Listing a (U.S.) state in a drop-down address menu could get you sued in that state, says court

A Nevada company, BevStar, operated a Web site by the name of “Drinks Tiger Blood.” (The site seems to be gone now.) A Utah company, Zing Brothers, accused the Nevada company of trademark infringement. The Utah company filed an infringement lawsuit in Utah.

The defendant moved to dismiss, on grounds that it had no contacts with Utah and therefore couldn’t properly be sued there. The court denied the motion. In large part, this was because the defendant’s online customer order form didn’t make the user type in the two-letter state code (as in the example at right). Instead, the Web form provided a drop-down menu for the user to specify which state to ship to.

That drop-down menu included the two-letter code for Utah — and that helped the court to justify deciding that Utah was a proper forum for the lawsuit, on grounds that the defendant had “purposefully established minimum contacts” with that state.

Background: How (U.S.) courts determine who can be sued where

It’s understandable why the Utah company wanted to file suit against the Nevada company in Utah, not Nevada. The home-court advantage in cost and convenience is non-trivial.

But in the U.S., the Constitution and statutory law impose restrictions on just where a plaintiff can file a lawsuit. As the Utah court explained in the Zing Bros. case, the court had to inquire, among other things, whether the defendant had purposefully estab­lished minimum contacts with the state of Utah.

The basic test here is whether the defendant’s conduct and connection with Utah were such that it “should reasonably expect to be haled into court there.” This requirement protects individuals and companies from being dragged to a far-away court based on “random, fortuitous or attenuated” contacts. See Zing Bros., LLC v. BevStar, LLC, No. 2:11-cv-00337 DN, slip op. at 3 (D. Utah Oct. 14, 2011) (denying BevStart’s motion to dismiss for lack of personal jurisdiction).

When will a defendant be held to have purposefully established minimum contacts? When the contacts come through a Web site, courts tend to follow the reasoning of the 1997 Zippo Manufacturing opinion. In that case, the court articulated a sliding-scale test. In one branch of that test, if a user can place orders online through the Web site, and there is “something more” to show the Web site operator’s actions were actually directed at the forum state, then the Web site operator likely can properly be sued in the forum state. See Zippo Manufacturing Co. v. Zippo Dot Com, Inc., No. 96-397, 952 F.Supp. 1119 (W.D. Pa. 1997) (denying defendant’s motion to dismiss or transfer).

In the Zing Bros. case, the Utah federal court said:

The home page at www.drinktigersblood.com and all linked pages, in­clu­ding the informational page within the site, contain large buttons that advertise and offer for sale various sizes and quantities of the product bearing the disputed trademark. …

The Website allows a user to view product descriptions, add items to an online cart, checkout online by providing credit card and shipping in­for­ma­tion, and create a login and password.

Once a user adds an item to the online cart, the user can estimate shipping by using a feature that contains a drop-down menu of states, which allows users to select Utah as a destination state and enter a Utah address and zip code.

This specific inclusion of Utah in the drop down list of states, and the website statements that orders are solicited anywhere “inside the USA[,]” is [sic] sufficient to establish that this [Web] site is “something more” than a non-targeted transaction site.

Zing Bros., slip op. at 6 (bold-faced emphasis added).

There’s no way to know whether the Zing Bros. court’s opinion will be sustained if there’s an appeal (most cases like this settle), nor whether other courts will adopt the same reasoning about drop-down menus for entering the state into an order form.

Lesson 1: Don’t say orders are solicited “anywhere in the U.S.”?

The Zing Bros. court hung its hat in part on the fact that the defendant’s Web site said that orders were solicited anywhere “inside the USA.” Other site designers should consider whether they really need to make such a statement for their marketing purposes, or whether their users will make that inference anyway. In the latter case, it likely wouldn’t hurt for designers to omit any such statement.

Lesson 2: Make the user type in the state code?

Suppose a Web site were to make the user type in a two-letter code for the state, instead of providing a drop-down menu. Would that eliminate the “something more” that the Zing Bros. court found the drop-down menu to be? Would it negate the risk that the Web site operator could be sued in any state?

It seems to me that making the user type in the two-letter code might not be enough of a change from a drop-down menu. Even with such a change, the Web site’s computer code likely would still have to process the typed code to calculate the shipping cost and to determine whether sales tax must be charged. A court inclined to follow the Zing Bros. reasoning might well rule that this, too, constituted “something more” that made a lawsuit proper in the state in question.

In the meantime, though, Web designers should consider not providing users with a drop-down menu to select the state for shipping goods, just in case that might make a difference in a court’s thinking.

(Hat tip: Prof. Eric Goldman)