Where to Sue and Collect!Written by Richard Newman
May 20, 2012 # 9:50 pm # Legal Challenges, Specials # 7 Comments
The interactive marketing space presents a unique set of legal challenges, including what jurisdiction to file a lawsuit in. Whatever the amount that is owed, considerations such as legal fees and costs, as well as the expenditure of time, often make it cost prohibitive to initiate formal legal action. Assuming that you have decided to initiate legal proceedings, the proper and best practical jurisdiction within which to do so must be assessed.
No court will entertain a matter unless personal jurisdiction is established over the parties involved. A court must have the power to bind a defendant.
Both state and federal courts maintain personal jurisdiction over in-state residents. Thus, it is not problematic to assert jurisdiction in a local court over a defendant who resides or operates in your state.
However, what should you do when the defendant’s principal place of business is not located within the state which you reside and contemplate filing suit? As a general rule, you can drag a defendant into court within your home state only when there are “minimum contacts” between the defendant and the state where the lawsuit is filed.
Within the performance marketing sector, defendants often do not live, operate a business, or own property in your home state. Traditional state power ends at the state line and local state courts generally do not have authority to bind a defendant in another state. At first blush, it may seem unlikely that local courts will have personal jurisdiction over a defendant. The minimum contacts analysis can get a bit tricky.
As referenced previously, local courts can assert personal jurisdiction over a business or individual so long as sufficient minimum contacts with that state exist, even if a defendant does not live or operate a business there. It must be foreseeable for a defendant to have to defend a lawsuit within your state.
Is there a “substantial presence” within your state that may justify personal jurisdiction? A substantial presence can include the regular solicitation of business within your state, negotiating or entering into a contract within your state, the derivation of substantial revenue from goods or services sold in your state, or the engagement of a regular and systematic course of conduct within your state.
Another method to secure home state jurisdiction is by establishing that a substantial injury was purposefully caused within the state. If the connection between the activity and the injury is ambiguous, courts often look for evidence that the activity was purposefully directed at the resident of the forum state.
Of course, jurisdiction may be obtained when both parties consent to it. This is where contractual venue provisions come into play. Venue provisions pertains to the geographic location of where a judicial proceeding will take place. When incorporated into a contract, venue provisions are generally enforceable unless either party can show it is unreasonable and unjust under the circumstances.
Lastly, if the amount in dispute is “substantial” and personal jurisdiction is unclear, consider filing the lawsuit in the defendant’s home state. It may ultimately prove more efficient than fighting over personal jurisdiction and subsequently attempting to collect on an out-of-state judgment.
Disclaimer: This article is intended for informational purposes only and does not constitute legal advice. Consult with an Internet Marketing Law Attorney for assistance assessing whether the facts justify initiating legal action within your state.