Ninth Circuit defines personal jurisdiction in interactive website dispute

In Herbal Brands Inc v Photoplaza Inc (21-17001; 9th Cir; 5 July 2023), the US Court of Appeals for the Ninth Circuit reversed and remanded a district court’s dismissal for lack of personal jurisdiction, deciding that the sale of a product via an interactive website provides sufficient “minimum contacts” to support jurisdiction over a non-resident defendant in a state where the defendant causes the product to be delivered. 

The initial dispute

Herbal Brands sells health, wellness, fitness and nutrition products directly to consumers and through authorised third-party retailers in Arizona. Photoplaza, a separate company, sold Herbal Brands products through two e-commerce storefronts without Herbal Brands’ permission.

Herbal Brands sent three cease-and-desist letters, stating that Photoplaza’s sales harmed Herbal Brands in Arizona. The company accused Photoplaza of:

• trademark infringement and unfair competition under the Lanham Act;
• false advertising under the Lanham Act; and
• tortious interference with contracts and business relationships under Arizona law.

The district court granted Photoplaza’s motion to dismiss for lack of personal jurisdiction. Herbal Brands appealed, and the case went to the Ninth Circuit.

The Ninth Circuit’s ruling

The Ninth Circuit noted that Photoplaza failed to submit any evidence contradicting the complaint's jurisdictional allegations. The court found that under its three-part test, Photoplaza had sufficient minimum contacts with Arizona to warrant personal jurisdiction:

• Photoplaza purposefully directed its activities at the forum;
• Herbal Brands’ harm arose out of Photoplaza’s contacts with Arizona; and
• exercise of jurisdiction over Photoplaza would be reasonable.

The second and third prongs of the Ninth Circuit’s test were easily resolved. Herbal Brands’ claimed harm rose out of – and related to – Photoplaza’s conduct of selling the products to Arizona residents.

The court referred to its 2004 holding in Schwarzenegger concerning  a plaintiff’s burden to establish jurisdiction, at which point the burden shifts to the defendants under the seven-factor balancing test of Freestream Aircraft (2018). It  found that Photoplaza did not meet its requirement of presenting a compelling case that exercising jurisdiction would be unreasonable.

The bulk of the Ninth Circuit’s decision focused on the first prong (purposeful advantage), which applies when “a case sounds in tort”, such as claims of trademark infringement, false advertising and tortious interference with business relationships, each of which requires an intentional tortious or ‘tort-like’ act.

Referring to the effects test from the 1984 Supreme Court decision in Calder v Jones, the Ninth Circuit explained that Photoplaza purposefully directed its activities toward the forum if it:

• committed an intentional act;
•  expressly aimed at the forum state; and
• caused harm that Photoplaza knew was likely to be suffered in the forum state.

Related to the Calder test’s first and third criteria, Photoplaza’s product sales to Arizona residents were intentional acts and the cease-and-desist letters informed Photoplaza that its actions caused harm in Arizona.

Regarding the ‘express-aiming’ element, the Ninth Circuit explained that when a website itself is the only jurisdictional contact, the analysis turns on whether the site had a forum-specific focus, or whether the defendant exhibited an intent to cultivate an audience in the forum.

The court explained that Photoplaza’s e-commerce storefronts were interactive websites where visitors exchanged information with a host computer by inputting data directly. It further acknowledged in a footnote that there is a sliding scale of interactivity for websites. Finally, the court agreed with Herbal Brands that selling infringing products via interactive websites and causing the infringing products to be delivered to forum residents sufficed for jurisdiction over Photoplaza.

The Ninth Circuit stated:

We hold that, if a defendant, in its regular course of business, sells a physical product via an interactive website and causes that product to be delivered to the forum, the defendant has purposefully directed its conduct at the forum such that the exercise of personal jurisdiction may be appropriate.