David Doty writes:

The U.S. Bankruptcy Court for the Northern District of California recently held that a Hong Kong resident who had made online purchases of wine through a California retailer was subject to personal jurisdiction. See Kasolas v. Yau, Adv. Pr. No. 18-04012 (N.D. Cal. Bankr. May 11, 2018).

The defendant, a Hong Kong resident, had been a frequent customer of the debtor’s California wine-retail business, which made wine shipments to Hong Kong upon the defendant’s request. Though the defendant maintained an active business relationship with the wine-retailer, most of his interactions were conducted online while he was physically present in Hong Kong.

The bankruptcy trustee commenced an adversary proceeding against the defendant for recovery of fraudulent transfers. In response, the defendant moved to dismiss for lack of personal jurisdiction, arguing that he had not purposefully availed himself to the fora of the United States or California because he had never been physically present in either when these transactions took place.

The hallmark guidance for determining personal jurisdiction was expressed in Burger King Corp. v. Rudzewicz, in which the Supreme Court held that the exercise of specific personal jurisdiction over a nonresident defendant is proper if the defendant purposefully directed his activities at the forum, and the litigation results from injuries arising out of those activities. 471 U.S. 462, 472-73 (1985).

The bankruptcy court addressed the defendant’s argument by applying the Ninth Circuit’s three-part test for personal jurisdiction over a nonresident defendant, which considers factors relating to (1) personal availment, (2) relational proximity between the activities and the underlying claim, and (3) the reasonableness of jurisdiction if exercised. Though the bankruptcy court ultimately found all three prongs to be satisfied, it is the bankruptcy court’s discussion and treatment of purposeful availment that merits particular attention for its implications on an ever-growing online market.

Although there was evidence suggesting that defendant had made in-person purchases in California on at least one occasion, the bankruptcy court found his online contacts with the wine-retailer to be sufficient in and of themselves for purposes of asserting personal jurisdiction. First, relying, in part, on Burger King, the bankruptcy court reiterated that physical presence in a forum is not a necessary prerequisite for a court in that forum to assert personal jurisdiction over a nonresident defendant. Second, the bankruptcy court attached significant weight to the notice the defendant had of his activities being directed toward California and, by extension, the United States. The bankruptcy court determined that the defendant not only had personal knowledge of the wine-retailer’s location being in California, but that his knowledge was further bolstered by the terms and conditions on the wine-retailer’s website which indicated that it was indeed a California company.

Here, the bankruptcy court extended personal jurisdiction across borders in an increasingly internationalized online market made possible by technological advances – progress that the bankruptcy court opined only “strengthens the underlying rationale” of Burger King and its jurisprudential lineage. While the practical implications of this decision can be easily imagined, this case nevertheless demonstrates one of many ways in which the law continues to adapt to growing commerce.

David Doty is a summer associate in the firm’s Philadelphia office.