The Eastern District of Virginia recently addressed the effect of technology on the traditional requirements for a state court to exercise personal jurisdiction over a defendant, in DeCusati v. Reiss Engineering, Inc., 3:15-cv-204-JAG (July 30, 2015). Personal jurisdiction hangs on due process concerns. Since a plaintiff chooses where the suit is litigated, the defendant must have some connection to the state to ensure an equal footing and to be constitutionally permissible. However, an out-of-state defendant can be subject to a state’s personal jurisdiction even if never physically present in the state. The internet has particularly required the courts to adjust the framework used to delineate personal jurisdiction to decide if a company can be sued in the court of another state such as Virginia.
Robert DeCusati is a Virginia resident who applied online for a CFO position with Reiss Engineering, Inc., a Florida-based company. DeCusati traveled to Florida for an interview. REI then extended DeCusati a position over email, contingent on him passing a background check. The parties kept regular communication through phone and email. After accepting the position, DeCusati went back to Florida for a training seminar. However, REI ultimately revoked the offer a few weeks later due to DeCusati’s bad credit scores.
DeCusati filed suit against REI in Virginia court alleging violations under the Fair Credit Reporting Act and the Fair Labor Standards Act. REI filed motions to dismiss the lawsuit for lack of personal jurisdiction and improper venue. Since REI is a Florida company, DeCusati had the burden of demonstrating that the company “purposefully availed” itself of “minimum contacts” in Virginia to be sued there. The Court focused on whether REI’s communications with DeCusati over email and telephone and its internet activity established personal jurisdiction, and whether REI specifically “reached into Virginia.”
While a defendant’s physical presence in a state is not necessary to subject the defendant to personal jurisdiction, in this case, the Court found that the parties’ telephone calls and emails were insufficient to form a basis for personal jurisdiction to be sued in Virginia. The Court reasoned that a defendant must actively reach into a state to transact business. Here, REI did not initiate contact with DeCusati. It simply posted an online job advertisement, which did not specifically target Virginia residents. The Court ruled that the “Internet does not change the basic precepts of personal jurisdiction.”
The Court also considered whether DeCusati’s employment contract constituted sufficient minimum contacts to support personal jurisdiction. Even though DeCusati entered into the contract in Virginia, the Court found that it was “unconnected to Virginia.” It observed that there was no evidence of a forum selection clause in Virginia, that the parties considered any business interactions in Virginia, or that REI hired DeCusati because he resided in Virginia.
With more commercial activity occurring exclusively on the Internet, businesses must be cautious and prepared regarding their potential liability and the types of internet activity that will permit them to be sued outside their home state. Businesses should keep abreast of such legal development and consider conducting regular self-audits to determine where their business transactions occur nationwide.
Sara Dajani is an attorney with the business law firm, Berenzweig Leonard, LLP. Sara can be reached at [email protected] Sara Almousa, a law student at the George Mason University School of Law and a law clerk at Berenzweig Leonard, LLP, also contributed to this article.