INTRODUCTION :: Suppose your law firm represents CrabApple, the large, California-based manufacturer of the BuyPod, a portable digital music player. CrabApple also sells songs from its online music store, BuyTunes, for use on the BuyPod. One morning, a class-action antitrust lawsuit lands on your desk. It accuses CrabApple of illegal tying-because the BuyPod is designed to play only music from BuyTunes, and BuyTunes songs only play on BuyPods. CrabApple customers claim the tying has forced them to make unwanted purchases-BuyPod owners felt compelled to buy their music from BuyTunes, and anyone who wanted to use BuyTunes had to get a BuyPod. These consumers claim that the forced purchases damaged them. You recognize the name of plaintiffs’ law firm at the bottom of the complaint. The firm has a reputation for aggressive, well-funded, and protracted consumer litigation. The plaintiffs seek a treble-damage money judgment. They have filed the lawsuit in a federal district court in the state of West Dakota. You know West Dakota’s economy has long been mired in recession, due to factory and farm jobs going overseas. The judicial division is notorious among defense counsel for rogue juries and large plaintiffs’ verdicts. You fear the jury pool would have little inclination to treat your client fairly.
CrabApple has no connection to West Dakota. It has no stores or offices there, no property or bank account there, and none of its officers lives or works there. True, its products are purchased there, but the market is so small and depressed that you don’t think West Dakota even factors into CrabApple’s marketing plans. Yet despite this lack of contacts, plaintiffs are seeking personal jurisdiction over your client in West Dakota, based on the “effects test” from Calder v. Jones. The lawsuit claims CrabApple “expressly aimed” its anticompetitive activity at West Dakota, creating effects that injured consumers there, and justifying the assertion of jurisdiction by the West Dakota court. You have twenty days to respond.
Farfetched? Maybe not. In Calder, the Supreme Court held that the tortious effects that a defendant “expressly aimed” at a forum, without ever setting foot there, could provide the basis for personal jurisdiction in that forum, even in the absence of the usual contacts, such as the presence of an office or employees. The underlying tort in Calder was libel-a National Enquirer story written in Florida, impugning actor Shirley Jones in her home state of California. But in the nearly twenty-five years since the Court announced Calder, plaintiffs have analogized and attempted to apply the Calder test to other torts, including tortious interference with business relationships, infringement of publicity, and antitrust violations.
Calder required that a defendant “expressly aim” its conduct at the forum. This requirement makes sense for the classic effects-test hypothetical-someone who fires a rifle while standing just inside the Nevada border, aiming at another person standing in California. But with the globalization of business blurring regional and national boundaries, it is harder to show that a business has expressly aimed its anticompetitive activity at a particular forum. Thus, when companies serving national or international markets are antitrust defendants, the due process inquiry can become: When does aiming everywhere mean aiming nowhere? And in terms of the hypothetical at the beginning of this Note, the question is: Has CrabApple expressly aimed its conduct at West Dakota in a way that justifies its being haled into court there? The perverse result, according to some courts, is that the more widely you aim your anticompetitive conduct, the safer you are from Calder jurisdiction. The cynical advice to a cartel might be, “don’t aim too carefully.”
This Note suggests that while Calder jurisdiction fits well with some types of antitrust allegations, the Calder analogy weakens when charges of broad-based anticompetitive conduct collide with the long-arm statutes of particular states. The risk of forcing the analogy too far, of course, is a violation of due process. Part II of this Note reviews the facts and holding of Calder, and some of the key cases that followed it. Part III addresses the question of how the effects test might be different for antitrust complaints. Part IV reviews one type of anticompetitive conduct that seems to place particular strain on the Calder analogy-cartel practices whose effects are attacked in a particular state. Part V balances the due process argument for a narrow reading of Calder with policy considerations supporting a broader application of Calder to antitrust cases.
November 2014, Vol. 66, No. 6
Lily Kahng, The Taxation of Intellectual Capital