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Texas Appellate Court Rejects ''Sliding Scale'' Jurisdictional Analysis in Internet Defamation Case

Wednesday, August 17, 2011

Rebecca L. Tsai | Bloomberg Law Wilkerson v. RSL Funding, L.L.C., No. 01-10-01001-CV, 2011 BL 208123 (Tex. App. Aug. 11, 2011) Addressing an issue of first impression in the state, the Court of Appeals of Texas held that the "sliding scale" standard for assessing personal jurisdiction did not apply to a nonresident user of an interactive website.

Reviews on Yahoo! and Yelp Give Rise to Defamation Suit

After Trisha Wilkerson won the California state lottery, she assigned a portion of her future payments to RSL Funding, L.L.C., a financial services company, in exchange for a one-time payment. Jerry Wilkerson, Trisha's father, was unhappy with the transaction and posted comments about RSL on a website that displayed information about RSL's Houston headquarters. His review stated in part that "RSL has lied repeatedly to us and misled us and have caused numerous delays in this project that still has yet to be funded." He followed up with a comment that "RSL is still playing games as they think they have us over a barrel. So dishonest and disrespectful, will not even return a phone call." While Wilkerson claimed that he found the website through a search engine and thought that it was owned by RSL, the website was actually maintained by Yahoo!. Wilkerson posted similar comments on a website about RSL maintained by Yelp. RSL sued Wilkerson in Texas state court for defamation, libel, and business disparagement. Wilkerson filed a special appearance, contesting the trial court's jurisdiction over him. The trial court overruled the special appearance, and Wilkerson appealed.

Court of Appeals Rejects Sliding Scale Analysis

Assessing whether the trial court properly overruled the special appearance, the Court of Appeals declined to apply the "sliding scale" analysis that many other courts employ in considering whether to exercise jurisdiction over a nonresident defendant based on Internet contacts. Rejecting the sliding scale's reliance on the relative interactivity of the relevant websites, the Court reasoned that the "interactive features of Yahoo! and Yelp are the creations of the owners and operators of those websites" and thus the "interactive nature [of the websites] cannot be fully imputed to an individual user such as Wilkerson" for purposes of determining personal jurisdiction. The Court further commented that although the websites at issue here "may themselves be considered interactive," Wilkerson's use of those sites constituted a "passive" use and thus was not amenable to a sliding scale analysis. Instead, the Court applied the purposeful availment standard and held that Wilkerson's reviews were not directed specifically towards Texas and therefore did not give rise to personal jurisdiction. Accordingly, it reversed the trial court's order denying Wilkerson's special appearance.

Dissent

Judge Evelyn V. Keyes authored a dissent in which she criticized the majority for "derail[ing] an important case of first impression in a developing area of law in which internet website owners, search engine operators, and users are all in need of . . . legal guidance." In her view, the websites at issue were "clearly interactive," and thus the majority should have looked at the "degree of the interaction between the parties." Specifically, Judge Keyes opined that Wilkerson's reviews concerned a Houston business, were posted on local websites, and targeted users of those local websites. As such, she would have affirmed the trial court's exercise of personal jurisdiction over Wilkerson.
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