Wednesday, January 18, 2006

Ninth Circuit En Banc Dismisses Yahoo! Case

Last week the Ninth Circuit en banc issued an important decision in Yahoo! v. LICRA. In a complicated judgment, it concluded that it does have personal jurisdiction over LICRA and UEJF, but that the combination of votes against personal jurisdiction and ripeness required dismissal of the case without prejudice. It is a complex decision with forty-pages of opinion, so I will give only the briefest of summaries.
The case is one of the more important personal jurisdiction cases involving international parties and transnational contact. LICRA and UEJF sued Yahoo! in French courts for permitting the sale on its auction site of "messages, images and text relating to Nazi objects, relics, insignia, emblems and flags, or which evoke Nazism" and "text, extracts, or quotes from 'Mein Kampf' and the '[Protocols of the Elders of Zion]'" A French court order subjected Yahoo! to a fine of 100,000 Euros per day of delay. Since that time Yahoo! has brought its actions into "substantial compliance" with French law and the fines have not been imposed.
In response to this French court action, Yahoo! filed suit against LICRA and UEJF in federal district court, seeking a declaratory judgment that the interim orders of the French court are not recognizable or enforceable in the United States. The district court held that it had personal jurisdiction over LICRA, and the Ninth Circuit reversed.
At issue in the case was whether LICRA and UEJF, both anti-racism groups, were subject to personal jurisdiction based on their contacts in California. Those contacts were the following: (1) cease and desist letter that LICRA sent to Yahoo!, demanding that Yahoo! alter its behavior in California to conform to what LICRA contended were the commands of French law; (2) service of process of Yahoo! in California; and (3) LICRA obtained two interim orders from the French court directing Yahoo! to take actions in California, on threat of a substantial penalty.
The Court applied the three-prong test for specific jurisdiction to the facts of this case and concluded that the third contact satisfied the requirements of specific jurisdiction. Here is an excerpt:

The first two requirements are that LICRA and UEJF "have '(1) committed an intentional act, [which was] (2) expressly aimed at the forum state [.]' "... It is obvious that both requirements are satisfied. LICRA intentionally filed suit in the French court. Indeed, it had previously signaled its intent to file suit in its April 5 letter to Yahoo!. UEJF intentionally joined LICRA's suit ten days later. Further, LICRA and UEJF's suit was expressly aimed at California. The suit sought, and the French court granted, orders directing Yahoo! to perform significant acts in California. It is of course true that the effect desired by the French court would be felt in France, but that does not change the fact that significant acts were to be performed in California. The servers that support are located in California, and compliance with the French court's orders necessarily would require Yahoo! to make some changes to those servers. Further, to the extent that any financial penalty might be imposed pursuant to the French court's orders, the impact of that penalty would be felt by Yahoo! at its corporate headquarters in California.

The third requirement is that LICRA and UEJF's acts "'caus[e] harm that the defendant knows is likely to be suffered in the forum state.' " This requirement is somewhat problematic, for Yahoo! has not shown or even alleged any specific way in which it has altered its behavior in response to the French court's interim orders. Yahoo! changed its policy with respect to after the French court's orders were entered, but Yahoo! has consistently maintained that the change was unrelated to the orders....

Yahoo!, however, points to the possibility that a substantial penalty will be assessed under the French court's November 20 interim order. It points in particular to the provision in that order specifying that the potential amount of the penalty increases by 100,000 Francs for every day that Yahoo! is in violation of the court's orders. Yahoo! represents to us that even now, after its change of policy, it is acting in plain violation of the orders. It contends that a declaratory judgment determining the enforceability by an American court of the French court's orders will allow it to determine an appropriate course of conduct with respect to the activities in which it continues to engage. ...

Yahoo! contends that it has a legally protected interest, based on the First Amendment, in continuing its current policy with respect to Nazi memorabilia and Holocaust-related anti-semitic materials. Until that contention is endorsed by the judgment of an American court, it is only a contention. But even if the French court's orders are not enforced against Yahoo!, the very existence of those orders may be thought to cast a shadow on the legality of Yahoo!'s current policy. It is a close question whether LICRA and UEJF are subject to personal jurisdiction in California in this suit. But considering the direct relationship between LICRA and UEJF's contacts with the forum and the substance of the suit brought by Yahoo!, as well as the impact and potential impact of the French court's orders on Yahoo!, we hold that there is personal jurisdiction.

Thus, in an eleven-member en banc panel, there were eight votes for personal jurisdiction and only three votes against. But matters became far more complex on ripeness, which I will not summarize here. Suffice it to say that on ripeness there were five votes for ripeness, three votes against ripeness, and three members of the Court who did not reach the question. In a strange twist, the Court held that because a three-judge plurality concluded that the suit was not ripe, "[w]hen the votes of the three judges who conclude that the suit is unripe are combined with the votes of the three dissenting judges who conclude that there is no personal jurisdiction over LICRA and UEJF, there are six votes to dismiss Yahoo!'s suit." Very unusual and complex result.

The importance of the case is that when Internet companies engage in questionable conduct that arguably comports with our First Amendment freedoms, but is nonetheless a violation of the anti-racism or anti-semitism laws of other countries, Yahoo! opens the door for a declaratory judgment against public interest groups that seek to enforce foreign penalties and fines in the United States. But in the end LICRA won this battle against Yahoo! by forcing it to take greater cognizance of the French requirements that Nazi propoganda not be available for sale on Yahoo! auction sites in France. With the specter of huge fines imposed daily, Yahoo! had little choice but to brings its action into compliance with French law. But going forward, the Ninth Circuit's holding in Yahoo! on personal jurisdiction will give greater leverage to Internet companies to sue in the United States the next time such a conflict occurs.


Blogger randomopinion said...

I have to agree with you, this is an enormously important case because it could, as you say, open the door to many costly lawsuits in the US filed by foreign NGOs and even governments. For example (I'm aware that this is one of your favorite issues), in Spain it is a crime to do what Yahoo did not with nazi items but with anything having to do with a terrorist organization (e.g., the local group E.T.A.). And guess which is the nationality of many of the companies that host E.T.A.'s sympathizer's webs? Yup, the US of A. I believe (could be wrong) Garzón is presently on a sabatical (teaching in New York), but wait 'til he returns to his post.

Bottom line, we'll have a new subspecies of lawyer (right next to the ambulance chaser) - the web chaser.

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