Protecting Your Company From Unwanted Web Site Litigation.

As more and more businesses join the high tech information age, the number of lawsuits associated with the high tech exchange of information will continue to rise. It is therefore becoming increasingly important for companies who have or intend to create Web sites to consider the impact that the information provided can have on Web users as well as the company.

Before a company ventures into cyberspace, it should examine the ways in which it can protect itself from liability arising out of the content of its proposed Web site. Below, we discuss several matters which should be considered prior to forming a Web site. When careful consideration is given to these matters, not only can the expense of litigation be minimized, it can often be avoided altogether.

Virtual Jurisdiction

One of the first considerations a company must make when forming a Web site is whether or not the Web site will merely serve as an information base about the company or whether the company will actually be selling products online. The far-reaching effects and the huge potential for profits make the World Wide Web an extremely attractive place to sell products. However, with this increase in company exposure comes an increased risk of litigation arising in states or countries never before contemplated by a company. The laws involved in products liability lawsuits can vary a great deal and the costs associated with defending such a suit in a foreign state or country can be exorbitant. Before setting up a Web site, a business should consider the implications of defending against lawsuits in the various states or countries in which its products are ultimately sold.

The easiest way for a business to avoid being sued outside of its home state is to minimize its transactions within one state. However, for a growing company, this is not always the preferred method of doing business. In order to reduce the possibility of being sued in an adverse jurisdiction, a company must first research the national and international laws of the states or countries in which its products may be sold via the Internet. In addition, prior to setting up a Web site, a business should be aware of the particular Web site activities that could subject it to lawsuits outside of its home state. Below, we have provided some recent court decisions identifying the circumstances under which a company may be subject to suit outside of its home state due to its Web site activity.

Generally, if a court finds that a company has made sufficient "minimum contacts" with a plaintiffs state, it is deemed to have submitted to the jurisdiction of the courts of that state. For instance, a company is subject to suit in a plaintiffs state when a company actively engages in business within that state. In cases involving Web site sales, the most common argument made by plaintiffs is that the company, through its Web site sales, has made sufficient "minimum contacts" with the state thereby subjecting itself to that state's jurisdiction. In light of the increasing number of lawsuits based on the content of a company's Web site, courts have adopted the "interactive/passive" test to determine whether the plaintiffs state may confer jurisdiction over a business operating a Web site.

Most courts addressing the jurisdictional issue have concluded that a company is subject to suit in a plaintiff's state when the company uses its Web site "interactively" within a state. A company's Web site is often characterized as "interactive" if business transactions can be conducted over the Internet or if information can be exchanged with Web users for the purpose of the company soliciting business. Essentially, the greater the level of commercial activity associated with the company's Web site, the more likely it is that the courts will find that the company is subject to suit outside of its home state. For instance, courts frequently exercise jurisdiction over out-of-state companies that sell products through their Web sites to the residents of the plaintiffs' states. Courts have also found that companies have made sufficient "minimum contacts" with plaintiffs' states when companies converse with plaintiffs through their Web sites. Finally, courts have determined that companies charging fees to user s entering their Web sites are engaged in e-commerce, thereby subjecting those companies to suits in the user-plaintiffs' states.

Courts have deemed Web sites containing merely information or advertising about a business or its products to be "passive" Web sites. Along these lines, when companies maintain "passive" Web sites, courts have generally determined that they are not subject to the jurisdiction of the user-plaintiffs' states.

In sum, when conducting sales through a Web site, a company can subject itself to the jurisdiction of a foreign state or country. Thus, it is extremely important to understand the ramifications and expenses associated with defending against lawsuits in each individual state or country before conducting online business in that location.

Cyber Contracts

When forming a Web site, there are many potential litigation issues to consider, particularly if a company elects to sell its products through a Web site. Companies selling products through Web sites engage in both business-to-business sales as well as business-to-consumer sales. Needless to say, just as with any contract, an online sales contract can lead to litigation. Thus, a company must determine exactly how it will set forth the terms of its sales contracts, as well as how it will best be able to enforce the contract terms, should litigation arise.

When a business sells products directly to individual consumers, it must consider that the unsophisticated consumer will be less knowledgeable than the business consumer. Therefore, a company's Web site must accommodate the unsophisticated consumer, which will also help protect the company from unwanted litigation. It is particularly important that companies set forth simple contract terms that can be selectively agreed upon by the buyer. The cyber contract should indicate which laws will be applied and which form will be utilized in the event litigation arises. As well, the potential client should be informed whether the matter will be subject to arbitration versus trial. In addition, warranty disclaimers and clauses limiting liability should be included. In order to enforce the terms of an online sales contract, a company's Web site should have mechanisms in place requiring the consumer to affirmatively agree upon the contract terms prior to purchasing the company's products.

While this is a relatively new area of the law, most courts handling Internet contract disputes have enforced the terms of the contract where the Web site utilizes a "click' agreement approach prior to a customer purchasing a product. In these cases. the consumer must manually agree to the terms by clicking on them prior to purchasing the product. For instance, some Web sites require the potential buyer to select and "click" on "I agree" or "I don't agree" relative to each contract term. In these circumstances, the buyer is not only put on notice of the terms of the contract, the buyer is given the choice to affirmatively agree or reject the terms. By using these kinds of agreements companies have a greater chance of enforcing the terms of the contract in most jurisdictions.

LitigationTactics.com

As indicated above, a company should be aware that online Web site sales may subject it to an increase in litigation. Online sales, however, are not the only vehicle being used by plaintiffs' attorneys contemplating suits based on a company's Web site's content or sales. Savvy plaintiffs' lawyers are beginning to utilize the information provided on a company's Web site as a litigation tactic, even when a company maintains merely an informative site. Likewise, the Web can and should serve as an effective litigation tool for industrious defense lawyers.

We once had a case where a plaintiff claimed that exposure to certain chemicals manufactured by the firm's client caused him to contract cancer. The plaintiff claimed that he developed the condition at work where he assembled and cleaned automotive parts. He further asserted that he had to leave his place of employment, which eventually led to the filing of a workers compensation claim. According to the plaintiff and his doctors, the chemicals used caused the plaintiff to contract cancer and he was therefore unable to work.

Our firm conducted a Web search and we found a very interesting Web site belonging to the plaintiff. Specifically, we determined that the plaintiff had not only continued working, but he had started up his own business manufacturing the very same automotive parts using the very same chemicals. Having this information prior to the plaintiff's deposition, let alone trial, proved invaluable. Once the plaintiff's attorney realized his client had been untruthful about his case, the case was quickly dismissed.

On the flip side, many plaintiffs' lawyers have become quite proficient in obtaining useful information from manufacturers Web sites in products liability litigation. Plaintiffs' attorneys, often before filing suit, will research a company's Web site. We have found that many attorneys will compare a defendants Web site with a competitors Web site to determine exactly how the information differs. Diligent plaintiff's attorneys also review their defendants' Web sites off en on a daily basis, particularly in failure to warn cases. These attorneys are in search of data demonstrating that the company is not giving adequate warnings relative to its product or that certain information should have been known by the company due to the state of knowledge understood by its competitors. Of course, this failure to warn argument is quite appealing to a jury in the midst of this information age. By contrast, a company can utilize the information given on its Web site at trial to demonstrate that indeed it does provide adeq uate warnings and information about its products.

Prior to setting up a Web site, it can be useful to review competitors' Web sites to ensure that your company is providing adequate and up-to-date warnings. Periodic reviews of competitors' Web sites are also recommended. In addition, when advertising or selling products through a Web site, it can be beneficial to issue warnings with respect to the potential health hazards of using certain products. A company may also want to supply a toll free customer service number on the Web site for customers' questions and concerns or it can supply an e-mail box and return system for addressing customers' concerns. As well, Material Safety Data Sheets containing detailed information about the products can be made available through Internet or telephonic requests.

While there are numerous advantages to a company maintaining a Web site, careful consideration must be given to the content of the Web site in order to minimize the potential for liability and financial exposure. The laws involving Web site litigation are relatively new and they will continue to change and evolve for some time. However, the additional time and effort spent in researching, setting up and maintaining a company's Web site will likely reduce the number of suits filed against that company on a long term basis.

Lisa D. Collinson is a Partner at Hillsinger Costanzo specializing in the defense of products liability, medical malpractice and business litigation.