In a recent action, the Minnesota Court of Appeals states that the
Attorney General has the right to regulate internet activity. This is one
of the first pieces of case law to arise in the area of internet gambling.
STATE OF MINNESOTA
IN COURT OF APPEALS
State of Minnesota by its Attorney
General Hubert H. Humphrey, III,
Granite Gate Resorts, Inc., d/b/a On Ramp
Internet Computer Services; et al.,
Filed September 5, 1997
Ramsey County District Court
File No. C6957227
Hubert H. Humphrey III, Attorney General, Carolyn P. Ham, Ann Beimdiek
Kinsella, Assistant Attorneys General, 1400 NCL Tower, 445 Minnesota
Street, St. Paul, MN 55101 (for Respondent)
Ronald I. Meshbesher, Meshbesher & Spence, 1616 Park Avenue, Minneapolis,
MN 55404 and Eckley M. Keach, Goodman, Chesnoff & Keach, 520 South Fourth
Street, Las Vegas, NV 89101 (for Appellants)
Considered and decided by Willis, Presiding Judge, Crippen, Judge, and
S Y L L A B U S
Appellants, having advertised on the Internet a forthcoming on-line
gambling service and having developed from the Internet a mailing list that
includes one or more Minnesota residents, are subject to personal
jurisdiction in Minnesota because they purposefully availed themselves of
the privilege of conducting commercial activities in this state to an
extent that maintenance of an action here does not offend traditional
notions of fair play and substantial justice.
O P I N I O N
Respondent State of Minnesota filed a complaint against appellants Granite
Gate Resorts, Inc., d/b/a On Ramp Internet Computer Services, and Kerry
Rogers, individually and as principal officer of Granite Gate Resorts,
Inc., alleging that appellants engaged in deceptive trade practices, false
advertising, and consumer fraud on the Internet. Appellants challenge the
district court's denial of their motion to dismiss for lack of personal
jurisdiction. We affirm.
Rogers, a Nevada resident, is president of Granite Gate, a Nevada
corporation that does business as On Ramp. Until August 1995, On Ramp
provided Internet advertising on the site located at http://www.vegas.com,
which provides Nevada tourist information. Among the sites advertised was
WagerNet, an on-line wagering service planned to be available
internationally in the fall of 1995, whose page enabled Internet users to
subscribe for more information about the service.
The WagerNet site, designed by Rogers, stated:
On-Line sports wagering open to International markets, Fall of 1995
Global Gaming Services Ltd, based in the country of Belize, is pleased to
introduce WagerNet, the first and only on-line sports betting site on the
Internet. WagerNet will provide sports fans with a legal way to bet on
sporting events from anywhere in the world. . . 24 Hours a Day!
How it Works
First, there is a $100 setup fee, for necessary hardware and software. For
security and privacy, all members are issued a card system linked to their
personal computer to access WagerNet. Once on-line, the bettor selects the
team/s and amount/s they wish to wager. WagerNet then matches your bet with
an opposing bettor or bettors to cover your wager. WagerNet charges each
bettor a transaction fee of ONLY 2.5% as opposed to the 10% fee charged by
The website invited Internet users to put themselves on a mailing list for
WagerNet information and included a form for that purpose. It gave a
toll-free number for WagerNet and also told Internet users to contact On
Ramp at a Nevada telephone number for more information. A note on the page
advised users to consult with local authorities regarding restrictions on
offshore sports betting by telephone before registering with WagerNet.
A linked web page listed the terms and conditions to which an Internet user
assented by applying for the private access card and special hardware and
software required to access WagerNet's services. This page stated that any
claim against WagerNet by a customer must be brought before a Belizian
court, but that WagerNet could sue the consumer in his or her home state to
prevent the consumer "from committing any breach or anticipated breach of
this Agreement and for consequential relief."
On July 5, 1995, Jeff Janacek, a consumer investigator for the Minnesota
Attorney General's office, telephoned the toll-free number shown on an On
Ramp site that advertised All Star Sports, a sports handicapping service,
and asked how to bet on sports events. An On Ramp employee told Janacek to
call Rogers directly. Janacek dialed the number he was given, which was the
same number that the WagerNet site directed Internet users to call to
receive more information, and spoke with an individual who identified
himself as Rogers. Janacek identified himself as a Minnesotan interested in
placing bets. Rogers explained how to access WagerNet, told Janacek the
betting service was legal, and stated that he hoped the service would be up
and running by the 1995 football season.
In July 1995, the attorney general filed a complaint alleging that
appellants had engaged in deceptive trade practices, false advertising, and
consumer fraud by advertising in Minnesota that gambling on the Internet is
lawful. In October 1995, Janacek subscribed to the WagerNet mailing list
under a fictitious name and received an on-line confirmation stating that
he would be sent updates on the WagerNet service. Appellants filed a motion
to dismiss for lack of personal jurisdiction. The district court allowed
limited discovery to determine the quantity and quality of appellants'
contacts with the state. Rogers refused to produce the names of the persons
on the WagerNet mailing list, claiming that the information is the sole
property of a Belizian corporation. As a sanction, the court found that it
is established as a fact for this action that the WagerNet mailing list
contains the name and address of at least one Minnesota resident. In
December 1996, the district court denied appellants' motion to dismiss for
lack of jurisdiction.
Did the district court err in denying appellants' motion to dismiss for
lack of personal jurisdiction?
This is the first time a Minnesota court has addressed the issue of
personal jurisdiction based on Internet advertising. We are mindful that
the Internet is a communication medium that lacks historical parallel in
the potential extent of its reach and that regulation across jurisdictions
may implicate fundamental First Amendment concerns. It will undoubtedly
take some time to determine the precise balance between the rights of those
who use the Internet to disseminate information and the powers of the
jurisdictions in which receiving computers are located to regulate for the
general welfare. But our task here is limited to deciding the question of
personal jurisdiction in the instant case, and on the facts before us, we
are satisfied that established legal principles provide adequate guidance.
Minnesota's long-arm statute, Minn. Stat. § 543.19 (1996), "permits courts
to assert jurisdiction over defendants to the extent that federal
constitutional requirements of due process will allow." Domtar, Inc. v.
Niagara Fire Ins. Co., 533 N.W.2d 25, 29 (Minn.), cert. denied, 116 S. Ct.
583 (1995). To satisfy the Due Process Clause of the Fourteenth Amendment,
a plaintiff must show that the defendant has "minimum contacts" with the
forum state "such that the maintenance of the suit does not offend
`traditional notions of fair play and substantial justice.'" International
Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 158 (1945)
(quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S. Ct. 339, 343 (1940)).
There must be "some act by which the defendant purposefully avails itself
of the privilege of conducting activities within the forum State, thus
invoking the benefits and protections of its laws." Hanson v. Denckla, 357
U.S. 235, 253, 78 S. Ct. 1228, 1240 (1958).
Appellants allege that the district court erred in denying their motion to
dismiss because a nonresident defendant that places information on the
Internet has not purposefully availed itself of the privilege of conducting
activities within every state from which that information may be accessed.
The assertion of personal jurisdiction in Minnesota, appellants argue,
would not comport with the traditional notions of fair play and substantial
A court must consider five factors in determining whether a defendant has
established minimum contacts with the forum state: (1) the quantity of the
defendant's contacts; (2) the nature and quality of the defendant's
contacts; (3) the connection between the cause of action and the
defendant's contacts; (4) the state's interest in providing a forum; and
(5) the convenience of the parties. Rostad v. On-Deck, Inc., 372 N.W.2d
719-20 (Minn. 1985). The first three factors are of primary importance.
Land-O-Nod Co. v. Bassest Furniture Indus., Inc., 708 F.2d 1338, 1340 (8th
Cir. 1983). In close cases, "doubts should be resolved in favor of
retention of jurisdiction." Valspar Corp. v. Lukken Color Corp., 495 N.W.2d
408, 411-12 (Minn. 1992).
1. Quantity of Contacts.
The quantity of contacts here supports the contention that appellants
purposefully availed themselves of the privilege of conducting commercial
activities in Minnesota. The district court found that (1) computers
located throughout the United States, including Minnesota, accessed
appellants' websites, (2) during a two-week period in February and March
1996, at least 248 Minnesota computers accessed and "received transmissions
from" appellants' websites, (3) computers located in Minnesota are among
the 500 computers that most often accessed appellants' websites, (4)
persons located throughout the United States, including persons in
Minnesota, called appellants at the numbers advertised on its websites, and
(5) the WagerNet mailing list includes the name and address of at least one
In Maritz, Inc. v. Cybergold, Inc., 947 F. Supp. 1328 (E.D. Mo. 1996), a
Missouri federal court exercised personal jurisdiction over the California
operator of an Internet site that provided information on a forthcoming
service that would charge advertisers for access to a mailing list of
Internet users. Id. at 1334. In analyzing the quantity of the defendant's
contacts with Missouri, the Maritz court found that the defendant "has
transmitted information into Missouri regarding its services approximately
131 times," which allowed an inference that the defendant purposefully
availed itself of the privilege of conducting activities in Missouri. Id.
at 1333. The quantity of contacts here exceeds that in Maritz.
2. Quality of Contacts.
Even where the quantity of contacts with a state is minimal, the nature and
quality of the contacts may be dispositive. Trident Enters. Int'l, Inc. v.
Kemp & George, Inc., 502 N.W.2d 411, 415 (Minn. App. 1993); see also Zippo
Mfg. Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119, 1124 (W.D. Pa. 1997)
(concluding "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"). Advertising in the
forum state, or establishing channels for providing regular advice to
customers in the forum state, indicates a defendant's intent to serve the
market in that state. Asahi Metal Indus. Co. v. Superior Court of
California, 480 U.S. 102, 112, 107 S. Ct. 1026, 1032 (1987).
Appellants argue that they "have not directed their activities at the
citizens of Minnesota" because they "only placed information on the
internet." An Internet site, however, can be viewed as an "advertisement" by which [the foreign corporation] distributes its pictorial images throughout the United States. That the local user "pulls" these images from [the corporation's] computer in [in that case] Italy, as opposed to [the corporation] "sending" them to this country, is irrelevant.
By inviting United States users to download these images, [the corporation]
is causing and contributing to their distribution within the United States.
Playboy Enters., Inc. v. Chuckleberry Publ'g, Inc., 939 F. Supp. 1032, 1044
The Maritz court also rejected the view that Internet advertising is a
[Defendant's] posting of information about its new, up-coming service
through a website seeks to develop a mailing list of internet users, as
such users are essential to the success of its service. Clearly, [the
defendant] has obtained the website for the purpose of, and in anticipation
that, internet users, searching the internet for websites, will access [the
defendant's] website and eventually sign up on [the defendant's] mailing
list. Although [the defendant] characterizes its activity as merely
maintaining a "passive website," its intent is to reach all internet users,
regardless of geographic location. * * * Through its website, [the
defendant] has consciously decided to transmit advertising information to
all internet users, knowing that such information will be transmitted
Id. at 1333; see also Inset Sys., Inc. v. Instruction Set, Inc., 937 F.
Supp. 161, 165 (D. Conn. 1996) (holding that Massachusetts corporation
purposefully availed itself of privilege of doing business in Connecticut
by advertising its activities and its toll-free number on Internet because
Internet and toll-free numbers are designed to communicate with people in
Minnesota courts have concluded that defendants who know their message will
be broadcast in this state are subject to suit here. See, e.g., Tonka Corp.
v. TMS Entertainment, Inc., 638 F. Supp. 386, 391 (D. Minn. 1985) (holding
that Minnesota can exert personal jurisdiction over California corporation
that produced television program it knew would be broadcast nationwide);
BLC Ins. Co. v. Westin, Inc., 359 N.W.2d 752, 755 (Minn. App. 1985)
(holding that Wisconsin corporation's purposeful behavior in advertising
its Wisconsin bar on Twin Cities radio station is such that it should have
reasonably anticipated being haled into Minnesota court), review denied
(Minn. Apr. 15, 1985); see also A. Uberti & C. v. Leonardo, 892 P.2d 1354,
1362 (Ariz. 1994) (concluding that defendant intending to sell its products
to any and all United States citizens can be held accountable in any
jurisdiction where its products cause injury), cert. denied, 116 S. Ct. 273
(1995). Other states have held that direct mail solicitation into the state
is sufficient contact to justify personal jurisdiction. See, e.g., State ex
rel. Miller v. Baxter Chrysler Plymouth, Inc., 456 N.W.2d 371, 377 (Iowa
1990); Kugler v. Market Dev. Corp., 306 A.2d 489, 491 (N.J. Super. Ct. Ch.
Div. 1973); State v. Colorado State Christian College, 346 N.Y.S.2d 482,
485 (N.Y. Sup. Ct. 1973); State v. Reader's Digest Ass'n, Inc., 501 P.2d
290, 302 (Wash. 1972).
Internet advertisements are similar to broadcast and direct mail
solicitation in that advertisers distribute messages to Internet users, and
users must take affirmative action to receive the advertised product. Here,
the WagerNet site itself stated that it was "open to International
markets," indicating an intent to seek customers from a very broad
geographic area. The fact that WagerNet had apparently paid for advertising
in English on an American commercial site indicates an intent to reach the
American market, and by advertising their services with a toll-free number,
appellants indicated their intent to solicit responses from all
jurisdictions within that market, including Minnesota. A defendant cannot
"hide behind the structuring of its distribution system when [the
defendant's] intent was to enter the market [in the forum state] and profit
thereby." Rostad, 372 N.W.2d at 722. The presence of the disclaimer on the
site may be relevant to the merits of the consumer fraud action, but
appellants' clear effort to reach and seek potential profit from Minnesota
consumers provides minimum contacts of a nature and quality sufficient to
support a threshold finding of personal jurisdiction. 
3. Connection Between Cause of Action and Contacts.
If the cause of action arises from the nonresident defendant's contacts
with the forum state, even a single transaction can be sufficient to
establish personal jurisdiction over the defendant. See McGee v.
International Life Ins. Co., 355 U.S. 220, 78 S. Ct. 199 (1957).
Advertising contacts justify the exercise of personal jurisdiction where
unlawful or misleading advertisements are the basis of the plaintiff's
claims. See Baxter, 456 N.W.2d at 377 (holding that defendants' acts in
advertising within forum state are sufficient to render them amenable to
suit there in action alleging the advertising is unlawful); Reader's
Digest, 501 P.2d at 302-03 (concluding that unfair competition cause of
action arose from contacts because mailing sweepstakes entry information
constituted illegal lottery within state).
In this case, the state alleges violations of Minn. Stat. §§ 325D.44, subd.
1 (1996) (engaging in deceptive trade practices), 325F.67 (1996) (making
false statements in advertisements), and 325F.69, subd. 1 (1996) (engaging
in fraud, misrepresentation, or deceptive practices), based on appellants'
alleged misrepresentations regarding the legality in Minnesota of the
services offered by All Star Sports and WagerNet. Under Minn. Stat. § 8.31,
subd. 3 (1996), the attorney general is authorized to seek injunctive
relief and civil penalties when satisfied that any of the laws referred to
in Minn. Stat. § 8.31, subd. 1 (1996), which include the consumer statutes
allegedly violated here, "is about to be violated." Thus, the causes of
action against appellants arise out of the information that appellants
posted on their website inviting Internet users to use the on-line gambling
service when it becomes operational, which, as discussed, was directed
toward Minnesota and received here. See Maritz, 947 F. Supp. at 1333
(concluding that trademark infringement and unfair competition causes of
action result from injuries that arise out of or relate to defendant's
4. State's Interest.
Minnesota's interest in providing a forum for a resident plaintiff cannot
alone establish jurisdiction, but it can support the exercise of
jurisdiction over a nonresident defendant when viewed in light of the first
three factors for evaluating whether minimum contacts exist. Trident, 502
N.W.2d at 416. The state has an interest in enforcing consumer protection
statutes and regulating gambling. See State v. Alpine Air Products, Inc.,
490 N.W.2d 888, 892 (Minn. App. 1992) (concluding that consumer fraud
statutes were designed to protect and enhance public interests), aff'd, 500
N.W.2d 788 (Minn. 1993); see also State v. Brown, 486 N.W.2d 816, 817
(Minn. App. 1992) (concluding that Minnesota gambling industry "is highly
regulated to prevent its commercialization and to ensure that profits
generated from gambling are used for lawful purposes"). The state's
interest in providing a forum to enforce its consumer protection laws
weighs in favor of exerting jurisdiction over appellants. See Reader's
Digest, 501 P.2d at 303 (holding that Washington court had jurisdiction
over foreign defendant that advertised there, noting that "[i]f our courts
are not open, the state will be without a remedy in any court and the
Consumer Protection Act will be rendered useless").
5. Convenience of Parties.
The convenience of the parties is "of minor interest in comparison to the
first three factors." Rostad, 372 N.W.2d at 722.
As technological progress has increased the flow of commerce between
States, * * * progress in communications and transportation has made
defense of a suit in a foreign tribunal less burdensome.
Hanson, 357 U.S. at 250-51, 78 S. Ct. at 1238.
Appellants argue that the district court placed excessive weight on
WagerNet's statement that it reserved the right to sue customers in the
customer's home forum or Belize, at WagerNet's option, because WagerNet is
not a party to this action. The district court's decision, however, does
not rely significantly on WagerNet's claimed choice of forums. Moreover,
appellants do not contest the district court's finding that appellant
Rogers "makes all the decisions regarding WagerNet." "Foreign" corporations
that seek business in Minnesota and reserve the right to sue Minnesota
customers in courts here cannot claim inconvenience as an excuse to avoid
personal jurisdiction here, particularly in light of the state's interest
in regulating advertising and gambling. Appellants, an American corporation
and its officer, who facilitated WagerNet's solicitation of business in
Minnesota, have not shown that the inconvenience of defending themselves in
Minnesota would be so great, by itself, as to offend traditional notions of
D E C I S I O N
Appellants, through their Internet advertising, have demonstrated a clear
intent to solicit business from markets that include Minnesota and, as a
result, have had multiple contacts with Minnesota residents, including at
least one successful solicitation. The cause of action here arises from the
same advertisements that constitute appellants' contacts with the state and
implicates Minnesota's strong interest in maintaining the enforceability of
its consumer protection laws. Appellants have not demonstrated that
submission to personal jurisdiction in Minnesota would subject them to any
undue inconvenience. For these reasons, we hold that appellants are subject
to personal jurisdiction in Minnesota because, through their Internet
activities, they purposefully availed themselves of the privilege of doing
business in Minnesota to the extent that the maintenance of an action based
on consumer protection statutes does not offend traditional notions of fair
play and substantial justice.
 The balance of equities may be different where a defendant disseminates a message on the Internet for a purpose other than the solicitation of
business, but we need not decide that issue here.