Internet: Regulation Student Papers: Krebs - California Western
Internet: Regulation Student Papers: Krebs

Website Satisfies Minimum Contacts

by Robert Krebs

          A Minnesota court of appeals recently held that WagerNet, a Nevada-based on-line wagering service, was subject to personal jurisdiction in Minnesota as a result of website contacts. Humphrey v. Granite Gate Resort, Inc., 568 N.W.2d 715 (Minn.App. 1997).

     The court employed the minimum contacts test from International Shoe: (1) quantity and (2) quality of defendant’s contacts, (3) connection between the cause of action and the defendant’s contacts, (4) state’s interest in providing a forum, and (5) convenience of the parties.

Quantity of Contacts

     The court reasoned, relying on a federal case from Missouri, that because at least 248 computers in Minnesota received transmissions from WagerNet’s websites, the contacts were per se sufficiently numerous. "The defendant has transmitted information into Missouri regarding its services approximately 131 times which allowed an inference that the defendant purposefully availed itself of the privilege of conducting business in Missouri." Humphrey (quoting Maritz, 947 F.Supp at 1328).

     The court simply proclaimed, "the quantity of contacts here exceeds that in Maritz." Apparently 131 website "hits" satisfy the quantity requirement in Minnesota and the Eastern Federal District Court of Missouri.

Quality of Contacts

     The court considered WagerNet’s website to be an advertisement. As an advertisement, the website was a targeted message and the tool of a marketing plan. Such contacts are continuous and systematic, rather than sporadic and isolated. "Through the website, the defendant consciously decided to transmit advertising information to all Internet users," reasoned the court.

     The court believed WagerNet intended to solicit the American market and all jurisdictions within the market, including Minnesota, because it paid for advertising in English on an American website. Parallels were drawn between website contacts and the contacts of TV, radio, and direct mail. Minnesota courts have held that defendants who know their message will be broadcast in Minnesota can be brought into a court there.

     A mailing list was also being developed by WagerNet which was "established as fact" to include Minnesota addresses by a discovery sanction against WagerNet for failure to produce. If a website can be equated to an advertisement, its contacts are probably qualitatively sufficient to satisfy the minimum contacts test.

Connection

     Minnesota law dictates that, "advertising contacts justify the exercise of personal jurisdiction where unlawful or misleading advertisements are the basis of the plaintiff’s claim." Baxter, 456 N.W.2d at 377. WagerNet claimed Internet gambling was legal in Minnesota, which is false. WagerNet’s Internet advertising was, therefore, misleading. "Thus the causes of action against appellants arise out of the information the appellants posted on their website," the court held.

     This element is essential. Without a cause of action and some type of contact related to it, what’s really going on in the mind of the plaintiff at filing time?

State’s Interest

     Here, as usual, the court found a compelling state interest. Minnesota consumers were being deceived by WagerNet’s falsehoods regarding the legality of on-line gambling in their state. Protecting citizens from consumer deception is a strong interest for any state.

Convenience of Parties

     WagerNet employed a very convenient forum selection arrangement. Claims against WagerNet were to be brought in a Belizian court (That’s correct, Belize- the tiny nation in Central America!) while reserving WagerNet’s right to sue a customer in his or her state. The court reasoned that WagerNet could not claim inconvenience as an excuse because it reserved the right to sue in Minnesota.

     Furthermore, the court reasoned that because the defendants purposefully availed themselves of the privilege of conducting business in Minnesota, "the maintenance of an action here does not offend traditional notions of fair play and substantial justice."

The Bottom Line

     With rapid growth of Internet commerce, the question of "website as minimum contacts" is certain to be revisited frequently. Perhaps someday a website case will join the pantheon of Supreme Court minimum contacts decisions. Just imagine the great fact patterns on Civil Procedure exams!