In 'Absolute' Internet Auctions, a Contract Between a Bidder Located in Virginia and a Commercial Seller is Formed in Virginia at the Instant the Bidder Places his Bid; Commonwealth of Virginia Exercises Jurisdiction over Such Sellers

In National Auction Websites Malcolm v. Esposito, 63 Va. Cir. 440, 440-441 (Va. Cir. Ct. 2003), the Fairfax County Circuit Court held that the Commonwealth of Virginia exercises personal jurisdiction over commercial sellers conducting ‘without reserve’ auction sale using popular internet auction websites when the bidder places his bid while located in Virginia.  The court in this case discussed in detail if personal jurisdiction over Defendants exists in such scenario. 

This case arises relates to a dispute involving an internet transaction. Plaintiff Joseph Malcolm (“Plaintiff”) is a citizen and resident of the Commonwealth of Virginia. And the defendants are Prestigious Motor Sales, Inc., car dealership with a physical location in Connecticut, and it agents Chris Esposito and Thomas Esposito who do not reside or work in the Commonwealth of Virginia (collectively “Defendants”). Apart from the transaction in question, Defendants have never sold a vehicle to anyone in Virginia.

In this case, Defendants advertised the auction of a vehicle over the Internet auction website, "eBay." Plaintiff bid and won the auction, at which point the parties exchanged information via email and telephone. The Defendants arranged to have the car shipped from California to Virginia.

Shortly, Plaintiff came to know of a manufacturing defect in the vehicle and attempted to revoke his purchase of the vehicle. When the Defendants refused to rescind the transaction, the Plaintiff filed a suit in the Virginia Circuit Court alleging violation of the Virginia Consumer Protection Act; fraud in the transaction; breach of warranty; and fraudulent dealing after the transaction. Defendants subsequently challenged the Virginia Court’s jurisdiction over the Defendants. The court in this case had to decide if it exercises jurisdiction over the Defendants.
 
The Circuit Court noted that the purpose of the long-arm statute of Virginia "is to assert jurisdiction over nonresidents who engage in some purposeful activity in Virginia, to the extent permissible under the Due Process Clause of the Constitution of the United States." Id. at 442 (internal citations omitted).  According to Virginia law, when jurisdiction is based solely on the long-arm statute, "only a cause of action arising from acts enumerated in this section may be asserted against" the Defendant. Id. VA. CODE ANN. § 8.01-328.1(C).  The case at hand meets this requirement because the Plaintiff's cause of action stems directly from the Internet transaction purported to be the basis for jurisdiction. Id.

The court found that the Terms of Sale at issue mirror the law in Virginia. That is, in the case of "an auction without reserve, the announced terms of sale constitute a continuing offer by the owner, subject to acceptance by the submission of a bid. Each bid is the consummation of a contract, subject only to the receipt of a higher bid." Id. at 443 (quoting Holston v. Pennington, 225 Va. 551, 557, 304 S.E.2d 287 (1983).  The court stated that, “[s]pecifically, this term means that the property will actually be sold to the highest bidder at that time and place, that no minimum price will limit the bids, that the owner may not withdraw the property from sale after the first bid has been received, that the owner may not reject any or all bids…" Id. (internal citations omitted).

The court observed that the Plaintiff in this case, placed his bid for the vehicle on eBay while located in Virginia. This auction was advertised as ‘without reserve,’ wherein the parties formed a contract in Virginia at the instant Plaintiff placed his bid. The long-arm statute is "‘a single-act statute requiring only one transaction in Virginia to confer jurisdiction on our courts.’" Id. ( quoting John G. Kolbe, Inc. v. Chromodern Chair Co., 211 Va. 736, 740, 180 S.E.2d 664, 667 (1971)). The court noted that the Virginia Supreme Court has consistently held that forming even one contract in Virginia is akin to conducting a business transaction in the Commonwealth and is sufficiently substantial to permit personal jurisdiction to be asserted under the long-arm statute. Id. (internal citations omitted).  There is no change to this even if the transaction at issue occurred over the Internet. Id.

The court found that, being commercial sellers of automobiles on a reputed national auction website, Defendants had to have been able to foresee the possibility of being pulled into court outside of their home state. Id. at 446. The court reached the conclusion that the Defendants were subject to Virginia court’s jurisdiction based on the following: 1) Defendants were commercial sellers of automobiles, who at the time the car was sold were represented on the auction website as "power sellers" with 213 transactions; 2) at the time of the transaction, they represented that they had local, national, and international customers; 3) Defendants foresaw potential transactions with non-resident buyers based on the "winning bidder" email it sent to the buyer; 4) the product was an automobile, purchased to be delivered to and driven in Virginia, the recipient state. Id.