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Personal Jurisdiction Over Foreign Airlines

By: Kreindler Legal Staff

Summary

  • Though there are scant aviation-related cases, there are other decisions that are instructive on this issue of personal jurisdiction over a foreign airline on the sole basis of internet-related commerce. 
  • The issue is not settled as courts try to assess personal jurisdiction by weighing the passivity of a site as well as “the nature and quality of commercial activity” conducted by the defendant. 
  • Courts can employ three criteria to help confer personal jurisdiction:
    1. What is the qualitative nature of the cyber activities?
    2. What is the quantitative nature of the cyber activities?
    3. Where is the cyber presence headquartered? 
  • Although a foreign-based carrier may not have offices in the U.S., cyber-contacts may very well provide a key ingredient in an American court’s jurisdictional analysis.

(Reprinted from Association of Trial Lawyers of America - Aviation Law Section)

The activities of Airbus and Boeing sales executives at the recent Paris Air Show are evidence that the future of commercial aviation clearly lies in the Asia Pacific and Middle Eastern markets.

Boeing, for example, says it expects the Asia Pacific to be its largest market, accounting for 36 percent of its expected $2.1 trillion in aircraft orders over the next 20 years.1 Similarly, the Indian and Persian Gulf states are viewed as equally promising commercial aircraft markets, quickly eclipsing those of Europe and North America.

Promising Aviation Markets in the East

Due to the location of Qatar and Dubai as convenient hubs between Europe and the Far East, and the increasing integration of this region in the global economy, the Middle East led the world in 2004 with a one-year growth of 24.8 percent in air passenger traffic; Asia Pacific was a close second with a 20.5 percent growth in air passenger traffic in 2004.2

Just recently, India’s largest domestic airline, Jet Airways, committed to buying at least 20 Boeing planes worth over $2.8 billion, as well as making a separate deal for 10 Airbus aircrafts worth $1.5 billion. Similarly, Jet Airways’ domestic rival, Kingfisher, recently signed contracts for 15 Airbus aircrafts, including five Super Jumbo A380s, in a $43 billion deal.3

“India is today one of the most promising [aviation] markets,” says John Leahy, the chief commercial officer at Airbus. Id.

Additionally, Qatar Airways and China Southern Airlines are expected to ink similar contracts to feed their ambitious plans to add several international routes by 2010.4 Qatar Airways is one of the fastest growing airlines in the world, with routes throughout the Middle East and recently added connections to Africa and Europe. The airline plans to double its all-Airbus fleet of 40 planes in the next few years following the $5.1 billion order of 18 Airbus planes at the Paris Air Show in 2003.

The “Infant Airlines” Thrive on Virtual Ticketing

While the majority of these “infant airlines” do not currently operate in the United States, the proliferation of virtual ticketing via the internet has enabled a large number of American travelers to take advantage of these airlines’ cheap fares and numerous travel routes throughout the Indian sub-continent and the Far and Middle East.

A review of websites operated by many of the most successful “infant airlines” in Asia and the Middle East (e.g. Air Asia, Qatar Airways, Kingfisher) indicates that one of the hallmarks of these carriers is that all flights are booked via the internet. Some of these airlines, however, operate limited ticketing offices in their home countries. None have offices in either the United States or Europe. This “virtual ticketing” trend is being mirrored by legacy carriers in the United States. In 2004, for example, Northwest Airlines closed all of its 25 ticketing offices in the United States.5

In an unexpected fashion, the very convenience of garnering business in the United States via the internet will possibly enable claimants to subject these remote carriers to the jurisdiction of American courts.

While this area of aviation law is relatively unchartered, an examination of cases indicates that foreign airlines which rely upon Internet commerce to attract American passengers may indeed be subject to personal jurisdiction in the United States.

Possible Personal Jurisdiction Over Foreign Airlines

Although there is scant case law that contemplates the exercise of personal jurisdiction over a foreign airline on the sole basis of internet-related commerce, a number of related cases are instructive on this issue. For example, in Breschia v. Paradis Vacation Club, Inc., No. 02-3014, 2003 WL 22872128, *5 (N.D. Ill. Dec. 4, 2003), the court explained that the exercise of specific jurisdiction based upon internet interaction “is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the website.”

Passive websites in which there is “no exchange of information … is not grounds for the exercise of personal jurisdiction.” Id. In accordance with this doctrine, the court in Bensusan Rest. Corp. v. King, 937 F. Supp. 295, 399-400 (S.D.N.Y. 1996), refused to exercise jurisdiction based upon internet contacts alone where a defendant jazz club’s website only consisted of a calendar of upcoming events and ticketing information.

In contrast, defendants that enter into contractual relations with individuals in a particular state over the internet may be subject to personal jurisdiction in that forum. The court in Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1122-23 (W.D. Pa. 1997) did just that when it articulated a “sliding scale of internet activity” in determining that an online computer news service purposefully availed itself to doing business in Pennsylvania. Thus, the news service subjected itself to personal jurisdiction there, by operating an internet site to advertise and solicit customers for its services and by entering contracts with approximately 3,000 Pennsylvania residents.

Although courts consistently recognize that personal jurisdiction cannot rest on the sole basis of maintaining a “passive” web site since these sites do “little more than make information available to those who are interested in it,” Zippo, 952 F. Supp. at 1124, there is little agreement about the requisite level of cyber activity needed to confer personal jurisdiction.

Some courts have held that sufficient minimum contacts are established and the defendant is “doing business” over the internet when the defendant’s website is capable of accepting and does accept purchase orders from residents of the forum state.6

Other courts have rejected the idea that a company operating a website is subject to the jurisdiction of any forum whose citizens have purchased the company’s goods via the internet. See Millennium Enters., Inc., v. Millennium Music, LP, 33 F. Supp.2d 907, 921 (D. Or. 1999) (concluding that “[t]he fact that someone who accesses defendants’ website can purchase [one of defendant’s products] does not render defendants’ actions ‘purposefully directed’ at this forum”).

The court opined that in the internet age “the likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the internet.” Id at 1124; see also CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1264-65 (6th Cir. 1996) (holding that specific jurisdiction is proper 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).

Accordingly, the following checklist provides questions that should be scrutinized when determining the relative success of securing personal jurisdiction over defendants based upon cyber-contacts:7

(a) What is the qualitative nature of the cyber activities? Is the defendant’s web site “interactive” (e.g. communication and contractual relations can be exercised by parties electronically) or “passive” (e.g. information publishing web site)? In addition to business transactions, does the defendant also conduct cyber banking with financial institutions in the subject forum?

(b) What is the quantitative nature of the cyber activities? What percentage of defendant’s business is generated in the subject forum? What percentage of defendant’s business is conducted via the Internet? What is the frequency of the defendant’s “e-sales” activity with the resident of the subject forum?8

(c) Where is the cyber presence headquartered? Is the defendant’s Web site maintained by an Internet Service Provider (ISP) located in the subject forum?

In sum, pertinent case law indicates that a defendant’s Internet activities within a forum state can support the exercise of personal jurisdiction if the quantitative and qualitative nature of the e-contacts shows an active, continuous and systematic relationship with forum residents.

“Infant airlines” of the world beware — although you may not have any air routes or offices in the United States, your cyber-contacts may very well provide a key ingredient in an American court’s jurisdictional analysis.


Endnotes

  1. http://in.news.yahoo.com/050616/137/5yz5x.html (June 19, 2005).
  2. See http://www.airsider.net/files/2005/0205/008/ airlineforcast5.htm (Feb. 27, 2005).
  3. http://www.usatoday.com/travel/flights/2005-06- 15-india-middle-east-orders_x.htm (Jun. 15, 2005).
  4. http://news.airwise.com/story/view/1118357122. html (Jun. 9, 2005).
  5. See http://www.bizjournals.com/seattle/stories/ 2004/02/16/daily23.html (Feb. 19, 2004). United announced similar measures in 2003 and 2004.
  6. See Euromarket Designs, Inc. v. Crate & Barrel Ltd., 96 F. Supp.2d 824, 838 (N.D. Ill. 2000) (stating that the defendant “clearly is doing business over the website” because it purposefully designed “a Web site with a high level of interactivity, enabling customers to browse through an online catalog and place orders via the Internet”); see also Stomp v. NeatO, LLC, 61 F. Supp.2d 1074, 1078 (C.D. Cal.1999) (holding that the defendant’s two online sales “constitutes conducting business over the Internet, and therefore under the test enumerated in Zippo ... asserting personal jurisdiction is proper”).
  7. A court will obviously balance these factors against its obligation to exercise jurisdiction in a (reasonable( manner. This decision will often turn on the following issues: (a) burden of defendant in defending in the forum; (b) extent of conflict with the sovereignty of defendant’s state; (c) judicial economy; (d) plaintiff’s interest in seeking effective relief; and (e) the existence of an alternative forum (e.g. “forum non conveniens”). See generally Rodriguez v. Dixie Southern Industries, Inc., 113 F. Supp.2d 242, 253-54 (D.P.R. 2000) (“Gestalt Factors”).
  8. Note that in the context of Warsaw Convention cases, the potential exists that a federal court, under Fed. R. Civ. P. 4(k)(2), may exercise personal jurisdiction over Warsaw defendants on the aggregate basis of “contacts with the United States as a whole.” Coyle v. PT Garuda Indonesia, 180 F. Supp.2d 1160, 1170 (D. Or. 2001), rev’d on other grounds, 363 F.3d 979 (9th Cir. 2004).