Ruling Finds Out-of State Seller Out of Reach

IN A NEW and developing area of the law, the New Hampshire Supreme Court recently decided that an eBay Internet seller based in New Jersey was not subject to personal jurisdiction in New Hampshire for selling an excavator to a New Hampshire resident, due to lack of sufficient minimum contacts with the state. See Metcalf v. Lawson, ____ N.H. 147 (slip op. June 25, 2002).

Writing for the court, Justice Linda Dalianis’ analysis relies heavily on the facts surrounding the seller’s business conduct relating to New Hampshire, with a discussion of how the elements for personal jurisdiction apply to Internet auction transactions.

The defendant, Shirley Lawson, listed a John Deere mini excavator on the eBay Internet auction Web site. Lawson was a New Jersey resident and had never visited New Hampshire. The plaintiff, Robert Metcalf, was a New Hampshire resident. Metcalf e-mailed Lawson to ask about the quality of the excavator. Lawson replied by e-mail that it was in good condition, and Metcalf bid on the excavator and won the auction. After the auction, the parties exchanged further e-mail messages, and Metcalf eventually informed Lawson that his residence was in New Hampshire. Metcalf traveled to New Jersey and bought the excavator.

Metcalf later had problems with the excavator and contacted Lawson to receive a partial refund, but Lawson did not respond. Metcalf filed a small claims complaint in Milford District Court. After Milford District Court denied Lawson’s motion to dismiss for lack of personal jurisdiction, Lawson appealed, and the New Hampshire Supreme Court reversed.

Pursuant to the federal constitution due process clause and the state long-arm statute, a court may exercise personal jurisdiction over a non-resident if the defendant has certain minimum contacts with the state, such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. The constitutional touchstone of the determination is whether the defendant purposely established minimum contacts with the forum state. Since the Internet has no territorial boundaries, it can be difficult to apply long-standing jurisdictional principles in cases involving Internet contacts. Nevertheless, the court found that traditional constitutional requirements of foreseeability, minimum contacts, purposeful availment and fundamental fairness must continue to be satisfied before any activity – including Internet activity – can support an exercise of personal jurisdiction.

Today, most courts focus on the nature and the quality of the defendant’s activity over the Internet to determine if the contacts with the forum state were sufficient to exercise personal jurisdiction, sometimes called the "sliding scale approach." At one end of the scale, the defendant is believed to have sufficient contacts where she clearly does business over the Internet, such as entering into online contracts with residents from other states. On the other side of the scale, the defendant is believed not to have sufficient contacts when a Web site does nothing more than post information. In the middle of the scale, where a Web site is interactive so that information may be exchanged, the courts look to the level of activity and commercial nature of the exchange of information.

In Metcalf v. Lawson, the New Hampshire Supreme Court followed the example of a recent Michigan case evaluating Internet auction sales. The Michigan court found that the choice of the bidder is beyond the seller’s control in an Internet auction. Thus, a defendant’s Internet auction sales were the result of random and attenuated contacts, insufficient for finding that the defendant purposefully availed herself of the privilege of doing business in Michigan. See Winfield Collection, Ltd. v. McCauley, 105 F. Supp. 2d 746 (E.D. Mich. 2000).

Like in Winfield, the Metcalf court found that Lawson had no control over who would ultimately be the winning bidder on the excavator, nor could she exclude bidders from particular jurisdictions. Lawson did not deliberately direct any of her activity to New Hampshire. The sale of the John Deere excavator through eBay was a random, attenuated contact with the state of New Hampshire. Even the e-mail communications with Metcalf were the result of Metcalf’s activity, not Lawson’s. The court found there was insufficient evidence to establish that Lawson initiated any of the e-mail correspondence to Metcalf, or to establish when Lawson was made aware that Metcalf was a New Hampshire resident.

While it is arguably foreseeable that a New Hampshire resident could have bought the excavator at the auction, foreseeability alone is insufficient to support the exercise of personal jurisdiction under the federal due process clause. Thus, the New Hampshire Supreme Court held that the defendant did not engage in sufficient activity in New Hampshire to make it fair and reasonable for purposes of due process to require her to defend Metcalf’s claim here.

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