SELLING TRAVEL SERVICES OVER THE INTERNET AND ITS IMPACT UPON JURISDICTION : UPDATED

Originally Published In The International Travel Law Journal, Issue Two, 1999 And May Not Be Reproduced Without The Permission Of Thomas A. Dickerson

September 1, 2000
Revision Number 1


By Judge Thomas A. Dickerson1

Consumer use of the Internet to plan travel and make reservations has risen dramatically in recent years.
" According to the Travel Industry Association of America, 52 million people used the Internet in 1999 to plan travel, a 54% percent increase from 1998. Sixteen and half million used the Internet in 1999 to make reservations, a 146 percent increase...According to Internet research company PhoCusWright, US consumers spent over $7 billion in 1999 on travel bought on the Internet, up from $2.6 billion in 1998. Internet bookings represented 5.4 percent of all airline bookings in 1999, up from 1.9 percent in 1998 "2.
While consumers remain cautious about the reliability of information3, the prospect of hidden fees4 and insecure credit card transactions5, travel shopping on the Web is increasing6, particularly, as suppliers such as hotels7 and air carriers8 offer exclusive fares on their own Web sites with 24 hour accessability9 and retailers continue to develop creative ways10 to sell travel services, e.g., Priceline11.
At the same time the Internet threatens to destabilize the existing retail distribution system by replacing travel agents12. Unlimited and unlicensed13 access to the Internet threatens consumers by exposing them to complex travel scams14 and boiler room operators15. And, lastly, the marketing of travel services on the Internet may expose foreign suppliers and tour operators to greater risk of being hailed before U.S. Courts to answer lawsuits brought by aggrieved travelers.

Personal Jurisdiction

In adjudicating an injured traveler's claim against a foreign supplier or tour operator the Court must have jurisdiction over the subject matter16 as well as personal jurisdiction over the parties. Traditionally, personal jurisdiction has depended upon physical presence in the forum. For example, if a foreign hotel17 or air carrier18 conducted business through an agent19, a wholly owned subsidiary20, a parent corporation21 or joint venturer22 or maintained an office with a staff, a bank account and a local telephone number then jurisdiction would, generally, be appropriate. The rationale being that in return for the privilege of doing business in the forum a foreign travel supplier or tour operator should be available to answer claims brought by injured travelers.
In the absence of physical presence, however, the assertion of personal jurisdiction is more problematical. For example, instead of maintaining an office in the forum a foreign travel supplier may conduct business through an agent23, independent contractor24, travel agent25 or tour operator26. Under these circumstances personal jurisdiction has been found if there was active solicitation of business plus contract formation in the forum. This concept, known as the " solicitation-plus " doctrine, is still followed with some exceptions27 by most U.S. Courts28 .

Long Arm Jurisdiction

Most States have enacted statutes providing for personal jurisdiction based upon certain minimal contacts29. For example, New York's long arm statute30 provides for personal jurisdiction over a non-resident if " in person or through an agent " he
" transacts any business within the state " or " commits a tortious act within the state " as long as the particular cause of action asserted is one " arising from " any of such acts.
A modern jurisdictional analysis should consider the extent to which a defendant purposefully avails itself of the privilege of conducting business in the forum, that the claim must arise out defendant's forum related activities and the exercise of jurisdiction must be reasonable31. What is reasonable may depend upon (1) the extent of purposeful interjection, (2) the burden on defendant to defend in the chosen forum, (3) the extent of the conflict with the sovereignty of the defendant's state, (4) the forum state's interest in the dispute, (5) the most efficient forum for judicial resolution of the dispute, (6) the importance of the chosen forum to the plaintiff's interest in convenient and effective relief, and (7) the existence of an alternate forum32.

Jurisdiction And The Internet

The extent to which an Internet web site confers personal jurisdiction in a forum in which the web site is accessible to the general public and/or to customers has recently been addressed by several Courts. Initially, it should be noted that using a Web site to make travel reservations is not analogous to using an 800 number to make reservations33. These two instrumentalities are qualitatively different in their impact upon the assertion of personal jurisdiction over foreign travel suppliers.

The Zippo Dot Com Analysis

A useful jurisdictional analysis appears in Zippo Manufacturing Co. v. Zippo Dot Com, Inc.,34 a trademark infringement action brought by the manufacturer of " Zippo " lighters against a computer news service using the Internet domain name of " zippo.com ". In Zippo, the defendant was a California based news service with an interactive web site
" through which it exchanges information with Pennsylvania residents in hopes of using that information for commercial gain later ". The defendant had entered into news service contracts35 with 3,000 Pennsylvania residents and 7 " contracts with Internet access providers to furnish services to their customers in Pennsylvania ". Since it was defendant's " conscious choice to conduct business ( in Pennsylvania )" the Court asserted personal jurisdiction based upon the following analysis. " At one end of the spectrum are situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper...At the opposite end are situations where a defendant has simply posted information on an Internet Web site which is accessible to users in foreign jurisdictions. A passive web site that does little more than make information available to those who are interested in it is not grounds for the exercise (of) personal jurisdiction ...The middle ground is occupied by interactive Web sites where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site."

Passive Web Sites

If a foreign travel supplier or tour operator maintains an informational web site accessible to the general public but which can not be used for making reservations then most36, but not all37, Courts would find it unreasonable to assert personal jurisdiction. For example, in Weber v. Jolly Hotels38 a New Jersey resident purchased a tour packaged by a Massachusetts travel agent, not an exclusive selling agent39, which featured accommodations at a Sicilian hotel owned by an Italian corporation, Itajolly Compagnia Italiana Dei Jolly Hotels
[ " Jolly Hotels " ]. Jolly Hotels conducted no business in New Jersey but had a subsidiary which owned a hotel in New York City which could make reservations at all of its hotels. The plaintiff sustained injuries at defendant's Sicilian hotel and brought suit against Jolly Hotels in New Jersey. Jolly Hotels maintained a Web site accessible in New Jersey which provided "`photographs of hotel rooms, descriptions of hotel facilities, information about numbers of rooms and telephone numbers `". The Web site could not be used to make reservations at any of Jolly Hotels. Finding the Web site to be passive in nature the Court dismissed the complaint for a lack of personal jurisdiction but transferred the case to New York because defendant's subsidiary's New York City hotel could make reservations at all Jolly Hotels.

Passive Web Sites Plus

However, passive Web sites combined with other business activity, e.g., providing trainees to a company doing business in the forum40, entering into a licensing agreement with a company in the forum and selling to three companies in the forum41, entering into a contract with a company in the forum which contained a forum selection clause and multiple e-mail communications to the forum42, e-mail, fax and telephone communications43, contracts and various correspondence surrounding those contracts44, various support services incident to sales45, e-mail, fax, telephone and regular mail communications46 and 12 sales in the forum and plans to sell more47, mortgage loan applications printed out and chats online with mortgage representatives48, fielding e-mail questions about products and sending information about orders49, " the web site contains several interactive pages which allow customers to take and score performance tests, download product demos, and order products online ( and ) provides a registration form whereby customers may obtain product brochures, test demonstration diskettes or answers to questions "50, may provide a reasonable basis for the assertion of personal jurisdiction over foreign travel suppliers.

Interactive Web Sites

If the web site provides information, e-mail communication, describes the goods or services offered, downloads a printed order form or allows on-line sales with the use of a credit card and sales are, in fact, made in this manner in the forum then most Courts51 but not all52 would find the assertion of personal jurisdiction reasonable.

Interactive Web Sites And Forum Selection Clauses

An interesting twist to this analysis is when a forum selection clause53 is contained in a reservation form. For example, in Decker v. Circus Circus Hotel54, New Jersey consumers made reservations at a Nevada hotel using an interactive web site. The reservation form which appeared on the computer screen contained a forum selection clause informing guests that should they wish to commence a lawsuit against the hotel it could only be brought in Nevada. In the Decker case the Court decided to enforce the Nevada forum selection clause. The Court also found that the combination of an interactive web site with a forum selection clause negates any intent of being haled into a local courtroom.

Forum Selection Clauses Are Gaining Popularity

Forum selection clauses, typically, appear in travel or passenger contracts used by
A] Cruiselines [ Carnival Cruise Lines, Inc. v. Shutte55
( Florida forum selection clause enforced ); Effron v. Sun Line Cruises, Inc.56 ( Greek forum selection clause enforced ); Schaff v. Sun Line Cruises, Inc.57 ( Greek forum selection clause not enforced ); Hodes v. SNC Achille Lauro58 ( Naples forum selection clause enforced ); O.C. Harden v. American Airlines59 ( Hawaii forum selection clause enforced ); Jewel Seafoods, Ltd. v. M/V Peace River60 ( Chinese forum selection clause enforced ); Carron v. Holland America Line-Westours, Inc.61 ( Washington forum selection clause enforced ); Rawlins v. Clipper Cruise Lines62
( Missouri forum selection clause enforced ); Hollmann v. Cunard Line Limited63 ( London forum selection clause enforced )];
B] Hotels [ Doe v. Sun International Hotels, Ltd.64 ( female guest raped at hotel; Bahamas forum selection clause in guest registration form signed by minor guest's step father not enforced; void by reason of guest reaching age of majority )]; and
C] Tour Operators [ Rodriquez v. Class Travel Worldwide65
( minor tourist injured after being pushed into hotel pool; California forum selection clause in tour operator's registration form enforced ); Paster v. Putney Student Travel, Inc.66 ( tourist contracted oral yeast infection on the Blackfeet Indian Reservation in Montana during a " sweat ceremony ", one portion of which included the passing of a tobacco filed pipe; Vermont forum selection clause in tour participant contract enforced )].
Forum selection clauses are used as a means of discouraging consumer litigation by requiring that lawsuits to be brought in a forum far distant from the consumer's home. This usually increases the costs of litigation thus chilling the injured traveler's enthusiasm to pursue his or her claim.

Travelers Must Receive Adequate Notice

The traveler should have an opportunity to read the forum selection clause. In determining whether a passenger had notice of a forum selection clause the courts will examine the type size and the positioning of the lettering of the clause [ [ Walker v. Carnival Cruise Lines67 ( Florida forum selection clause in cruise ticket enforced; notice adequate; " It is well settled that passengers need not have actually read a ticket to be bound by the terms contained therein...The issue is simply whether passengers had an opportunity to read their tickets " ); O.C. Harden v. American Airlines68 ( " passengers are bound by
provisions printed on a ticket, even though the passenger did not actually read those provisions " ); Carron v. Holland America Line-Westours, Inc.69 ( notice adequate );; Doe v. Sun International Hotels, Ltd.70 ( notice inadequate ); Gomez v. Royal Caribbean Cruise Lines71 ( notice adequate ); Smith v. Doe72
( notice adequate )]. In addition, adequate notice presupposes that the passenger has received the ticket sometime before the cruise so it may be read [ Stobaugh v. Norwegian Cruise Line Limited73 ( notice inadequate; passengers paid in full for cruise and were then notified of forum selection clause in ticket; " the way in which NCL imposed the forum selection clause upon the passengers after they paid for the cruise in full offends our notion of fair play and does not pass the test of fundamental fairness " )].

Forum Selection Clauses Must Be Reasonable

The U.S. Supreme Court has held that negation of a forum selection clause requires evidence of bad faith. " It bears emphasis that forum-selection clauses contained in form passage contracts are subject to judicial scrutiny for fundamental fairness "74 There must be some evidence that the forum was selected as a means of " discouraging cruise passengers from pursuing legitimate claims ". U.S. forums such as Florida or Washington are, generally, considered reasonable [ Kaufman v. Ocean Spirit Shipping Ltd.75 ( forum selection clause transferring case from Michigan to Louisiana fair )] and are not
" remote alien forums "76. However, distant foreign forums are more suspect [ Bhatnagar v. Surrendra Overseas Ltd.77 ( forum selection clause limiting litigation to India unenforceable as unjust and unreasonable ); Schaff v. Sun Line Cruises, Inc.78
( Greek forum selection clause not enforced )].

The Internet Has Expanded Jurisdiction

The Internet has changed the way in which the Courts decide what types of business contacts justify the assertion of personal jurisdiction. To establish personal jurisdiction over foreign travel suppliers and tour operators under the traditional solicitation-plus doctrine it was necessary to find both solicitation of business and the entering into of reservations' contracts in the forum. Because foreign travel suppliers or their reservations' services entered into contracts at distant locations, the Courts, invariably, found local solicitation of business through travel agents but no contract formation in the forum. This meant that injured travelers were denied a local forum in which to bring a lawsuit against a foreign travel supplier.
The Internet may have changed all that. The Courts that have addressed the issue seem to agree that when an interactive web site is used to take orders and make reservations that contract formation takes place in the consumer's forum and not at the location of foreign travel supplier's home computer. Although the Courts have applied the solicitation-plus doctrine to Internet marketing they have done so in a manner which has dramatically increased the reach of personal jurisdiction over foreign travel suppliers and tour operators.

FOOTNOTES