In 'With Reserve' Internet Auctions, Commonwealth of Virginia Does not Have Jurisdiction Over Non-resident Commercial Sellers if the Bid is Accepted From Outside of Virginia

In Irving v. Wagner Zone, Inc., 68 Va. Cir. 127, (Va. Cir. Ct. 2005), the Circuit Court held that, in ‘with reserve’ auctions conducted using internet auction websites, the Virginia Court will have jurisdiction over non-resident Defendants only if the Plaintiff can show that the Virginia court exercise long arm jurisdiction over the Defendant.  For this, the Plaintiff must show that the internet transaction consummated in Virginia.  In Irving, the Defendant accepted the Plaintiff’s bid while in Illinois, and not Virginia.  So, the contract was consummated in Illinois.  Further the Defendants did not target and focus on Virginia buyers.  So, the court copncluded that Virginia court did not have jurisdiction over the Defendant owner. 

This case involved a dispute relating to an auction sale over the internet.  The Plaintiff car buyer (“Plaintiff”), a citizen and resident of Virginia, bid and purchased a used car from the Defendant Wagner Zone, Inc., an Illinois Corporation (“Defendant”). The Defendant listed the car for sale on "eBay's" website as an item "with reserve."  However, the webpage did not list the amount necessary to meet the reserve.  It only allowed any interested buyer to contact the seller for further details concerning the car. Under the website's provisions, a seller is not obligated to sell an item to any buyer if the reserve price has not been met. Further, the winning bid must meet the reserve price and represent the highest bid on the item.

The Plaintiff bid the required reserve amount and became the purchaser. Plaintiff and Defendant then engaged in numerous communications to send and receive payment between the parties and to arrange for transfer of the vehicle. The seller required that the car should be picked up in Illinois.

When the car was brought to Virginia, Plaintiff saw that the car was defective and sought rescission of the vehicle's sale contract with Defendant. The Defendant, through its agents, refused to rescind the transaction.  Consequently, the Plaintiff filed the instant action, in the Fairfax County Circuit Court of Virginia, against Defendant and its agents for : Violation of the Virginia Consumer Protection Act of 1977; Breach of Warranty; Breach of Contract; and a Violation of Virginia Code § 46.2-1529.1 (Disclosure of Express Warranties).  The Defendant challenged the Virginia Court’s jurisdiction over them. 

The court in this case after analyzing the facts stated that, for the Virginia Court to exercise jurisdiction over Defendants, Plaintiff must assert long arm jurisdiction over Defendants because Defendants are citizens and residents of Illinois. Id. at 129. Virginia Code § 8.01-328.1(A) allows a Court to exercise jurisdiction over a non-resident defendant when the cause of action arises from defendant's business transactions in the Commonwealth. Id. The Virginia Supreme Court held that a single act, that is, the transacting of any business within the Commonwealth, confers jurisdiction over the defendant. Id. ( citing Kolbe, Inc. v. Chromodern, Inc., 211 Va. 736, 740, 180 S.E.2d 664, 667 (1971)). 

Plaintiff contends that the parties entered into a contract that constitutes a "business transaction" under the Virginia long arm statute and hence long arm jurisdiction can be extended to the Defendants. Id. The court stated that, in contracts that is entered between a non-resident and resident of Virginia, courts will look to the place of its consummation to answer questions of jurisdiction. Id. at 130. (citing Bay Tobacco, LLC v. Bell Quality Tobacco Prods., 261 F. Supp. 2d 483 (E.D. Va. 2003).)  If the place of consummation was Virginia, then the contract constitutes a "business transaction" under the Statute. Id.

The court noted that, in auction sales, to determine the place of consummation of contract we must refer to the Virginia Code provisions on auction sales.  Id. According to the Virginia Code, there are two types of auction sales: with reserve and without reserve. "In an auction with reserve the auctioneer may withdraw the goods at any time until he announces completion of the sale." Id.  Va. Code § 8.2-328(1)-(3). In other words, a contract between the buyer and seller only forms upon acceptance by the seller of a buyer's bid. Id. In contrast, an auction without reserve establishes each buyer's bid as the "‘consummation of a contract, subject only to the receipt of a higher bid.’" Id. (quoting Holston v. Pennington, 225 Va. 551, 557, 304 S.E.2d 287 (1983), see also Malcolm v. Esposito, 63 Va. Cir. 440 (2003)).

Based on the terms sale, the case at hand is an auction "with reserve." Therefore, any contract formed between the parties would have been consummated only when the Defendant accepted Plaintiff's bid. Defendant accepted Plaintiff's bid in Illinois, not Virginia. Id.  Therefore, the contract is consummated in Illinois.  Based on the foregoing, Plaintiff failed to allege any one business transaction in the Commonwealth accomplished by Defendants. Id. Moreover, the facts of the case show that the Defendant did not intend to focus on Virginia buyers.  Id.

Therefore, the court found that it does not exercise jurisdiction over Defendants. Id. at 131.