Companies concerned about being haled into court on the basis of internet contacts should review the recent Texas appellate court decision in Novamerican Steel, Inc. v. Delta Brands, Inc. 2007 WL 2325835 (Tex. App. – Dallas 2007, n.p.h.) In Novamerican, the Dallas Court of Appeals indicated that informational websites generally are not a sufficient basis for establishing personal jurisdiction.
DBI, a Texas company, sold a heavy gauge rotary shear to NTS, which is incorporated in Delaware. NTS is owned by Novamerican, a Canadian corporation. Neither NTS nor Novamerican had offices or employees in Texas, and neither company directly advertised or distributed marketing materials in Texas. The companies, however, did maintain a company Internet website. DBI filed a lawsuit in Texas state court claiming that NTS and Novamerican unlawfully used its design for the rotary shear and misappropriated its trade secrets. NTS and Novamerican filed a special appearance, challenging the Texas court’s jurisdiction. The trial court concluded that it did have personal jurisdiction.
The Dallas Court of Appeals reversed, holding that a Texas court not exercise personal jurisdiction over NTS or Novamerican. The court first recognized that there was no specific jurisdiction because the factual basis for DBI’s claims was not sufficiently connected to the contacts NTS and Novamerican did have with Texas.
The court also rejected DBI’s claim that a Texas court had general jurisdiction over the defendants. General jurisdiction is present when a defendant’s contacts in a form are continuous and systematic, such that the forum may exercise personal jurisdiction even if the cause of action did not arise from or relate to the activities conducted within the forum. DBI contended that NTS and Novamerican had continues and systematic contacts with Texas based, in part, on their internet website.
The court concluded that the defendants’ website was “passive” under the sliding scale-test used by Texas courts when assessing whether a website is sufficient to support the exercise of general jurisdiction over a defendant. The court explained this sliding–scale analysis as follows:
“At one end of the scale are websites clearly used for transacting business over the Internet, such as entering into contracts and knowing and repeated transmission of files of information, which may be sufficient to establish minimum contacts with a state. On the other end of the spectrum are ‘passive’ websites that are used only for advertising over the Internet and are not sufficient to establish minimum contacts even though they are accessible to residents of a particular state. In the middle are ‘interactive’ websites that allow the ‘exchange’ of information between a potential customer and a host computer. Jurisdiction in cases involving interactive websites is determined by the degree of interaction. Texas courts have used this test in determining whether an internet site is sufficient to support the exercise of general jurisdiction over a defendant.”
In this case, defendants’ website was a basic informational site listing facts about Novamerican and its subsidiaries. The website had a “contact us” page containing addresses, phone numbers, and a web-based submission form. The court noted, however, that customers did not use the website to purchase products from the defendants. Accordingly, the website was insufficiently interactive to confer general jurisdiction. In addition, the court found that a a corporate officer’s comment regarding the potential for selling products in Texas was not evidence that the defendants actually transacted business over the Internet for purposes of establishing general jurisdiction. Consistent with Novamerican, Businesses concerned about internet jurisdiction should recognize that courts will focus on the level of website interactivity in determining when an internet presence becomes a basis for exercising personal jurisdiction.