Defendant Trambert, a resident of California, listed a Toyota SUV for sale to the highest bidder on eBay in November of 2008. Defendant was later notified that Plaintiff MacNeil, a resident of Illinois, was the winning bidder, and the two made arrangements for payment and delivery. As part of the eBay Terms and Conditions, MacNeil was responsible for pick-up or shipping of the vehicle. In December, Plaintiff’s agent in California inspected the vehicle and accepted title and possession, and delivered Plaintiff’s cashier’s check, which was drawn on an Illinois bank. After personally inspecting the vehicle Plaintiff discovered that there was no satellite radio and no DVD screens in the headdress, as had been indicated in the eBay listing. In February of 2009, Plaintiff filed an Illinois small claims court action for $2,546 and Defendant moved to dismiss for lack of personal jurisdiction. The trial court granted defendant’s motion and the appellate court affirmed.

A plaintiff has the burden of establishing a prima facie case for jurisdiction when seeking jurisdiction over a nonresident defendant. Bolger v. Nautica International, Inc., 269 Ill. App. 3d 947, 949 (2007). Illinois has a long-arm statute that permits jurisdiction over foreign defendants that comports with the due process requirements of the Constitution. To satisfy federal due process, a defendant must have minimum contacts with the forum state such that defending a lawsuit there would not offend “ ‘ “traditional notions of fair play and substantial justice.” ‘ “ Spartan Motors, Inc. v. Lube Power, Inc., 337 Ill. App. 3d 556, 560 (2003), quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L. Ed. 95, 102, 66 S. Ct. 154, 158 (1945), quoting Milliken v. Meyer, 311 U.S. 457, 463, 85 L. Ed. 278. 283, 61 S. Ct. 339, 343 (1940). In deciding the question of jurisdiction a court will determine whether there was purposeful availment of the benefits and protections of the forum state.

Plaintiff’s complaint averred that the had only seen Defendant’s ads for the vehicle on eBay and that was insufficient to establish general jurisdiction. Plaintiff argued, however, that the court had personal jurisdiction over Defendant because, after listing the car on eBay, which is accessible worldwide, Defendant should have anticipated being brought to court in Illinois if the winning bidder was a resident of Illinois. The appellate court rejected this argument and cited the case of Foley v. Yacht Management Group, Inc., No. 08 – -C – - 7254 (N.D. Ill. July 9, 2009), which also dealt with a failed eBay sale. In Foley, the Defendant refused to accept payment from the winning bidder and the Plaintiff brought suit. In determining whether the court had jurisdiction, the court ruled that Defendant had no tied to the forum state other than the fact that the winning bidder lived there. The Foley court held the Defendant, as an eBay seller, had no control over where the buyer of its item would live and therefore there was no purposeful availment.

While Plaintiff argued that the various telephone calls and emails that occurred between the parties was enough to establish minimum contacts, the court disagreed. Plaintiff also sought to establish jurisdiction based on precedent involving the use of “interactive websites.” Not only does Defendant not run the eBay site, nothing in the record indicated that Defendant’s listings or personal eBay pages were interactive enough to trigger jurisdiction. Plaintiff’s final argument for jurisdiction, that Defendant committed tortuous conduct in the forum, was similarly rejected by the appellate court; the so-called “Effects Doctrine” applies only to intentional torts, and not to breach of contract.

Ultimately Defendant’s business contacts with Illinois were nothing more than random and attenuated and therefore the court was unable to assert jurisdiction in this case.

Around September of 2007, two laptops were stolen from a Gap office in Chicago, which contained personal information and social security numbers for approximately 750,000 job applicants, including Plaintiff Ruiz who had applied for a job online. Gap sent a letter to the affected individuals 11 days after the breach and offered 12 months of credit monitoring at no cost as well as advice regarding additional precautions to take. Ruiz did not accept Gap’s offer and brought a class action lawsuit against Gap and Vangent, Inc., the company contracted by Gap to process the online applications. The district court granted Gap’s motion to dismiss Ruiz’ claims for negligence, breach of contract, unfair competition, invasion of privacy, and violation of California Civil Code §1798.85 and the appellate court affirmed.

The primary problem with Ruiz’ claims appears to be that his alleged harm from this situation did not rise to the level required under his causes of action and was only sufficient to give him standing.

A claim for negligence in California requires (1) the existence of a duty to exercise due care, (2) breach of that duty, (3) causation, and (4) damages. Both the district court and the court of appeals held that to establish sufficient harm under California law, the damage must not be nominal, speculative, or a mere threat of future harm. Ruiz was unable to establish that his identity had actually been stolen or that he had expended any money on monitoring (or really that the credit monitoring offered by Gap was insufficient to protect him). Monitoring costs may have been sufficient, as they have been in cases dealing with exposure to toxic chemicals, but Ruiz had no such costs.

Similarly, there was no harm required for a claim for breach of contract by Gap’s vendor or unfair competition against Gap. While California has recognized nominal damages for contract actions, damages must still be appreciable and actual rather than Ruiz’ claim for an increased likelihood of damage through identify theft now that his personal information has been exposed.

A plaintiff alleging an invasion of privacy must establish each of the following: (1) a legally protected privacy interest; (2) a reasonable expectation of privacy in the circumstances; and (3) conduct by defendant constituting a serious invasion of privacy. This conduct must be “sufficiently serious in . . . scope, and actual or potential impact to constitute an egregious breach of the social norms underlying the privacy right.” Hill v. Nat’l Collegiate Athletics Ass’n, 865 P.2d 655, 657 (Cal. 1994). While there is explicit requirement for intentional conduct, the appellate court noted that no California court has yet extended the application of this claim to a situation involving accidental or negligent conduct such as the case in the present matter.

California Civil Code § 1798.85 provides that a person or entity may not “[r]equire an individual to use his or her social security number to access an Internet Web site, unless a password or unique personal identification number of other authentification device is also required to access the Internet Web site.” Ruiz’ attempt to bring a claim under this section ignores the plain language of the code, which is clearly directed at the act of logging onto a website and not the transmission of information through a website for the purpose of applying for a job.

Plaintiff Cunina Agard is a wedding planner who was hired by Defendants Brett and Jennilee Hill but subsequently fired before the date of the wedding. A year and a half after the wedding, Defendants published statements on multiple websites regarding the Plaintiff and her services, which the Plaintiff contends were false. The statements were headed “Wedding Coordinator Warning.” While few specifics were given, the statements described the alleged process of suing, and collecting a judgment from, the Plaintiff, and made a claim that hiring Plaintiff would cause more problems “than any bride should have to deal with.” Specifically, Plaintiff contends that three (3) statements false statements were made: (1) “Ms. Agard moved multiple times,” (2) “We discovered that she is operating under a new name and location,” and (3) that Defendants had to fire Plaintiff “a couple months before the wedding due to issues that are too numerous and frustrating to go into at this moment.” Plaintiff also claims that Defendants approached various vendors known by Defendants to have business relationships with Plaintiff to discredit her professionally.

Plaintiff alleges that the false statements were made to portray her in a negative light and imply that she was actively trying to avoid service of the lawsuit and that she was trying to hide from her tarnished reputation and conceal her identity in a new location. Plaintiff sought regular damages of $300,000, special damages up to $425,000, and punitive damages to be determined by the court, for defamation and tortuous interference with contract or prospective economic advantage. Defendants also sued the Plaintiff in small claims court and were awarded a judgment of $4,000. Defendants filed a motion to dismiss Plaintiff’s claims.

In support of her claim of defamation, Plaintiff argued that Defendants maliciously published the aforementioned statements in an attempt to interfere with her business and that as a result, she suffered damages, loss of reputation, and was thereafter unable to work as a wedding planner in her county or the surrounding counties. Defendants argued that by way of collateral estoppels, the small claims judgment precluded Plaintiff from bringing such claims and that as statements made to “future brides” and as opinions, the statements were privileged.

The tort of defamation involves (1) a publication that is (2) false, (3) defamatory, (4) unprivileged, and that (5) has a natural tendency to injure or that causes special damages. Taus v. Loftus, 40 Cal.4th 683, 804 (Cal. 2007). Defamatory language not libelous on its face is not actionable unless the Plaintiff alleges and proves that he has suffered special damages as a proximate result thereof.” Cal. Civ. Code § 45. Malice or ill will is not an element of defamation. 5 Witkin, Summ. Of Cal. Law Torts § 529 at 782 (10th ed. 2005).

Whether or not a statement was made as an “opinion” is not alone dispositive of a finding of defamation. The question is resolved in a determination of whether a “reasonable fact finder could conclude the published statement declares or implies a provably false assertion of fact.” Franklin v. Dynamic Details, Inc., 116 Cal. App. 4th 375, 385 (Cal. Ct. App. 2004). In determining actionable fact versus nonactionable opinion, the Ninth Circuit employs a 3-part test: (1) whether the general tenor of the entire work negates the impression that the defendant was asserting an objective fact, (2) whether the defendant used figurative or hyperbolic language that negates the impression, and (3) whether the statement in question is susceptible of being proved true or false. Gardner v. Martino, 563 F.3d 981, 987 (9th Cir. 2009). In essentially all cases1 the truth of the offensive statements is a complete defense against civil liability, regardless of bad faith or malicious purpose. Smith v. Maldonado, 72 Cal. App. 4th 637, 647 (Cal. Ct. App. 1999). The burden of pleading a proving truth is on the defendant.

Cal. Civ. Code § 47 provides that certain privilege exist as a defense to an action for defamation, however, the court refused to grant such a privilege because the Defendants failed to specifically allege which privilege granted by the statute they were afforded. Additionally, their argument that Plaintiff’s claim was barred by collateral estoppels was unpersuasive because the statements made by Defendants did not rely on any of the facts from the small claims action.

To succeed on a claim of intentional interference with prospective business advantage, the plaintiff must prove “(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.” Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 1153 (Cal. 2003). Additionally, the plaintiff must also plead and prove that the defendant’s conduct was wrongful by some legal measure other than the fact of interference itself. By pleading that the Defendants’ statements were libelous, the court held that the Plaintiff successfully plead the elements for tortuous interference, including the requirement that Defendants’ conduct be wrongful in addition to the interference.

Defendants’ motion to dismiss was denied as to plaintiff’s libel claim for the first two statements and granted on the third, and denied as to plaintiff’s intentional interference claim.

Appellant Zuccarini registered the domain name “officdepo.com” and Office Depot subsequently brought, and won, an action against Zuccarini under the Anticybersquating Consumer Protection Act of 1999 (“ACPA”). Office Depot obtained a judgment against appellant, which it assigned to DSH. DSH sought to levy upon some of the other 248 domains owned by appellant and registered the judgment in the district court for the Northern District of California. The district court denied DSH’s request to compel the domain registrars to transfer Zuccarini’s property, holding that under California Code of Civil Procedure § 699.040, it could not order a third party to turn over property. DSH then moved for the appointment of a receiver who would obtain and sell the domains to satisfy the judgment. The district court granted the motion and Zuccarini appealed.

A district court can obtain quasi in rem jurisdiction over property held within its geographical borders, including intangible property. Under §§ 695.010(a) and 699.710 of the California Code of Civil Procedure, all property of a judgment debtor can be used to satisfy a writ of execution. The applicable state and federal provisions declare that if the domain names are property subject to execution, and if they are located in the Northern District of California, then the district court is an appropriate location to execute judgment on them through the appointment of a receiver.

“[A]ttaching a situs to intangible property is necessarily a legal fiction; therefore, the selection of a situs for intangibles must be context-specific, embodying a ‘common sense appraisal of the requirements of justice and convenience in particular conditions.’” Af-Cap Inc. v. Republic of Congo, 383 F.3d 361 (5th Cir. 2004). While California law does not specifically address the location of domain names, the ACPA states that a trademark owner in a cybersquatting action can proceed in rem against a squatter “in the judicial district in which the domain name registrar, domain name registry, or other domain name authority that registered or assigned the domain is located . . . “ 15 U.S.C. § 1125(d)(2)(A).

The court found the language of the ACPA persuasive and concluded that under California law, domain names are located where the registry is located for the purpose of asserting quasi in rem jurisdiction.

A foreign state can exercise personal jurisdiction over a non-resident for non-forum related activities when the individual or business has engaged in “systematic and continuous” activities in the forum state. This type of jurisdiction is known as general jurisdiction and can be exercised when a company does targeted business in a state, such as by opening a store or sending employees to make sales or perform services. A foreign state can exercise specific jurisdiction, however, when an entity’s activity within the state create sufficient “minimum contacts” with the state. Specific jurisdiction is what is invoked when a state exercises jurisdcition based on a website.

To satisfy the “minimum contacts” requirement, websites are divided into 3 categories:

Commercial Websites – which do a substantial volume of business over the internet, and through which customers in any location can immediately engage in business with the business owner;

Interactive Websites – which merely provide information, will almost never provide sufficient minimum contacts for jurisdiction. Such a website will only provide a basis for jurisdiction if there is an intentional tort such as defamation on the website, and if it is directed at the jurisdiction in question

Passive Websites – which permit the exchange of information between the website owner and visitors, may be subject to jurisdiction, depending on the website’s level of interactivity and commerciality, and the amount of contacts which the website owner has developed with the forum due to the availability of the website within the jurisdiction.

If you’re not sure which category your website falls into it may be time to consult with a local internet and e-commerce attorney.. For a quick and easy answer, the Minnesota District Court poses this question, is your website more of “less sophisticated than a typical teenager’s Facebook page”? If it is less sophisticated then chances are you are not subjecting yourself, or your company, to foreign jurisdiction.

Duc Xuan Nguyen, President of the Federation of Associations of the Republic of Vietnam Navy and Merchant Marine sent an e-mail to his fellow veterans accusing plaintiff Huang Tan Phan of having been disciplined by the Navy of the Republic of Vietnam for abusing behavior during the last days of the Vietnam War. Defendant Lang Van Pham received the e-mail and forwarded it with the following introduction: “Everything will come out to the daylight, I invite you and our classmates to read the following comments of Senior Duc (Duc Xuang Nguyen) . . .” The issue before the court was whether the additional comments by defendant were enough to subject him to liability for the defamatory contents of the e-mail he was forwarding.

The court in Barrett v. Rosenthal (2006) 40 Cal. 4th 33, held that simply forwarding a defamatory e-mail was not enough to hold a defendant liable for defamation. The defendant in Barrett, however made “no changes in the article she republished on the newsgroup,” but the court held that at some point “active involvement in the creation of a defamatory Internet posting would expose a defendant to liability as an original source.”

The “material contribution” test articulated by the Ninth Circuit in the case of Fair Housing Council of San Fernando Valley v. Roommates.com, LLC (2008) 521 F.3d 1157 states that a defendant’s own acts must materially contribute to the illegality of a message for immunity to be lost. Applying that test the court held that the defendant in this case made no material contribution to the alleged defamation in the e-mail he received. The defendant merely introduced the contents of an email with the only defamatory content found in the original message. Defendant was therefore immune from liability for defamation under Section 230 of the Communications Decency Act.

Here are some simple steps you can follow to ensure that your contract will be seen by your customers and enforced by the court if a problem does arise:

1. Don’t Hide Your Terms

This step should be fairly obvious but too many website operators choose to bury their terms of service either on unrelated pages that customers are unlikely to visit, or at the very bottom of a page in a small font. No matter what size font you use, if your users have to scroll way down a page to view the terms (and they don\’t have to do the same amount of scrolling to make a purchase) chances are you’re running an unnecessary risk

2. Have Plenty of Links

This step is really a continuation of your efforts NOT to hide the terms of a website. If you have multiple pages required to finalize an order, have a link to the terms on each page, and have each link be visible. This doesn’t mean that your website needs to be plastered with links but one visible link per page should suffice without disrupting the look and feel of your site.

3. Use Blue, Underlined Links

This may sound silly, but courts like consistency and precedent and while you may like the look of a yellow hyperlink for your terms in italic, courts are familiar with standard blue, underlined links. Chances are your customers are familiar with blue links as well so make it as easy as possible for them to recognize the links to your terms by showing them the convention they’re used to.

4. Consider a Clickwrap Agreement

Clickwrap agreements require a user to check a box or push a button signifying that they have seen and read the terms before making a sale. Browsewrap on the other hand, assumes that users have read and agreed to terms because they have been conspicuously posted. While both types of agreements will be enforced under the right conditions, if the organization and structure of your site permits a clickwrap agreement it is always best to have an affirmative action that shows a manifestation of intent to enter into an agreement.

For more information about e-commerce and online contracts visit the WLF Lawyers website: http://www.wlflawyers.com.

The following are a few examples of reasons to perform an audit of your legal documents.

1. Technology Policies

Most employment agreements do more than just set the salary of an employee and the number of vacation days allowed. These agreements contain employee policies and workplace procedures that must be followed, and the more complicated and high-profile the position, the more restrictive these agreements are of work, and even some personal, activities.

There was a time when having an e-mail or computer policy seemed ridiculous and overly controlling but today these are commonplace clauses in most employee contracts. Now, more and more companies are adding policies for cell phones and even social networking sites. If your employee policies don’t include the word “Twitter,” chances are they need to be reviewed.

2. “Personal” Online Activities

The Federal Trade Commission (FTC) recently released updated guidelines aimed at protecting consumers from potentially misleading endorsements. Under these new rules, an employer could be liable for statements made on non-employer maintained websites (such as personal blogs, MySpace, Facebook, and Twitter) by employees. Employees are now required to disclose their relationship to an employer when making endorsements even if those endorsements reflect their own thoughts, opinions, and beliefs. A misleading statement by an employee made on one of these social networking sites can expose an employer to expansive liability but I’m guessing most employees won’t consider such activities damaging, or even covered by the terms of their employment.

3. Non-transferability Clauses

When parties come together to form a contract they usually only want to deal with the other party and require that the terms of the contract are nontransferable without their written consent. These types of clauses are generally not argued about and present few problems, that is, until a Court decision in September of 2009. In the case of Cincom Sys, Inc. v. Novelis Corp., the 6th Circuit held that a nontransferable software license was violated when a party to the contract merged with another subsidiary of its parent company, thereby changing its corporate structure.

Because this type of language that prevents transfer or assignment of a contract is so common it is highly recommended that an audit be performed in advance of any mergers or sales.

Conclusion

Most businesses realize that there are certain legal services included in the cost of doing business. My firm deals with many individuals who have recently started a business or are contemplating taking their first steps to a new venture. Too often, however, we encounter people who simply want the minimum work possible to allow them to move on to “more important things” and who have no interest in developing an ongoing relationship with an attorney or law firm. In many cases these individuals turn to form contracts and non-attorney legal providers to give them standardized templates and forms that they try to adapt to suit their needs to save money. While these practices may appear to work at the time you never really know the value of your legal documents, or of a relationship with a good law firm, until you are paying to enforce your rights in court.

Why should you prepare a term sheet?
This document, which will outline the basic points of your intended agreement, will not only make dealing with your attorney easier, and faster, it might even save you some money.

Identify the parties
Identifying the parties to an agreement is one of the most important steps to proper contract formation. Who signs an agreement and possibly more important, what their position in a company is, determines the extent of your ability to enforce the rights and obligations memorialized in the contract. If you will be signing this agreement, will you be signing as an individual or the representative of a company? Will your counterpart in another company be signing as well or, if this is going to be a form contract, will the other party be a customer?

What is the purpose of the contract?
Telling your attorney why you’re entering into this agreement will do more than help him/her write a title, it will give insight into the circumstances or industry surrounding the agreement. Write a short description of the type of agreement, such as “contract for marketing services related to local doctor’s office.” You may know what terms and provisions should be in your contract but an attorney will likely do some research before starting to draft the agreement to make sure it complies with industry standards and any applicable laws.

How long will the contract last?
The term of an agreement is another extremely important provision that is often overlooked in informal conversations between the parties before seeking legal advice. Will this contract be for a set length of time? A few months? A few years? Or will it continue until the parties agree to terminate the relationship? While your attorney can advise you on a favorable term for your position it is best to come prepared with at least some idea of how long the agreement should last.

How will payment be made?
Most contracts involve payment and, if everything goes well, payment will be made. If you are the party who will be receiving payment consider what form you would prefer payment to take. If you are the party who will be making payments discuss this with the other party to make sure their preferred method is reduced to writing. The method of payment will not only affect the physical act of payment it will also have an impact on terms that address late payments and possibly even penalties. Wire transfers and credit card or check payments over the phone can be made almost instantly but payments by check must be sent in advance.

Will there be penalties for late payment?
If payment is being made by check it might be reasonable to allow a few days for receipt because mail is often delayed, however if payment is made by wire transfer it might be reasonable to incur late fees even 24 hours after payment was due. If your business is depending on funds from the sale of goods or performance of services covered under an agreement any delay can negatively impact your livelihood. Late fees act not only as a deterrent to prevent late payment they can also compensate one party for expenses incurred for obtaining credit to continue operation of the business or even lost profits due to halted operation.

Can this contract be transferred?
If you’re contracting for the specific services of an individual or company you may not want to allow a transfer of the rights and obligations of the agreement but what about if one of the parties is sold?

What is the location of the parties and where will the contract be carried out?
If both parties reside in the jurisdiction where the contract will be carried out this information may not be necessary but when dealing with an entity in another state it is important to decide on the forum for legal disputes and the applicable law to be applied. Additional information, such as where the contract will be carried out, will help your attorney determine your leverage for making the forum convenient to you and your interests.

Will you be exchanging sensitive information?
Most contracts require at least one party to disclose sensitive information and trade secrets. Some of this information, such as client information may be protected by privacy statutes and any disclosure should be carefully guarded. Alerting your attorney to the possibility of such an exchange will allow him/her to include provisions to prevent unnecessary disclosure and to properly penalize any breaches.

Summary
Even a short list of key terms or contract expectations faxed to your lawyer in advance of a meeting or conference call will make your consultation much more productive.

The First Sale Doctrine – Sales of Copyrighted Software Online

Copyright protection gives exclusive control over the sale and distribution of copyrighted works to the copyright holder. Sales by an unauthorized party are considered piracy. There is an exception to this protection, which applies to rightful purchasers of a work, called the “first sale doctrine.” Under this theory, if you buy a book, for example, while you don’t own any portion of the copyright, you are the exclusive owner of that copy, and are free to keep it or sell it as you wish. The entire “used goods” market, which is a large portion of the eBay marketplace, is dependent on the first sale doctrine.

Many “purchasers” of software are aware that when they buy software what they are actually buying is a license for its use from the seller. Software is handled that way to allow developers to have more control over the use of their products once they are transferred. In 2007 Autodesk, Inc., the developer of the AutoCAD software package, sent a takedown notice to eBay after discovering the sale of several AutoCAD packages by Timothy Verner. Mr. Verner acquired the software packages from a Seattle architecture firm (CTA), and not Autodesk, Inc.

According to Autodesk, it still owned the AutoCAD packages in Mr. Verner’s possession because it never transfered ownership to CTA and under the terms of the software license CTA was barred from transferring rights to a third party. Thus, Verner’s sales constituted copyright infringement, or at least contributory infringement, according to Autodesk. The District Court attempted to reconcile two lines of precedent regarding this issue but was ultimately unable leading it to side with the oldest precedent among the competing options. Ultimately Mr. Verner’s sale was held to be privileged by the first sale doctrine regardless of how restrictive Autodesk’s “license” was because the intent of the parties had been to transfer ownership. Autodesk never sought to reclaim ownership of any of its software packages, the packages were merely licensed to extend unenforceable control over its products in the stream of commerce.

Forum Selection Clause – Plan Your Trip to California

In Tricome v. eBay, Inc., the plaintiff argued that eBay’s forum selection clause naming California as the forum for disputes is unconscionable and should not be enforced. The plaintiff further argued that as a “form contract,” eBay’s terms of use constituted a procedurally and/or substantively unconscionable agreement.

While plaintiff contended that the user agreement containing the forum selection clause was a contract of adhesion since the plaintiff never had the opportunity to discuss or negotiate its terms, numerous courts have held that not to be the standard for deeming a contract to be one of adhesion. Additionally, even the terms of an admitted adhesion contract are enforced unless they are “so one-sided as to be oppressive.” eBay operates worldwide and it is not shocking for it to focus its legal defense in a particular forum rather than having to litigate in potentially hundreds or thousands of other jurisdictions.

So, if you’re an eBay seller, selling software in compliance with eBay’s terms is probably not going to cause you any trouble with the copyright holder but if you run afoul eBay’s rules prepare for a trip to California.