Opinion ID: 2633549
Heading Depth: 3
Heading Rank: 1

Heading: Mleads Lacks Sufficient Minimum Contacts Arising Out of This Claim

Text: ¶ 11 We first review whether Mleads's act of sending this one email to Fenn established minimum contacts between Mleads and Utah. Mleads argues that it did not, and we agree. The activity that gave rise to this claim, namely the sending of an unsolicited email advertisement, created an insubstantial contact with Utah under the federal due process analysis. ¶ 12 A Utah court may not exert jurisdiction unless the defendant's contacts create a `substantial connection' with the forum state. [14] The fact that the contact with Utah occurred via the Internet does not change the analysis. Traditionally, when an entity intentionally reaches beyond its boundaries to conduct business with foreign residences, the exercise of specific jurisdiction is proper, [15] and [d]ifferent results should not be reached simply because business is conducted over the Internet. [16] Nevertheless, [t]he `minimum contacts' standard is not susceptible of mechanical application, and instead, involves an ad hoc analysis of the facts, [17] particularly when dealing with the Internet because emails and websites present unique and complicated problems for jurisdictional analysis. The main complication is that a defendant, like Mleads, is generally unaware of the geographic location to which it sends an email because that information is not necessarily provided with the email address. With this in mind, courts have applied a variety of tests in Internet jurisdiction cases. Thus, a defendant may establish a substantial connection with Utah in a number of ways. ¶ 13 First, a defendant may purposefully avail itself of the benefits of conducting business in Utah. [18] Generally, a party purposefully avails itself of the benefits of conducting business in a state by deliberately engaging in significant activities within the state [19] or by creating `continuing obligations' between himself and residents of the forum. [20] Courts often determine purposeful availment by considering whether the defendant deliberately created some relationship with the forum state that would serve to make that state's potential exercise of jurisdiction foreseeable. [21] Nevertheless, the question of purposeful availment is irrelevant when the nature and quality of the contact creates an insubstantial connection with the forum. [22] Furthermore, even if a defendant has purposefully availed itself of the benefits of conducting business in a forum so that the exercise of jurisdiction is foreseeable, a court may still be restrained from the assertion if doing so violates the traditional notions of fair play and substantial justice. [23] ¶ 14 Second, some courts have also upheld jurisdiction in Internet cases under the Calder v. Jones effects test. [24] In applying the Calder test, the court examines the degree to which defendants knew or should have known that their actions may affect a given plaintiff in the forum. [25] The defendants in Calder were not intending to avail themselves specifically of the benefits of conducting business in California. But the court concluded that because they had knowledge that their defamatory acts could injure a particular California-based company, California courts could properly exercise jurisdiction. Likewise, in applying the effects test to Internet activity, the Ninth Circuit, in Panavision International v. Toeppen, concluded that California may exercise personal jurisdiction over an Illinois defendant who registered other companies' trademarks as Internet domain names with the intention of later selling those domain names to the trademark owners. [26] Because Panavision was headquartered in California, the court determined that the defendant must have known his actions would have the effect of injuring the plaintiff in California. [27] ¶ 15 Third and more generally, one could establish sufficient minimum contacts, even without purposeful availment or knowledge of a potential effect, when the nature and quality of the activity is generally of such a degree to support the exercise of jurisdiction. [28] Such an analysis is particularly relevant in Internet cases because [c]ourts determining personal jurisdiction primarily on the basis of Internet activity generally focus on the nature and quality of activity that a defendant conducts over the Internet. [29] We have similarly stated that [d]ue process is only satisfied based on the `quality and nature of the activity' for each individual defendant. [30] ¶ 16 One approach to the nature and quality inquiry has been to apply a sliding scale in extending the jurisdictional analysis to Internet situations. [31] The sliding scale approach, introduced in Zippo Manufacturing Company v. Zippo Dot Com, Inc., [32] advocates exercising jurisdiction over corporations that clearly do business over the Internet. [33] To make this determination in the context of websites, Zippo and its progeny look to whether the defendant corporation actually engages in knowing and repeated transmission of computer files over the Internet. [34] If so, the Internet activity is active under the due process analysis and satisfies minimum contacts. [35] For instance, repeatedly sending contracts via email satisfies the minimum contacts required by due process because the defendant corporation is clearly doing business in the forum-state. [36] However, at the opposite end of the sliding scale are websites where a defendant has merely posted information accessible to users in foreign jurisdictions. Courts term these websites as passive and generally determine jurisdiction to be improper. The middle ground is occupied by interactive Web sites where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site. [37] Thus, when the level of activity falls in the middle ground and is interactive, we focus specifically on the nature and quality of the activity, meaning the type of activity and the level of exchange that occurs over the Internet. And implicit in this analysis is the sender's purpose in sending the email and its effect on the recipient. ¶ 17 Furthermore, we recognize that certain types of emails, merely through their nature and quality, may rise to a level that creates a substantial connection between the defendant and Utah. It is conceivable, for example, that sending mass emails into Utah, or even a threatening or otherwise tortious individual email, may result in a substantial connection between the defendant and Utah if the nature and quality is such as to have a meaningful impact on Utah and its citizens. ¶ 18 In applying the nature and quality test for determining minimum contacts, some courts have asserted specific personal jurisdiction over defendants based solely on nationwide Internet advertisements. [38] These courts have relied on the law regarding personal jurisdiction over corporations that advertise in magazines. For example, in Haelan Products, Inc. v. Beso Biological , the United States District Court for the Eastern District of Louisiana held that the forum court could properly exercise jurisdiction over a corporation for trademark infringement on the Internet. [39] The court relied on a four-factor test which the Fifth Circuit had applied to determine whether advertisements in a nationally-circulated trade magazine were sufficient minimum contacts under the due process analysis: (1) Whether the publications defendant advertised in circulated in the forum state; (2) Whether the defendant advertised in these publications frequently, regularly, or occasionally; (3) What amount of business was obtained from the advertisements; and (4) Whether the defendant attempted to limit the states in which its product was marketed. [40] The Beso court affirmed the assertion of specific personal jurisdiction for the trademark infringement that occurred over the Internet because the defendant advertised in four nationally-distributed publications which circulated in the state, maintained a nationwide toll-free number that it published in at least one trade magazine, and its Internet address and website were used to advertise and solicit business in the forum state. ¶ 19 In summary, under a minimum contacts analysis for Internet activity, [p]roper inquiry must not focus on the mere quantity of contacts, but rather upon the quality and nature of those contacts as they relate to the claims asserted. [41] We do not intend to permit corporations to hide behind the excuse of ignorance in not knowing where they or their agents send email advertisements. However, before asserting jurisdiction arising out of those emails, a plaintiff must demonstrate a substantial connection to Utah created by the one email contact. Specifically, the plaintiff must establish that the corporation purposefully availed itself of the benefits of conducting business in Utah, knew its email may injure persons in Utah, or the nature and quality of the sent email supports the exercise of personal jurisdiction in Utah. One way, but not necessarily the only way, a plaintiff may establish that the nature and quality of the activity supports jurisdiction is to demonstrate that the defendant's conduct created an active or interactive relationship with Utah. However, we do not limit jurisdiction under the general nature and quality to the active/passive test. ¶ 20 In this case, the record is devoid of any evidence illustrating a substantial connection between Mleads and Utah arising out of this one email. Mleads lacked knowledge of the exact location to which its marketing agency would send the email. The record indicates, without any controverted evidence, that Mleads's marketing agency possessed the email address but not the geographic location to which the email would be sent or at which it would be retrieved. Thus, it is difficult in this particular case to rely on purposeful availment to satisfy minimum contacts. ¶ 21 However, even if Mleads, by sending this email through an agent, had purposefully availed itself of the benefits of conducting business in Utah, the contact does not provide the required minimum contacts. First, under the Zippo analysis, while the email Mleads sent was not clearly passive activity, it is also not the type of active contact that warrants automatic assertion of jurisdiction. Because the activity falls in the middle ground known as interactive, we must focus on the nature and quality of the activity and the level of exchange it established between Mleads and Fenn. The email did not create an actual business transaction between Mleads and Fenn. The email contained, for example, no contract. It merely provided Fenn with information. Furthermore, although Mleads intended to solicit a business relationship with Fenn, the email is not reflective of an actual relationship or exchange between the two parties. And implicit in interactive activity is the exchange of information between parties. Fenn never responded to the email nor did she contact Mleads through any other means. Although the possibility existed for an exchange to occur, because it did not, these facts fall under the type of interactive activity for which the exercise of personal jurisdiction is improper. ¶ 22 Finally, analogizing to our analysis of magazine advertisement cases in Haelan Products, the fact that Mleads earns 1% of its revenue in Utah but does not engage in widespread advertising in the state suggests its contacts are at best insubstantial. In our past personal jurisdiction cases dealing with corporate advertisement, the record generally reflected additional contacts  telephone or fax communications, business transactions, or the like  within the state. For instance, we upheld the assertion of specific personal jurisdiction when a corporation advertised in Utah and its brokers regularly spoke on the phone with representatives and other contacts in Utah. [42] We also viewed advertisement in Utah as a substantial contact when the contact included direct oral communications between the parties. [43] However, we have never held, nor are we prepared to hold now, that a claim arising out of one email advertisement, brought by one party under a specific jurisdiction claim, without direct communications between the parties or proof of offense or injury to the recipient, establishes a substantial connection to Utah under the federal due process analysis. Accordingly, we hold that minimum contacts are not satisfied with this one email.