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 review the interaction between the physical and online worlds.
The Dallas Court of Appeals recently reviewed the current state of that important law in Shopstyle, Inc. & Popsugar, Inc. v. rewardStyle, Inc., finding no Texas jurisdiction over the out-of-state operators of a popular website. Justice Lana Myers wrote the opinion, joined by Justices Bill Whitehill and Amanda Reichek.
rewardStyle runs a website, LIKEtoKNOWIT.com, that lets “digital lifestyle ‘influencers’ monetize their social media content by allowing customers to shop for items feature in online posts.” PopSugar and ShopStyle have competing websites, one of which is shopstyle.com. rewardStyle sought to take presuit depositions under Tex. R. Civ. P. 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 here. The court’s analysis thus focused on their online activity, which it found insufficient to sustain Texas jurisdiction. Four points are particularly relevant for how the Dallas Court of Appeals will address such disputes.
No Zippo. In 1997 — when “internet” meant free CDs from America Online — the Western District of Pennsylvania in Zippo Manufacturing Co. v. Zippo Dot Com, Inc. developed a “sliding scale” test for personal jurisdiction based on the interactivity of the defendant’s website. That once-influential test has fallen into disfavor. The Dallas court noted a growing line of Texas 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….” Zippo will likely not control in future personal jurisdiction disputes about online activity.
Operative facts. Texas law requires that a party’s Texas connections relate to the “operative facts” of the case. The operative facts here were alleged acts of misappropriation. Because none of them took place in Texas, details about the operation of the website had little weight. The 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.”
Purposeful availment. The structure of defendants’ websites also helped their jurisdiction arguments. The sites are based on “hyperlinks that take viewers to the websites of third-party affiliated retailers where a consumer can purchase the linked products.”
In other words, “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.’” This feature weakened the claim that the defendants were “purposefully availing” themselves of Texas law.
Third-party activity. Recent cases from the U.S. and Texas Supreme Courts emphasize that “only the defendant’s contacts with the forum are relevant, not the unilateral activity of another party or third persons.” This principle was important to the Dallas Court of Appeals, which 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.
In sum, while personal jurisdiction disputes about online activity can involve technical matters, the controlling legal principles are well-known and well-settled. As in many other jurisdiction cases, 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 should help future cases review the relevant issues even if they are technically complex.
David Coale is a partner at Lynn Pinker Hurst Schwegmann. He specializes in appellate litigation.