HY Cite Corp. v. Badbusinessbureau.com, L.L.C.
2004 U.S. Dist. LEXIS 206, 297 F.Supp.2d 1154, 70 U.S.P.Q. 2d (BNA) 1266 (2004)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A federal court can exercise personal jurisdiction over a nonresident defendant only if the defendant has sufficient 'minimum contacts' with the forum state, arising from purposeful availment or intentional targeting, such that exercising jurisdiction comports with traditional notions of fair play and substantial justice. A website's mere accessibility in a state or a corporation's principal place of business there are generally insufficient to establish general or specific personal jurisdiction without evidence of purposeful targeting or direct connection to the cause of action.
Facts:
- Plaintiff Hy Cite Corporation is a Wisconsin corporation with its principal place of business in Madison, Wisconsin, marketing and selling products under its Royal Prestige trademark.
- Defendant badbusinessbureau.com is a limited liability company organized under the laws of St. Kitts/Nevis, West Indies, with no assets, offices, or employees in Wisconsin.
- Defendant owns and operates 'The Rip-Off Report' website, which serves as a forum for consumers to submit and defendant to post complaints about various businesses.
- Hy Cite's products have been the subject of 30 to 40 consumer complaints posted on badbusinessbureau.com's website.
- Defendant allows subjects of complaints to post rebuttals for a $25 fee and advertises a 'Corporate Customer Advocacy Program' on its website.
- On June 24, 2003, Hy Cite contacted badbusinessbureau.com via e-mail to inquire about resolving complaints, and badbusinessbureau.com responded on July 11, 2003, informing Hy Cite of the advocacy program, which Hy Cite did not enroll in.
- Defendant's website also sells a book, 'Rip-Off Revenge Guide,' one copy of which was purchased by a Wisconsin resident.
- Defendant's website offers ad space (none purchased by Wisconsin companies), solicits donations (unclear if any from Wisconsin), and allows viewers to enlist as volunteer 'rip-off reporters' or coordinate class actions (none in Wisconsin).
Procedural Posture:
- Hy Cite Corporation, a Wisconsin corporation, initiated a civil action in the United States District Court for the Western District of Wisconsin against badbusinessbureau.com.
- Hy Cite Corporation alleged claims of unfair competition, false advertising, disparagement, and trademark infringement under state and federal law.
- Badbusinessbureau.com filed a motion to dismiss the case for lack of personal jurisdiction, arguing it did not have sufficient contacts with Wisconsin.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the operation of a consumer complaint website, generally accessible in Wisconsin, along with limited interactions with a Wisconsin-based corporation and a single sale to a Wisconsin resident, establish sufficient minimum contacts to subject the non-resident website operator to personal jurisdiction in Wisconsin for claims of unfair competition, false advertising, disparagement, and trademark infringement?
Opinions:
Majority - Crabb, Chief Judge
No, the defendant badbusinessbureau.com's contacts with Wisconsin are not sufficiently continuous and systematic for general jurisdiction, nor are they purposefully directed at the state in a way that gives rise to the specific claims, thus failing to satisfy the personal jurisdiction requirements of the Fourteenth Amendment’s due process clause. The court began by declining to adopt the `Zippo` 'sliding scale' test as a standalone substitute for traditional minimum contacts analysis, noting that a website's interactivity is only one factor and that rigid adherence to `Zippo` could lead to erroneous results. The court emphasized that the Supreme Court has rejected 'mechanical' tests for personal jurisdiction and that traditional due process principles remain paramount, requiring purposeful availment or intentional targeting, not mere accessibility. For general jurisdiction, the court found Hy Cite's argument bordered on frivolous, as badbusinessbureau.com lacked any physical presence, substantial business, or agents in Wisconsin. The website's general accessibility, along with potential contacts like unsolicited donations, unpurchased ad space, and a single book sale to a Wisconsin resident, were insufficient to establish continuous and systematic contacts equivalent to being constructively present in the state. For specific jurisdiction, the court examined the 'purposeful availment' and 'effects test' standards. Under purposeful availment, the court found no evidence that badbusinessbureau.com purposefully availed itself of Wisconsin's benefits or protections. The unsolicited inquiry from Hy Cite and the consumer-posted complaints did not constitute targeted solicitation by the defendant. The single book sale lacked a sufficient 'nexus' to the cause of action (trademark infringement and disparagement), as the lawsuit did not directly arise from the sale itself. Under the effects test (`Calder v. Jones`), Hy Cite failed to show that badbusinessbureau.com expressly aimed its tortious activities at Wisconsin or that the 'brunt of the harm' was suffered there. The court noted that consumers, not badbusinessbureau.com, created the allegedly defamatory complaint text, and merely mentioning a trademark on a generally accessible website does not constitute express aiming. Furthermore, for a corporate plaintiff, its principal place of business is not automatically the locus of injury; Hy Cite failed to provide specific facts showing that the brunt of its injury was uniquely or primarily felt in Wisconsin, distinguishing the case from `Indianapolis Colts` where the trademark's value was inherently tied to the forum state.
Analysis:
This decision provides critical clarification on the application of personal jurisdiction principles in the internet age, particularly in federal courts within the Seventh Circuit. By rejecting `Zippo` as a rigid substitute for the traditional minimum contacts analysis, the court reinforces that mere website accessibility is insufficient for jurisdiction and emphasizes the necessity of purposeful targeting and a direct nexus between the defendant's forum contacts and the plaintiff's claims. For corporations, the ruling establishes a higher bar for demonstrating 'brunt of the harm' under the effects test, requiring more than just a principal place of business in the forum state, thereby preventing plaintiffs from arbitrarily selecting a forum without strong ties. This precedent helps define the boundaries of jurisdiction for online businesses, mitigating the risk of being haled into court in any state where their website might be viewed.
