Supreme Court Denies Certiorari in Internet Jurisdiction Case

April 28, 2003. The Supreme Court denied certiorari, without opinion, in Healthgrades.com v. Northwest Healthcare Alliance. This denial lets stand an opinion of the U.S. Court of Appeals (9thCir) holding that the U.S. District Court (WDWash) has personal jurisdiction over an out of state defendant in defamation case, based solely upon publication of its allegedly defamatory statements in its internet web site. The lower courts, and foreign courts, have issued many opinions in the last few years, some of which are inconsistent, which leave considerable uncertainty as to when a court has personal jurisdiction over a distant defendant, whose internet based conduct serves as the basis for the claim, and personal jurisdiction. The Supreme Court passed up an opportunity to bring some clarity to this issue.

This is Supreme Court No. 02-1250. See, Order List [9 pages in PDF] at page 2.

Background. HealthGrades.com (HG) publishes ratings of health care providers in a web site. It is based in the state of Colorado. It is incorporated in Delaware. Northwest Healthcare Alliance (NHA) provides health care services in the state of Washington, where it is also incorporated. HG rated NHA "average".

District Court. NHA filed a complaint in state court in the state of Washington against HG alleging defamation. HG removed the action to the U.S. District Court (WDWash), and then moved to dismiss for lack of personal jurisdiction.

The District Court wrote in its Order Granting Defendant's Motion to Dismiss, June 13, 2001, that "Courts confronting jurisdictional challenges based on the maintenance of internet websites have developed an analytical doctrine in which the sites are placed somewhere along a ``broad spectrum of internet use´´ with interactive websites, on one hand, and passive websites, on the other, representing the spectrum's poles." It added that "Truly passive websites, which are generally accessible and simply post information  available to the visitor, without more, do not support the exercise of personal jurisdiction over the passive website."

The District Court determined that HG's website is passive, and dismissed the complaint for lack of jurisdiction in Washington.

Court of Appeals. The U.S. Court of Appeals (9thCir) reversed, in an opinion which it designated as non-precedential, and which it did not publish.

The Appeals Court wrote that "Because most Internet activity occurs in cyberspace, the Internet presents special consideration in personal jurisdiction analysis, and the law in this area can fairly be described as in its infancy."

It continued that "Thus far the Ninth Circuit has endorsed two tests for determining whether an out-of-state web site operator's activities amount to purposeful availment of the forum state rendering the exercise of personal jurisdiction over the out-of-state web site operator constitutionally permissible: 1) the sliding scale approach, as articulated in Cybersell ... and 2) the effects test, endorsed by the Supreme Court in Calder v. Jones,  ... , and adopted by the Ninth Circuit in Panavision ..." (Citations omitted.)

See, Panavision Int'l L.P. v. Toeppen, 141, F.3d 1316 (9th Cir. 1998), Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997), and Calder v. Jones, 456 U.S. 783 (1984).

The Appeals Court continued that "The effects test is employed when the harm allegedly suffered by plaintiff sounds in tort. ... Under this approach, the exercise of personal jurisdiction over an out-of-state defendant is proper if the defendant: 1) engaged in intentional actions; 2) expressly aimed at the forum state; 3) causing harm, the brunt of which is suffered -- and which the defendant knows is likely to be suffered -- in the forum state. (Citations omitted.)

The Appeals Court added that since the plaintiff, NHA, sued for defamation, which is a tort, the effects test should be applied. And, it then held that under this effects test the exercise of jurisdiction over the defendant, HG, is permissible.

It explained that "has purposefully interjected itself into the Washington state home health care market through its intentional act of offering ratings of Washington medical service providers. This act was expressly aimed at plaintiff's forum state, since defendant was well aware that its ratings of Washington home health care providers would be of value primarily to Washington consumers. Though defendant gleaned its information from various public sources, including the federal government, the information was obtained originally from Washington sources, and the allegedly defamatory rating received by plaintiff on defendant's web site concerned the Washington activities of a Washington resident. Finally, the brunt of the harm allegedly suffered by plaintiff occurred in Washington -- where plaintiff is incorporated, where plaintiff has its principal place of business, and where plaintiff's reputation is likely to suffer if in fact it has been injured by defendant's actions. The effects, therefore, of defendant's out-of-state conduct, were felt in Washington, plaintiff's claims arise from that out-of state conduct, and defendant could reasonably expect to be called to account for its conduct in the forum where it understood the effects of its actions would be felt."

Petition for Writ of Certiorari. HG asserted in it petition that "The ``effects test´´ doctrine of Calder v. Jones ... cannot be applied to create personal jurisdiction based on the maintenance of an internet web site which has uniform, nationwide application."

HG cited several case from other circuits, including ALS Scan v. Digital Services Consultants, 293 F.3d 707 (4th Cir. 2002), Young v. New Haven Advocate, 315 F.2d 256 (4th Cir. 2002), and Revel v. Lidov (5th Cir. Dec. 31, 2002).

Other Opinions. Young v. New Haven Advocate, like HealthGrades, involves a claim of defamation. But the 4th Circuit applied a different analysis, and reached the opposite result. Thus, the Supreme Court denied certiorari, despite there arguably being a split between the circuits (if a non-published opinion can create a split).

On December 13, 2002, the U.S. Court of Appeals (4thCir) issued its opinion [12 pages in PDF] in Young v. New Haven Advocate, holding that a court in Virginia does not have jurisdiction over two small newspapers, and their editors and reporters, located in Connecticut, who wrote allegedly defamatory stories about a Virginia prison warden and published them on the internet. The Court held that the web publication did not establish minimum contacts because the newspapers are not directed at a Virginia audience.

Relying on ALS Scan and International Shoe v. Washington, 326 U.S. 310 (1945), the 4th Circuit wrote that "The facts in this case establish that the newspapers' websites, as well as the articles in question, were aimed at a Connecticut audience. The newspapers did not post materials on the Internet with the manifest intent of targeting Virginia readers. ... In sum, the newspapers do not have sufficient Internet contacts with Virginia to permit the district court to exercise specific jurisdiction over them."

On the other hand, perhaps the opinions in HealthGrades and Young v. New Haven Advocate, are consistent, because a newspaper, even if published on the internet, is still aimed at a local audience, while a health care rating service is aimed wherever the rated health care providers are located.

See also, TLJ story titled "4th Circuit Rules in Internet Jurisdiction Case", December 13, 2002. See also, stories titled "Internet Shoes: Two Appeals Courts Address Internet Based Personal Jurisdiction", "Fourth Circuit Holds No Personal Jurisdiction Over Out of State Web Host", and "DC Circuit Suggests Personal Jurisdiction Over Out of State Online Brokerage" in TLJ Daily E-Mail Alert No. 452, June 17, 2002.

There is another noteworthy case. The 9th Circuit's opinion reached the same result as the opinion issued on December 10, 2002, by the High Court of Australia in Dow Jones v. Gutnick, another defamation case. However, while the results were the same (personal jurisdiction exists where the allegedly defamed party is located), the analyses differed.

The Australian Court wrote in the Gutnick case that "defamation is to be located at the place where the damage to reputation occurs. ... In the case of material on the World Wide Web, it is not available in comprehensible form until downloaded on to the computer of a person who has used a web browser to pull the material from the web server. It is where that person downloads the material that the damage to reputation may be done. Ordinarily then, that will be the place where the tort of defamation is committed."

See, story titled "High Court Rules Australia Has Jurisdiction Over Dow Jones Based on Web Publication" in TLJ Daily E-Mail Alert No. 564, December 10, 2002.

Non Publication. The Court of Appeals did not publish its opinion. It further wrote that "This disposition is not appropriate for publication and may not be cited by the courts of this circuit except as provided by Ninth Circuit Rule 36-3." Tech Law Journal transcribed a copy of the 9th Circuit's opinion from the appendix of HealthGrades.com's Petition for Writ of Certiorari on file at the U.S. Supreme Court, and published it in the TLJ web site. For a criticism of non-publication of appeals court opinions, see, Nonpublication.com.