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Internet Websites and Jurisdiction

In recent times, a significant amount of business is conducted online.  The Internet connects a business to customers anywhere in the world. What happens when a dispute arises between a business in one state and a customer in another? If the customer wants to bring legal action against the business because of a transaction that occurred online, where does the customer file the action? The answer may depend on the type of website. The courts have created the distinction between active and passive websites. When a transaction occurs through an interactive website, the business may be subject to the jurisdiction of the state where the customer accessed it. Is your business developing a website? Did you know that an interactive website may subject you to the jurisdiction of any state? If so, then you must understand the difference between active and passive websites, and how they may affect your legal rights.

What Is the Active and Passive Distinction?

An interactive or active website is one where business transactions can occur through the website or information can be exchanged to solicit business. On the other hand, a passive website is one that is used to post information for potential customers, but it does not allow for interaction. A passive website is similar to an advertisement. The distinction is crucial because courts will confer personal jurisdiction over companies that maintain active websites in the state where the consumer is located. Active websites include sites that foster online sales, sites that take measures to solicit business in a particular forum, and the use of a third-party site to sell an item. Not every website fits neatly into these two categories, and issues arise when the website falls between the two.

How Do Courts Decide Whether A Website Is Active Or Passive?

In general, the courts look to a number of factors when deciding whether a website is active or passive. A federal court in Virginia held that an active website did not confer personal jurisdiction in Virginia because the website was not directed toward Virginia and no Virginia residents visited the site. On the other hand, another federal court in Connecticut held that a site that seemed passive did confer personal jurisdiction on the company because of a toll-free number posted on the website. The court held that the number was enough to be a solicitation. While many courts apply the “active/passive” test, not all rely on it exclusively. The Second Circuit has stated, “a website’s interactivity may be useful for analyzing personal jurisdiction,” but “traditional statutory and constitutional principles remain the touchstone of the inquiry.” The general test for personal jurisdiction is whether the defendant has minimum contacts with the state in question. Courts apply the minimum contacts test on a case-by-case basis. To apply this test to a website, a court would look to the “quality and nature” of the site’s activity and whether that activity is such that it would be fair to hale the defendant into that jurisdiction.

If you plan on doing business online, then you must be aware of whether your website is active or passive. The distinction could be the difference of you being summoned into court on the other side of the country. If you are concerned about the interactivity of your website, you may contact us to speak to attorney.