In Herbal Brands, Inc. v. Photoplaza, Inc., the court considered whether defendant had sufficient minimum contacts for personal jurisdiction in Arizona.[i] Plaintiff, Herbal Brands, Inc. (“Herbal Brands”), is a Delaware corporation with its principal place of business in Arizona. It creates and sells health and wellness products. It also enters into agreements with third parties to sell the products as authorized sellers.
The defendants, Photoplaza, Inc.; Goldshop 300, Inc.; Goldshop, Inc.; Instock Goodies, Inc.; TZVI Heschel; Schloma Bichler; and Lali Dats were residents of New York who conducted e-commerce under the umbrella of Amazon storefronts. Herbal Brands alleged defendants had sold more than 23,000 Herbal Brands products at the time of the filing of the lawsuit.
Prior to bringing suit, Herbal Brands sent three cease-and-desist letters to defendants asserting defendants were infringing on Herbal Brands’ trademark, tortiously interfering with Herbal Brands’ agreements with authorized sellers, and that defendants were particularly harming Herbal Brands in Arizona, the state where it maintained its principal place of business.
Herbal Brands filed suit in federal court bringing claims for: (1) trademark infringement and unfair competition under the Lanham Act and Arizona law; (2) false advertising under the Lanham Act; and (3) tortious interference with contracts and business relationships under Arizona law.
Defendants filed a motion to dismiss based on lack of personal jurisdiction. Herbal Brands responded and submitted an affidavit listing 25,700 allegedly infringing products being sold as of July 2021. The district court granted defendants’ motion to dismiss, finding Herbal Brands failed to meet its burden that defendants “expressly aimed” their conduct at Arizona.[ii] Herbal Brands appealed.
The appellate court determined when defendants filed their motion to dismiss, they failed to provide any evidence to dispute the jurisdictional allegations in the complaint. The appellate court then applied a three-part test analyzing the applicability of the Arizona long-arm statute to determine whether defendants availed themselves of Arizona’s personal jurisdiction. In applying the three-part test, the appellate court determined:
- Defendants purposefully directed its activities at the forum in Arizona;
- Herbal Brands’ harm arose out of defendants’ contact with Arizona; and,
- Exercise of jurisdiction over defendants was reasonable.
As it relates to the first part of the test, purposeful availment, the appellate court determined defendants directed their activities towards Arizona and thereby opened themselves up to personal jurisdiction. The appellate court found defendants did this by hosting e-commerce storefronts via website, which was interactive. In this interactive capacity, visitors to the website could input their own information in search for products, but defendants did not only host the website. Defendants operated the interactive website as well as “something more.” This “something more” was defendants’ delivery of the infringing Herbal Brands products to residents of Arizona, which thereby opened them up to personal jurisdiction. The appellate court stated, “[w]e hold that, if a defendant, in its regular course of business, sells a physical product via an interactive website and causes that product to be delivered to the forum, the defendant has purposefully directed its conduct at the forum such that the exercise of personal jurisdiction may be appropriate.”[iii]
The second and third part of the test were satisfied as Herbal Brands claimed the harm to it arose out of and due to defendants’ conduct of selling the products to Arizona residents. Additionally, defendants did not meet their burden to dispute the exercise of personal jurisdiction. To do so, defendants would have to show it would be unreasonable to exercise personal jurisdiction. The appellate court evaluates reasonableness based on seven factors:
(i) the extent of the defendant’s purposeful interjection into the forum state’s affairs; (ii) the burden on the defendant of defending in the forum; (iii) the extent of conflict with the sovereignty of the defendant’s state; (iv) the forum state’s interest in adjudicating the dispute; (v) the most efficient judicial resolution of the controversy; (vi) the importance of the forum to the plaintiff’s interest in convenient and effective relief; and (vii) the existence of an alternative forum.[iv]
Defendants never addressed any of these factors in their determination that it was unreasonable.
Technology and e-commerce are changing the landscape for businesses. The rise of online shopping makes it more difficult to determine where a business may be forced to defend itself in a lawsuit. A skilled attorney can review a business’s plan and advise what defenses may be appropriate and whether there is jurisdiction.
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[i] See generally, Herbal Brands, Inc. v. Photoplaza, Inc., No. 21-17001, 2023 WL 4341454 (9th Cir. July 5, 2023).
[ii] Id. at *5.
[iii] Id. at *2.
[iv] Freestream Aircraft (Bermuda) Ltd. v. Aero Law Grp., 905 F.3d 567, 607 (9th Cir. 2018).