(Reuters) – If you’re an online retailer delivering products to the US West Coast, now would be a good time to find yourself a regular local consultant.
The 9th U.S. Circuit Court of Appeals ruled Wednesday in Herbal Brands Inc. v. Photoplaza, Inc. that Arizona courts have specific personal jurisdiction to hear Herbal Brands trademark infringement claims against several sales defendants Internet retail based in New York because defendants routinely sell and deliver physical products to buyers in Arizona.
The IX District has already considered that the mere management of an interactive website does not constitute sufficient jurisdictional justification. But Herbal Brands accused Photoplaza and its defendants not only of selling unauthorized herbal health and wellness products via Amazon storefronts, but also of delivering those allegedly damaged and defective products across the country, including to buyers of Arizona.
Delivering a physical product, wrote 9th Circuit Judge Susan Graber for a panel that also included judges Richard Clifton and Morgan Christen, is behavior expressly aimed at the state of the forum, and therefore sufficient to establish forum jurisdiction. .
The appeals court declined to specify whether a single delivery is sufficient to justify jurisdiction of a forum, instead ordering lower courts to focus on whether the delivery is part of the defendant’s normal business operations or is an event really one off. Trial court judges, the 9th Circuit said, can still exercise their discretion to dismiss cases if they feel it would be unreasonable to claim jurisdiction.
If, for example, a Maine resident ran a small business that sold New England-themed keychains and made a sale to an Arizona resident, the seller might be able to successfully argue that it would be unreasonable to take him to court in Arizona due to the limited nature of his intentional meddling in Arizona affairs or the undue burden associated with advocacy in the forum, Graber wrote. But those hypothetical facts are not the facts of this case.
The 7th Circuit reached a similar conclusion in NBA Properties, Incorporated v. Hanwjh last year, which involved trademark claims against a Chinese retailer selling allegedly counterfeit NBA-branded apparel through Amazon. The 7th Circuit also focused on the defendants’ willingness and ability to ship products to Illinois buyers. It didn’t matter, the appellate court said, that the one Illinois purchase cited by the NBA licensee was initiated by the plaintiffs themselves, presumably to establish jurisdiction.
The 2nd Circuit also upheld, way back in 2010, Chloe v. Queen Bee of Beverly Hills, LLC, that the mere act of shipping a product in this case, an alleged counterfeit Chloe bag, to New York was sufficient to give New York specific personal jurisdiction over a California-based online retailer that allegedly extensively traded in New York. As in the 7th Circuits NBA Properties case, the 2nd Circuit was not concerned that the crucial delivery was initiated by the plaintiff (actually, an administrative assistant at one of Chloe’s outside law firms) for the purpose of claiming jurisdiction.
But not all appellate courts agree with the 2nd, 7th and 9th Circuits, as the 9th Circuit noted in the Herbal Brands decision. The 8th Circuit claimed in Brothers and Sisters in Christ, LLC v. Zazzle, Inc. 2022 that an online retailer’s delivery to a Missouri resident of a single T-shirt with an allegedly infringing slogan was not sufficient to establish the jurisdiction of Missouri.
The 5th Circuit seems inclined to agree with the 8th Circuit. The court answered a simpler question in Admar International, Incorporated v. Eastrock, LLC 2021, ruling that online retailers cannot be dragged to court in every state simply by operating a website that allows customers across the country to make orders. Then, in a footnote, the court added that delivering a single $13 product to Louisiana would not be enough to establish Louisiana jurisdiction. The footnote is dicta, but, as the 9th Circuit noted Wednesday, it suggests the 5th Circuit’s view on the matter.
Defense attorneys in the Herbal Brands case told me via email that the US Supreme Court will eventually have to figure out the difficult question of where online retailers can be sued. The 9th Circuit, said Serge Krimnus and Andrew Bochner of Bochner IP, has not even attempted to conciliate the circuit division on the issue at hand: whether nationwide sales of a physical product to a consumer via an interactive website constitute a goal expressed in each state. Krimnus and Bochner said they are evaluating next steps for their clients.
Herbal Brands oral argument attorney on the 9th Circuit, Daniel Wucherer of Vorys, Sater, Seymour and Pease, said in an e-mailed statement that he and his client “appreciate the court’s finding that brand owners and other parties harmed by online sales don’t have to travel across the country to file suit when an online seller sells products in the plaintiff’s state.” Wucherer also said it’s difficult to predict when or if the Supreme Court will address the issue of jurisdiction for lawsuits against online retailers.
Wucherer noted that the China-based defendant in the 7th Circuits NBA case petitioned the court for review last November, citing 7th Circuits’ disagreement with 5th and 8th Circuits. The judges declined to hear the case.
The new 9th Circuit Herbal Brands ruling likely deepens the divide, but could also be seen as a path to consensus by focusing on the willingness and ability of defendants to deliver products to forum state rather than the particular number of sales and deliveries that are sufficient to establish jurisdiction.
Companies worry a lot about where they can be sued, as you know from the spirited amicus action in the Supreme Court in two major recent jurisdictional cases, Mallory v. Norfolk Southern Railway Co. and Ford Motor v. Montana Eighth Judicial District. The defendants in the Herbal Brands case warned the 9th Circuit that e-commerce will suffer if plaintiffs can sue online retailers wherever they please.
But within reason, that’s now the rule in three circuits, with growing momentum for plaintiffs.
To know more:
The US Supreme Court opens the way for plaintiffs to choose where to sue companies
The Supreme Court rejects Ford’s bid for new limits on specific jurisdiction
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