Nam Tai Electronics, Inc. v. Joe Titzer

Respondent, using seven different aliases, posted 246 messages on Yahoo!
Internet message boards, some of which were devoted to discussions of appellant’s
stock. Yahoo! is a California corporation based in Santa Clara, California. In
order to avail himself of the opportunity to post on a Yahoo! message board,
respondent was required to register a nickname or alias known as a Yahoo! ID, and
agree to Yahoo!’s terms of service. The terms of service include a promise not to
post any content that is unlawful, defamatory, libelous or otherwise objectionable.
The terms of service further state that the relationship between the person
registering and Yahoo! shall be governed by the laws of the State of California,
and that both agree to submit to the personal and exclusive jurisdiction of the
California courts.

Appellant contends that at least three of the messages posted by respondent
were false, defamatory, misleading, or otherwise unlawful. The messages at issue
stated that appellant had colluded with other companies to win contracts in
restraint of free trade and that it was losing business to another China-based
electronics manufacturing firm. In July 2000, appellant filed a complaint for libel,
trade libel, and violations of Business and Professions Code section 17200 against
the unknown author of the three messages. After some investigation, appellant learned that respondent was the author, and the complaint was amended to add him
as the true defendant. Respondent was personally served with the complaint in
Colorado in December 2000, and immediately moved to quash for lack of personal
jurisdiction. Hearing was set for March 2, 2001.

On February 15, 2001, counsel for respondent filed a status conference
questionnaire which stated respondent had specially appeared and filed a motion to
quash to be heard on March 2. At the status conference that was attended by
counsel for both sides, the court set a trial date and final status conference date.

At the subsequent hearing on the motion to quash, the court granted the
motion. The court found that specific jurisdiction could be based on the fact that
respondent “derived benefit from California” by having “an account contract with
Yahoo!, a California-based Internet company, that permitted him to post messages
on a Yahoo!-maintained bulletin board.” Nevertheless, the court concluded that
“while specific jurisdiction could be extended over [respondent] it would not
comport with traditional notions of fair play and substantial justice to do so,”
explaining at length why it believed this was so: “1. [Appellant] is not a
California resident. It filed suit in California to conveniently obtain subpoena
power over Yahoo!, which it then used to compel Yahoo! to disclose the name of
the person who posted the alleged defamatory messages on the Yahoo! bulletin
board devoted to [appellant] corporation. [] 2. [Respondent’s] messages did
not have a peculiar California impact. [Respondent’s] messages posted to the
bulletin board were disseminated world-wide. [Respondent’s] messages, in other
words, were not California-directed and had no peculiar impact on California
residents. . . . [] 3. That the Yahoo! employees who maintained the electronic
bulletin board are located in California is incidental. The Yahoo!-maintained
bulletin board is part of a world-wide communications network that is accessible to
any Internet user. The bulletin board is interactive: messages may be posted on it
from any Internet portal by a Yahoo! account subscriber. [] 4. [Respondent] accessed and posted to the bulletin board from outside California. [] [5.]
[Respondent] is an individual and resides in Colorado. [Respondent] using
keystrokes from his computer entered an account contract with Yahoo! over the
Internet. He posted the 246 messages to Yahoo!-maintained bulletin boards,
including the three that are allegedly defamatory toward [appellant], from a
computer terminal in Colorado. He has not conducted any commercial activities
in California, and owns no property in California.”

The court also ruled that respondent did not waive his right to challenge
jurisdiction by filing the status conference questionnaire or by participating in the
status conference because (1) the status conference was a matter of routine set by
the court’s staff and when counsel for respondent called to seek a continuance he
was wrongly informed by the courtroom assistant that it could not be continued;
(2) counsel alerted the court that respondent was making a special appearance to
challenge jurisdiction; and (3) the court agreed that counsel could make the
appearance without waiving jurisdiction.

Once service was quashed as to respondent, the complaint was dismissed
because there were no remaining defendants. Appeal was taken from the order
quashing service and dismissing the complaint.

The parties debate whether review of the trial court’s decision should be by
way of the substantial evidence test or independent review. Under either test
respondent would prevail, because we agree with the trial court that appellant has
failed to present persuasive evidence a relationship between this state and the
injury sufficient to justify the exercise of personal jurisdiction over respondent
under concepts of fair play and substantial justice.

Unknown

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Reported by Kent Morlan