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    April 15, 2021 Articles

    “Meatspace,” Cyberspace, and Personal Jurisdiction

    Cyberpunk fiction often calls the physical world “meatspace,” as distinct from the online world of cyberspace. Litigation does not observe that distinction.

    By David Coale
    Reference points from this case are likely to be useful in any case about personal jurisdiction based on online activity.

    Reference points from this case are likely to be useful in any case about personal jurisdiction based on online activity.

    Pexels | Markus Spiske

    Cyberpunk fiction often calls the physical world “meatspace,” as distinct from the online world of cyberspace. Litigation does not observe that distinction. Disputes about personal jurisdiction often ask a court to look at the interaction of the physical and online worlds.

    A recent opinion from the intermediate Texas court of appeals in Dallas summarizes the current issues and prevailing legal views in that area. ShopStyle, Inc. & PopSugar, Inc. v. rewardStyle, Inc., No. 05-19-00736-CV, 2020 WL 4187937 (Tex. App.–Dallas July 21, 2020) (no petition). The court found that a Texas court could not exercise personal jurisdiction over the out-of-state operators of a popular website. The opinion illustrates the current state of the law on that issue, while also reminding of the importance of knowing local “twists” on basic principles of personal jurisdiction.

    The plaintiff, rewardStyle, Inc., runs a website, LIKEtoKOWIT.com, that lets “digital lifestyle ‘influencers’ monetize their social media content by allowing customers to shop for items featured in online posts.” Id. at *1. PopSugar, Inc., and ShopStyle, Inc., have competing websites, one of which is shopstyle.com. The plaintiff sought to take presuit depositions under Texas Rule of Civil Procedure 202. It alleged that its competitors’ websites used rewardStyle’s content without consent.

    PopSugar and ShopStyle are not incorporated in Texas and have no physical presence there. The court’s analysis thus focused on their online activity, which it found insufficient to sustain Texas jurisdiction. Four points from the court’s analysis are relevant for any business with significant e-commerce operations. 

    Zippo: Sliding Scale Test

    In 1997—when internet meant free CDs from America Online—the Western District of Pennsylvania’s Zippo opinion developed a “sliding scale” test for personal jurisdiction, based on the interactivity of the defendant’s website:

    At one end of the spectrum are situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper. . . . At the opposite end are situations where a defendant has simply posted information on an Internet Web site which is accessible to users in foreign jurisdictions. A passive Web site that does little more than make information available to those who are interested in it is not grounds for the exercise personal jurisdiction.

    Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997) (citations omitted).

    That once-influential test has fallen into disfavor. The Dallas court noted a growing line of authority that “there needs to be more than the existence of a website (whether interactive or not) to support an inference that the forum was targeted by the website owner.” ShopStyle, 2020 WL 4187937, at *8 (citations omitted). As one of the cited opinions observed, “evidence of a website, regardless of whether it is interactive, just illustrates ‘the potential for activity from the forum in question and the website owner’s knowledge of that potentiality[,]’” rather than “actual use or its extent.” Id. (citations omitted).

    Because Zippo was one of the first cases to address the jurisdictional effect of online activity, it has significantly influenced the development of the law in that area. ShopStyle signals, however, that even in a jurisdiction that has previously embraced the Zippo sliding scale, there may be room to argue that its strong focus on interactivity may no longer be appropriate.

    Operative Facts

    Texas personal-jurisdiction law requires that to establish minimum contacts, a party’s Texas connections must relate to the “operative facts” of the case. See Moki Mac v. Drugg, 221 S.W.3d 569, 580 (Tex. 2007). The operative facts in ShopStyle were alleged acts of misappropriation. Because none of them took place in Texas, details about the operation of the website had little weight in the jurisdictional analysis. The ShopStyle court observed, “Whether PopSugar’s website is available in Texas or whether links to Texas-based retailers are available on PopSugar’s website is unrelated to the operative facts as alleged by rewardStyle.” 2020 WL 4187937, at*12.

    Other states and federal courts phrase the minimum-contacts test differently. The U.S. Supreme Court is presently considering cases where the differences among those tests may be addressed. See, e.g., Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct., 443 P.3d 407 (Mont. 2019). While the precise weight to give a case’s operative facts may vary, those facts will always have some relevance to a jurisdictional analysis. ShopStyle’s treatment of them reminds that the “real-world” location of activity that affects the online world is still an important consideration in evaluating personal jurisdiction.

    Purposeful Availment

    The structure of the ShopStyle defendants’ websites also helped their jurisdiction arguments. The defendants showed that their sites are based on “hyperlinks that take viewers to the websites of third-party affiliated retailers where a consumer can purchase the linked products.” 2020 WL 4187937, at *7. “In other words,” said the court, “the user cannot purchase products on the PopSugar website but instead follows links to the websites of affiliated third-party retailers. . . . [T]he ‘user cannot consummate a commercial transaction online without accessing and logging-into a third-party website.’” Id. at *9.

    While this evidence was not case dispositive by itself, the ShopStyle court concluded that it weakened the plaintiff’s claim that the defendants had “purposefully avail[ed] itself of the privilege of conducting activities in Texas.” Id. at *12. The court reviewed and distinguished several cases from other jurisdictions where the relevant websites had different, additional technical features tied to business in the forum state. See id. at *11.

    This aspect of ShopStyle websites is likely to recur in a number of cases. While jurisdictions may vary in how they approach the general topic of “purposeful availment,” the technical features reviewed by this part of ShopStyle are likely to be part of any significant online business operation.

    Third-Party Activity

    ShopStyle applied recent U.S Supreme Court opinions holding that “it is the defendant, not the plaintiff or third parties, who must create contacts with the forum State.” 2020 WL 4187937, at *21 (citing, inter alia, Walden v. Fiore, 571 U.S. 277, 291 (2014)). Under those cases, “only the defendant’s contacts with the forum are relevant, not the unilateral activity of another party or third persons.” 2020 WL 4187937, at *4.

    Applying this principle, the ShopStyle court observed that simply “permitting hyperlinks to the websites of third-party Texas-based retailers where products can be purchased” was not enough, by itself, to show the necessary control of those retailers’ sales by the defendants. 2020 WL 4187937, at *17. That conclusion goes to a basic feature of online retail activity; and because the underlying legal principle comes from recent Supreme Court cases, the Dallas court’s observation is likely to hold true in many other jurisdictions.

    Conclusion

    In sum, while personal-jurisdiction disputes about online activity can involve technical matters, the controlling legal principles are well-known. The Dallas Court of Appeals’ ShopStyle opinion focused on the operative facts of the case and the defendants’ own contacts with Texas. Those reference points are likely to be useful in any case about personal jurisdiction based on online activity, even if local law handles them differently than the Texas law applied in this case.

    David Coale is a partner at Lynn Pinker Hurst & Schwegmann in Dallas, Texas.

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