Steve Fogle's Feature

Steve Fogle's Feature Website's Role in Anchoring Jurisdiction in Texas: A New (or Old) Standard? By Steve Fogle and Melodee Gruber

On August 11, 2011, a divided panel of the First Court of Appeals in Houston, Texas, issued an opinion in Wilkerson v. RSL Funding¹ which some are calling a new standard for internet jurisdiction. The crux of the issue before the Court was whether the type of internet activity – interactive usage versus a passive usage – should control the jurisdictional analysis.

The story behind this unusual case begins with some good luck. California resident Trisha Wilkerson won the California state lottery and, wanting to cash out her earnings, entered into a contract with Texas-based RSL Funding, who gave Trisha a lump-sum payment in exchange for her future lottery payments. The agreement was offered by mail between RSL in Texas and Trisha in California. Thereafter, it's safe to say Trisha's experience with RSL was less than optimal. This led Trisha's father (the actual Wilkerson party to this suit) to post several unflattering comments about RSL on the internet. Mr. Wilkerson meant to post his remarks on RSL's own website but was unsuccessful in navigating the universe of the internet in order to leave his missive with RSL. Instead, his unflattering complaints were posted on a third-party website and reached a larger and, in RSL's eyes, substantially more damaging audience.

RSL sued Mr. Wilkerson in Texas state court for defamation, libel and business disparagement. Wilkerson pled his lack of contacts with Texas and asked the court to dismiss the case for lack of personal jurisdiction over him. The trial court declined to grant the dismissal. This led Wilkerson to appeal to the First Court of Appeals in Houston which reversed and rendered a judgment of dismissal in his favor.

As in most jurisdiction opinions, the result of the case was fact-driven. The only communication between Trisha and RSL was the contract mailed between Texas and California. Mr. Wilkerson's connection with Texas was limited to his internet postings about RSL. Ultimately, the Court concluded that the State of Texas did not have personal jurisdiction over Mr. Wilkerson on these facts. While the outcome may not be surprising, the point of this article is how the Court analyzed the facts.

Instead of relying on the sliding-scale jurisdictional analysis first utilized in Zippo Manufacturing Co. v. Zippo Dot Com, Inc.,² which both parties urged, the Court based its ruling on the traditional constitutional standard of purposeful availment. According to the majority opinion, the Zippo sliding-scale test is inadequate to measure a non-resident's purposeful availment because the interactive features of the website are the creations of the owners and operators of the websites – not the non-resident user. As such, the majority felt that analysis of a website's interactivity is not useful in determining whether jurisdiction should be exercised over a third-party user of that website. Because Mr. Wilkerson's comments were made available to anyone interested in them and not knowingly or intentionally directed to a Texas audience, the Court concluded that Wilkerson did not purposefully avail himself of the Texas jurisdiction such that it would be fair to haul him into a Texas court.

The dissenting opinion, of course, took the majority to task not only for using the traditional test but also for failing to recognize that Wilkerson had sufficient contacts under either the traditional test or sliding-scale (and thus had purposefully availed himself of the Texas jurisdiction).

Only time will tell whether the Wilkerson Court's approach to jurisdiction over a non-resident based on the use of a third party's interactive website will hold up or whether other appellate courts will take an entirely different approach. The final answer will likely have to come from the Texas Supreme Court. At press time, RSL had filed a motion for rehearing with the Court of Appeals. It is unknown if RSL will be taking the question up , but it seems likely someone will have to eventually. Stay tuned.

¹Wilkerson v. RSL Funding, L.L.C., No. 01-10-01001-CV, 2011 WL 3516147 (Tex. App.—Houston [1st Dist.] Aug. 11, 2011, no pet. h.)

²952 F.Supp. 1119 (W.D.Pa. 1997). Under Zippo, personal jurisdiction can be constitutionally exercised in direct proportion to the nature and extent of the non-resident’s activities on the internet. Id. at 1124. At one end of the scale, jurisdiction may be extended where a non-resident “clearly does business” in Texas such as entering a contract and knowingly exchanging data over the internet. At the opposite end of the spectrum, jurisdiction may not be had over a non-resident for maintaining a “passive” website that simply posts information accessible to Texas users. Id.