaza, Inc., et al., 2023 U.S. App. LEXIS 16904 (9th Cir. July 5, 2023) (“Herbal Brands”) that a non-resident defendant who sells a physical product via an interactive website to a particular forum may be subject to personal jurisdiction in that forum, even absent any additional contacts. The Ninth Circuit’s decision scratches the surface of the murky jurisdictional waters that have surfaced in the wake of the Internet age and the rise of online commercial activity. So, does the Ninth Circuit’s ruling in Herbal Brands mean that a company selling its products online could be hailed into court in every state in which its products are sold? It depends.
Establishing Personal Jurisdiction Under the Traditional Framework
Courts have traditionally employed a three-prong test for determining whether personal jurisdiction exists over a non-resident defendant, which requires an evaluation of the following: (1) whether the defendant has sufficient minimum contacts with the forum state; (2) whether the plaintiff’s claims arise out of the defendant’s forum-related activities; and (3) whether the exercise of personal jurisdiction over the defendant would be reasonable. Many courts, including the Ninth Circuit in Herbal Brands, look to the “effects” test derived from Calder v. Jones, 465 U.S. 783 (1984) (“Calder”) to determine whether a defendant has sufficient minimum contacts with a forum state such that the first prong of the traditional personal jurisdiction analysis is met. To satisfy the “effects” test, a defendant must (1) commit an intentional act (2) that is expressly aimed at the forum state, and (3) cause harm, which the defendant knows is likely to be suffered in the forum state.
The Internet and Its Impact on the Territorial Limits of Personal Jurisdiction
The rise of the Internet age and the prevalence of e-commerce has led some courts in more recent years to depart from the traditional personal jurisdiction framework described above, at least concerning the first prong. Courts first began to consider the potential impact of the Internet on the scope of personal jurisdiction decades ago soon after the Internet was invented. For example, in the seminal case of Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. PA 1997) (“Zippo”) decided in 1997, the court acknowledged the fact that conducting commercial activity online was inevitably going to give rise to a “global revolution”. In a proactive effort to address the jurisdictional issues that were expected to arise from that global revolution, the Zippo court developed a “sliding scale” to determine whether a defendant has sufficient minimum contacts with a forum in cases where the defendant’s contacts stem solely, or primarily, from Internet activity. At one end of the spectrum are cases where a defendant engages in repeated business with a particular forum via an interactive website and likely has other physical contacts with the forum state. At the other end of the spectrum are cases where a defendant simply maintains a passive website that does nothing more than provide information to consumers. And, of course, most cases fall somewhere in the middle.
The Ninth Circuit’s Application of the Calder “Effects” Test
In Herbal Brands, the plaintiff, a manufacturer of health and wellness products, maintained its principal place of business in Arizona. The defendants were New York residents that sold products via various Amazon storefronts, including the plaintiff’s products. Plaintiff brought suit in the District of Arizona, alleging that the defendants had infringed on the plaintiff’s trademark rights by selling the plaintiff’s products on Amazon without authorization. The district court dismissed the plaintiff’s complaint for lack of personal jurisdiction, finding that the plaintiff failed to meet its burden of showing that the defendants had sufficient minimum contacts with Arizona. The Ninth Circuit reversed, finding that the defendant’s sale of physical products through an interactive website constituted purposeful direction, such that the defendants did have sufficient minimum contacts with Arizona.
In finding that the defendants had sufficient minimum contacts with the forum state, the Ninth Circuit applied the traditional personal jurisdiction framework—i.e. the Calder “effects” test, rather than the more fluid “sliding scale” approach established in Zippo. Notably, the Ninth Circuit has not always done so and has, on occasion, applied the Zippo “sliding scale”. For example, in Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997)—an Internet case decided in 1997—the Ninth Circuit elected to follow Zippo, and outright declined to apply the Calder “effects”, finding that Zippo was the more fitting standard because the defendant’s alleged contacts with the forum state stemmed from the operation of a website. Conversely, in more recent years, the Ninth Circuit has reversed course and elected to apply the Calder “effects” test—see, e.g., Janus v. Freeman, 840 Fed. Appx. 928 (9th Cir. 2020), decided in 2020. The Herbal Brands decision is of course just the most recent example of the Ninth Circuit’s application of Calder.
While the Herbal Brands decision does not address Zippo one way or the other, the Ninth Circuit’s application of the Calder “effects” test is perhaps indicative of how the Ninth Circuit is going to continue analyzing personal jurisdiction in the Internet context. That begs the question—should the Calder “effects” test be applied to Internet cases, or do Internet cases warrant the development of a new personal jurisdiction test? The Ninth Circuit did not squarely address that question in Herbal Brands, but it also did not shy away from addressing the policy concerns associated with applying the Calder “effects” test to resolve personal jurisdiction issues that are specific to Internet cases.
The Ninth Circuit acknowledged that if the sale of products by way of an interactive website to a forum can be sufficient to establish minimum contacts, plaintiffs may very well be able to “manufacture” jurisdiction in their desired forum, anywhere, and e-commerce may very well be negatively impacted. Although those concerns did not preclude the Ninth Circuit from exercising personal jurisdiction in Herbal Brands, there is seemingly nothing preventing courts from declining to exercise personal jurisdiction on those grounds going forward. Indeed, the Ninth Circuit invites defendants in future cases to make the argument that an exercise of personal jurisdiction based purely on virtual contacts with a forum state would not be reasonable, such that the third prong of the traditional personal jurisdiction analysis cannot be met. In that same vein, any similar policy arguments related to the appropriate territorial limits of personal jurisdiction in Internet cases should be made under the third prong of the traditional personal jurisdiction analysis—according to the Ninth Circuit, that is. It is almost certain that defendants will accept the Ninth Circuit’s invitation to advance these policy arguments, but how those arguments will fare remains to be seen.
The Herbal Brands decision is noteworthy because the Ninth Circuit applied the traditional personal jurisdiction analysis, while simultaneously providing future litigants with a road map for how to argue that the third prong of the traditional framework cannot be satisfied in Internet cases. Perhaps that is a nod to the Ninth Circuit’s recognition of the fact that with the Internet age and the increase in online commercial activity comes the need to modify the way personal jurisdiction is analyzed. The Ninth Circuit may not at this time be willing to create a new test for personal jurisdiction that is unique to Internet cases, but it certainly seems willing to factor certain policy concerns into the traditional personal jurisdiction analysis. The key for future litigants will be to fashion those policy arguments in a way that is well-taken by the Ninth Circuit. The Brands’ opinion provides a good roadmap.
Implications of the Herbal Brands Ruling
While the Herbal Brands ruling might appear to expand the scope of personal jurisdiction in Internet cases—or at the minimum affirm that Internet cases will continue to be evaluated under the traditional personal jurisdiction framework in certain circuits—the Ninth Circuit’s ruling might not be so far-reaching. Notably, in Herbal Brands, the Ninth Circuit did not hold that defendants who sell physical products via an interactive website will automatically be subject to personal jurisdiction in every state in which their products are sold. The Ninth Circuit made clear that it was not attempting to establish any such brightline rule to be applied to personal jurisdiction scenarios arising in Internet cases in the future. The Ninth Circuit also made clear that it’s holding in Herbal Brands should not be construed as an attempt to reconcile the split of authority that currently exists in the federal circuits regarding whether—and under what circumstances—a defendant’s contacts with a forum via an interactive website are sufficient to establish minimum contacts. In the words of the Ninth Circuit, that endeavor is reserved for “another day”.
For now, at least two primary schools of thought have emerged when it comes to assessing personal jurisdiction in Internet cases. The first holding is that the traditional Calder “effects” test can and should be applied to Internet cases the same way it is applied to any other type of case to determine whether a defendant has sufficient minimum contacts with a forum state. The second recognizes that a more flexible approach—like the “sliding scale” developed in Zippo—should be used to analyze a defendant’s contacts with a forum state in Internet cases, as such cases present unique jurisdictional issues that did not exist and therefore were not contemplated when the traditional framework was established. Some circuit courts have expressly adopted, or rejected, either Calder or Zippo. Other circuits have wavered between the two approaches.
Given the current split of authority, it is not clear under what circumstances personal jurisdiction exists when a defendant’s alleged contacts with a forum are primarily, or solely, virtual—that in large part depends on what circuit court is answering that inquiry. Circuit courts do seem to agree on one thing, though: personal jurisdiction always has been, and will continue to be, evaluated on a case-by-case basis, even in Internet cases. Regardless of which school of thought each circuit tends to align with, it seems that no circuit is willing to go so far as to say that the operation of an interactive commercial website will either always, or never, give rise to sufficient minimum contacts with any one forum state—the Ninth Circuit included.
Conclusion
The Herbal Brands decision does not promulgate any binding standard to be applied to any jurisdictional scenarios that will inevitability arise in future Internet cases. Just because the defendants were subject to personal jurisdiction in Herbal Brands, does not mean that all corporate defendants will be subject to personal jurisdiction in every state in which they do online business. Nonetheless, companies doing business online should take note of the Herbal Brands decision, as it is indicative of how the Ninth Circuit is currently choosing to analyze personal jurisdiction in an era where online commercial activity is more prevalent than ever.
*Not intended to constitute legal advice to be relied upon. We recommend you consult with legal counsel to receive tailored advice suitable to your circumstances.
