On September 29, 2010, the Seventh Circuit decided an interesting personal jurisdiction dispute in
, 623 F.3d 412 (7th Cir. 2010), Case No. 09-3927. The central issue was whether a court in Illinois could exercise personal jurisdiction over the company that operates the domain name registration
site GoDaddy.com. The Court held that it could because of GoDaddy's actual contacts with Illinois.
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uBID is a Chicago-based company that auctions the excess inventory of manufacturers and retailers over the Internet. It sued GoDaddy for violating the the Anti-Cybersquatting Consumer Protection Act. GoDaddy was headquartered in Arizona and moved to have the case dismissed for a lack of personal jurisdiction. The district court granted that motion and uBID appealed.
On appeal, the Court first concluded that GoDaddy was not subject to general jurisdiction in Illinois because its contacts with Illinois were limited to the marketing and sale of registrations for Internet domain names, as well as contracts with many Illinois customers and the hosting of websites accessible from Illinois. However, the Court then concluded that GoDaddy's contacts with Illinois were sufficient to exercise specific jurisdiction over it.
GoDaddy has thoroughly, deliberately, and successfully exploited the Illinois market. Its attempt to portray itself either as a local Arizona outfit or as a mindless collection of servers is unconvincing. This is a company that, like the national magazine in Keeton, has conducted extensive national advertising and made significant national sales. GoDaddy has aired many television advertisements on national networks, including six straight years of Super Bowl ads. It has engaged in extensive venue advertising and celebrity and sports sponsorships. All of this marketing has successfully reached Illinois consumers, who have flocked to GoDaddy by the hundreds of thousands and have sent many millions of dollars to the company each year. These contacts establish GoDaddy's minimum contacts with the state for claims sufficiently related to those contacts.
The Court found that these activities were sufficient to satisfy due process, even though GoDaddy did not specifically target Illinois customers in its advertising.
GoDaddy's national marketing campaign is intended to reach as large an audience as possible, including the 13 million potential customers in the nation's fifth most populous state. In fact, we need not infer: there is evidence in this case that GoDaddy (or its agent) has placed physical ads in particular Illinois venues. The evidence shows that this marketing campaign has already created substantial business for GoDaddy in Illinois.
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No more persuasive is GoDaddy's argument that its sales to Illinois residents are automated transactions unilaterally initiated by those residents. GoDaddy tells us that its customers enter into most transactions without any human action on GoDaddy’s end. But of course the customers who buy domain names from GoDaddy are not simply typing their credit card numbers into a web form and hoping they get something in return. GoDaddy itself set the system up this way. It cannot now point to its hundreds of thousands of customers in Illinois and tell us, "It was all their idea."
After establishing that GoDaddy had sufficient minimum contacts with Illinois to satisfy due process, the Court turned to whether uBID's claim was related to those contacts. The Court discussed three different tests that courts had applied to making this decision: but-for causation, proximate cause, or a mechanical "arises out of" test. It chose the last of these tests.
On this understanding of relatedness, neither but-for causation nor proximate causation is a satisfactory guide. But-for causation would be "vastly overinclusive," haling defendants into court in the forum state even if they gained nothing from those contacts. The tacit quid pro quo would break down. On the other hand, requiring proximate causation between contacts and claim would exclude too many claims.
The Court ultimately concluded that uBID's claim bore "a sufficient relationship to GoDaddy's business activities in Illinois to expect GoDaddy to defend itself in Illinois without violating the due process clause."
Finally, the Court held that it was fair to force GoDaddy to defend itself in Illinois. The Court expressed concern about adopting "an overly expansive test of jurisdiction for
internet-based commerce." However, those concerns were overcome because of the extent and size of GoDaddy's business.
GoDaddy's contacts with Illinois are extensive. It has hundreds of thousands of customers in the state and earns millions of dollars in revenue from the state each year. Illinois residents encounter GoDaddy's ads on television, on the Internet, and on billboards at Wrigley Field and the United Center, among many others. GoDaddy has continuously and deliberately exploited the Illinois market for domain name registration and has profited handsomely from it. Now GoDaddy is being called to account for alleged harm to an Illinois resident arising directly from the services GoDaddy provides to its Illinois customers, at least two of whom registered domain names that contributed to the alleged harm. There is no unfairness in requiring GoDaddy to defend that lawsuit in the courts of the state where, through the very activity giving rise to the suit, it continues to gain so much.
This case may very well turn out to be a very important decision in the future regarding the extent to which states can exercise personal jurisdiction over out-of-state defendants whose business is both nationwide and conducted primarily over the internet. There is at least an argument that the Court is saying that a company that advertises and does business on a nationwide-basis should expect that it could be brought into court in any state for actions related to that business.
