The decision from the Mississippi Wine Express case sets a bad precedent in utilizing ambiguity to impose legal jurisdiction over a business. The results of the decision will hurt Mississippi consumers and could lead to businesses avoiding interaction with Mississippi residents. The lack of concrete standards utilized for reaching this decision, should concern anyone who puts any importance on notions of due process and fairness.
California and New York retailers setup a website that sold wines to the public. Anyone that purchased wine from the website agreed that pursuant to UCC terms of contract that the sale occurred in the retailer’s home state and that the retailer would help arrange for shipping.
Mississippi’s Attorney General agents purchased wine from several California and New York retailers, and the retailer helped arrange for shipping to Mississippi. The purchase was done pursuant to UCC FOB terms, and the purchaser agreed that the sale took place at the retailer’s location and not in Mississippi.
Mississippi charged these retailers. The original case was decided at Chancery Court, where the judge ruled in favor of the retailers. The State appealed and the Mississippi Supreme Court took the case.
Long-Arm Statute Analysis
The Justice first analyzed whether Mississippi’s long-arm statute conferred personal jurisdiction over the nonresident defendant.
The Justice stated that Miss. Code Ann. § 13-3-57 makes it clear that jurisdiction shall apply to any corporation or person “who shall do any business or perform any character of work or service in this state . . . .”
Then the judge concluded that because each retailer operates an interactive, commercial website where Mississippi customers can purchase alcoholic beverages, that this is sufficient to meet the long-arm statute’s requirements.
Problematically, the Justice never spelled out which specific activity the retailers performed in this state.
Each retailer, charged by Mississippi, had no property or agents in the state, nor did they target customers in the Mississippi market.
Failing to find any requisite activity, the Judge relied on the amorphous notion of an interactive website to pull the retailers into the state.
Justice Beam then goes into each retailers’ sales amounts to justify bringing the defendants into the state based on the long-arm statute. Justice Beam cites to the fact that “from December 2014 to January 2018, Gold Medal had transacted with 225 Mississippi residents approximately 2,556 times, making approximately $181,821 in sales. Fromt he year 2015 to 2017, Wine Express transacted with 69 Mississippi residents approximately 189 times, for approximately $39,580 in sales. And from December 2014 to October 2017, Bottle Deals transacted with 46 Mississippi residents approximately 51 times, for approximately $7,229 in sales.”
Justice Beam goes onto state the volume of sales leads to conducting business in Mississippi, which gave them a virtual presence in Mississippi, and hence they are subject to personal jurisdiction under the long-arm statute.
What I find interesting is Justice Beam during oral argument chided the retailers for their business model offending the U.S. Supreme Court’s ruling in Wayfair.
However, when it comes to applying Mississippi’s Wayfair standards, Justice Beam forgot about Wayfair because it cuts against her theory of establishing jurisdiction!
Under Mississippi Wayfair standards, jurisdiction is established for sellers that lack physical presence, if the sales into the state exceed $250,000 over a 12-month period.  As the numbers above demonstrate, no retailer came remotely close to meeting this number. The most activity was $181,821 over a four-year period.
Without a clear test for the activity necessary to establish jurisdiction, the Court could have applied Wayfair. However, after being so worried about the retailers offending Wayfair, Justice Beam did not mention Wayfair once in her opinion. Mainly because if the Justice utilized Wayfair, no retailer would meet the standards for doing business under the long-armed statute.
Further reaching implications of this decision
This decision runs the risk of turning Mississippi citizens into commercial pariahs in every other state of the nation.
If a business with absolutely no physical presence, no purposeful targeting of a market, and a low sales volume by standards such as Wayfair, is subject to legal sanction, they will stop doing business with residents of that state.
As with shipping of alcohol into Mississippi, importing alcohol from another state into Mississippi is illegal.
So, if Mississippi residents physically visit a New York or California retailer and get the wine shipped back to them, does the New York or California retailer purposefully avail itself to the Mississippi market? Or let’s take it another step, does a Louisiana retailer that sells beer to Mississippi residents coming over the border, purposefully avail itself to the Mississippi market?
Problematically, Mississippi with its new and lack of concrete standards, is utilizing arbitrary guidelines on what a Justice thinks the law ought to be as opposed to what it should be.
As a result, businesses will suffer based on judicial overreach.
But in this newly developed legal quagmire, the real losers are Mississippi consumers!
The Justice next analyzed whether adjudicating the claims in a Mississippi court is consistent with Due Process.
- Minimum Contacts
The Justice first looked at whether the retailers had sufficient minimum contacts to establish personal jurisdiction.
The Justice first discussed the Zippo sliding scale test developed by a federal district court in Pennsylvania, Zippo Manufacturing Co. v. Zippo Dot Com, Inc., 952 F. Supp. 1119 (W.D. Pa. 1997), and adopted by the 5th Circuit, Mink v. AAAA Development, LLC, 190 F.3d 333 (5th Cir. 1999).
Mississippi resides in the Federal 5th Circuit Court of Appeals.
Zippo is a well-regarded opinion and its test has been applied in many subsequent decisions. The Zippo test determines whether a website’s activity establishes personal jurisdiction.
Then the Justice discussed a decision from the 7th Circuit, Illinois v. Hemi Group, LLC 622 F.3d 754 (7th Cir. 2010), which did not adopt Zippo and applied a totality-of-the-circumstances-test.
In Hemi Group, the Seventh Circuit utilizing a totality-of-the-circumstances test held that personal jurisdiction in Illinois was properly imposed on a Native American cigarette seller from New Mexico. In Hemi Group, the cigarette sellers did not target Illinois customers or have any agents of process in the state.
In the Justice’s view whether under the Zippo sliding scale test or the Hemi Group totality-of-the-circumstances test, the minimum contacts test was satisfied.
Justice’s selective use of past judicial decisions
Justice Beam’s use of past judicial precedent demonstrates that the law was used to justify the means. One glaring omission from this opinion is the absence of Beer Across America v. Butler.
In Beer Across America, an Alabama resident ordered beer from the company’s website. The company never targeted Alabama nor advertised in the state, it had no agents of process, and performed no activity in the state. Similar to this situation, the customer ordered the product UCC FOB. And the contract indicated that the company would help arrange for shipping. The sales to Alabama were 3 to 4% of the company’s total sales. Which was a higher percentage of sales than the retailers Mississippi sales constituted.
Now the question to raise, is why did Justice Beam ignore this opinion? The facts are nearly identical and the opinion utilized the Zippo test which was adopted by the 5th Circuit. Instead Justice Beam holds that Zippo supports the Justice’s conclusion without even analyzing Beer Across America.
Failing to analyze a case like this, would have gotten me graded down in a legal writing law school class! And also, the Justice goes outside to the 7th Circuit to adopt a case to the Justice’s liking. A case which dealt with cigarettes that lives under a completely different regulatory environment than alcohol.
Finally, the Justice indicates that “whether under the Zippo sliding-scale test or the totality-of-the-circumstances test, we find that the minimum-contacts prong of the due process test is met.” If the Justice looked at how the Zippo test was analyzed in Beer Across America and compared it to this case, maybe we could buy this statement as fully vetted.
In absence of the proper legal analysis, we need to question whether this case was subject to a complete and thorough review by the Mississippi Supreme Court.
- Whether the State’s cause of action arises out of or relates to the Defendant’s forum-related activities.
The Justice concluded that “there is no dispute that the State’s claims arise out of and are related to the Defendants’ activities with Mississippi.”
- Whether jurisdiction comports with fair play and substantial justice.
The Court indicated that the defendants did not argue against jurisdiction and that Mississippi courts have a strong interest in having a forum to resolve disputes involving the state.
The real-world consequences
Where a consumer resides is determinative of their access to a lesser, or a greater, selection of fine wines. A resident of New York has access to a greater wine selection than a resident of Mississippi; this is the factual reality. States like Mississippi lack the population and large municipal areas necessary for fine wine stores to flourish and their markets are shut off from shipping. Because retailers cannot ship directly to consumers in Mississippi, in state resident consumers face functional discrimination in product choice and availability.
The Mississippi Supreme Court is now attempting to eliminate the legal freedom now enjoyed by Mississippi consumers to travel to other states and purchase wine not available in Mississippi. The Mississippi consumer who travels to another state (in person or virtually) and takes full legal responsibility for the delivery and shipment of the consumer goods under the Uniform Commercial Code (UCC) to him or herself in Mississippi or elsewhere is exercising a basic legal right. Mississippi, in this case, asserts that this legal freedom on the right of Mississippi residents to travel does not exist. We beg to differ. The Uniform Commercial Code is as alive in Mississippi as it is in New York or California. Miss. Code § 75-2-401.
If parties traveling and making contracts under specifically defined laws and court precedents all the sudden discover these legal doctrines (specifically the UCC) are no longer reliable, this causes irreparable harm to the relationship between Mississippi consumers and out-of-state merchants.
If out of state merchants suspect that goods sold will be taken back to Mississippi because the buyer has a Mississippi address on his or her identification, the merchants will become hesitant or even stop selling consumer goods to those Mississippi consumers. This will mark Mississippi consumers with a scarlet letter and will shut off their access to products in other markets.
Justice Beam’s failure to take into considerations UCC legal concerns is troubling and damaging to the consumer. The Justice’s lack of consideration will have a resounding impact on Mississippi consumer and deny them the right to travel and obtain the goods they desire.