Chapter 03 - The American Judicial System, Jurisdiction, and Venue PDF

The primary role of courts is to decide cases and resolve legal disputes. Court decisions may also shape or create legal doctrines that impact business. Business owners and managers should thus know how our court system works in practice, especially because the risk of litigation is always present i...

The primary role of courts is to decide cases and resolve legal disputes. Court decisions may also shape or create legal doctrines that impact business. Business owners and managers should thus know how our court system works in practice, especially because the risk of litigation is always present in the business world. In this chapter, students will learn - The role and structure of the American judicial system. - The function and legal authority of state and federal courts. - How the law develops through court decisions. In order for a court to render a binding decision, a court must have *jurisdiction* or legal authority over both the dispute itself (subject matter jurisdiction) and the parties in the case (personal jurisdiction). Accordingly, students will also learn - The circumstances under which a court has the legal authority to decide a case (jurisdiction). - The appropriate location to resolve a dispute (venue). **ROLE AND STRUCTURE OF THE JUDICIARY** **LO 3-1** Explain the role of the judiciary in the American legal system. The American legal system is structured around a set of federal and state [**[courts]**](javascript:void(0)) collectively known as the [**[judiciary]**](javascript:void(0)). The judiciary has two primary roles. First, courts *adjudicate* cases. In its adjudication role, a page 77court resolves disputes. Second, courts are also charged with the responsibility of *judicial review.*[^^](javascript:void(0)) In its judicial review role, a court may review decisions of lower courts or the actions of the other branches of the government to determine whether these decisions and actions comply with existing law and with the Constitution. **State versus Federal Courts** **LO 3-2** Distinguish between federal courts and state courts. The U.S. system of government is a "federal" system: It recognizes two distinct levels of government, state and federal. As a result, there are two levels of courts in this dual structure. One level, [**[state courts]**](javascript:void(0)), adjudicates cases arising under state statutes, state common law, or state constitutional law. In addition, state courts also may apply nonexclusive federal statutes as well as federal constitutional law. The other level, [**[federal courts]**](javascript:void(0)), is concerned primarily with national laws, federal constitutional issues, and other cases that are outside the purview of state courts. It is important to note that not all courts have the *authority* to hear all cases. In order for a court, whether state or federal, to have the legal authority to hear a case, the court must have *jurisdiction* over the dispute and parties in the case. Proper venue also must be established. The concepts of jurisdiction and venue are discussed in detail later in this chapter. **State Courts** The majority of court cases filed in the United States are brought in state courts. All 50 states have two types of tribunals: [**[state trial courts]**](javascript:void(0)) and [**[state appellate courts]**](javascript:void(0)). **State Courts** The majority of court cases filed in the United States are brought in state courts. All 50 states have two types of tribunals: [**state trial courts**](javascript:void(0)) and [**state appellate courts**](javascript:void(0)). **LO 3-3** Identify the main duties of trial courts versus appellate courts. *State Trial Courts* When one party alleges a breach of a legal duty or a violation of a legal right, the aggrieved party, called the [**plaintiff**](javascript:void(0)), may initiate in a trial court a civil action or lawsuit against the alleged wrongdoer, called the [**defendant**](javascript:void(0)). Trial courts page 78adjudicate cases through an established procedure in which both parties are able to present evidence, question witnesses, and articulate legal arguments about their case.[^2^](javascript:void(0)) The names of trial courts vary widely from state to state. However, all state trial courts have either *general authority* to hear a case or *limited authority* to hear a particular type of case. Courts of general authority are organized into geographic districts (often divided at the county level or by a set of contiguous counties)[^^](javascript:void(0)) and adjudicate many types of cases, including breach of contract, employment discrimination, personal injury, criminal cases, property disputes, and so forth. Courts of limited authority, by contrast, are often confined to a particular type of dispute such as family law matters (e.g., divorce, child custody, or adoption cases) or probate matters (e.g., wills and estates). Some states, notably Delaware, have courts devoted solely to issues relating to commercial law matters. In Delaware, these specialized courts are called *chancery courts.* It is important to remember that state trial court decisions are binding *only* on the parties involved in the dispute. Trial court decisions do not set precedent for future disputes or parties. Only appellate courts set precedent. **KEY POINT** Inferior courts often do not maintain a permanent record of their trials. Some states simply record the trial and then erase the recording after the period for appeal has expired. State trial courts are courts of record, meaning that a court stenographer attends the trial and creates a permanent written transcript of the trial. For minor matters and cases with a dollar value that is relatively low (typically less than \$10,000, depending on the state), there are local courts known alternatively as municipal courts, small-claims courts, or justice-of-the-peace courts. Such courts provide local access to a court for the purpose of resolving relatively simple disputes on an expedited basis. These courts are typically referred to as *inferior* trial courts because states provide an automatic appeal for the losing party, usually to the state trial court. This appeal actually takes the form of a new trial, or [[trial de novo]](javascript:void(0)). **Legal Speak \>))** Trial de Novo A form of appeal in which the appeals court conducts a new trial as if the original trial had never occurred. State trial courts are often divided into (1) courts that hear [[civil cases]](javascript:void(0)), in which one party seeks a remedy, such as an award of money damages, for a private wrong committed by another party, and (2) courts that hear [[criminal cases]](javascript:void(0)), in which the accused party is charged by the government of committing a crime. *State Appellate Courts* After a state trial court has rendered a decision, the losing party may file an appeal in a state appellate court. Appellate courts are primarily concerned with reviewing the decisions of trial courts. In some states, appeals to any appellate-level courts are *discretionary.* That is, the party requesting the appeal (known as the *petitioning* party or the *appellant*) files a document with the court requesting an appeal. Based on a variety of factors, the appellate court then decides whether to allow the appeal to be heard. In other states, the losing party has an automatic right of appeal to the appellate court. In either case, if the appellate court denies an appeal, the trial court ruling is *binding* on the parties in that case.[^^](javascript:void(0)) Appellate judges determine whether the trial in the lower court was conducted in accordance with the legal rules and doctrines of that state. Appellate courts assess the lower court's decision by (1) reviewing lower court transcripts and rulings; (2) reading *briefs,* which are documents written by the attorneys for each side articulating legal reasons why their side should prevail; and (3) sometimes allowing the attorneys to engage in *oral page 79argument,* which requires the attorneys for the parties to appear in front of an appellate panel of judges to participate in a live question-and-answer session on the legal issues in the case. **Legal Speak \>))** Remand To send a case back to the lower court from which it came for further action consistent with the opinion and instructions of the higher court. The appellate court focuses on such issues as the rulings of the trial judges, the admission of evidence, jury selection, and other factors that may have affected the outcome of the case in the lower court. Note that appellate courts, except in some rare cases, do *not* consider new evidence in their review. Instead, the main job of appellate courts is to determine whether a legal error was made at the trial court level. In cases where the error is substantial enough, a court may reverse the decision of the trial court and [[remand]](javascript:void(0)) the case back to the trial court. Another major distinction between trial courts and appellate courts is that an appellate court decision sets *precedent* that is binding on all lower trial courts.[^^](javascript:void(0)) Because one of the primary purposes of the law is to provide some degree of reliability and uniformity in adjudicating cases, trial courts are required to follow the rulings of appellate courts. In most states, the highest appellate court is called the *state supreme court.*[^^](javascript:void(0)) A state supreme court's decision is final and binding on *all* courts situated in that state (including federal courts located in that state) on *all* issues involving state law. States vary as to how state trial court and appellate judges are selected. Some states elect all trial and appellate judges as part of their general elections, while others use an appointment process whereby the governor appoints a judge, but the appointment is subject to review and rejection by the state legislature (typically the state senate). Some states use a hybrid method whereby local judges are elected and appellate court judges go through an appointment process. **KEY POINT** Only appellate courts have the right to set binding precedent. Federal Courts The federal government operates a separate system of federal courts. Trial courts at the federal level are the [[U.S. district courts]](javascript:void(0)). Federal appellate courts are called the [[U.S. courts of appeal]](javascript:void(0)). Because the federal appellate courts are divided into circuits, these courts are frequently referred to as *circuit courts of appeal.* Finally, the [[U.S. Supreme Court]](javascript:void(0)) not only has authority to review the decisions of the circuit courts; it also has authority to review decisions of state supreme courts that involve some issue of federal law. *U.S. District Courts* District courts serve the same primary trial function as state trial courts but address issues involving federal matters such as federal statutes, regulations, or constitutional issues. There are 94 districts in the United States, with at least one federal district court in every state and one for the District of Columbia. Federal district courts may also decide certain matters involving *state law* when the parties are from different states and the amount in controversy exceeds \$75,000. These federal trial courts hear a variety of matters and render decisions that are binding only on the parties involved in the dispute. Some federal courts specialize in certain areas of law. They include the Bankruptcy Court, the Tax Court, and the Court of International Trade. **KEY POINT** When the parties are from different states and the amount in controversy exceeds \$75,000, federal courts may decide state law cases (e.g., contract disputes), except in cases involving divorce, alimony, or child custody. page 80 *U.S. Courts of Appeal* There are 13 federal courts of appeal, each of which reviews the decisions of federal district courts in the state or several states within its circuit. Two exceptions are the Court of Appeals for the District of Columbia, which decides cases originating in Washington, D.C., and the Federal Circuit Court of Appeals, which decides a variety of exclusively federal issues such as patent, copyright, and trademark cases or cases where the United States is named as a defendant. The Federal Circuit is said to have national jurisdiction because its authority is not confined to one particular circuit. Just as with state appellate courts, federal circuit courts of appeal set precedent and their decisions are binding on all the states in that circuit. [[Figure 3.1]](javascript:void(0)) illustrates how the federal circuits are divided geographically. *U.S. Supreme Court* The U.S. Constitution does not specify the number of justices who sit on the Supreme Court. Originally established at six members, one chief justice and five associate justices, the Court has ranged from a low of five members to a high of 10 members. It has remained at nine members since 1869. The U.S. Supreme Court has both original and appellate jurisdiction. The Court's original jurisdiction is limited to cases involving ambassadors and other high public officials and those cases where the disputing parties are two states. In original jurisdiction cases, the Court operates as a trial court. In addition to the Court's original jurisdiction and its appellate authority to decide any appeal from any U.S. circuit court of appeal, the Court also may exercise its appellate authority over state supreme courts when a federal issue is involved. page 81 Furthermore, the Court's appellate review is discretionary. An aggrieved party may petition the Court to review its appeal by presenting a petition for *writ of certiorari* that explains the basis for the appeal. Upon review, if four of the nine justices vote to hear the case, the parties in the case are then permitted to pursue the appeal before the Supreme Court. In practice, however, the odds of getting a case to the Court are very low. Typically, parties file between 6,000 and 8,000 petitions for a writ of certiorari per year, and the Court grants only about 1 percent of those requests. [[Table 3.1]](clbr://internal.sandbox/book/text/XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX) illustrates the number of petitions filed versus the number of petitions granted by the Supreme Court from 2009 to 2014. ----------------------------------------------------------------------------------------------------------------------- **TABLE 3.1 U.S. Supreme Court Case Acceptance Rate** ------------------------------------------------------- -------------------- --------------------- -------------------- **Term** **Total Number of\ **Number of Cert.\ **Acceptance\ Cert. Petitions** Petitions Granted** Rate (0.01 = 1%)** 2009 8,131 77  0.9% 2010 7,868 90 1.1 2011 7,685 66 0.9 2012 7,647 93 1.2 2013 7,586 76 1  2014 7,083 71 1  2015 6,536 81 1.2 2016 6,289 75 1.2 2017 6,229 78 1.3 ----------------------------------------------------------------------------------------------------------------------- Source: Journal of the Supreme Court of the United States. ***Legal Speak \>))*** **Writ of Certiorari** A discretionary order issued by the Supreme Court granting a request to argue an appeal. A party filing for an appeal must file a petition for writ of certiorari. In addition to deciding some highly publicized and politically charged cases, the main work of the U.S. Supreme Court is to decide cases presenting legal issues that have generated conflicting opinions among the appellate circuit courts, referred to by the Court as a *conflict among the circuits* or a *circuit split.* All federal judges are selected via the appointment process. The president nominates candidates for federal trial and appellate courts. The nominees are then subject to the review of the Senate. If the nominee is rejected, the president must nominate another candidate. Once confirmed, the nominee is sworn in as a federal judge and may be removed from office only by impeachment. **HOW THE LAW DEVELOPS** **LO 3-4** Articulate how the law evolves through the adjudication of cases. The American legal system is a "common law" system: The law is interpreted and developed by courts in written decisions. When a decision is issued by an appellate court, it not only decides the individual case before the court; it also sets a precedent for lower courts to follow in future cases. Furthermore, because of our federal structure or dual system of government (state and federal), it can often be a daunting task---even for trained lawyers!---to figure out "what the law is" or what binding precedents apply in any given case. As we saw in the previous section, trial courts may rule on certain points of law and render a decision, but in terms of precedent, a trial court decision is binding only on the parties to the case and on no one else. In other words, a trial court decision does not establish binding precedent. If, however, an appellate court affirms or reverses the decision of the trial court, the decision of the appellate court sets a precedent: From that point on, the appellate court's ruling on that particular point of law must be followed by the trial courts in the same jurisdiction in all future cases. To further complicate matters, federal trial courts within a certain state (called *district courts*) may rule on *state law* issues in so-called diversity of citizenship cases (e.g., cases involving parties from different states and an amount in controversy in excess of \$75,000). [[Figure 3.2]](javascript:void(0)) illustrates the structure of state and federal courts. FIGURE 3.2 Understanding State and Federal Courts A diagram of court rules AI-generated content may be incorrect. Consider the following hypothetical case to illustrate how the law develops. Assume that in the imaginary U.S. state of Holmestown, no precedent exists on the following issue page 84of state law: *Does an e-mail constitute a signed writing sufficient to satisfy a state statute that requires certain contracts to be in writing?* Further assume that two separate controversies have occurred simultaneously and two separate cases, each with different parties, have been filed. **JURISDICTION AND VENUE** **LO 3-5** Differentiate between subject matter jurisdiction and personal jurisdiction. Not all courts have the authority to hear all cases. The law sets out certain procedural rules that govern which courts may decide which cases. [**[Jurisdiction]**](javascript:void(0)) is a court's authority to decide a particular case based on (1) who the parties are and (2) the subject matter of the dispute. [**[Venue]**](javascript:void(0)) is a determination of the most appropriate *location* for litigating a dispute. **Jurisdiction and Business Strategy** Improvements in technology and in product and service delivery make jurisdiction and venue essential to business planning. As with all legal decisions that business owners and managers make, jurisdiction must be considered in a cost-benefit context. For example, consider a company like Facebook, with headquarters in northern California. Facebook now has over two billion active users all over the world. This means that Facebook could potentially be sued in any state and in other countries as well. With so many users worldwide, what can Facebook do to ensure that any lawsuit involving a Facebook user is litigated in northern California? For the answer to this question, keep reading. We will explore this issue in more depth later in the chapter and, in [Case 3.3](javascript:void(0)), examine an actual lawsuit brought against Facebook presenting the questions raised here. ***Legal Speak \>))*** **Jurisdiction** An English word derived through the combination of two Latin words: *juris* ("of law" or "of right") and *dictio* ("speaking"). Thus, *jurisdiction* refers to a court's authority to *speak the law,* or render a decision in a legal dispute. For now, consider two hypothetical companies, Ultimate Widget Corporation (UWC) and Knock Off Stores, Inc. (Knock Off). Suppose UWC, a New York company, is considering suing Knock Off, a California company, over copyright infringement. UWC management must consider not only the merits of its potential lawsuit but also the costs involved in pursuing the suit. Specifically, UWC's management must consider (1) the total amount of the possible recovery from Knock Off, (2) the actual benefits UWC will reap from the prevention of Knock Off's copyright infringement, and (3) any alternate dispute resolution methods available. If Knock Off is a small company and not likely to steal any of UWC's customers or markets, it may not be worth the costs of litigation to sue Knock Off in California. Pursuing the infringement action would expose UWC to the expense of traveling to California, hiring local counsel in California, and losing productive hours of managers and other witnesses who would be required to travel to testify and be deposed for the case. However, if a New York court has jurisdiction over the dispute, this fact is likely to change the dynamics of the cost-benefit analysis for UWC because now the expenses of the suit are markedly lower. ***KEY POINT*** The cost-benefit analysis involving jurisdictional restrictions may affect the managerial decision-making process when a company or individual contemplates filing a lawsuit. Litigating disputes in out-of-state courts increases the costs of litigation. **Overview of Jurisdiction** **LO 3-6** Explain original jurisdiction and how state and federal courts may have concurrent jurisdiction. The origins of jurisdiction are found in the U.S. Constitution, specifically, the Due Process Clause of the Fifth and the Fourteenth Amendments. In essence, the Constitution prohibits the deprivation of a property interest (usually money damages) without a fair process. While the origins of jurisdiction lie in the Constitution, appellate courts and legislatures have also shaped the rules used by modern courts to analyze questions of jurisdiction. **Two-Part Analysis** Jurisdiction requires a two-part analysis: A court must have both (1) [**[subject matter jurisdiction]**](javascript:void(0)) and (2) [**[personal jurisdiction]**](javascript:void(0)) (also known as *in personam jurisdiction*). Subject matter jurisdiction is the court's authority over the *dispute* between the parties, while personal jurisdiction is the court's authority over the *parties* involved in the dispute. For example, suppose that Abel is employed by Auto Parts Company (APC) to drive a delivery vehicle. One morning, Abel is on a delivery, and due to his lack of care (called *negligence*[^^](javascript:void(0))), he hits Cain, a pedestrian who is crossing the street in a designated public crosswalk located directly in front of the hotel where he has been staying. Cain is severely injured, and he considers filing a lawsuit against Abel to recover the losses he has suffered page 86from the incident. However, Cain discovers that Abel is without assets and, in the state where the incident has taken place, the law provides that APC is responsible for Abel's actions. Consequently, Cain decides to pursue a lawsuit against APC. Initially, Cain must decide in *which* court to file the lawsuit. He probably will have some choice, but it will be a limited one. This is true because the court selected must have jurisdiction over this type of dispute (a negligence case) and over the defendant (APC). Cain will likely bring this suit in a *state* trial court because the jurisdiction of federal courts is limited. We will refer to the *Cain v. APC* case throughout this section to illustrate various aspects of jurisdiction and venue. **Subject Matter Jurisdiction: Authority over the Dispute** **LO 3-7** Recognize the types of controversies over which federal courts have subject matter jurisdiction and those in which diversity jurisdiction applies. Recall from the discussion at the beginning of this chapter that state and federal statutes define which courts have *general* jurisdiction and which have *limited* jurisdiction. State statutes give state trial courts subject matter jurisdiction on virtually all matters involving a state statute, state common law, or a state constitutional issue. Federal district courts, by contrast, are limited by the Constitution and by federal statutes as to what types of cases they have authority to hear. In order for a federal court to have subject matter jurisdiction in a case, the issue must generally involve a [**federal question**](javascript:void(0)) (e.g., some issue arising from the U.S. Constitution, a federal statute or regulation, or federal common law). Federal courts have *exclusive* jurisdiction over all cases in which the United States is a [**party**](javascript:void(0)) in the litigation. For example, a business that sues the Internal Revenue Service for a federal tax refund must pursue the matter in federal court because it involves the United States as a party named in the lawsuit. Even if there is no federal question and the United States is not a party to the litigation, federal courts may have subject matter jurisdiction over cases involving parties from *two different states* (or one party from outside the United States), a situation known as [**diversity of citizenship**](javascript:void(0)). An additional requirement in diversity-of-citizenship cases is that the amount in controversy must be more than \$75,000. For example, if a dispute arises in which a business in New York sues a business in California for breach of contract for \$80,000, the parties are said to be *diverse* and a federal court sitting in New York or California will be given subject matter jurisdiction in the case. Note that the amount-in-controversy requirement applies *only* when a court has jurisdiction via the diversity-of-citizenship requirement. In a diversity case, a federal court applies *state law* because the dispute involves issues governed by state statutes or state common law. Recall the Cain-APC hypothetical case from the beginning of this section. Now assume that Cain is a resident of Massachusetts and that he is visiting Texas, where APC is headquartered, when the incident occurs. Cain is likely to prefer filing the lawsuit in his home state to avoid spending time and resources traveling to Texas to attend the trial. Assuming that Cain's injuries are sufficiently severe to warrant damages exceeding \$75,000, Cain may consider filing suit in the federal district court in Massachusetts. That court has subject matter jurisdiction because the parties are diverse and the amount in controversy has been satisfied. However, that is only the first part of the jurisdiction analysis. Once it has been determined that the federal district court in Massachusetts has subject matter jurisdiction, Cain must also clear another substantial jurisdictional requirement: *personal jurisdiction.* We discuss personal jurisdiction in greater detail later in this chapter. **Original versus Concurrent Jurisdiction** Courts that are authorized to initially hear a case are said to have [**original jurisdiction**](javascript:void(0)). However, it is important to note that more than one court may have jurisdiction over the same case. This scenario is called page 87[**concurrent jurisdiction**](javascript:void(0)). State courts may have concurrent jurisdiction with other state courts or federal courts. For example, suppose that Melvin Ventures Co. alleges that one of its out-of-state vendors has breached a contract, causing \$100,000 in damages. Melvin Ventures will have a choice of several forums for bringing a lawsuit against the vendor. [Table 3.2](clbr://internal.sandbox/book/text/XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX) illustrates the various courts that may have concurrent jurisdiction in the case. -------------------------------------------------------------------------------------------------------------------------------------- **TABLE 3.2 Subject Matter Jurisdiction** ------------------------------------------- --------------------------------------------------------- -------------------------------- **Court** **Requirements** **Subject Matter Jurisdiction\ in Melvin Ventures Case?** Local court Any case claiming *up to* \$10,000 in damages No State trial court Any case in *excess of* \$10,000 in damages Yes State appellate court Appeals from state trial court No Federal trial court More than \$75,000 in damages; diversity of citizenship Yes -------------------------------------------------------------------------------------------------------------------------------------- **Choice of Forum** Choosing a forum (court location) to litigate a dispute when courts have concurrent jurisdiction is an important strategic choice. A party filing a lawsuit must take into account several factors: Costs This factor includes travel costs, filing fees, and legal fees for local counsel (necessary for out-of-state lawsuits). --------- ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Judges The expertise and experience of the judge varies greatly based on the court. Local judges are typically not suited for complex business cases. State and federal judges have earned law degrees and typically have gained significant legal experience prior to becoming a judge. Juries Juries may vary depending on the location and choice of the forum (e.g., a jury in a small town in Kansas versus a jury in New York City). Appeals In many cases, the losing party in a local court case is entitled to an automatic appeal. Appeals from other courts are typically discretionary. Time The amount of time that it takes to actually get to trial varies, depending on the court and the backlog of cases in the court. Local inferior courts often hear cases within a few weeks, while state trial courts and federal courts may take several months if not years to get a case ready for trial.  **Self-Check** Subject Matter Jurisdiction In the following cases, does a federal district court located in New Jersey have *subject matter* jurisdiction? 1. A New Jersey businessperson sues her in-state business partner for a breach of contract that resulted in \$40,000 in losses. 1. The U.S. Environmental Protection Agency sues a New Jersey corporation for cleanup costs under a federal statute that regulates local waste disposal. 1. A Pennsylvania resident sues a New Jersey corporation for an injury caused by the corporation's product; the injury has resulted in \$90,000 of unpaid medical bills. 1. A New Jersey corporation is sued by a New Jersey resident under federal employment discrimination statutes. 1. A New Jersey resident sues the U.S. government in an appeal from the ruling of the U.S. Copyright Office. *Answers to this Self-Check are provided at the end of the chapter.* **Jurisdiction over Property** Courts may also exercise jurisdiction in a lawsuit based on property located within their jurisdictional boundaries. [**In rem jurisdiction**^8^](javascript:void(0)) typically allows a court the authority to determine title to an object or real estate. [**Quasi in rem jurisdiction**](javascript:void(0)) occurs when a court uses its in rem jurisdiction to compel a litigant to appear in court by attaching property that belongs to the litigant. This allows a court to obtain jurisdiction even if that court would normally have no personal jurisdiction over that party. For example, suppose that Molony, a resident of Florida, injures Trostle, a resident of Pennsylvania, during Trostle's vacation in Key West. If Trostle wishes to sue Molony in Pennsylvania, normally a Pennsylvania court would not have personal jurisdiction over Molony because he does not live there and the injury did not occur there. However, suppose that Molony owns a bed-and-breakfast in Pennsylvania. In that case, the Pennsylvania court could use its quasi in rem jurisdiction to compel Molony to appear in court and answer the negligence allegations---or Molony could face the seizure of his bed-and-breakfast to reimburse Trostle for any damages suffered as a result of Molony's negligence. ***Legal Speak \>))*** **Litigant** The generic term used to describe any party to a lawsuit. **Personal Jurisdiction** Personal jurisdiction, called [**[in personam jurisdiction]**](javascript:void(0)), is a court's authority over the *parties* in a legal dispute. A party may be either an individual or a business entity such as a corporation. Since 1877, in the landmark case *Pennoyer v. Neff,*[^^](javascript:void(0)) the U.S. Supreme Court has articulated a framework for the exercise of personal jurisdiction by lower courts with the objective of providing *fairness* to the parties and complying with federal constitutional requirements related to due process. Of course, courts have modified this framework as necessary based on the realities of industrial and technological advances in society. This framework is used to determine jurisdiction over the defendant by a state's trial courts *and* the federal district courts within that state. Typically, analysis of personal jurisdiction focuses on the *conditions* of the controversy and the *actions* of the defendant. **In-State Defendants** Personal jurisdiction is obtained by the courts when the business or individual is served with the complaint, initiating the lawsuit. The service of the complaint puts the business or individual on notice of being sued. Complaints are discussed in detail in [[Chapter 4]](javascript:void(0)), "Resolving Disputes: Litigation and Alternative Dispute Resolution." **LO 3-8** Explain the role of long-arm statutes in determining personal jurisdiction. **Out-of-State Defendants** Courts use a two-prong test to determine whether they have personal jurisdiction over a party who does not reside in the state in which the court is located. First, the court's jurisdiction must be authorized by a [**state long-arm statute**](javascript:void(0)) that grants the court specific authorization over the defendant due to the defendant's conduct or page 89other circumstances. As the name implies, long-arm statutes are intended to allow a court to "reach" into another state and exercise jurisdiction over a nonresident defendant. Typically, long-arm statutes[^10^](javascript:void(0)) provide for jurisdiction if an out-of-state defendant (1) transacts business within the state's borders, or (2) commits a negligent act in that state that results in a loss to another party, or (3) owns property in the state. The second prong requires a court to ensure that exercising jurisdiction over an out-of-state defendant meets the constitutional requirements of *fairness* and *due process.* This means that courts must consider the plight of the defendant who has been forced to defend a lawsuit in another state by taking into account the burden on the defendant. Courts examine two specific questions in deciding these fairness and due process issues. **LO 3-9** Apply the minimum contacts test in both a traditional and an Internet setting. Question No. 1: Does the defendant have some level of [**minimum contacts**](javascript:void(0)) with the state, such as regularly shipping products to consumers in that state? If a defendant has continuous and systematic contact with a particular state, this will be sufficient to satisfy the minimum-contacts requirement.[^11^](javascript:void(0)) Question No. 2: Has the defendant *purposefully availed* himself by some affirmative act directed to that specific state? Whether a company has purposely availed itself in a state was addressed by the U.S. Supreme Court in *Asahi Metal Industry Co., Ltd. v. Superior Court of California.*[^12^](javascript:void(0)) When a company performs "some act by which \[the company\] purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws," then the availment test is met. ***Legal Speak \>))*** **Defamation** Discussed in detail in [[Chapter 9]](javascript:void(0)), "Torts and Products Liability," defamation is an intentional act of making an untrue public statement about a party that causes some loss to be suffered by the defamed party. **Injurious Effect** Another important consideration that courts explore in a personal jurisdiction analysis is whether it was reasonably *foreseeable* that the defendant's actions would have an *injurious effect* on a resident of the court's state. This question is usually applied in the context of a dispute involving some *intentional* act by the defendant that results in an injury to an individual or business entity located in the court's state. For example, in *Calder v. Jones,*[^^](javascript:void(0)) the U.S. Supreme Court ruled that a California court had jurisdiction over a Florida corporation in a defamation case filed by the actress Shirley Jones against a tabloid, the *National Enquirer.* Despite the fact that the tabloid had no physical presence or other contacts with California, the Court reasoned that jurisdiction was proper because the defendant knew, or should have known, that the defamatory article would have an injurious effect on the actress in California, where she lived and worked. This became known as the *effects test* and is now an important part of a personal jurisdiction analysis. Note, however, that courts apply the effects test narrowly and, thus far, only to cases involving intentional injurious acts (such as defamation).[^^](javascript:void(0)) **Physical Presence** The physical presence of an out-of-state party in a particular state is generally an automatic basis for jurisdiction over the defendant by both that state's courts *and* federal trial courts within that state. In a business context, physical presence may include having an office, agent, or personnel (such as a sales team) located within the court's jurisdiction. Many states have also passed specific statutes that give state courts personal jurisdiction over out-of-state residents who operate motor vehicles within the state for the narrow page 92purposes of allowing a victim of an auto accident to pursue a claim against an out-of-state driver. **Voluntary** A court also has personal jurisdiction if the parties agree to litigate in a specific court. Voluntary personal jurisdiction applies when a nonresident party agrees to the jurisdiction of a particular court in a certain state. This voluntary jurisdiction is often done through a *forum selection clause* written in a contract between the parties. A forum selection clause is a contractual agreement that obligates the parties to litigate any dispute arising out of the contract in a particular court named in the clause. Essentially, the parties are agreeing to a forum *ahead of time* so that if any litigation involving that particular contract is instituted, both parties are obligated to litigate the dispute in a predetermined court. As an example, [Figure 3.3](javascript:void(0)) restates the forum selection clause set forth in Facebook's terms of service. Note that later in this section, in [Case 3.3](javascript:void(0)), a federal trial court interprets and applies Facebook's forum selection clause. FIGURE 3.3 Facebook's Forum Selection Clause *"You will resolve any claim, cause of action or dispute... you have with us arising out of or relating to \[these terms of service\] or Facebook exclusively in the U.S. District Court for the Northern District of California or a state court located in San Mateo County, and you agree to submit to the personal jurisdiction of such courts for the purpose of litigating all such claims."* The leading case involving a forum selection clause is *Carnival Cruise Lines v. Shute,* 499 U.S. 585 (1991), in which the U.S. Supreme Court upheld a federal court's ruling that dismissed a personal injury claim by a resident of the state of Washington who had been a passenger on a Carnival Cruise Lines ship and had fallen during a guided tour of the ship. The Court concluded that the passenger ticket was a contract between the passenger and Carnival Cruise Lines and that the ticket contained a forum selection clause whereby the parties agreed to litigate any disputes in Miami, Florida (where Carnival's headquarters is located). Recall our *Cain v. APC* hypothetical case introduced earlier in the chapter. Suppose that Cain files his lawsuit in a federal district court in Massachusetts. In addition to establishing subject matter jurisdiction, he must also meet the court's standards for personal jurisdiction over APC. In this case, given the fact that the incident took place in Texas, it may be difficult for Cain to demonstrate APC's connection with Massachusetts unless APC owns property, maintains an office, regularly sends personnel to Massachusetts, or has some other regular and systematic connection with the state. In its jurisdiction analysis of the Cain versus APC matter, a federal court would first look to the Massachusetts long-arm statute and then to the constitutional requirements of due process and fairness, including APC's level of minimum contacts and purposeful availment in Massachusetts. ***CONCEPT SUMMARY** Jurisdiction* +-----------------------+-----------------------+-----------------------+ | ** ** | **Federal Trial | **State Trial | | | Courts** | Courts** | +=======================+=======================+=======================+ | Personal Jurisdiction | 1. Residents and | 1. Residents and | | | business entities | business entities | | | located in the | located in the | | | state where the | state; or | | | federal trial | | | | court sits; or | | | | | | | | | 1. Nonresidents | | | | owning property | | | 1. Nonresidents | in the state; or | | | with *minimum | | | | contacts* with | | | | the state in | | | | which the federal | 1. Nonresidents | | | trial court sits; | with *minimum | | | or | contacts* with | | | | the state | | | | according to | | | | state long-arm | | | 1. Nonresidents | statute; or | | | owning property | | | | in the state in | | | | which the federal | | | | trial court sits; | 1. Voluntary | | | or | | | | | | | | | | | | | | | | 1. Voluntary | | +-----------------------+-----------------------+-----------------------+ | Subject Matter | 1. Federal question; | State law matters | | Jurisdiction | or | (statutes, common | | | | law, state | | | | constitutional | | | | issues) | | | 1. United States is | | | | a party; or | | | | | | | | | | | | | | | | 1. Diversity of | | | | citizenship | | | | exists and amount | | | | in controversy | | | | exceeds \$75,000 | | | | (amount required | | | | only in diversity | | | | cases) | | +-----------------------+-----------------------+-----------------------+ **Venue** While jurisdiction requires an analysis of whether a court has legal authority over a particular case, venue is a legal concept that defines the most appropriate *location* for the dispute to be heard. Two or more courts will sometimes have jurisdiction over the very same matter, but it might be more appropriate from a fairness perspective for the case to be heard in a particular location. Many states have venue rules to determine where a case may be heard. Typically, state statutes provide that venue in a civil case is where the defendant resides or is headquartered, while in a criminal case the venue is ordinarily where the crime was committed. While changes in venue for civil cases are rare, in high-profile criminal cases a defense attorney may ask for a *change of venue* to help select a jury from outside the area where the crime was committed, under the theory that the out-of-area jury will be more impartial and less influenced by the media. To understand how venue may be important in a business context, suppose two Florida-based companies, Beta and Alpha, are involved in a breach of contract dispute in which Beta sues Alpha. The transaction involves an order that took place over a website based in Florida, and the order was shipped from Alpha's warehouse in Georgia to Beta's branch office in South Carolina. Although a number of state and federal courts may have jurisdiction over a dispute in this case, a Florida court may decide that Florida is the best *venue* for the dispute to be litigated because both parties have their principal office located there and assumedly it is the most convenient forum for the parties. It is likely that the witnesses and records are in Florida as well. Note, however, that a state court cannot unilaterally declare that venue exists in *another* jurisdiction. Courts apply venue statutes to determine whether or not *their* court is the most appropriate venue. In [[Case 3.3]](javascript:void(0)), a federal trial court orders a transfer of venue based on a forum selection clause. **INTERNET JURISDICTION** How do the principles of personal jurisdiction and minimum contacts apply to websites and e-mails? That is, if you send an e-mail to someone in another state, or if you do business over the Internet with someone in another state, would the courts in the other state have personal jurisdiction over you? Internet and e-mail jurisdiction is an area of law that is still developing. **How the Law Develops in Real Time** Today, almost anything can be bought, sold, or exchanged online. The Internet allows any business to reach consumers worldwide, build brand recognition, and maximize revenue. Almost all businesses have their own websites, and the online activities of a business or individual might include sending e-mails and text messages or engaging in video conferencing. Additional online activities might include sponsored ads on Google, Facebook, or other popular websites. Because online activities are now so commonplace, business owners and managers must consider whether their various activities on the Internet could confer personal jurisdiction in courts in far-off locations. Simply put, is sending an e-mail or a text message sufficient to establish personal jurisdiction? What about a blog post or a YouTube video? Ideally, one could look to legislation (such as state long-arm statutes) or court decisions for guidance on these issues. But most state long-arm statutes were enacted decades ago, before the Internet was commercialized in the mid-1990s. As such, the U.S. Supreme Court has yet to decide a personal jurisdiction case involving e-mail or purely Internet activities. Meanwhile, lower courts are divided on the issue of Internet jurisdiction. Some courts have ruled that having a physical presence in the forum state is not necessary when continuous electronic communications are conducted between the parties and the out-of-state party is engaged in an ongoing business relationship with parties located in the forum state. For example, in *Costar Realty Information v. Meissner,*[^^](javascript:void(0)) a district court held that e-mails directed into Maryland, coupled with other activities, established personal jurisdiction over an Arizona-based defendant. Although the defendant had never entered Maryland, it had contracted to use the local plaintiff's database and services, it had communicated with the plaintiff via e-mail and telephone, and it had repeatedly accessed the plaintiff's Maryland-based servers. At the same time, other courts have reached the opposite conclusion, holding that e-mail communications alone are insufficient to establish personal jurisdiction. For instance, a week after *Costar Realty* was decided by a district court in Maryland, the Fourth Circuit Court of Appeals (which encompasses Maryland) affirmed a trial court's dismissal for lack of personal jurisdiction over two nonresident defendants in the case of *Consulting Engineers Corp. v. Geometric Ltd.*[^^](javascript:void(0)) The federal appellate court held that a handful of e-mails and telephone communications alone did not satisfy minimum contacts with the state of Virginia. Although the plaintiff argued that the out-of-state defendant had intentionally directed electronic communications into Virginia with the clear intent of transacting business there, the court rejected that broad application and looked instead at "the quality and nature of the contacts" to evaluate whether they met the standards for minimum contacts. The court held that even if the defendant had "reached out" to plaintiffs via e-mail in Virginia, that fact, coupled only with the e-mails and telephone calls, was insufficient to establish personal jurisdiction. Given this divergence among the lower courts, the issue of Internet jurisdiction provides a real-time case study of how the law develops in response to rapid technological page 96change. First, let's recap what we already know about personal jurisdiction; then let's see how the lower courts have grappled with Internet jurisdiction cases. To begin with, courts have developed a standard three-prong test for establishing personal jurisdiction over an out-of-state defendant: 1. The defendant must have sufficient minimum contacts with the forum state; 1. The claim asserted against the defendant must arise out of those contacts; and 1. The exercise of jurisdiction must be fair and reasonable. In Internet jurisdiction cases, courts tend to diverge over the first prong: when do online activities generate sufficient minimum contacts with the forum state? In fact, a [**[circuit split]**](javascript:void(0)) currently exists among the federal courts of appeal as to this issue. The Fourth and Fifth Circuits, for example, have handed down opinions applying *Zippo*'s sliding-scale analysis.[^^](javascript:void(0)) On the other hand, cases from the Seventh and Ninth Circuits have rejected *Zippo* and applied the *Calder* effects test instead to determine whether online activities could subject a defendant to personal jurisdiction in the target forum,[^^](javascript:void(0)) while the Second Circuit has adopted a "totality test" instead.[^^](javascript:void(0)) Let's take a closer look at these tests. The *Zippo* test was announced in the case of *Zippo Manufacturing Co. v. Zippo Dot Com, Inc.*[^^](javascript:void(0)) This test uses a three-point sliding scale to assess whether a defendant's online activities constitute minimum contacts. In summary, there are minimum contacts when a defendant's website or Internet presence is on the far end of the scale (e.g., when a defendant actively and repeatedly conducts business over the Internet). By contrast, there are no minimum contacts when a defendant is on the opposite end of the scale---situations in which the defendant merely posts information on a website that anyone can access. In the middle of the sliding scale---interactive websites in which users exchange information with a host computer---courts must consider the level and nature of the exchange of information on a case-by-case basis to determine whether there are minimum contacts. [[Figure 3.4]](clbr://internal.sandbox/book/text/XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX) is an illustration of the *Zippo* sliding scale used by many courts to analyze minimum contacts via the Internet. **FIGURE 3.4 *Zippo* Sliding-Scale Test** ------------------------------------------- Under the alternative "effects test," by contrast, the minimum contacts requirement is satisfied if it is reasonably *foreseeable* that the defendant's actions could have an *injurious effect* on a resident of the court's state. page 97 The effects test originated in the case of *Calder v. Jones.*[^^](javascript:void(0)) Recall that *Calder* involved a lawsuit for defamation. Specifically, the U.S. Supreme Court ruled that a California court had personal jurisdiction over the *National Enquirer,* a Florida corporation, in a defamation case filed by Shirley Jones, an actress who lived in California. Despite the fact that the *Enquirer* had no physical presence in California, the Court reasoned that jurisdiction was proper because the *Enquirer* knew or should have known that its defamatory article would have an injurious effect on the actress in California, where she lived and worked. Regardless of whether a particular jurisdiction follows the *Zippo* sliding-scale test, the *Calder* effects test, or an all-purpose totality test, in all cases courts will carefully consider any facts demonstrating how a website or e-mail/text message targets a particular forum. For instance, do the websites under consideration list specific jurisdictions where shipments will or will not be made? Does the website contain an end-user agreement that designates certain jurisdictions for legal actions? Is a specific mailing address or area code listed on the website or e-mail? Jurisdictionally savvy business owners and managers should thus keep abreast of case law developments and consider conducting a strategic self-study or "self-audit" to determine where their online business transactions occur nationwide under the various legal tests. A strategic self-audit could prove helpful in predetermining jurisdictions where one's business is likely to be hauled into court. Finally, although there is a circuit split regarding which test to apply, two facts remain clear: We should expect more and more cases involving wrongs committed over the Internet, and as these cases are decided and trickle upwards toward the U.S. Supreme Court, the law in this area will continue to develop. ***CONCEPT SUMMARY** Internet and E-mail Jurisdiction* - Lower federal courts have applied different tests to determine whether online activities can generate sufficient "minimum contacts" for personal jurisdiction purposes, such as the *Zippo* sliding-scale test and the *Calder* effects test. - Under the *Zippo* sliding-scale test, there are minimum contacts when a defendant actively and repeatedly conducts business over the Internet, while there are no minimum contacts when a defendant merely posts information on a website that anyone can access. In the middle of this sliding scale, however, courts must consider the level and nature of the exchange of information on a case-by-case basis to determine whether there are minimum contacts. - Under the "effects test," the minimum contacts requirement is satisfied if it is reasonably *foreseeable* that the defendant's actions could have an *injurious effect* on a resident of the court's state. **INTERNATIONAL JURISDICTION IN THE INTERNET AGE[^^](javascript:void(0))** The Internet makes it easier than ever before for an individual or a business to engage in international transactions. While international commerce presents a substantial opportunity for a business's products or services to be advertised and sold to hundreds of millions of potential consumers worldwide, there are attendant legal risks that business owners and managers should be aware of. Even with the rapid movement toward global harmonization of laws and regulations, individual countries have their own political traditions, national cultures, and identities that may affect the way a country applies its laws and legal systems. For example, suppose that Snow Sports Equipment (SSE) decides to expand its business to the European market. The owners of SSE set up an export chain whereby its products are page 99sold via a website with computers and servers located in an office in Boulder, Colorado, and then shipped from a leased warehouse in Prague, Czech Republic, to a retail store in Geneva, Switzerland. Which country's courts would have jurisdiction over any disputes involving the product? Also, which law would apply? U.S. law? European Union law? Swiss law? Czech law? Can a European consumer sue SSE in Europe under Swiss law or European law? (Note that the Czech Republic is an EU member state, but Switzerland is not.) This uncertainty and the inherent difficulty in determining which laws apply to an Internet transaction create challenges for business owners and managers. To some extent, these challenges can be addressed through the use of forum selection clauses and choice of law clauses in business contracts. Thus, effective business owners and managers will work with their business lawyers to anticipate and solve these challenges ahead of time, and some degree of cost-benefit analysis may be necessary to measure the risks of international trade versus the return on investment. **Country of Origin Standard** The governments of the United States, Canada, and the European Union have generally agreed to apply the law of the country in which the defendant's servers are *located.* This so-called [**[country of origin principle]**](javascript:void(0)) provides courts an easy rule of thumb to determine the relevant choice of law. Yet some countries have adopted a *country of reception* approach that increases the risk to a business because, in theory, one would need to have a fundamental knowledge of the laws of each individual country where one conducts business online in order to reduce the risk of noncompliance. **Other Theories of Jurisdiction in Electronic Commerce** Consider a decision by Australia's highest court, issued in December 2002. The court ruled that American-based publisher Dow Jones could be sued in Australia for defamation based on an article that appeared on its website, even though Dow Jones has no presence in Australia and its website and infrastructure (such as the mainframe servers) are located in New Jersey. The plaintiff in the case, Joseph Gutnick, a wealthy Australian businessman, likely chose his home forum because of its convenience and Australia's relatively pro-plaintiff defamation laws. Dow Jones contended that the case should take place in the United States because that was where the article was uploaded to its computer servers (in New Jersey) and it was also the closest location to where the article was physically published (New York). The Australian court ruled against Dow Jones, reasoning that an online article is actually published where and when the article appears on the user's computer screen. [**Court**](javascript:void(0)) [p. 76](javascript:void(0)) A judicial tribunal duly constituted for the hearing and adjudication of cases. [**Judiciary**](javascript:void(0)) [p. 76](javascript:void(0)) The collection of federal and state courts existing primarily to adjudicate disputes and charged with the responsibility of judicial review. [**State courts**](javascript:void(0)) [p. 77](javascript:void(0)) Courts that adjudicate matters dealing primarily with cases arising from state statutory, state common, or state constitutional law. [**Federal courts**](javascript:void(0)) [p. 77](javascript:void(0)) Courts that adjudicate matters dealing primarily with national laws, federal constitutional issues, and other cases (such as cases involving diversity jurisdiction). [**State trial courts**](javascript:void(0)) [p. 77](javascript:void(0)) The first courts at the state level before which the facts of a case are decided. [**State appellate courts**](javascript:void(0)) [p. 77](javascript:void(0)) State-level courts of precedent, concerned primarily with reviewing the decisions of trial courts. [**Plaintiff**](javascript:void(0)) [p. 77](javascript:void(0)) The party initiating a lawsuit. [**Defendant**](javascript:void(0)) [p. 77](javascript:void(0)) The party responding to a lawsuit and alleged by the plaintiff to have caused a wrongful act. [**Trial de novo**](javascript:void(0)) [p. 78](javascript:void(0)) A completely new trial. [**Civil cases**](javascript:void(0)) [p. 78](javascript:void(0)) Cases in which one party seeks a remedy, such as an award of money damages, for a private wrong committed by another party. [**Criminal cases**](javascript:void(0)) [p. 78](javascript:void(0)) Cases in which the accused party is charged by the government with committing a crime. [**Remand**](javascript:void(0)) [p. 79](javascript:void(0)) When an appellate court sends a case back to the lower court from which it came for further action consistent with the opinion and instructions of the higher court. [**U.S. district courts**](javascript:void(0)) [p. 79](javascript:void(0)) Trial courts at the federal level. [**U.S. courts of appeal**](javascript:void(0)) [p. 79](javascript:void(0)) The intermediate appellate courts in the federal system, frequently referred to as the *Circuit Courts of Appeal.* There are 13 circuits or geographical areas, each of which reviews the decisions of the federal district courts in the state or several states within its circuit. [**U.S. Supreme Court**](javascript:void(0)) [p. 79](javascript:void(0)) The highest federal court that not only reviews decisions of the lower federal courts but also reviews decisions of state courts that involve some issue of federal law. [**Precedent**](javascript:void(0)) [p. 84](javascript:void(0)) Applying the law made in previous appellate court opinions to current cases with similar facts; binding on the trial courts. [**Jurisdiction**](javascript:void(0)) [p. 84](javascript:void(0)) The legal authority that a court must have before it can hear a case. [**Venue**](javascript:void(0)) [p. 84](javascript:void(0)) A determination of the most appropriate court location for litigating a dispute. [**Subject matter jurisdiction**](javascript:void(0)) [p. 85](javascript:void(0)) The court's authority over the dispute between the parties. [**Personal jurisdiction**](javascript:void(0)) [p. 85](javascript:void(0)) The court's authority over the parties involved in the dispute. [**Federal question**](javascript:void(0)) [p. 86](javascript:void(0)) Some issue arising from the Constitution, a federal statute or regulation, or federal common law. [**Party**](javascript:void(0)) [p. 86](javascript:void(0)) A person or entity making or responding to a claim in a court. [**Diversity of citizenship**](javascript:void(0)) [p. 86](javascript:void(0)) Situation in which opposing parties in a lawsuit are citizens of different states or one party is a citizen of a foreign country; the case is placed under federal court jurisdiction if the amount in controversy exceeds \$75,000 and does not involve a decree for divorce, alimony, or child custody. [**Original jurisdiction**](javascript:void(0)) [p. 86](javascript:void(0)) Jurisdiction that enables a court to be the trial court to hear the case. The case must be filed first in this court. [**Concurrent jurisdiction**](javascript:void(0)) [p. 87](javascript:void(0)) Situation in which two different courts each has subject matter jurisdiction to hear a case. page 101 [**In rem jurisdiction**](javascript:void(0)) [p. 88](javascript:void(0)) Jurisdiction over real or personal property when the property itself is the principal subject of the lawsuit. [**Quasi in rem jurisdiction**](javascript:void(0)) [p. 88](javascript:void(0)) Jurisdiction over real or personal property when the lawsuit has to do with personal liabilities not directly associated with the property. [**In personam jurisdiction**](javascript:void(0)) [p. 88](javascript:void(0)) Another term for *personal jurisdiction.* [**State long-arm statutes**](javascript:void(0)) [p. 88](javascript:void(0)) State statutes intended to allow a court to reach into another state and exercise jurisdiction over a nonresident defendant due to the defendant's activities or other conduct affecting the state in which the court sits. [**Minimum contacts**](javascript:void(0)) [p. 89](javascript:void(0)) A legal term for when it is appropriate for a court in one state (the forum state) to assert personal jurisdiction over a defendant from another state. [**Circuit split**](javascript:void(0)) [p. 96](javascript:void(0)) Occurs when two or more different federal circuit courts of appeal offer conflicting rulings on the same issue. [**Country of origin principle**](javascript:void(0)) [p. 99](javascript:void(0)) General agreement between the United States, Canada, and the European Union governments to apply the law of the country in which the defendant's servers are located.