Friday, April 30, 2004
Ninth Circuit to Review Ruling on Jurisdiction Over L.L. Bean
En Banc Panel Will Decide Whether Retailer’s California Marketing Activities Subject It to Suit
By DAVID WATSON, Staff Writer
An en banc panel of the Ninth U.S. Circuit Court of Appeals will review a September ruling by a three-judge panel, which held clothing retailer L.L. Bean had sufficient contacts with California to support jurisdiction in a declaratory relief action filed against it by a software developer.
In a brief order, Chief Judge Mary M. Schroeder said a majority of the court’s active judges voted to review the ruling in favor of Gator.com Inc. The company sued in federal court after L.L. Bean sent it a cease-and-desist letter objecting to the firm’s distribution of a “digital wallet” to Internet shoppers.
The software keeps track of the shopper’s passwords, credit card numbers and personal information, but also provides discount coupons for the products of a competitor when the user visits certain retailers’ Web sites. Users of the program who visited the L.L. Bean site received an Eddie Bauer coupon via a pop-up window.
U.S. Magistrate Judge Maria-Elena James of the Northern District of California granted L.L. Bean’s motion to dismiss the action in which Gator sought a declaration that its program did not infringe on the Bean trademark or violate any law. She found the court lacked personal jurisdiction over L.L. Bean, which is incorporated in Maine.
While the retailer does not have offices, maintain an agent for service of process, or pay taxes in California, it sells millions of dollars of goods to California residents each year through its catalogues and Web site.
Writing for the three-judge panel in September, Senior Judge Warren J. Ferguson said it was a “close question” whether L.L. Bean’s marketing activities directed at California consumers were sufficiently systematic and continuous to support general jurisdiction, but he and his two colleagues concluded that they were.
“L.L. Bean’s contacts are part of a consistent, ongoing, and sophisticated sales effort that has included California for a number of years,” the judge explained.
He added that the company’s Internet sales activities alone would support general jurisdiction under the “sliding scale” test that the Ninth Circuit and other federal courts have adopted for Web-based marketing.
The judge rejected L.L. Bean’s argument that it would be unreasonable to burden the company with the task of litigating in California when its offices, records and personnel were all located in Maine.
“This argument lends little support to L.L. Bean’s case, given that it is a multi-million dollar company that concedes that its agents regularly do business around the country, including flying to California to meet with vendors,” Ferguson declared.
The court also said yesterday it would review en banc a November panel decision that a direct-mail marketer of magazine subscriptions failed to state a claim it was defamed by Oregon state officials who allegedly described its solicitations as deceptive, “misleading,” and “phony.” The panel found the plaintiff was unable to meet the “stigma-plus” test applicable to defamation claims brought under 42 U.S.C. Sec. 1983 and that the district court properly abstained from hearing its claim for declaratory relief because the state had notified the plaintiff it intended to pursue civil remedies based on the conduct that was the subject of the declaratory relief claim.
The cases are Gator.com Corp. v. L.L. Bean, Inc., 02-15035, and American Consumer Publishing Association, Inc.v. Margosian, 01-36113.
Copyright 2004, Metropolitan News Company