Is a Facebook Page Sufficient to Allow for the Exercise of Long-Arm Jurisdiction?

by Simy Wolf on July 24, 2012 · 0 comments

in Contract Law,Large law firm issues,Law Firms,Litigation

In our increasingly social media savvy age,this was bound to occur sooner or later–a recent federal district court decision entitled Lyons v. Rienzi & Sons, Inc. et al.,  09 CV 4253 (E.D.N.Y. 2012) grappled with the issue of whether a Facebook page can be considered a contact with New York for purposes of exercising long-arm jurisdiction.

INTRODUCTION

The yacht designer, defendant Nuvolari-Lenard S.R.L., a foreign resident who worked in Europe, was sued by plaintiff after he was injured on a vessel, allegedly because of defective naval architecture.  The defendant claimed that plaintiff lacked personal jurisdiction to bring the lawsuit in a New York court.

FACTS

Plaintiff Lyons alleged that he was employed by defendant Rienzi as the captain and sole crew member of a yacht which Rienzi owned.  Four years ago he was injured when he slipped and fell while working on the yacht.  He claimed that Nuvolari’s negligence in designing a slippery deck surface caused his fall.  Nuvolari subsequently filed a motion to dismiss the lawsuit based on lack of personal jurisdiction.

Nuvolari is a small firm, employing just six full-time employees and four part-time employees.  All of its design work is done in Italy where the company has its sole mailing address.  It only has an Italian fax and telephone line.  The company’s website was created in Italy and is updated there.  Customers cannot purchase anything or request services via the website, hence customers from around the world are unable to use the website to procure goods and services from the company.  Nuvolari has never sought authorization to do business in any part of the United States, and it is not registered to do business in any part of the United States.  Nuvolari does not have any U.S. bank accounts or agents in the U.S.

Nuvolari’s sole contact with the U.S. is its Facebook page which can be accessed by U.S. users.  The company’s owners do travel to the U.S. several times to conduct company business.  Most of these trips involved attending boat shows in Florida. The owners also travel to Wisconsin to oversee the construction of vessels they had designed.

Ten years ago Nuvolari entered into an agreement to provide its yacht designs to an American company (not located in New York) in exchange for royalty payments. The contract was signed in Italy.  Its earnings over the last eight years from this arrangement totaled approximately $9 million.  Nuvolari received $30,000 from the design of the subject yacht.  That yacht was designed in Italy, manufactured in Wisconsin and then transported to New York where it was sold to Rienzi.

LAW

The court noted that on a motion to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of proving that the court has jurisdiction over the defendant.  Courts determine whether the forum state has jurisdiction over the defendant by conducting a two-part analysis.  First it determines whether, under the forum’s laws, it has jurisdiction over the defendant.  Then it must determine whether the exercise of jurisdiction under these laws is consistent with federal due process.

Since the federal district court was sitting in diversity, it applied New York State’s jurisdictional statutes to the issue.  Under N.Y.C.P.L.R. section 301 a foreign corporation is subject to New York’s general personal jurisdiction if it is “doing business” in New York.  A corporation must do business in New York with some measure of permanence and continuity, not just occasionally or casually.  The business conducted must be substantial in nature.

N.Y.C.P.L.R. section 302, which provides for specific personal jurisdiction over non-domiciliaries, allows for the exercise of personal jurisdiction whose actions have a substantial impact within New York as long as the claim giving rise to the lawsuit arose out of that conduct.  The statute enumerates various acts that would have a substantial impact.  They include transacting business in New York to supply goods or services in New York (302 (a)(1); committing a tortious act in New York or outside of New York if it injures a person or property within New York (302 (a) (2); regularly doing or soliciting business or engaging in other persistent conduct in New York or deriving substantial revenue from goods or services used or rendered in New York; expects or should reasonably expect its acts to have consequences in New York and derives substantial revenue from interstate or international commerce (302(a)(3).

To determine if a court has personal jurisdiction pursuant to C.P.L.R. section 302 (a)(1), the courts look to the totality of defendant’s transactions and activities, if any, in New York and, if such transactions exist, whether the cause of action arose from those transactions, i.e. whether a substantial relationship exists between the claim asserted and the actions that occurred in New York.

A court has personal jurisdiction under C.P.L.R. section 302(a)(2) only if tortious acts were performed in New York by a defendant who was physically present in New York when he performed the wrongful act.

Section 302 (a)(3) allows for personal jurisdiction where a tortious act committed outside of New York causes injury within New York if defendant had sufficient economic contact with New York or an active interest in interstate or international commerce together with a reasonable expectation that the subject tortious conduct could have consequences within New York.

If the court concludes that it has personal jurisdiction, it has to determine whether the exercise of such jurisdiction comports with the constitutional guarantee of due process.

In order to determine if due process is accorded, the court must determine two things: whether the defendant has minimum contacts with New York and whether asserting jurisdiction comports with the traditional notions of fair play and substantial justice, i.e., whether the exercise of jurisdiction is reasonable under the particular circumstances.

The “minimum contacts” test requires the court to bear in mind that the defendant must engage in some act by which he purposely avails himself of the privilege of conducting activities in New York (the forum state), thereby invoking the benefits and protections of New York’s laws.  This purposeful conduct puts the defendant on notice that he and his property can be subject to New York’s exercise of state power.  The question is whether defendant manifested an intention to submit itself to the power of a sovereign.  It is not enough for the purposes of this inquiry if the defendant could have predicted that its goods and services could reach New York.

To determine if the court’s exercise of jurisdiction is reasonable, it must evaluate several factors: the burden on the defendant; New York’s interests; the plaintiff’s interests in obtaining relief; the interstate judicial system’s interest in obtaining the most efficient resolution of controversies; and the shared interest of several states in furthering fundamental substantive social policies.

There is also a Federal Rule of Civil Procedure which comes into play—Rule 4(k)(2).  That statute provide that for a claim arising under federal law, serving a summons or filing a waiver of services establishes personal jurisdiction over the defendant if: the defendant is not subject to the jurisdiction of any state court’s general jurisdiction; and exercising such jurisdiction is consistent with the U.S. Constitution and laws.

Hence, under F.R.C.P. 4(k)(2), a defendant sued under federal law can be subject to jurisdiction based on its contacts with the U.S. as a whole when the defendant is not subject to the personal jurisdiction of any particular state.  Such jurisdiction is conferred as long as the exercise of such jurisdiction comports with due process and the Fifth Amendment.

Three requirements have to be met to exercise personal jurisdiction under such rule: the claim has to arise under federal law; the defendant cannot be subject to the jurisdiction of any state court of general jurisdiction; and the exercise of such jurisdiction is consistent with the U.S. Constitution and laws.

The court concluded that it could not exercise general personal jurisdiction pursuant to C.P.L.R. 301.  Nuvolari simply does not engage in systematic and continuous activity in New York.  The company’s Facebook page, which is accessible to users in New York, is irrelevant.  In fact, most of New York’s long-arm statute provisions do not provide even a colorable basis for the exercise of personal jurisdiction over Nuvolari.  The company did not transact any business in New York. The yacht was designed in Italy and the relevant contract was also signed in Italy.  Nuvolari did not agree to supply goods or services in New York nor did it ever intend to do so.  Additionally, Nuvolari did not engage anyone to act as its agent in New York.

The court did not have specific personal jurisdiction under C.P.L.R. section 302 either.  Any tortious act occurred in Italy, where the boat was designed.  Furthermore, Nuvolari had no basis for believing that providing a yacht design to a manufacturer located outside of New York would have consequences within New York.  The yacht could have access to the seven seas without ever passing through New York.  Even assuming that Nuvolari’s acceptance of a royalty payment for the yacht design would provide personal jurisdiction under section 302(a)(3),  due process requirements prohibit the exercise of personal jurisdiction on that basis since Nuvolari did not regularly conduct business or solicit business in New York or engage in any persistent conduct in New York.  Nuvolari did not avail itself of the benefits provided by New York nor did it contemplate doing so.  Hence it did not have any meaningful contact with New York.

F.R.C.P. 4(k)(2), is also inapplicable.  First, Nuvolari is subject to the personal jurisdiction of one of the states (although not New York State), i.e., Florida.  The company’s owners travel to Florida many times with the purpose of promoting the company’s designs at boat shows.  Second, due process precludes the exercise of personal jurisdiction since the company’s contacts with New York are too insignificant to allow for the exercise of personal jurisdiction.

CONCLUSION

The court concluded that New York did not have personal jurisdiction over Nuvolari, notwithstanding its Facebook page, which was a de minimis issue, and consequently granted its motion to dismiss.

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