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You Can’t Buy Personal Jurisdiction On eBay

Posted in Cyberspace Law, Web/Tech

by Scott Cameron

 

eBay describes itself on its website as: “The World’s Online Marketplace®, enabling trade on a local, national and international basis. With a diverse and passionate community of individuals and small businesses, eBay offers an online platform where millions of items are traded each day.” Nearly anything can be bought and sold on eBay. However, the Ninth Circuit recently announced that one thing you do not buy on eBay is personal jurisdiction.

 

The decision, Boschetto v. Hansing, 539 F.3d 1011 (9th Cir. 2008), begins by stating that the “appeal presents a question that remains surprisingly unanswered by the circuit courts: Does the sale of an item via the eBay Internet auction site provide sufficient ‘minimum contacts’ to support personal jurisdiction over a nonresident defendant in the buyer’s forum state?” In the Ninth Circuit it does not.

The case involved an online eBay auction which resulted in the sale of a car by a Wisconsin seller to a California buyer. Paul Boschetto was the winning bidder on the 1964 Ford Galaxie with a $34,106 bid. The seller, Jeffrey Hansing, advertised the car as “a 1964 Ford Galaxie 500 XL 427/425 hp ‘R Code’ in awesome condition, not restored, rust free chrome in excellent condition, recently rebuilt and ready to be driven, with clear title, and a vehicle warranty number of 4E68R149127.” Upon learning that he was the winning bidder, Boschetto contacted Hansing by email to arrange for delivery of the vehicle to California. Ultimately, Boschetto hired a transport company to pick up the car in Wisconsin and deliver it to California.

 

When the car arrived, Boschetto was disappointed to find it did not live up to its advertisement. It was not an “R Code,” the motor would not turn over, and rather than the advertised “awesome condition,” it was covered with rust and dents. When Hansing refused to return the purchase price, Boschetto sued in the US District Court for the Northern District of California based on diversity of citizenship. The defendants, including Hansing and a variety of others allegedly involved in the seller’s end of the sale, all of whom were Wisconsin residents with no ties to California other than the 1964 Ford Galaxie 500, moved to dismiss for lack of personal jurisdiction. The District Court agreed, and dismissed the complaint with prejudice. 

 

The Ninth Circuit began its review by setting out its familiar three-part test to determine whether the exercise of specific jurisdiction over a nonresident defendant is appropriate. First, the nonresident defendant must have purposefully directed his activities or consummate a transaction with a resident by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws. Second, the claim must be one which arises out of the defendant’s forum-related activities. And third, the exercise of jurisdiction must comport with fair play and substantial justice – it must be reasonable.

 

Noting that the case was one grounded in contract, the court analyzed the first prong of the test under the “purposeful availment” standard. Purposeful availment, the court explained, requires that a defendant “must have performed some type of affirmative conduct which allows or promotes the transaction of business within the forum state.”    The court was clear that “the formation of a contract with a nonresident defendant is not, standing alone, sufficient to create jurisdiction.” 

 

In analyzing the sale of the 1964 Ford Galaxie, the Ninth Circuit agreed with the district court that the lone transaction for the sale of one item does not establish that the defendant purposefully availed himself of the privilege of doing business in California. The court noted that the transaction did not create any ongoing obligation between the parties, there was no continuing commitment assumed by the defendants in the contract, nor did the performance of the contract require the defendants to engage in any substantial business in California. Funds were sent to Wisconsin, and the California buyer arranged to have the car picked up there and have it delivered to California. 

 

The court then compared this case to its leading Internet personal jurisdiction case – Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997). The court pointed out that in Cybersell, and all the cases following it, the party over whom personal jurisdiction was found was the owner and operator of the Internet website, and the nature of the website had jurisdictional significance. Here, on the other hand, eBay, the owner of the website, was not the defendant. Hansing did not direct the eBay website at California or California residents. eBay was simply a conduit for a one-time transaction to a California resident. 

 

The court was also careful to limit the effect of its holding by pointing out that the use of eBay can, under a proper case, support personal jurisdiction over a nonresident seller. This, however, was not such a case. Boschetto did not allege that the defendants were regular sellers on eBay or that eBay sales were a regular portion of their commercial car sales business. Rather, Boschetto alleged nothing more than the sale of one car using the eBay auction site.

 

This case does provide guidance as to the types of allegations that should avoid dismissal for lack of jurisdiction, or at least entitle the plaintiff to leave to conduct jurisdictional discovery prior to dismissal. First, the court pointed out that “power sellers,” those with numerous eBay sales, may be subject to jurisdiction based on a sufficient number of those sales to forum residents. Likewise, alleging eBay sales which are a regular part of the seller’s commercial business may also be enough. Alleging a single sale, however, is not enough. Clearly, Boschetto v. Hansing provides something to consider whether you are drafting a complaint or charting a defense to one involving sales on eBay. 

 

What Boschetto v. Hansing does not address is the opposite question: Would a buyer have sufficient minimum contacts with the seller’s forum state to support personal jurisdiction in a suit filed over the sale. While such a case would also be a factual inquiry that would vary from case to case, it would seem as though a court would be more likely to find such contacts sufficient. After all, the buyer chooses to bid on an item he or she knows is in the seller’s state, leading to a stronger argument that the buyer purposefully availed himself of doing business there. In addition, without additional contacts, they buyer must file suit in the seller’s forum in a dispute arising from the sale. So perhaps you can’t buy personal jurisdiction on eBay, but you may be able to sell it.