California Court Delivers Jurisdictional Ruling

14 June 1999
A three-judge panel from the California Court of Appeal for the Second District ruled last week that California courts don't have jurisdiction over servers not located in the Golden State.

The decision, based on a defamation lawsuit filed against the Jewish Defense Organization, overturns a lower-court ruling in January holding that the JDO's contracting of two California companies, GeoCities and, established sufficient contacts in California for the suit to proceed. The appellate panel reversed the decision, on grounds that the use of the California companies failed to satisfy the conditions required to give California courts "specific jurisdiction" over the nonresident defendants.

Presiding justice Mildred Lillie wrote, "Defendants' conduct of contracting, via computer, with Internet service providers, which may be California corporations or which may maintain offices or databases in California, is insufficient to constitute 'purposeful availment."

The interactive gaming industry is no stranger to court cases regarding jurisdiction over Internet businesses.

Janus Merritt Group Principal David Safavian points out, however, that the California decision's impact on the Internet gambling front will be very limited.

The ruling, along with similar court decisions, implies that state jurisdiction would be permitted in circumstances where the operator made an affirmative effort to recruit California customers. "In the specific case, there was no such opportunity," Safavian said. " It was merely the posting of a slanderous comment online."

He added, "If the reasoning of the Granite Gate case's logic is adopted by the Califonia courts, operators would be subject to the Califonia state courts' jurisdiction by soliciting customers in the Golden State."