GoDaddy subject to suit out-of-state

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GoDaddy, the Internet domain name registration company, is subject to suit outside of Arizona even though its physical presence is almost entirely limited to that state.

On Sept. 29, the Seventh Circuit reversed a district court’s dismissal of a suit against the company for lack of personal jurisdiction in Illinois. The GoDaddy Group Inc. provides services for the registration of domain names on the Internet. Its servers are in Arizona; it is incorporated and headquartered in Arizona; and the vast majority of its offices and employees are in Arizona.

However, it engages in national advertising, including the last six Super Bowls. It also sponsors race car driver Danica Patrick and golfer Anna Rawson. In Illinois, it has billboards in major league sports stadiums.

GoDaddy earns profits by registering Internet domain names. Some buyers use them and build websites under the names; others do nothing with them.

UBID Inc., an Illinois corporation, filed a lawsuit in Illinois alleging that GoDaddy has violated the Anti-Cybersquatting Consumer Protection Act by allowing the registration of domain names that are similar to uBID’s trademarks and domain names.

The district court dismissed the suit for lack of personal jurisdiction, but the Seventh Circuit reversed in an opinion by Judge David Hamilton.

The court agreed with the district court that GoDaddy did not have systematic contacts with Illinois to be subject to general jurisdiction there. But it found that it was subject to specific jurisdiction in this case.

The court first found that GoDaddy has “thoroughly, deliberately, and successfully exploited the Illinois market” through its national advertising, and has collected millions in revenues from Illinois.

“These contacts establish GoDaddy’s minimum contacts with the state for claims sufficiently related to those contacts,” the court concluded.

GoDaddy argued that such national advertising, not targeted directly at Illinois consumers, is insufficient to subject it to personal jurisdiction there.

But the court rejected the argument, reasoning, “it is easy to infer that GoDaddy’s national marketing campaign is intended to reach as large an audience as possible, including the 13 million potential customers in the nation’s fifth most populous state.”

The court further found GoDaddy’s characterization of its advertising to be inaccurate, noting that it has placed physical advertisements at sports venues in Illinois.

The court also rejected GoDaddy’s argument that its sales to Illinois customers are mere automated transactions initiated by the customers. The court explained, “GoDaddy itself set the system up this way. It cannot now point to its hundreds of thousands of customers in Illinois and tell us, ‘It was all their idea.'”

Second, the court found that uBID’s claim arises out of GoDaddy’s contacts with Illinois.

In doing so, it eschewed adopting either a but-for causation or a proximate cause approach to the relationship.

The court found that but-for causation would be overinclusive, by subjecting defendants to suit in states even if they gained nothing from its contacts in those states, and that a proximate cause approach would be underinclusive.

Instead, it adopted the approach of the Third Circuit in O’Connor v. Sandy Lane Hotel Co., 496 F.3d 312, 323 (3d Cir. 2007): the relationship must be “intimate enough to keep the quid pro quo proportional and personal jurisdiction reasonably foreseeable.”

Applying that test, the court found, “Substantively, the contacts alleged in uBID’s complaint and the wrongs alleged in uBID’s complaint are so intimately related that GoDaddy cannot reasonably have been surprised to find itself sued in Illinois. Temporally, too, the claim and the contacts are inseparable. The allegedly infringing parked pages were all active and garnering income at the time uBID filed its complaint.”

What the court held

Case: uBID, Inc., v. The GoDaddy Group, Inc., No. 09-3927

Issue: Is an out-of-state Internet company subject to suit for cybersquatting?

Holding: Yes. Where the company advertised nationally, it is subject to suit in the forum state.

David Ziemer can be reached at [email protected].