Spot Delivery
"Internet Sales - Once is Not Enough for Jurisdiction"
By Thomas B. Hudson
Jacqueline Susann wrote a book titled "Once is Not Enough." Although I doubt if she had Internet interstate vehicle sales in mind, it turns out that she was right.
The question is whether a vehicle seller who sells a single car to someone in another state using the Internet can be sued in the buyer's state when the deal turns sour. Two recent cases deal with this scenario.
Steve Malone, an Ohio resident, bought a 1968 GTO convertible from Thomas Berry, who is not a resident of Ohio, on Racingjunk.com, an online auction website. Berry had posted an advertisement on Racingjunk.com that stated the car was ready to drive and had a new engine and transmission.
After Malone submitted the winning bid, he arranged to have the car shipped to him in Ohio. During this time, Malone and Berry had several discussions by telephone and e-mail. Malone received the car, was not happy with its condition, and sued Berry in small claims court in Franklin County, Ohio for misrepresenting the vehicle's condition. The Franklin County magistrate found for Malone, and Berry challenged that judgment on appeal, arguing that he was not subject to personal jurisdiction in Ohio.
The Ohio Court of Appeals noted that determining the reach of Ohio's long-arm statute is a factual inquiry and will vary in each case. The appellate court compared Racingjunk.com to eBay and found that where an individual posts an advertisement on an auction site and makes a single transaction, the individual does not purposefully avail him or herself of the privilege of doing business in the state where the buyer resides. In reaching this conclusion, the appellate court focused on the fact that Berry did not operate the auction website and that sellers on Internet auction websites have very little control over who will ultimately submit the highest bid. Thus, the appellate court concluded that Berry's contacts with Ohio were not sufficient to subject him to personal jurisdiction.
A similar case actually involved an eBay posting. Nathan Wratislaw, a Montana resident, posted a car for sale on eBay. Robert Marschke, a South Dakota resident, saw the car on eBay but did not bid. Instead, Marschke called Wratislaw about the car and negotiated an agreement to purchase it.
Marschke arranged to wire funds to Wratislaw's bank account in Montana, and Wratislaw mailed the contract to Marschke in South Dakota. Marschke arranged to have the car transported to South Dakota. After the car arrived, Marschke decided that the car was not in the condition he expected and sued Wratislaw in a South Dakota court.
Wratislaw moved to dismiss based upon lack of personal jurisdiction. The trial court dismissed the case, and Marschke appealed.
The South Dakota Supreme Court affirmed dismissal for lack of personal jurisdiction. The high court found that since Marschke did not bid on or buy the car through eBay, the contact created by use of the Internet was no different than if Marschke responded to a print ad. The high court pointed out that it had not previously addressed a nonresident defendant's use of the Internet as a basis for establishing personal jurisdiction, and because the actual sale in this case did not take place on the Internet, the court would not reach that issue.
The high court turned to a traditional analysis of sufficient contacts and found that, based upon the following factors, Wratislaw did not have sufficient contacts with South Dakota: Wratislaw had no physical contact with South Dakota before, during, or after the sale of the car; this was a "one-shot" deal; Marschke initiated the telephone calls and negotiations; Wratislaw sent a solitary e-mail into cyberspace to obtain Marschke's contact information to mail him the contract; and Wratislaw did not have an office, employees, real estate, or a bank account in South Dakota and did not distribute or sell products within the state.
These cases are the latest we've seen dealing with interstate Internet vehicle transactions. So far, there have been perhaps 10 or 12 of these cases, and most have involved car dealers. The others, like these cases, involved individuals. The cases have split on the issue of whether the buyer's state has jurisdiction over the seller for purposes of a lawsuit. Although these cases would seem to favor the seller, dealers shouldn't take much comfort from them.
First, both of these cases involved a single sale. It's very likely that the courts would come out differently if the seller were a South Carolina dealer selling several hundred cars a year over the Internet to Georgia residents. The Ohio court might come out the same way, but it's unlikely that the South Dakota court, with its emphasis on the "one-shot deal," would.
Second, as the courts note, their analysis of the issues in these cases is very heavily dependent on the facts in front of them. Smart dealers who do their homework will be able to assure that the facts describing their transactions are ones that would support a decision that they cannot be sued out of state.
Third, the interstate Internet cases so far have involved only the issue of jurisdiction - can the seller be sued in the buyer's state. It is only a matter of time before plaintiffs begin to assert more claims, alleging, for example, that the selling dealer needs a used car license in the buyer's state, that the selling dealer's buyer's order violates the law of the buyer's state, that a finance transaction, even though legal in the seller's state, violates the maximum finance charge limits in the buyer's state - the issues that can be raised are limited only by the imaginations of the plaintiffs' lawyers.
If you have your own website that can be accessed by potential buyers, or if you are actively selling cars on eBay or other websites, and if you have been careful, you have had a legal review of the way you are conducting business online in order to reduce the possibility that you can be sued in other states or that you are otherwise violating the laws of your buyers' states.
If that legal review is something you've been meaning to do but have simply not gotten around to yet, this might be the time.
Malone v. Berry , 2007 WL 4261679 (Ohio App. December 6, 2007); Marschke v. Wratislaw , 2007 WL 4277436 (S.D. December 5, 2007). For more information about Thomas Hudson and Spot Delivery® go to www.spotdelivery.com
or contact: tbhudson@hudco.com
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