Introducing the Podcast

Be sure to check out the first Podcast, available in MP3. This week’s podcast discusses the recent case of Dix v. ICT Group, discussed on this site, in which the forum selection clause in AOL’s terms of service was held unenforceable.

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(6 min. 11 sec., appx. 1.09 MB)

Web developer was only “puffing” when it represented the quality of its services

The First Circuit has upheld the U.S. District Court for the District of Maine’s determination that a web developer’s litany of self-laudatory statements to its client did not give rise to actionable misrepresentation. The client was sophisticated enough to distinguish mere “puffery” from real factual assertions about the web developer’s services and abilities.

The case of Uncle Henry’s Inc. v. Plaut Consulting Co., Inc. arose out of “an agreement to create a website that went awry.” After Plaut’s Edgewing division failed to satisfactorily complete the complex auction website for which Uncle Henry’s had paid over a half million dollars, Uncle Harry’s sued, alleging breach of contract and fraud.

The proceedings quickly became complicated, as Plaut counterclaimed for breach of contract and quantum meruit. The hodgepodge of issues raised in the various claims and counterclaims and appeals and cross-appeals makes this case a good read for an insomniac practitioner in the First Circuit. There is too much detail to cover here in full, and in any event most of the issues are simply brick-and-mortar, that is, not unique to the law of the Internet.

One aspect of the case, however, may be of particular interest to web developers and the lawyers who represent them. This has to do with that dialect of commercial language known as “puffing.”

In the District Court, Uncle Henry’s had claimed that numerous statements that Plaut made about the quality of its work were fraudulently misrepresentative. Among these statements were that the developer would “provide Uncle Henry’s a total solution unsurpassed in the industry,” and that the developer “was a proven company with a long track record and many years’ experience.” The court granted summary judgment, holding that the statements constituted nothing more than “puffing” or “trade talk” upon which no reasonable person would rely. Citing to previous authority, the court poetically explained that “dealers talk” is “that picturesque and laudatory style affected by nearly every trader in setting forth the attractive qualities of the goods he offers for sale.”

On appeal, Uncle Henry’s argued that an exception to the rule that puffery should not be believed applies to it. Such exception provides that “puffing” statements are actionable if the hearer of them is so unsophisticated or lacking in information as to be “at the mercy” of the speaker. The Court of Appeals did not buy this argument, however, and affirmed the District Court on this point. As support for the conclusion that Uncle Henry’s was not merely at the mercy of Plaut, the court noted both that counsel for Uncle Henry’s had aggressively investigated and negotiated the contract before signing it, and that Uncle Henry’s had experience in web development before its dealings with Plaut.

Alas, I cannot resist. Isn’t it a coincidence that this puffing case comes from Maine, well known for its puffins?

puffin image

Uncle Henry’s Inc. v. Plaut Consulting Co., 2005 WL 407394 (1st Cir. Feb. 22, 2005).

Puffin photo used courtesy of a Creative Commons license from Martin Burns.

Application of “effects test” brings pool table manufacturer out from behind the personal jurisdiction 8-ball

In the case of Brunswick Bowling & Billiards Corp. v. Pool Tables Plus, Inc., the U.S. District Court for the Northern District of Illinois held that the listing of the defendant’s company name, address and email address on two websites did not give rise to personal jurisdiction under the “sliding scale” test. Application of the effects test to defendant’s non-Internet activities, however, was sufficient for the exercise of personal jurisdiction.

Brunswick sued its competitor Pool Tables Plus in the Northern District of Illinois for various Lanham Act and state law violations, accusing Pool Tables Plus of misrepresenting both the relationship between Brunswick and Pool Tables Plus and the quality of Brunswick’s products. Pool Tables Plus moved to dismiss for lack of personal jurisdiction, submitting an affidavit stating it was “completely devoid of Illinois contacts.”

In determining the question of personal jurisdiction, the court began by applying the “sliding scale” test articulated in the case of Watchworks v. Total Time, Inc., 2002 WL 424631 (N.D.Ill. 2002). Under this test, the court determined that the presence of defendant’s mailing address and email address on websites found at and did not make the defendant’s business conducted over the Internet sufficiently “active” to show minimum contacts with Illinois. Thus, the court declined to exercise personal jurisdiction on this basis.

Under the “effects test,” however, set forth in the case of Riddell, Inv. v. Impact Protective Equip., L.L.C., 2003 WL 21799935 (N.D.Ill. 2003), the court determined that the exercise of personal jurisdiction would be proper. The defendant’s non-Internet activities, namely, making representations to its customers about Brunswick, caused harm to Brunswick that was felt in Illinois. Furthermore, Illinois had an interest in adjudicating a case in which harm to a business within its borders was alleged.

Even though the court held that it could exercise personal jurisdiction over Pool Tables Plus, it dismissed the case on venue grounds.

Brunswick Bowling & Billiards Corp. v. Pool Tables Plus, Inc., 2005 WL 396304 (N.D.Ill., February 16, 2005).

AOL does not get to choose where it can be sued

In a recent decision in the case of Dix v. ICT Group, Inc., reversing the lower court, the appellate court in the state of Washington held unenforceable a forum selection clause in AOL’s terms of service which stated that Virginia courts have exclusive jurisdiction over any dispute arising in connection with the services.

The plaintiffs had sued AOL (and its independent contractor ICT to answer customer service questions) in Washington state court, claiming that they had been swindled when AOL started charging them for secondary accounts for which the plaintiffs had never signed up. AOL moved to dismiss, claiming that under the terms of service, Virginia was the only place in which such suit could be brought. The trial court agreed, and dismissed the lawsuit. The appellate court held otherwise, reversing the lower court’s dismissal and remanding the case for further proceedings.

The appellate court began its analysis by reminding us that a party to a contract challenging a forum selection clause bears a heavy burden. In the state of Washington, absent evidence of fraud, undue influence, or unfair bargaining power, courts are reluctant to invalidate forum selection clauses because they enhance contractual predictability.

The plaintiffs put forward two arguments to invalidate the forum selection clause. The court did not accept the plaintiffs’ first argument of fraud: that AOL began billing them for the new accounts without giving them the opportunity to sign new terms of service. The second argument, that enforcing the provision would violate public policy, passed muster.

Washington is not the first state to have had the opportunity to rule on the enforceability of AOL’s forum selection clause. The court looked to some mixed decisions on the issue coming from such states as California, Maryland and Florida. In the end, the court’s decision to hold the forum selection clause unenforceable was based mostly on the policy underlying the state’s consumer protection statue. Denying the ability to litigate the question in a Washington court would “undermine the very purpose” of the consumer protection act, which is to offer broad protection to its citizens.

Dix v. ICT Group, Inc., — P.3d —, 2005 WL 372483 (Ct. App. Wash., Feb. 17, 2005)

Directing e-mail to residents of Texas gives rise to personal jurisdiction

The case of Middlebrook v. Anderson is a recent case coming to us from a federal court in Texas, and like the recent case of Bible & Gospel Trust v. Wyman discussed on this site, it addresses the issue of whether the court could properly exercise personal jurisdiction over an out of state defendant based on his conduct over the Internet. Unlike the Minnesota federal court in Bible & Gospel Trust, the Texas court in Middlebrook determined that the exercise of personal jurisdiction over the defendant was proper. The Texas court, however, had plenty more to hang its hat on, as the defendant had done much more to direct his activities to the forum state.

Plaintiffs sued Anderson, a California resident, for defamation after they discovered he had placed on his website a story that accused plaintiffs of various types of wrongdoing and illegal conduct. The story also told of plaintiff Middlebrook’s 2003 arrest for child indecency, for which he was never indicted. Anderson also posted on his website a solicitation for information about Middlebrook.

Anderson’s conduct did not stop with merely posting defamatory statements on his website. Perhaps most central to the court’s decision to exercise personal jurisdiction over Anderson were the numerous emails he sent to addresses that he had obtained at a seminar in Texas. The emails repeated many of the accusations which were posted on the website.

These activities of the defendant were directed toward Texas, and served to establish sufficient contacts with the forum state for the exercise of personal jurisdiction. The court held that through his actions, Anderson purposefully availed himself to the law of the forum state, and that the exercise of personal jurisdiction over him comported with traditional notions of fair play and substantial justice.

Middlebrook v. Anderson, 2005 WL 350578 (N.D.Tex. Feb. 11, 2005).

Possibility that witness recordings would be uploaded to Internet no justification for withholding from press

In an order granting a journalist’s motion for the government to make available copies of tape recorded conversations that were introduced in a criminal trial, the U.S. District Court for the Eastern District of New York held that the likelihood of the tapes being broadcast over the Internet did not create significant or unique security concerns.

Jerry Capeci, author and publisher of the website Gang Land, sought an order from the court requiring the government to make copies of five tape recordings of conversations which were introduced in a previous criminal trial. The government responded by seeking a protective order citing various concerns, among them the security of witnesses and innocent third parties.

As part of its argument, the government contended that the duplication of the recordings for publication on the Internet would create a different and more significant security risk, apparently because of the Internet’s ability to permit the rapid and widespread dissemination of information. The government rejected this argument and granted Capeci’s request, ordering the government to make the tapes available for copying within seven days.

In rejecting the government’s argument that the likelihood of publication on the Internet creates a special security risk, the court noted the presumption that access to trial evidence should be made available where possible to interested members of the community who are unable to be present in court. The court stated that the capacity of the Internet to distribute the information over a wider area actually speaks in favor of, and not against, equal access to information for web-based journalists such as Capeci.

The court continued by rejecting the government’s argument that there is some inherent difference in the Internet which would give rise to heightened concerns. It noted that first amendment concerns would bar the court from allowing a news organization to publish a sound recording in only certain media (e.g., radio or television) while prohibiting dissemination over the Internet.

U.S. v. Massino, — F.Supp.2d —, 2005 WL 336304 (Feb. 14, 2005)

Use of spyware doesn’t pay in Florida divorce proceeding

Evidence obtained through wife’s use of spyware on husband’s computer to obtain information about extramarital affair not admissible in divorce proceedings.

Just in time for Valentine’s Day, we have a romantic case coming from Florida that interprets a provision of that state’s Security of Communications Act. The case originated in divorce court, and the appellate court considered whether evidence of a husband’s infidelity obtained through the use of a spyware program installed by the wife was properly excluded in the divorce proceedings. The court held that it was properly excluded from consideration.

After marital discord eruped between Husband and Wife, Wife installed a spyware program on Husband’s computer that captures screenshots which are saved on the hard drive for later review. Through these means, Wife discovered Husband’s online philandering with another woman.

After Husband discovered the spyware on his computer, he petitioned the divorce court to exclude the evidence Wife had obtained using the spyware. The court excluded the evidence, entered a final decree, and Wife appealed.

On appeal, the court affirmed that the evidence was properly excluded, because Wife had obtained it illegally under a provision of the Security of Communications Act that makes it illegal for a person to intentionally intercept wire, oral or electronic communications.

Wife asserted that the communications were not illegally obtained, arguing that by the time the communications appeared on the screen they were no longer in transit, and not subject to interception. The court acknowledged that “there is a rather fine distinction between what is transmitted as an electronic communication subject to interception and the storage of what has been previously communicated.” It went on to hold that “the evanescent time period” between the transmission of the communications and their appearance as visible text on the screen was not “sufficient to transform acquisition of the communications from a contemporaneous interception to retrieval from electronic storage.”

O’Brien v. O’Brien, — So.2d —, 2005 WL 322367 (Feb. 11, 2005).

KERACARE trademark diluted by registration of domain name

The United States District Court for the Northern District of Illinois granted summary judgment in favor of a plaintiff who claimed that the defendant’s registration and use of fifteen domain names incorporating variations of plaintiff’s trademark KERACARE caused dilution of the mark.

Plaintiff Avlon owns the incontestable trademark registration for the mark KeraCare for hair care products. Defendant Robinson is in the hair care products industry as well, and does business under the name Sheldeez Hair Prouducts and Salon. Robinson registered at least fifteen domain names incorporating variations of Avlon’s mark, including From these sites, Robinson offered for sale hair care products made by both Avlon and Avlon’s competitors.

Avlon sued Robinson claiming, among other things, that Robinson’s incorporation of Avlon’s mark in his domain names diluted Avlon’s mark, in violation of Section 43(c) of the Lanham Act, 15 U.S.C. § 1125(c). (Dilution is defined in Section 45 of the Lanham Act, 15 U.S.C. § 1127 as “the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of (1) competition between the owner of the famous mark and other parties, or (2) likelihood of confusion, mistake, or deception.) Avlon moved for summary judgment on the dilution claim, and the court granted Avlon’s motion.

Robinson first argued that Avlon had failed to show the KeraCare mark is famous. The court disagreed, and found that the mark is famous. The court noted that Robinson’s actions in part betrayed the mark’s fame – if the mark was unfamiliar to the vast majority of shoppers, Robinson would not have registered at least fifteen variants of the word as domain names. The court also gave weight to the fact that Avlon’s mark was incontestable under Section 15 of the Lanham Act, 15 U.S.C. §1065. Finally, the court also gave weight to the fact that Avlon sells millions of dollars of KeraCare products annually, and that Robinson himself testified that the KeraCare line is one of four product lines that are “well known and respected in a marketplace ‘flooded’ with product lines.”

Robinson next argued that Avlon had failed to establish actual dilution of its mark as required by the Supreme Court’s decision in Moseley v. V Secret Catalogue, Inc. et al. 537 U.S. 418 (2003). The court was not persuaded by this argument. It looked to the portion of Moseley which states that “actual dilution can reliably be proved through circumstantial evidence–the obvious case is one where the junior and senior marks are identical.” Because Robinson’s domain names used Avlon’s exact marks, the court found that Avlon had shown actual dilution. The court noted that actual dilution was also supported by the fact that Robinson’s control over all possible variations of Avlon’s marks permitted him to decide what messages and goods are associated with such marks.

Avlon Indus. v. Robinson, 2005 WL 331561 (N.D.Ill. Feb. 8, 2005).

Webmaster not a “publisher” of defamatory comments made by third parties in users’ forum

An appeals court in New Jersey upheld the trial court’s dismissal of defamation claims against a community website forum operator, invoking an immunity provision of the Communications Decency Act of 1996.

This was a case of local politics gone bad. In 1999 defendant Moldow created a website featuring information about local government activities in the New Jersey town of Emerson. The site contained various features including a message forum where citizens could post messages anonymously.

After some time, certain anonymous visitors to the website began posting defamatory messages in the forum about various local elected officials, including plaintiffs Donato and Calogero. Plaintiffs filed suit against Moldow alleging defamation and other causes of action, on the theory that Moldow was liable for defamation as a publisher of the statements in his capacity as operator of the website.

The trial court dismissed the action against Moldow, finding that he was immune from liability under a provision of the Communications Decency Act of 1996 which provides that “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider,” and a related “good samaritan” provision discussed below. The appellate court affirmed, and went through a three part analysis under the statute.

In the first part of the analysis the court confirmed that Moldow was both a provider and user of an interactive computer service, as to not be considered a publisher. He was a provider of an interactive computer service merely by providing a website, and was a user by virtue of being a customer of an ISP.

The second part of the analysis focused on whether Moldow’s actions in shaping the discussions on the message forum rendered him an “information content provider” and thus not covered under the statute’s immunity. For example, Moldow deleted certain offensive messages, gave guidelines for posting, and edited and re-posted certain messages to remove obscenities. The court reviewed a litany of decisions from other jurisdictions which had considered similar questions. In the end, the court determined that Moldow’s activities were nothing more than the exercise of traditional editorial functions and thus subject to the type of immunity that Congress intended under the Act.

The third and final part of the court’s analysis considered whether Moldow had acted in bad faith in his actions. The appellants had claimed that Donato’s alleged personal malice toward them made it such that his conduct was in bad faith and thus not protected by the Act’s immunity. As a supplement to the immunity provisions, the Act has a “good samaritan” provision which states that no provider or user of an interactive computer service is liable for “any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, filthy, excessively violent, harassing, or otherwise objectionable.” The court concluded that the good samaritan provision was enacted not to diminish the broad immunity, but to make sure that it was not diminished. Essentially, because the court had determined that Moldow’s actions were protected by the Act’s immunity, they could not have been done in bad faith.

Donato v. Moldow, 2005 WL 201121 (Ct. App. N.J., January 31, 2005)

Minnesota Federal court declines to exercise personal jurisdiction over Winnipeg website operator

In an action for defamation, copyright infringement and business interference, the U.S. District Court for the District of Minnesota declined to exercise personal jurisdiction over a website operator based in Winnipeg, Manitoba, holding that Minnesota’s long arm statute precluded such exercise as to the defamation claim, and that the Zippo and “effects” tests did not warrant exercise of personal jurisdiction as to the copyright and business interference claims.

The plaintiffs in this case were a religious organization and the owner of the copyright in the organization’s religious writings. Plaintiffs filed suit in Minnesota against a website operator located in Winnipeg, Canada, claiming that they were defamed through a website maintained by defendant, and that the defendant infringed the plaintiffs’ copyright and interfered with their business relations. The defendant moved to dismiss, claiming that he did not have sufficient contacts with Minnesota for the court’s exercise of jurisdiction over him. The court agreed, and dismissed the action.

The court concisely reviewed the standards it applies when determining whether to exercise personal jurisdiction over an out of state defendant. It covered the threshold questions of whether the facts presented satisfy the forum’s long arm statute and whether the court’s exercise of jurisdiction would be fair in accordance with due process.

There were two main components of the court’s analysis. It first analyzed the question of jurisdiction in relation to the defamation claim and then went on to answer the question of whether the defendant would be subject to personal jurisdiction in the copyright infringement and business interference claims.

In general, Minnesota’s long arm statute provides that a Minnesota court can exercise personal jurisdiction over an out of state defendant if that defendant is alleged to have committed and act outside of Minnesota which causes injury in Minnesota. There is a specific exception, however, when the cause of action lies in defamation. In this case, even though the website was created in Minnesota, the defendant was never in Minnesota for purposes of maintaining the website, and everything he did to maintain the site he did from his home in Canada. The court held that because the defendant’s “acts” in maintaining the site were committed in Winnipeg, where his computer was located, the plaintiffs could not establish that the court should exercise personal jurisdiction as to the defamation claim.

The court then considered whether it could exercise personal jurisdiction over the defendant as to the copyright infringement and business interference claims. The court applied the well-known Zippo test first articulated in the case of Zippo Mfg. Co. v. Zippo Dot Com, Inc. 952 F.Supp. 1119 (W.D.Pa. 1997). This test focuses on the nature and quality of commercial activity that an entity conducts over the Internet. The greater the amount of interactivity of a website, the more likely a court will determine it can exercise personal jurisdiction over the entity owning the website. In this case, there was no commercial activity on the site, and the interactivity of the site consisted only of a users forum and a guestbook. The court found that this was not sufficient to warrant exercise of personal jurisdiction under the Zippo test.

The analysis did not stop there, however. The court went on to apply the “effects” test, articulated in the case of Calder v. Jones, 465 U.S. 783 (1984). This test essentially provides that a court’s exercise of personal jurisdiction over an out of state defendant is proper if the defendant’s intentionally tortuous activity is specifically directed to the forum state and the plaintiff feels the “brunt of the harm” within the forum state. In the present case, the court determined that the plaintiffs did not pass the effects test, because the website was directed at the Brethren organization, and not specifically at Minnesota or its residents.

Bible & Gospel Trust v. Wyman, — F.Supp.2d —, 2005 WL 273162 (D.Minn. January 31, 2005).

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