On 28 November 2023, the Ninth Circuit Court of Appeals issued a decision of first impression that will sharply curtail a plaintiff’s ability to sue nationally operating payment processors and potentially many other businesses with broadly accessible web-based platforms. In Briskin v. Shopify, Inc., a data privacy lawsuit, the Ninth Circuit considered the appropriate limits on a U.S. court’s assertion of “specific” personal jurisdiction over a foreign defendant (and its U.S.-based subsidiaries) with broad, yet untargeted nationwide contacts. The Court held that “[w]hen a company operates a nationally available e-commerce payment platform and is indifferent to the location of end users, the extraction and retention of consumer data, without more, does not subject the defendant to specific jurisdiction.”

Unlike “general” personal jurisdiction, which allows a court to hear all claims against a defendant as long as that defendant is “at home” in the state, “specific” jurisdiction applies to defendants with less intimate ties to the forum state but who nevertheless purposefully avail themselves of the privilege of conducting activities there, as long as there is a sufficiently strong connection between the plaintiff’s claims and the defendant’s contacts with the forum state. The U.S. Supreme Court has issued numerous important decisions over the past decade regarding both general and specific personal jurisdiction, including most recently the Court’s 2021 specific jurisdiction decision in Ford Motor Co. v. Mont. Eighth Jud. Dist. Ct. In Ford, the Supreme Court held that for specific jurisdiction to exist, a strict causal connection between a plaintiff’s claims and a defendant’s forum activities is not required; instead, it is sufficient for the claims merely to “relate to” those forum contacts. Although that holding somewhat stalled a trend of more restrictive personal jurisdiction decisions by the Supreme Court, the Court left for another day the question of how its decision would apply in the context of “internet” businesses, while also making clear that the “relates to” test “incorporates real limits . . . to adequately protect defendants foreign to a forum.”

The Ninth Circuit’s decision in Briskin imposes the “real limits” on specific jurisdiction over internet-based transactions that the Supreme Court expressly declined to address in Ford because of the special “doctrinal questions” raised by e-commerce, and thus helps to protect businesses with interactive web-based platforms from expansive jurisdiction in the United States courts.

Background

In August 2021, Briskin commenced a putative class action in the U.S. District Court for the Northern District of California against Canada-based Shopify, Inc. and two of its wholly owned U.S. subsidiaries, both of which are incorporated and have their principal place of business outside of California. According to the complaint, Briskin, a California resident, purchased fitness apparel online from a California-based retailer that used Shopify’s e-commerce platform to process the transaction. Briskin alleges that Shopify violated various California privacy and unfair competition laws by unlawfully obtaining, retaining, and sharing his personal information without his consent.

The District Court provided Briskin with two opportunities to amend his complaint to “bolster[]” the allegations about Shopify’s contacts with California. To that end, Briskin alleged that Shopify had contractual relationships with numerous California merchants, a California-based physical location to enhance Shopify’s relationship with those merchants, and a fulfilment center located in California that stores and ships goods. Briskin further alleged that one of Shopify’s U.S. subsidiary defendants is registered to do business in California, once had a San Francisco office, employs a quarter of its workforce in California, and services thousands of California businesses. The other subsidiary defendant, according to Briskin, contracts with “thousands” of California-based merchants and partners with another California-based payment processor, with whom it shares consumers’ personal data. Nonetheless, in May 2022, the District Court dismissed the complaint without leave to amend on the basis that it failed to allege that the Shopify defendants committed intentional acts specifically directed to California.

The Decision

Addressing the “novel” question of specific jurisdiction over an online payment platform, the Ninth Circuit considered whether Shopify, by providing web-based payment processing services to online merchants throughout the country and the world, thereby expressly aims its conduct at California. Analogizing to and relying on Ninth Circuit precedent regarding personal jurisdiction over businesses with interactive websites, the Panel held that this conduct did not establish specific jurisdiction over Shopify in the state.

The Panel first found that there was an insufficient relationship between the plaintiff's claims and Shopify’s broader business contacts in California, deeming such contacts essentially irrelevant to the specific jurisdictional analysis. In so holding, and relying on Ford, the Court rejected Briskin’s argument that Shopify’s contracts with California merchants and brick-and-mortar operations in the state “set the wheels in motion” for Shopify to eventually commit the privacy violations alleged. “[S]uch a butterfly effect theory of specific jurisdiction,” as the Court dubbed it, would be incompatible with due process.

The Panel also rejected the notion that Shopify directed its conduct at California simply because Briskin resided there, made his online purchase while located there, and suffered the alleged privacy-based injuries there. Applying the U.S. Supreme Court’s decision in Walden v. Fiore and its progeny, the Court held that it is Shopify’s contacts with California—not Briskin’s (or some other third party’s)—that drive the specific jurisdiction analysis. Nor were Briskin’s injuries tethered to California in any meaningful way; to the contrary, in the Court’s view, his injuries would have been the same regardless of where Briskin decided to live or make his online purchases.

Having narrowed down the conduct it determined to be relevant to the issue of specific jurisdiction—namely Shopify’s collection, retention, and sharing of consumer data obtained from persons who made purchases online while in California—the Panel proceeded to determine the legal framework to apply. The closest analogy, it concluded, was its precedent involving interactive websites (although not the sale of goods through an interactive website, which the Court was careful to point out is subject to a different set of legal rules). Applying this framework, the Court held that operation of a web-based platform is not enough in and of itself to satisfy the express aiming requirement. “Something more” is needed. To establish that “something more” in suits involving internet platforms, a plaintiff must allege either that the site has a forum-specific focus, or alternatively, that the defendant sought to specifically appeal to an audience in the state. The Panel found that neither of those additional factors applied with respect to Shopify. Instead, Shopify’s platform is accessible across the United States and Shopify is “indifferent” to the location of either the merchant or the end consumer; nor does Shopify do anything to prioritize or cultivate California consumers in particular.

While somewhat receptive to Briskin’s argument that dismissal for lack of personal jurisdiction would allow Shopify to engage in activity in all fifty states yet not be subject to jurisdiction anywhere, the Ninth Circuit was also concerned about a defendant’s due process rights and careful to apply the "real limits” suggested by the Supreme Court in Ford so that web-based platforms would not be subject to boundless jurisdiction. Moreover, the Ninth Circuit made clear that the Shopify defendants could still be subject to general jurisdiction in their state of incorporation or principal place of business (though it is less clear how this would apply to the Canada-based parent entity), or, potentially, impleaded into a case in a different forum against a merchant over which a court would have jurisdiction.

Implications

The Ninth Circuit’s decision in Briskin v. Shopify, Inc. is noteworthy in two main respects. First, in finding that Shopify’s fairly extensive business contacts with California were not sufficiently connected to the plaintiff’s data privacy claims, the Court imposed significant limitations on what forum contacts can be deemed relevant to the specific jurisdiction analysis. And, second, by determining that a nationwide payment processor like Shopify did not expressly aim its conduct at California, the Court protected a broader range of online-focused businesses who serve, but do not specifically target, merchants or consumers in all fifty states from a finding of specific jurisdiction under the purposeful availment prong of the analysis.

While the decision tackles important questions about the purposeful availment and the “arise from or relate to” prongs of the specific jurisdiction analysis as it relates to internet-based businesses, other federal courts outside the Ninth Circuit (not to mention state courts everywhere) will undoubtedly continue to grapple with these difficult issues. In fact, the Ninth Circuit was careful to explain that the specific jurisdiction inquiry is “fact intensive” and the extraction and retention of consumer data might in some other case, depending on the precise nature and structure of the defendant’s business operations, qualify as express aiming towards a particular forum.

All businesses with web-based operations or platforms like Shopify’s who wish to limit their litigation exposure to certain U.S. fora would therefore be wise to study this decision carefully because, as the Ninth Circuit and the Supreme Court have emphasized, a fundamental precept of the personal jurisdiction doctrine is that a defendant may structure its business operations to reduce or avoid exposure to particular courts.