Lang & Klain, PLC





William G. Klain

In a Lawsuit Arising from an Online Transaction,
Where Should an Unhappy Buyer File Suit?

When the car that a Tucson man purchased on eBay didn’t live up to its description, his lawsuit
against the Michigan seller was dismissed because Arizona courts lacked jurisdiction

In 2007, Tucson resident Jimmie Holland bought a 1976 Cadillac on eBay from a Michigan resident. Holland paid $15,100 for the car, sight unseen, and paid an additional fee to have the car transported from Michigan to Tucson. His only contacts with the seller were via emails (through eBay) and telephone calls that Holland initiated.

When the car arrived in Arizona, Holland discovered that it needed repairs and otherwise fell short of the seller’s description in the eBay listing. In an attempt to get his money back, Holland sued the seller in Pima County Superior Court.

The seller asked that Holland’s suit be dismissed on the grounds that the Arizona court did not have “personal jurisdiction” over him because he lacked “sufficient contact” with Arizona. After a hearing, the court granted his motion to dismiss, and Holland appealed, resulting in an Arizona Court of Appeals ruling in Holland v. Hurley.

This case touched on two types of personal jurisdiction: general and specific. “General” jurisdiction applies only when the defendant has “substantial” or “continuous and systematic” contacts with the state, while “specific” jurisdiction focuses on the scope and nature of the relationship between the defendant and the state arising from the transaction or event underlying plaintiff’s claims. The Michigan seller did not have an Arizona office or other physical presence, nor was anyone in Arizona acting on his behalf. Consequently, he was not subject to Arizona’s general jurisdiction.

While Holland conceded that general jurisdiction was not an issue, he asserted that Arizona courts did indeed have specific jurisdiction over the Michigan seller. He claimed support for his argument in the Arizona Supreme Court’s Cybersell ruling, which states, in part, that:

When [a defendant is not subject] to general jurisdiction, the court may still find specific jurisdiction if: (1) the defendant purposefully avails himself [emphasis added] of the privilege of conducting business in the forum; (2) the claim arises out of or relates to the defendant’s contact with the forum; and (3) the exercise of jurisdiction is reasonable.

With regard to “purposeful availment,” Holland argued that the seller did not have to “purposely direct his actions toward Arizona” to be subject to Arizona’s jurisdiction; rather, it was sufficient that the seller “directed his actions toward each and every state when he placed the Cadillac for sale on eBay.” In other words, according to Holland, the seller’s use of eBay to sell the car should have subjected him to specific jurisdiction in all 50 states.

The Court disagreed.

The seller did not market and sell the car via his own website; rather he sold it on eBay, a massive third-party website over which the seller could exercise no control as to scope of communication or degree of interactivity. Further, since eBay is an auction site where sales are generally made to the highest bidder, the seller could not even dictate to whom he would sell the car or where the buyer might be located.

Further undermining Holland’s argument that the seller was subject to Arizona courts’ jurisdiction was the fact that the sale of the Cadillac was a one-time contract for sale of a good that involved Arizona only because that is where Holland happened to live. The seller did not make any marketing efforts in Arizona or that were specifically directed at Arizona. Thus, the Court concluded, the relationship, if any, between the seller and Arizona was irrelevant to this particular sale.

In reaching that conclusion, the Court looked to the U.S. Ninth Circuit Court of Appeals decision in Boschetto, a case in which the facts were very similar to this one. In Boschetto, the Court concluded that “the lone transaction for the sale of one item [also an automobile on eBay] does not establish that [the nonresident defendant seller] purposefully availed [himself] of the privilege of doing business in California. Because the seller’s interaction with California was merely a 'one-shot affair,' it was insufficient to establish minimum contacts.”

That the ruling was specific to “this particular sale” is significant, as the Court’s opinion conceded the possibility that “an out-of-state eBay seller could be subject to Arizona’s jurisdiction.” In this case, however, Holland failed to meet his burden ‘to come forward with facts, by affidavit or otherwise, supporting personal jurisdiction.’”

In the end, one could argue that, because the car was (a) sold in Michigan, (b) by a Michigan seller who apparently was in Michigan when he allegedly misrepresented the car’s condition in his eBay product description, and (c) delivered to Arizona from Michigan, Holland should have sued the seller in Michigan. There would have been little question as to jurisdiction, and when all the dust had settled, Holland might have gotten his money back.

However, he chose to fight his legal battle in Arizona, where he was left empty-handed and where future Arizona buyers and sellers were given additional legal guidance as to jurisdictional issues when an internet auction deal goes bad.