GTE New Media Services Inc. v. BellSouth Corp.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 17, 1999 Decided January 11, 2000

No. 99-7097

GTE New Media Services Incorporated,

Appellee

v.

BellSouth Corporation, et al.,

Appellants

Appeal from the United States District Court

for the District of Columbia

(No. 97cv02314)

Charles Rothfeld argued the cause for appellants. With him

on the briefs were Richard J. Favretto, Andrew J. Morris

and Miriam R. Nemetz.

Thomas A. Isaacson argued the cause for appellee. With

him on the brief were Robert F. Ruyak and Alan M. Wise-

man. Kenneth W. Brothers, Mark C. Hansen, Stephen A.

Weisbrod and Glenn B. Manishin entered appearances.

Before: Edwards, Chief Judge, Sentelle and Randolph,

Circuit Judges.

Opinion for the Court filed by Chief Judge Edwards.

Edwards, Chief Judge: The matter at hand involves an

interlocutory appeal brought pursuant to 28 U.S.C. s 1292(b).

The issues presented are whether the District Court may

assert personal jurisdiction over the defendants and whether

venue is proper in the District of Columbia ("District") when

the defendants' sole contact with this forum is the operation

of Internet websites that are accessible to persons in the

District. The District Court tentatively concluded that the

quality and nature of the websites militated in favor of

personal jurisdiction. The trial judge noted, however, that

"[a]ll of the interactive website cases reviewed [by the Dis-

trict Court] involved defendants with at least some physical

contact with the forum," whereas the defendants in this case

have no physical contact with the forum. GTE New Media

Servs., Inc. v. Ameritech Corp., Order Certifying for Interloc-

utory Appeal the Court's Ruling That Personal Jurisdiction

Exists and Staying Proceedings at 3, reprinted in J.A. 218.

Given the unusual circumstances of this case, the District

Court determined that the questions of personal jurisdiction

and venue should be certified for immediate review by this

court.

The underlying action in this case rests on a complaint by

GTE Media Services, Inc. ("GTE") against various defen-

dants, including BellSouth Corp., BellSouth Enterprises, Inc.,

BellSouth Advertising & Publishing Corp., Intelligent Media

Ventures, Inc., SBC Communications Inc., Pacific Telesis

Group, Pacific Bell Interactive Media, US West, Inc., and US

West Media Group, for alleged violations of Sections 1 and 2

of the Sherman Antitrust Act. GTE contends that the defen-

dants engaged in a conspiracy with an illicit purpose to

dominate the Internet business directories' market. The

defendants, in turn, moved to dismiss the complaint for want

of personal jurisdiction. The defendants argue that the mere

ability of District residents to access the defendants' Internet

Yellow Pages from locations within the city is insufficient to

establish personal jurisdiction.

GTE contends that the action, tortious injury, and "persis-

tent course of conduct" required under the District's long-arm

statute are established, because the defendants have entered

into an agreement outside of the District with a purpose of

causing Internet users in the District to use the defendants'

Internet links to pursue business leads in the District. In

other words, GTE asserts that the alleged conspiracy was

designed to cause Internet users who otherwise would have

had access to GTE's links to be diverted to the defendants'

links, which in turn resulted in more advertising revenue for

the defendants. GTE argues, in the alternative, that Section

12 of the Clayton Act provides an independent basis for

personal jurisdiction.

On the record at hand, we hold that the District Court

erred in concluding that there is sufficient evidence here to

support personal jurisdiction. And GTE's tortured interpre-

tation of Section 12 of the Clayton Act cannot save the day.

However, at this juncture of the case, GTE is still free to

supplement the record through jurisdictional discovery. The

case is hereby remanded to the District Court for further

proceedings, including additional discovery and possible

amendments to the complaint, should that be deemed war-

ranted. We decline to pass upon the District Court's theory

of jurisdiction, which is premised on the supposed existence of

certain facts to show substantial effects, when we have no

way of knowing whether there are indeed facts to support the

asserted theory. And we reject GTE's theory of jurisdiction,

which appears to rest on a view that mere accessibility to an

Internet site in the District is enough of a foundation upon

which to base personal jurisdiction.

I. Background

The relevant facts are relatively simple. GTE alleges that

in July 1997, five regional Bell operating companies (Ameri-

tech Corp., Bell Atlantic, BellSouth, SBC Corp., US West)

and their relevant subsidiaries conspired to capture, control,

and dominate the Internet business directories' market. See

GTE New Media Servs. Inc. v. Ameritech Corp., 97-CV-2314,

Mem. Op. at 5-6, reprinted in Joint Appendix ("J.A.") 185-86.

After the alleged conspirators held meetings in California,

Colorado, Georgia, and Michigan, they agreed to provide

jointly a coded map of the United States that would allow

users of their Internet Yellow Pages to access particular

states and particular businesses. Each of the regional Bell

operating companies would provide exclusive service to a

particular region, and the other companies apparently agreed

not to compete with the designated exclusive server in its

given region. The regions designated to each regional Bell

operating company corresponded to the region to which the

company provided telecommunications service. See id. at 5,

reprinted in J.A. 185. The regional Bell operating compa-

nies' next step was to obtain exclusive links for their map on

well-known Internet browser sites run by Netscape Commu-

nications Corp. ("Netscape") and Yahoo, Inc! ("Yahoo"), to

ensure that users of these popular sites would be specifically

directed to the operating companies' Internet Yellow Pages.

Before the alleged conspiracy, GTE had a non-exclusive

contract with Netscape, pursuant to which Netscape offered a

choice of Internet business directories on its site, including

GTE's SuperPages. See id. at 7, reprinted in J.A. 187.

When users accessed the "Yellow Pages" option on Net-

scape's toolbar, they had access to GTE's website. GTE

asserts, however, that Netscape terminated this arrangement

on July 18, 1997, by removing its links to GTE's SuperPages,

including hyperlinks on Yahoo.

On October 6, 1997, GTE filed its complaint against the five

regional Bell operating companies, Netscape, and Yahoo,

claiming, among other things, violations of Sections 1 and 2 of

the Sherman Antitrust Act. Several defendants (i.e., Bell-

South, SBC Corp. and US West, excepting US West Dex,

Inc.) moved to dismiss the complaint for lack of personal

jurisdiction; two (i.e., BellSouth and SBC Corp.) also argued

that venue was improper in the District of Columbia. On

September 28, 1998, the District Court denied both motions

to dismiss, finding that (1) the court had personal jurisdiction

under section 13-423(a)(4) of the D.C. long-arm statute, be-

cause GTE had sufficiently alleged a tortious injury in the

District caused by the defendants' acts outside of the District;

and (2) because venue is proper under 28 U.S.C. s 1391

wherever a party is subject to personal jurisdiction, the

finding of personal jurisdiction also resolved the venue ques-

tion. On March 29, 1999, however, the District Court certi-

fied an order for interlocutory appeal and ordered a stay of

proceedings. The District Court noted that, although it had

found that the defendants operated an interactive website

that supported a finding of personal jurisdiction,

the instant case differs from any other reported case ...

in that it involves an interactive website with no other

contacts with the District of Columbia. All of the inter-

active website cases reviewed by this court involved

defendants with at least some physical contact with the

forum. While this court has concluded that the quality

and nature of the [operating companies'] website favors

the exercise of personal jurisdiction in the District of

Columbia, certainly a substantial ground for difference of

opinion concerning the ruling exists.

GTE New Media Servs. Inc., Order Certifying for Interlocu-

tory Appeal the Court's Ruling That Personal Jurisdiction

Exists and Staying Proceedings at 3, reprinted in J.A. 218

(emphasis added). On April 8, 1999, the defendants filed a

petition for permission to appeal. This court entered an

order granting permission to appeal on May 28, 1999.

II. Discussion

A. The District of Columbia Long-Arm Statute and the

Due Process Clause of the U.S. Constitution

To establish personal jurisdiction over a non-resident, a

court must engage in a two-part inquiry: A court must first

examine whether jurisdiction is applicable under the state's

long-arm statute and then determine whether a finding of

jurisdiction satisfies the constitutional requirements of due

process. See United States v. Ferrara, 54 F.3d 825, 828 (D.C.

Cir. 1995).

The District's long-arm statute provides, in relevant part,

that

[a] District of Columbia court may exercise personal

jurisdiction over a person, who acts directly or by an

agent, as to a claim for relief arising from the person's--

(1) transacting any business in the District of Columbia;

... (4) causing tortious injury in the District of Columbia

by an act or omission outside the District of Columbia if

he [i] regularly does or solicits business, [ii] engages in

any other persistent course of conduct, or [iii] derives

substantial revenue from goods used or consumed, or

services rendered, in the District of Columbia.

D.C. Code Ann. s 13-423(a) (1981). A plaintiff seeking to

establish jurisdiction over a non-resident under the foregoing

provisions of the long-arm statute must demonstrate, pursu-

ant to section (a)(1), that the plaintiff transacted business in

the District, or show, pursuant to section (a)(4), that the

plaintiff caused a tortious injury in the District, the injury

was caused by the defendant's act or omission outside of the

District, and the defendant had one of the three enumerated

contacts with the District. Section (a)(1)'s "transacting any

business" clause generally has been interpreted to be coex-

tensive with the Constitution's due process requirements and

thus to merge into a single inquiry. See Ferrara, 54 F.3d at

828. Section (a)(4) has been construed more narrowly, how-

ever. See Crane v. Carr, 814 F.2d 758, 762 (D.C. Cir. 1987)

("The drafters of this provision apparently intended that the

(a)(4) subsection would not occupy all of the constitutionally

available space.... This court has explicitly noted, more-

over, that (a)(4) of the D.C. long-arm statute may indeed stop

short of the outer limit of the constitutional space.").

Even when the literal terms of the long-arm statute have

been satisfied, a plaintiff must still show that the exercise of

personal jurisdiction is within the permissible bounds of the

Due Process Clause. In other words, a plaintiff must show

"minimum contacts" between the defendant and the forum

establishing that "the maintenance of the suit does not offend

traditional notions of fair play and substantial justice." Inter-

national Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)

(internal quotation marks omitted). Under the "minimum

contracts" standard, courts must insure that "the defendant's

conduct and connection with the forum State are such that he

should reasonably anticipate being haled into court there."

World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297

(1980).

Cases applying the familiar personal jurisdiction analysis to

the Internet are thus far relatively scarce; only the Second,

Fifth, Sixth, and Ninth Circuits have ventured into this

domain. Three decisions among the five issued by these four

appellate courts have dismissed complaints for want of per-

sonal jurisdiction.

In Bensusan Restaurant Corp. v. King, 126 F.3d 25, 29 (2d

Cir. 1997), for example, the Second Circuit found that the

operator of a Missouri jazz club named "The Blue Note" did

not commit tortious acts in New York within the meaning of

New York's long-arm statute when he established an Internet

website for his club that contained a hyperlink to a New York

club of the same name. The court held that, because the

Missouri club operator should not have reasonably expected

his allegedly tortious acts to have consequences in New York

and because he did not significantly engage in interstate

commerce, it would not extend long-arm jurisdiction under

another subsection of the long-arm statute.

Similarly, in Mink v. AAAA Development LLC, 190 F.3d

333, 336-37 (5th Cir. 1999), the Fifth Circuit declined to find

personal jurisdiction in a case in which the developer of a

computer software program brought an action against pur-

ported competitors and sought to rest personal jurisdiction on

a finding that the defendant operated an Internet website

that was accessible by residents in the forum state. The

court reasoned that "[t]here was no evidence that [the defen-

dant] conducted business over the Internet by engaging in

business transactions with forum residents or by entering

into contracts over the Internet." Id. at 337. Thus, although

the defendant's website had an e-mail address that allowed

consumers to interact with the company, the court noted that

"[t]here is no evidence ... that the website allows [the

defendant] to do anything but reply to e-mail initiated by

website visitors." Id. The court also noted that the website

was not interactive enough to support a finding of jurisdic-

tion, because customers could not purchase anything on-line.

See id.

Finally, in Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414,

419-20 (9th Cir. 1997), the Ninth Circuit declined to find

personal jurisdiction in an infringement action in Arizona

against a Florida corporation that provided consulting ser-

vices for strategic management on the web and used the same

name as the plaintiff's corporation. The court found that the

challenged web page was essentially passive. The court

found that there was "no question that anyone, anywhere

could access that home page and thereby learn about the

services offered," but it failed to "see how from that fact alone

it can be inferred that [the defendant] deliberately directed

its merchandising efforts toward Arizona residents." Id. at

419. In addition, the court noted that because the defendant

did not encourage people in Arizona to access its sites and

there was no evidence that any part of the defendant's

business was sought or achieved in Arizona--in fact, no

Arizona resident other than the plaintiff had ever "hit" the

defendant's site--there was no purposeful availment and thus

no personal jurisdiction. See id.

The two decisions in which appellate courts have found

personal jurisdiction in cases involving Internet-related dis-

putes present facts that are quite different from those in the

instant case. In CompuServe, Inc. v. Patterson, 89 F.3d

1257, 1264 (6th Cir. 1996), for example, the Sixth Circuit

found personal jurisdiction over a defendant in Ohio, because

the defendant had entered into a contract that allowed him to

market his software in other states with Ohio-based Compu-

Serve acting as his distributor. The court concluded that it

was reasonable to subject the defendant to suit in Ohio,

because it was home to the computer network service that he

himself had chosen to employ. The court also determined

that the defendant was on notice that he had created a

connection with Ohio, because (1) he had entered into con-

tracts that would be governed by Ohio law with an Ohio-

based company; and (2) he sent his software, via electronic

links, to Ohio and advertised his products on CompuServe.

The court highlighted that "it is Patterson's relationship with

CompuServe as a software provider and marketer that is

crucial to this case." Id. at 1264. In this case, however, GTE

has yet to offer evidence of either a contractual relationship

or a comparable marker of activity directed uniquely toward

the District.

Likewise, in Panavision International, L.P. v. Toeppen,

141 F.3d 1316 (9th Cir. 1998), the Ninth Circuit upheld

personal jurisdiction in a case involving a "cyber-pirate" (i.e.,

someone who steals valuable trademarks, establishes domain

names on the Internet using the trademarks, and then offers

to sell the domain names back to the rightful trademark

owners), see id. at 1318, by employing the "effects doctrine,"

which holds that "jurisdiction may attach if the defendant's

conduct is aimed at or has an effect in the forum state." Id.

at 1321. The court concluded that "[t]he brunt of the harm to

Panavision was felt in California," given that Panavision's

principal place of business was in California and "the heart of

the theatrical motion picture and television industry is located

there." Id. In the instant case, unlike Panavision, there is

nothing as yet to indicate that the defendants engaged in

unabashedly malignant actions directed at or felt in this

forum.

The District Court in this case asserted personal jurisdic-

tion, pursuant to D.C. Code Ann. s 13-423(a)(4), on the

ground that the defendants allegedly caused tortious injury in

the District by an act outside the District followed by a

persistent course of conduct in the District. Under this

theory of jurisdiction, it does not matter that the defendants

have no demonstrated physical contacts in the District.

Rather, it is enough, according to the District Court, that the

defendants entered into an agreement outside of the District

with an eye toward attracting Internet users in the District to

their websites (instead of to GTE's SuperPages) and thereby

draw advertisers away from GTE. The District Court found

that, on these asserted facts alone, the defendants foreseeably

caused tortious injury to GTE's business in this forum. See

Ameritech Corp., Mem. Op. at 10, reprinted in J.A. 190. The

defendants' course of conduct was seen to be "persistent" by

the District Court, because their websites are "highly interac-

tive" with District users and significantly commercial in both

quality and nature. Id. at 11-12, reprinted at J.A. 191-92.

We disagree with this line of reasoning.

There is no evidence in this record to support the claim

that the defendants "secured advertising revenue by increas-

ing the user traffic on their websites." Id. at 13, reprinted at

J.A. 193. At best, GTE has provided only conclusory state-

ments and intimations to buttress its assertion that it lost

advertising revenues as a result of the defendants' actions.

These are not enough. Cf. First Chicago Int'l v. United

Exchange Co., 836 F.2d 1375, 1378-79 (D.C. Cir. 1988) ("Con-

clusory statements ... '[do] not constitute the prima facie

showing necessary to carry the burden of establishing person-

al jurisdiction.' ... [T]he 'bare allegation' of conspiracy or

agency is insufficient to establish personal jurisdiction." (cita-

tion omitted)). We will neither assume nor infer that the

alleged conspiracy had substantial effects of the sort alleged

by GTE, because to do so would be to assume or infer the

answer to the very question that is before us.

Furthermore, it is difficult to understand, at least on the

present record, what tortious injury has been suffered by

GTE in the District. GTE claims that it has lost advertising

revenues by virtue of the defendants' allegedly unlawful

conspiracy. However, nothing has been offered to indicate

that these advertising revenues were lost in the District,

either by lost sales or lost revenue collections.

Additionally, personal jurisdiction surely cannot be based

solely on the ability of District residents to access the defen-

dants' websites, for this does not by itself show any persistent

course of conduct by the defendants in the District. Access

to a website reflects nothing more than a telephone call by a

District resident to the defendants' computer servers, all of

which apparently are operated outside of the District. And,

as this court has held, mere receipt of telephone calls outside

the District does not constitute persistent conduct "in the

District" within the meaning of the long-arm statute. See

Tavoulareas v. Comnas, 720 F.2d 192, 194 (D.C. Cir. 1983).

Finally, GTE appears to suggest that, when a District

resident accesses the defendants' Yellow Pages websites, the

defendants are somehow "transacting business" in the Dis-

trict. This is a far-fetched claim on this record. Access to an

Internet Yellow Page site is akin to searching a telephone

book--the consumer pays nothing to use the search tool, and

any resulting business transaction is between the consumer

and a business found in the Yellow Pages, not between the

consumer and the provider of the Yellow Pages. In short,

there is nothing here to indicate that District residents actu-

ally engage in any business transactions with the defendants.

When stripped to its core, GTE's theory of jurisdiction

rests on the claim that, because the defendants have acted to

maximize usage of their websites in the District, mere acces-

sibility of the defendants' websites establishes the necessary

"minimum contacts" with this forum. See Br. for Appellee at

16. This theory simply cannot hold water. Indeed, under

this view, personal jurisdiction in Internet-related cases

would almost always be found in any forum in the country.

We do not believe that the advent of advanced technology,

say, as with the Internet, should vitiate long-held and invio-

late principles of federal court jurisdiction. The Due Process

Clause exists, in part, to give "a degree of predictability to

the legal system that allows potential defendants to structure

their primary conduct with some minimum assurance as to

where that conduct will and will not render them liable to

suit." World-Wide Volkswagen Corp., 444 U.S. at 297. In

the context of the Internet, GTE's expansive theory of per-

sonal jurisdiction would shred these constitutional assurances

out of practical existence. Our sister circuits have not accept-

ed such an approach, and neither shall we.

B. The Clayton Act

GTE asserts an alternative basis for personal jurisdiction,

resting on Section 12 of the Clayton Act, 15 U.S.C. s 22

(1994). Section 12 provides:

Any suit, action, or proceeding under the antitrust

laws against a corporation may be brought not only in

the judicial district whereof it is an inhabitant, but also in

any district wherein it may be found or transacts busi-

ness; and all process in such cases may be served in the

district of which it is an inhabitant, or wherever it may

be found.

15 U.S.C. s 22 (emphasis added). The language of the

statute is plain, and its meaning seems clear: The clause

before the semi-colon relates to a supplemental basis for

venue in actions under the Clayton Act; the clause after the

semi-colon relates to nationwide service of process in anti-

trust cases; and invocation of the nationwide service clause

rests on satisfying the venue provision.

Although both parties agree that the clause regarding

nationwide service also confers nationwide jurisdiction, they

disagree over whether the venue clause must be satisfied for

there to be nationwide personal jurisdiction over defendants

in antitrust cases. The defendants argue that "[p]roper

venue under Section 12 is ... a prerequisite for nationwide

service (and jurisdiction): [I]f venue does not lie under the

provision, nationwide service is impermissible." See Reply

Br. of Appellants at 22. GTE contends that compliance with

Section 12's venue provision is not a prerequisite for use of its

national jurisdiction provision. More specifically, GTE ar-

gues that venue may be obtained under either Section 12 or

under the general federal venue provision of 28 U.S.C.

s 1391, and that use of either route allows resort to Section

12's national jurisdiction provision.

GTE relies on Go-Video, Inc. v. Akai Electric Co., 885 F.2d

1406 (9th Cir. 1989), to buttress its position. In Go-Video, the

Ninth Circuit rejected the argument that Section 12 must be

read as an "integrated whole," even though the reference to

serving process "in such cases" clearly seems to require that

the preceding clause's venue requirements be established

before nationwide service can be authorized. The court rea-

soned that "as a general matter, courts have interpreted

special venue provisions to supplement, rather than preempt,

general venue statutes." Id. at 1409. Under this analysis, an

interpretation of Section 12 that viewed the first clause as

restricting the second clause would contradict the general

view of Section 12 as expanding the bounds of venue. We

disagree with the reasoning of the Ninth Circuit.

The desire to view Section 12's venue provision as expan-

sive does not justify the Ninth Circuit's total disregard of the

first clause, particularly given the literal convolutions re-

quired to jettison the first clause. Indeed, it seems quite

unreasonable to presume that Congress would intentionally

craft a two-pronged provision with a superfluous first clause,

ostensibly link the two provisions with the "in such cases"

language, but nonetheless fail to indicate clearly anywhere

that it intended the first clause to be disposable. Even the

Ninth Circuit seems to recognize that its sweeping interpreta-

tion of Section 12 tends to make the venue provision "wholly

redundant." Id. at 1413.

On the question of the meaning of Section 12, we align

ourselves with the position taken by the Second Circuit. See

Goldlawr, Inc. v. Heiman, 288 F.2d 579, 581 (2d Cir. 1961),

rev'd on other grounds, 369 U.S. 463 (1962). The court in

Goldlawr reasoned that Section 12

specifies where suit against a corporation under the

antitrust laws may be brought, namely, in a district

where it is an inhabitant and also where 'it may be found

or transacts business.' Conversely, it should follow that

if a corporation is not an inhabitant of, is not found in,

and does not transact business in, the district, suit may

not be so brought. By statutory grant if suit is brought

as prescribed in this section 'all process in such cases

may be served in the district of which it [the corporation]

is an inhabitant, or wherever it may be found.' Thus, 'in

such cases,' Congress has seen fit to enlarge the limits of

the otherwise restricted territorial areas of process. In

other words, the extraterritorial service privilege is given

only when the other requirements are satisfied.

Id.

In our view, the Second Circuit's unadorned interpretation

of Section 12 is clearly correct. See also Herbert Hoven-

kamp, Personal Jurisdiction and Venue in Private Antitrust

Actions in the Federal Courts, 67 Iowa L. Rev. 485, 509 (1982)

("A better approach is to interpret section 12 the way it is

written. Worldwide service is proper only when the action is

brought in the district where the defendant resides, is found,

or transacts business."). A party seeking to take advantage

of Section 12's liberalized service provisions must follow the

dictates of both of its clauses. To read the statute otherwise

would be to ignore its plain meaning. Thus, because GTE

has not shown that the defendants were inhabitants of, may

be found in, or transacted business in the District, as required

by Section 12's first clause, it cannot avail itself of Section

12's second clause.

C. Jurisdictional Discovery

Finally, GTE contends that if, on the existing record, there

are insufficient grounds to support personal jurisdiction, it is

still entitled to jurisdictional discovery. We agree. This

court has previously held that if a party demonstrates that it

can supplement its jurisdictional allegations through discov-

ery, then jurisdictional discovery is justified. See Crane, 814

F.2d at 760 (vacating, in part, the District Court's judgment,

because "Crane's case was dismissed with no opportunity for

discovery on the issue of personal jurisdiction").

Such is the case here. The record now before this court is

plainly inadequate. We do not even know for certain which

defendants own and operate which websites. Even the par-

ties at oral argument agreed that the jurisdictional questions

at issue are quite different for some defendants as opposed to

others. And, as the record now stands, there is absolutely no

merit to GTE's bold claim that the parent companies and

subsidiaries involved in this lawsuit should be treated identi-

cally. Jurisdictional discovery will help to sort out these

matters. GTE also claims that it may be able to present new

facts to bolster the District Court's theory of "substantial

effects" within the District. We cannot tell whether jurisdic-

tional discovery will assist GTE on this score, but it is entitled

to pursue precisely focused discovery aimed at addressing

matters relating to personal jurisdiction.

III. Conclusion

For the foregoing reasons, the case is hereby remanded to

the District Court for further proceedings.