Although there are numerous items I take issue with in the Attorney General’s brief, I will focus on their jurisdictional analysis and where I respectfully disagree with them. I may choose in another post to examine some of their other arguments such as purposeful availment. But for sake of brevity I will focus on jurisdictional issues in this post.
Mississippi’s reply brief to the amicus briefs and appellee’s brief, argues for a jurisdictional concept that does not square with well settled legal principles. Imposing Mississippi’s view of personal jurisdiction would require judges to create jurisdictional doctrine by judicial fiat and in contravention of common legal practice.
Facts of the case
The Mississippi Attorney General Jim Hood, who is running for Governor, ran a sting operation against California and New York retailers. He ordered wine and had the wine shipped into Mississippi and had some quantities shipped to dry counties and to underage buyers.
When the wine was ordered from the retailers, subject to this lawsuit, the contract terms specified that the sale would take place in California and New York and that the retailer would help arrange for shipping.
Nobody disputes that the transaction was classified as a freight on board (FOB) transaction in compliance with the Uniform Commercial Code (UCC).
Peculiar notions of jurisdiction
A main part of this controversy is whether Mississippi has personal jurisdiction over retailers who sold products in another state to Mississippi residents.
Mississippi believes that they are afforded personal jurisdiction because in their view an illegal act was committed in Mississippi.
Mississippi’s basis for jurisdiction relies on the situs of the illegal act resting in Mississippi.
But we must ask the important question, did the illegal act occur in Mississippi?
Can Mississippi go after a retailer that sells wine to Mississippi residents in another state?
Illinois has a major problem with bootlegged liquor being brought over the border from Indiana. Due to the largesse of Illinois tax rates, Indiana liquor is substantially cheaper than Illinois liquor. Based on this factor, many Illinois retailers resort to purchasing mass amounts of liquor from Indiana retailers.
A Chicago news station ran a news story highlighting a Dyer, Indiana liquor store that sold massive amounts of liquor to Illinois customers. The high amounts of liquor being bought made it highly improbable that the amounts were for personal use. In fact, cameras followed some vehicles leaving the Dyer, Indiana store and the liquor purchased was dropped off at certain Illinois retail locations.
Although the liquor purchased from the Indiana retailer was imported illegally into Illinois, the State did not go after the Indiana retailer. The sale was legal under Indiana law and because it happened in another state, Illinois had no jurisdiction over the Indiana retailer.
Nevertheless, Illinois did not sit back and allow the free flow of liquor across state lines. Illinois sanctioned certain retailers that purchased their liquor from Indiana retailers and illegally imported liquor into the state. https://www.nwitimes.com/business/jobs-and-employment/illinois-liquor-licenses-revoked-suspended-after-bootlegging-from-indiana/article_0d56dfb0-3889-5546-88c2-bbba09778596.html
As Illinois’ actions indicate: 1. A state’s grounds for imposing jurisdiction over a sale occurring in another state are legally suspect; and 2. If the state wants to enforce the law properly, it should impose penalties over those that chose to act not in accordance with the law.
What Mississippi is actually doing?
In my brief for Wine Freedom I analogized to a situation where a customer from Mississippi visits a border liquor store in Louisiana, presents a Mississippi ID and purchases liquor which it brings back to Mississippi. Under Mississippi law it is illegal to bring/import alcohol back into the state. Miss. Code § 97-31-47.
In this scenario, the Louisiana retailer sells liquor to someone that will probably violate Mississippi law.
So why isn’t Mississippi going after the Louisiana retailer, because akin to the Illinois situation, it does not have jurisdiction over that retailer.
When I raised this issue in my brief, the State of Mississippi indicated that the situations are not comparable because: the New York and California wine retailers sold to residents located in Mississippi; they received a pecuniary benefit from their business with residents located in Mississippi; they purposefully directed shipments of alcohol to residents they knew were located in Mississippi; and they acted on the buyer’s behalf to arrange for the transportation of alcohol to a known address.
Let’s look at Mississippi’s differences between the two situations. 1. The Louisiana retailer in my analogy and the New York and California retailers all knowingly sold to Mississippi residents and received a pecuniary benefit from residents located in Mississippi. These two factors are identical between the parties.
The difference is whether purposefully directing shipments to Mississippi and helping arrange for transportation to Mississippi makes these situations different.
When the brick and mortar Louisiana retailer sells to Mississippi residents, they are allowing them to purchase alcohol that has a high likelihood of being imported into Mississippi. They are also, by selling to Mississippi residents, arranging for the liquor to come into Mississippi illegally.
But let’s examine another situation where a Mississippi consumer purchases their wine out-of-state and brings it back into Mississippi. Suppose a Mississippi resident goes on vacation to New York or California and buys wine there. Is the New York or California retailer guilty if the Mississippi resident brings the bottle back on the plane, or is the New York or California retailer guilty if the Mississippi resident ships it from California or New York back to Mississippi, or is the New York or California retailer guilty if they arrange for the Mississippi resident to ship back wine it purchased while on vacation? Where is the line of demarcation!
The common denominator between all situations is where the legal liability resides? In these situations, the consumer went out-of-state to obtain liquor. They made the choice and took the legal risk and even signed their name to the legal risk when dealing with California and New York retailers.
Mississippi paternalistically wants to govern the risk for consumers and shut them off from buying liquor in other states. Thereby limiting consumer purchasing solely to the Mississippi market and putting a commercial barrier around the state.
Brick and Mortar versus the internet retailer, does it matter?
The main factual difference between the Louisiana retail store used in my analogy and the California and New York retailers is one is a brick and mortar store whereas the other is an internet retailer.
So, does this make a difference on how the law should be applied?
The answer is simply no!
If the state wants to draw a legal distinction between the two, then the distinction ignores the legal reality that the UCC, which governs the sales of goods, does not draw a difference between whether a consumer orders online versus a brick and mortar.
The internet has been with us for three plus decades, and that the UCC and the states over these decades have not issued new policies or laws on the difference between bricks and mortar and the Internet. Absent the UCC issuing such a distinction, the UCC F.O.B. terms apply uniformly to brick and mortar and internet retailers.
Also, even if the UCC does not change its terms, the state can enact a change. The UCC does not bind a state and is merely a set of policy recommendations. Many states including Mississippi, enacted parts of the UCC but not the whole thing. The state may choose the path to distinguish between a brick and mortar and internet sale. Clearly, that has not happened. Akin to the UCC, if Mississippi does not legally distinguish between brick and mortar versus internet retailers, we can state with certainty that the UCC F.O.B. terms apply uniformly to internet retailers and brick and mortar retailers.
Mississippi tries to draw one main distinction between the brick and mortar and the internet retailer. The Internet retailer is this sophisticated business that runs an interactive website that customers can access throughout the country.
Now let’s say all things are equal and the Louisiana brick and mortar store like the California and New York retailer does not target Mississippi customers with any advertising. (In the specific situation at hand, it is not like the California or New York retailers put up billboards advertising their business in the state and actively sought out the Mississippi market.) In other words, Mississippi consumers come to the retailers without the retailers enticing Mississippi residents.
Under the state’s view ordering off an interactive website that creates a contract and creates an account are the distinguishing factors that create jurisdiction with the State of Mississippi.
This is suspect reasoning. In a case Butler v. Beer Across America, 83 F. Supp 2d 1261 (N.D. Ala. 2000), a website in which an out-of-state customer can order beer via UCC FOB provisions did not create jurisdiction. Like the California and New York retailers, Beer Across America did not target the state and the sellers came to them. The court in this case indicated that the website was akin to an electronic postal reply card, whereas under the same circumstances, Mississippi would have us believe that the California and New York retailers operated interactive websites.
Further advancing this questionable analogy is that in the Butler case a greater percentage of their sales went into Alabama, than the sales of the California and New York retailers going into Mississippi.
Try as they may, Mississippi cannot establish personal jurisdiction over these retailers. The retailers followed the law and applied well settled legal doctrine in the UCC FOB provisions and they never actively targeted Mississippi. Mississippi consumers targeted them.
In the end, Mississippi should respect the privilege of their state residents’ ability to go shop for alcohol in another state and Mississippi should not seal off its borders to commercial activity.