District Court Asserts Jurisdiction Over Canadian Company Based on Internet Sales Facilitated by Independent Contractors

The World in U.S. Courts: Summer and Fall 2016 - Personal Jurisdiction/Forum Non Conveniens/ Foreign Sovereign Immunity Act (FSIA) | June.29.2016

Premium Nutraceuticals, LLC v. Leading Edge Marketing, Inc., U.S. District Court for the Southern District of Georgia, Augusta Division, July 12, 2016

Plaintiff Premium Nutraceuticals filed suit in U.S. District Court in Georgia against defendant Leading Edge, a Canadian corporation that developed and sold products (sexual enhancement supplements) similar to those developed and sold by Premium. Premium’s allegations against Leading Edge included claims for unfair business practices, unfair competition, illegal cybersquatting, false advertising, and misuse of Premium’s trademark.  Among other arguments, Leading Edge moved to dismiss Premium’s claims for lack of personal jurisdiction.

 

The Court used a two-part test to determine whether personal jurisdiction could be asserted against Leading Edge.  First, Leading Edge was required to have “minimum contacts” with the forum State of Georgia.  The Court found that Leading Edge had done business in Georgia (1.44% of Leading Edge’s sales relevant to Premium’s claim in the year preceding the motion’s filing were to Georgia residents) and that these sales related to Premium’s claims.  It thus found the necessary minimum contacts.

 

Second, the Court then turned to the question whether asserting jurisdiction would otherwise be fair.  Leading Edge argued that exercising personal jurisdiction over it would offend traditional notions of fair play and justice for two reasons: (1) because as a Canada-based company, it would incur great hardship and expense if it were required to defend itself in Georgia; and (2), because it would be fundamentally unfair to require its employees to travel to a foreign country to defend a lawsuit based on sales facilitated through the company’s affiliate websites, which were created by “independent marketers” over whom it allegedly asserted no control.

 

The Court rejected these arguments because (1) financial hardship alone is insufficient to show that an exercise of personal jurisdiction would offend traditional notions of fair play and justice; and (2) there exists no controlling authority supporting defendant’s proposition that because a party’s contacts with a forum state were facilitated by independent contractors, it would be unfair to require it to litigate there.  As a result, the Court found that the criteria required for it to exercise personal jurisdiction over Leading Edge were satisfied, and therefore denied defendant’s motion to dismiss on that basis.

RETURN TO Summer and Fall 2016 Edition

RETURN TO The World in U.S. Courts Home Page

U.S. Laws Discussed

Editorial Board