Personal jurisdiction based on forum contacts is proper where company conducts business through Internet

Law Reporter, Dec 2002

Gorman v. Ameritrade Holding Corp., 293 F.3d 506 (D.C. Cir. 2002).

The D.C. Circuit Court of Appeals held that a court may assert personal jurisdiction over a defendant based on its contacts with a forum through the Internet.

Here, Gorman, the proprietor of a real estate brokerage company, reportedly had an agreement with a brokerage company under which a link to his Web site would appear on the front page of the brokerage company's Web site. The brokerage company was subsequently acquired by another brokerage company, which refused to provide the front-page link to Gorman's site. Gorman sued in a District of Columbia (D.C.) court for breach of contract. The trial court dismissed the complaint for lack of personal jurisdiction, holding that a company that uses a Web site to encourage use by D.C. residents does not establish the necessary minimum contacts with D.C. and does not operate continuously and substantially within D.C.

Reversing, the D.C. Circuit noted that D.C. law permits courts to exercise general jurisdiction over foreign corporations for claims not arising from a corporation's conduct in D.C. as long as the corporation is doing business in D.C. In addition, the business contacts must be continuous and systematic.

The court rejected defendant's argument that, although it engages in electronic-transactions with D.C. residents, the transactions do not occur in D.C. but rather are conducted in the borderless environment of cyberspace. Cyberspace, the court explained, is not a "mystical incantation" capable of precluding courts from exercising jurisdiction. Just as traditional ideas of personal jurisdiction have adapted to other changes in communications, they are adaptable to transformations wrought by the Internet. The court reasoned that, just as transactions by mail and telephone can be the basis for personal jurisdiction, transactions through e-mail or Web sites can support jurisdiction over a party.

Applying this reasoning here, the court noted that defendant's contact with D.C. is not limited to a passive Web site through which customers merely access information about financial markets. Rather, customers use defendant's Web site to engage in electronic transactions with defendant. Customers can open accounts online, transmit funds to their accounts, buy and sell securities, and borrow from defendant. As a result of these transactions, the court found, defendant and its D.C. customers enter into binding contracts. In addition, the contacts with D.C. are continuous and systematic, the court said, because defendant permits such transactions to occur 24 hours daily.

Accordingly, the court held that the exercise of jurisdicton was proper. However, the court affirmed the dismissal on other grounds.