I’ll try not to be too geeky here, but the Ninth Circuit issued an opinion recently in Boschetto v. Hansen , Case No. 06-16595 (Aug. 20, 2008) that tells us something about how our pre-www legal system handles rights and liabilities in this era of internet commerce.

The question: What happens in an Ebay auction goes bad? Boschetto won an eBay auction for a 1964 Ford Galaxie , for $34,106.  (Digression: I have to seriously question why anyone was offering that kind of coin for a mass produced Ford dating back to the Johnson administration. But I’m so underwhelmed by cars that it’s just me wondering…) Boschetto sued in California federal court after the car arrived because–here’s something you always need for a case–he was unhappy with the condition and the quality of the prized vehicle.  All of the defendants resided in Wisconsin.

Law 101 background: While it may seem overly formal, American courts can only act on a matter if they have jurisdiction over the parties and over the subject of the lawsuit. The Boschetto decision focuses on jurisdiction over the party (”personal jurisdiction”).  In the American system, personal jurisdiction requires a significant connection between the court excercising jurisdiction and the party. This ensures that an Oregon consumer can’t be sued in court in Vermont unless there is a connection between the Vermont court and the consumer related to the issue of the lawsuit.

How they got before the Ninth Circuit: After Boschetto filed suit in U.S. District Court in California, the Wisconsin defendants moved to dismiss. The Wisconsin defendants argued that the California court lacked personal jurisdiction, and the California court agreed and dismissed. So Boschetto appealed to the Ninth Circuit.

To the guts of it: There are a number of ways for a party to create jurisdiction in a distant state. But the big one that is relevant here is when a party “purposely avails” him/her/itself of the privileges related to doing business in the distant state. The Court decided that EBay auctions are nothing more than a general offering of goods to the highest bidder, no matter where the buyer is located, and sellers do not purposely avail themselves of the distant state’s protections simply by offering goods to the highest bidder. The Court carefully limited its ruling to cases like this one that involved a one-time sale of goods between parties in different states. So the result could be very different if the parties regularly did business, or if the seller agreed to additional duties besides the one-shot sale of goods.

What this means to consumers/eBay buyers: Back to buyer beware, I suppose. If a one-time eBay deal goes bad, and you have no other agreement about jurisdiction, you’ll have to go to the seller’s home state to seek a court’s assistance.  This isn’t to be alarmist…lots of deals that go bad don’t wind up in court. Nor should they. But it’s important to know what happens when things go bad.

Parting thoughts: When I started to read the opinion, I expected to think that the Court got it wrong. After all, a seller on eBay has to know that if things go bad, he or she could wind up in court in a distant state. But given the facts here and the rules of jurisdiction, seems like the Ninth got it right.

Okay, that’s a virtual overdose of law geek-hood. I have to imagine that this type of post isn’t of much interest to non-lawyers. But it caught my eye and sometimes, the fingers go where they will.

David Sugerman