Masood H. Sayeedi, Claimant, against Timothy D. Walser, Defendant.

Civil Court of the City of New York, Richmond County

 2007 NY Slip Op 27081; 2007 N.Y. Misc. LEXIS 497

February 27, 2007, Decided

OPINION: Philip S. Straniere, J.

Plaintiff Masood H. Sayeedi, a resident of Staten Island, New York, commenced this action against Defendant Timothy D. Walser, a resident of Houston, Missouri, for breach of contract resulting from the internet sale of an automobile engine. Plaintiff purchased the engine via "eBay."

      EBay is a popular internet service that provides consumers with a way to buy and sell new or used goods in an auction style format over the internet. In 1995 eBay was one of the first to pioneer what has now become a ubiquitous form of e-commerce. As facilitators and providers of eBay-type services continue to increase in popularity courts are, not surprisingly, faced with the task of applying settled law to modern technological dilemmas. The case at bar is a case that requires such application.

A. Do eBay users surrender their rights to bring legal actions against one another upon agreeing to the terms and conditions of the "eBay user agreement?"

Ebay transactions take place only between registered users and both the buyer and the seller must have registered eBay accounts before any sale or purchase can occur. Before an individual can start an eBay account the user must agree to a standard "click through" or "click wrap" agreement setting out eBay's requirements for membership entitled "eBay user agreement." Although this agreement contains a section entitled "Resolution of Disputes," said section only governs disputes brought directly against eBay, itself, by users, and not disputes between users. Although dispute resolution options are provided, and albeit encouraged by eBay, the user agreement does not explicitly limit a user's traditional common law rights to seek redress for tortious activity. Therefore, an action in Civil Court is an available remedy.

B. Is a non-resident defendant subject to New York jurisdiction on the basis of a single on-line auction for goods placed on an international web site?

The New York Civil Court Act (CCA) confers, upon courts, jurisdictional power over non-residents in three situations. The first is if the non-resident "transacts any business within the city of New York or contracts anywhere to supply goods, or services in New York;" the second is if the non resident "commits a tortious act within the city of New York" (with the exception of defamation); and the third is if the non-resident "owns or possesses any real property within the city of New York."(CCA § 404 [a] [1],[2], and [3], respectively)

CCA § 404's far reaching nature has limits. The requirements for personal jurisdiction set out in CCA's long arm statute requires nothing less than the due process guarantees provided by the United States Constitution. The inquiry and requisite criteria for establishing personal jurisdiction over a non-domiciliary was set out in the seminal U.S. Supreme Court case International Shoe Co. v. Washington (326 U.S. 310, 316 [1945]) and its progeny. An assertion of jurisdiction meets the Int'l Shoe Co. requirements only if the out-of-state defendant has "purposefully directed" his or her activities at residents of the forum, and if the plaintiffs claims "arise out of or relate to" those activities.(Burger King v. Rudzewicz, 471 U.S. 462 [1985].) Isolated contacts may support jurisdiction only if a substantial connection with the forum state is created and such contacts must be more than "random, fortuitous, or attenuated" (Id. at 475-76).

a. Does CCA § 404's "supply goods, or services" requirement, bypass a minimum contacts analysis or must one still be conducted?

CPLR 302(a)(1) was amended in 1979 (the language was subsequently incorporated into CCA § 404) to permit the assertion of long-arm jurisdiction where the plaintiff's cause of action arises from a contract "to supply goods or services in the state," without regard to where the contract was made. It is clear that the exercise of jurisdiction is not proper under every set of facts that seemingly fit a straightforward reading under the statute. The stated purpose of CPLR § 302 and CCA § 404 was to embrace nonresidents who have engaged in purposeful activities in connection with the matter in suit and to extend as far as due process will allow. To determine this limit, New York courts have adopted requirements that mirror the Int'l Shoe Co test. The New York personal jurisdiction inquiry requires an affirmative answer to the following questions: (1) is the quality of the New York contact of such a nature that a non-resident defendant can be deemed to have purposefully invoked the benefits and protections of New York law, and (2) does the claim in question arise out of that purposeful New York activity. As David Siegel notes in CPLR § 404 practice commentaries "the case law on [long arm jurisdiction] is immense and almost every case is just a sui generis inquiry into whether or not the acts performed by the defendant constituted the [necessary] contacts."

Accordingly, in order to assert jurisdiction under CCA § 404 analysis, an inquiry into the twofold minimum contacts test described above must be made.

b. Did the Defendant transact any business within the city of New York or "contract anywhere" to supply goods, or services in New York, to a degree sufficient to satisfy constitutionally mandated minimum contacts?

The Defendant in this case created a username, posted an item for sale on eBay, and shipped the item to the highest bidder. The New York Court of Appeals has held, on more than one occasion that the "mere shipment" of goods into New York does not qualify as a sole basis for personal jurisdiction. In order for jurisdiction to attach, any such shipment had to be part of a larger transaction in which the defendant engaged in some relevant acts within the state. This principle has endured even after the "contract anywhere to supply goods, or services in New York" language was incorporated into CCA § 404. (See McGowan v. Smith, (52 N.Y.2d 268, 419 N.E.2d 321, 437 N.Y.S.2d 643 [1981]). In McGowan the court ruled that long-arm authority does not extend to a non-domiciliary who merely shipped goods into the state without ever crossing its borders; and further required some purposeful activities within state in order to justify bringing a non-domiciliary defendant before New York state courts. (See also, Paradise Products Corp. v. Allmark Equipment Co., 138 A.D.2d 470, 526 N.Y.S.2d 119 [2d Dep't 1988], where plaintiff's New York suit for breach of contract lacked jurisdiction because the defendant's mere "knowledge that a product may be destined for a particular forum" was deemed insufficient contact with the State.)

Similarly, in Messilia v. Costa, (2/14/2000 N.Y.L.J. 32, [col. 2]), this Court had the occasion to consider whether a Florida defendant who entered into a contract to ship computer goods to the plaintiff in New York, who then repackaged the products for sale outside the country, satisfied CPLR § 302's "contract anywhere" clause. In Messilia defendant was a local computer supply retailer that had no other contacts with New York other than the shipment of computer goods to plaintiff, defendant had no other customers in New York and only, perhaps, one other account outside of Florida. Customers were able to place orders either by telephone, or facsimile transmission. Even though the defendant maintained a passive website, it functioned only as an informational conduit, all orders had to be placed via some conventional means of communication. This Court considered the constitutional grounds for which CPLR § 302 rests: namely: (1) the contract will have contemplated that the defendant's promised action would have a New York "effect" so there is no surprise or absence of purposeful activity by the defendant: and (2) the total failure to perform a contract to deliver goods or perform services in New York can have direct consequences in the state, no less so than if the contract were performed but inadequately. (Weinstein, Korn & Miller, New York Civil Practice CPLR § 302.11a). Since defendant's actions had no "effect" in New York, given plaintiff's reselling of the products, the Court determined that despite CPLR § 302's expansive language, constitutional limits nonetheless restricted the exercise of jurisdiction.

Although there appears to be no New York cases on whether jurisdiction is proper specifically as a result of a single on-line auction for the sale of a good that was shipped in-state, the First Department in Jones v. Munroe (NY 2 Misc 3d 24, 773 N.Y.S.2d 498 [2003]) upheld a dismissal for failure to meet the requirements of CCA § 404 where a Florida resident defendant sold to plaintiff an automobile through eBay. Munroe, however, did not involve the shipment of goods to the plaintiff's residence in New York. The automobile was retrieved by the plaintiff from the defendant's state of residence in Florida. The court ruled such contacts were insufficient to confer personal jurisdiction.

The situation, such as this case, where a single online auction is conducted through eBay (or some similar on-line auctioneer) and goods are actually shipped to the buyer's state appears not to have been addressed by any other New York court. Although several non-New York courts have had the occasion to consider the issue, the majority of these courts have held that the usual online auction process does not rise to the level of purposeful conduct required to assert specific jurisdiction. (See United Cutlery Corp. v. NFZ, Inc., 2003 U.S. Dist. LEXIS 21664, 2003 WL 22851946, [D. Md. 2003]; Machulsky v. Hall, 210 F. Supp. 2d 531, 544-45 [D.N.J. 2002]; Winfield Collection, Ltd. v. McCauley, 105 F. Supp. 2d 746, 749 [E.D. Mich. 2000]; Boschetto v. Hansing, 2006 U.S. Dist. LEXIS 50807, 2006 WL 1980383 [N.D.Cal.]).

The typical eBay sale is conducted as follows: "A seller advertises an item on the eBay interface, using a template. The seller establishes a minimum initial bid and a deadline for the item's auction to end. Buyers may then bid for the item through the eBay interface, which for each item posts the current bid and the time remaining. At the expiration of the auction period, the highest bidder wins the item. EBay puts the seller and winning buyer in contact by email to arrange payment and shipping". (Action Tapes Inc. v. Victoria Weaver, 2005 U.S. Dist. LEXIS 29312, 2005 WL 3199706 [N.D. Tex] at *1). The courts finding no jurisdiction often have focused on the logistics germane to an on-line auction where the "choice of [the] highest bidder is beyond the control of the seller," (Winfield Collection, 105 F. Supp. 2d, 746), and similarly that the only intent manifested by the eBay seller is to "sell to the highest bidder, regardless of identity or location" (United Cutlery, 2003 U.S. Dist. LEXIS 21664, 2003 WL 22851946 at *4). These courts have reasoned where the eBay seller has no authority over the audience to which the listing of their good(s) are disseminated, (Id), such sales are merely "random" and "attenuated" contacts and do not raise to the level of "purposeful availment" required to meet due process.

The few courts that have found personal jurisdiction over purely on-line auction sales have focused primarily on the sophistication of the seller. (See, e.g., Dedvukaj v. Maloney, 447 F. Supp. 2d 813 [D. Mich. 2006]). Traditionally, courts have applied the "sliding scale" test in internet jurisdiction cases, which seeks to distinguish interactive from passive websites (see Zippo Mfg. Co. v. Zippo Dot Com, Inc. 952 F. Supp. 1119 [W.D.Pa.,1997]). Under the Zippo sliding scale test, "proper exercise of personal jurisdiction in a claim involving Internet contact is directly proportional to the commercial interactivity of the website over which the contact is made" (Action Tapes, 2005 U.S. Dist. LEXIS 29312, 2005 WL 3199706 at *2, [internal citations omitted]). However, this mode of analysis makes little sense in the eBay context since eBay, and not the user, controls the interactivity and marketing efforts of the website. As noted in Action Tapes, the sellers and buyers who connect through eBay "cannot be said themselves to control eBay's degree of commercial interactivity any more than a buyer and seller at Sotheby's can be said to be responsible for the premises or to control the auctioneer" (Id). Accordingly, the "sliding scale" standard is not applicable in the current case. Courts such as Dedvukaj appear to be applying a modified Zippo analysis, aimed not at determining the interactivity or passivity of the eBay internet site itself, but instead seeking to distinguish between the purposeful activity and the impressions created by the activity and representations of the individual eBay user from the standard content, templates, and general structure provided to all eBay users.

 Regardless of whether such a sliding scale analysis is employed or not, the crucial question remains whether the quality of the New York contact was of such a nature that the defendant can be said to have purposefully invoked the benefits and protections of New York law (Hutton v. Piepgras 451 F. Supp. 205 [1978, SD NY].) In the case at bar the contacts of the Defendant, as presented by Plaintiff, fail to meet the Hutton requirements. It has not been shown to this Court's satisfaction that the Defendant purposefully invoked the benefits and protections of New York law. No evidence was provided by Plaintiff as to Defendant's overall eBay statistics, experience, or of any marketing directed at potential customers, designed for instance, to welcome bids from New Yorkers or any other acts that indicate Defendant may be purposely availing himself specifically to the business of New Yorkers or any desire to take advantage of New York law. The Defendant was prepared to sell his Chevrolet engine to whoever the highest bidder happened to be regardless of the state in which they happened to reside. Given this unique sale style, even though a contract may be formed, the location of delivery is not likely in the seller's realm of contemplation. In the typical on-line auction sale the ultimate destination of any item is completely determined by the potential buyers through the bidding process. Accordingly, to summon the Defendant into a New York court on this matter would contravene the traditional notions of "fair play" and "substantial justice" that have become the touchstone of personal jurisdiction.

In view of the fact that the Court has no jurisdiction to decide this matter, the Court recommends that Plaintiff utilize one of the many on-line dispute resolution options provided by eBay to its members to resolve this matter. Alternatively, Plaintiff should investigate his options under "PayPal Buyer Protection" which provides coverage on items purchased on eBay where payments, as here, are made via eBay's PayPal electronic payment service.

Plaintiff's cause of action is dismissed. The Court lacks the personal jurisdiction required to reach the merits of this case. A single transaction conducted on-line via eBay between members where one member is a resident of a state other than New York, without more, does not constitute sufficient purposeful availment to satisfy the minimum contacts necessary to justify summoning across state lines, to a New York court, the seller of an allegedly non-conforming good.

Dated: February 27, 2007