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Suing a Web-Based Company
Generally, suing a company in state court is fairly easy. For the state to exercise jurisdiction over the company, the company must have “minimum contacts” with the state. This usually means that it has employees in the state, or conducts a large amount of business there. The company can also easily be sued in the state in which it is incorporated, or where it has its principal place of business.
While this “minimum contacts” test is fairly easy to apply to companies that do their business in the physical world, it becomes far more complicated when the company’s business exists solely, or primarily, in cyberspace. This is especially true when a lawsuit arises out of a company’s online activities.
When the business of the company is not physically embodied in any location, it is far more difficult to determine what, if any, contacts it has with a given state. This makes suing a web-based company difficult.
If a user logs onto a company’s website whose server is located in another state or country, it is difficult to say if the website has directed any activity to the user’s state, if the user decides to sue the web-based company.
The general test for determining if a state has jurisdiction over a web-based company is the “active/passive” distinction. A website is “active” if the user interacts with it, such as by providing personal information and/or money in exchange for products or services. A passive website is more like a one-way conduit; the user goes to a website, reads text, looks at pictures, etc., with no interaction.
If a user accesses an active website, and suffers some legal wrong as a result, it will be far easier for him or her to sue that website in the user’s state. A passive website will be far more difficult to sue.
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