bbieron@platformeconomyinsights.com

Ninth Circuit Drastically Expands State Jurisdiction Over Online Companies

Apr 1, 2025

Report from Reuters

In Brief – The Ninth US Circuit Court of Appeals has ruled that online commerce platform Shopify, based in Canada, could face a class action lawsuit in California for allegedly violating state privacy laws. An en banc panel overturned an earlier ruling that said the digital company could not be sued in the state because it did not specifically target its services to California-based online retailers. The consumer lawsuit claims that Shopify violated state law when its payments service used by online retailers downloaded tracking cookies to the phones of buyers, including those in California, and the data was later used by Shopify to bolster online advertising. The earlier courts had ruled that online retailers who made sales to state residents may be subject to state law, but Shopify was not because its payment service was offered online generally without targeting California shoppers. The en banc panel ruled 10-1 in the other direction, determining that Shopify “expressly aimed” its conduct toward Californians by “knowingly installing tracking software onto unsuspecting Californians’ phones so that it could later sell the data it obtained”. A spokesman for Shopify, which is based in Canada and operates from Delaware and New York as well, said the decision “attacks the basics of how the internet works,” and Circuit Judge Consuelo Callahan, the lone dissenter, criticizing the majority’s new “traveling cookie rule” because it “impermissibly manufactures jurisdiction wherever the plaintiff goes.”

Context – Expanding state “jurisdiction” over digital platforms selling third-party business services would likely be immensely disruptive. This case highlights the current difference in the standard for “jurisdiction” in state law liability cases between companies that sell physical products online that are then delivered into a state, which the Ninth Circuit has held does create jurisdiction for the company in the state, and the standard for third-party services that are offered on the internet, which has heretofore not established jurisdiction for a service provider if services are offered online without targeting the state. It is well understood that requiring legal and regulatory compliance in more places benefits larger businesses over smaller ones.

View By Monthly
Latest Blog
Yelp Wins Legal Ruling in Antitrust Battle with Google

Report from Courthouse News Service In Brief – Federal Magistrate Judge Susan Van Keulen has ruled that Yelp, a leading internet company critic of Google’s search practices, can rely on District Judge Amit Mehta’s 2024 decision in the Justice Department’s landmark...

Illinois Governor Signs Robust AI “Safety” Law

Report from CBS News In Brief – Illinois Governor JB Pritzker (D) has signed the AI Safety Measures Act into law pushing the state to the forefront of AI regulation. The law imposes “safety” requirements on companies developing so-called frontier AI models, including...

Japan Moving to Regulate Social Media and AI in Election Campaigns

Report from Nippon.com In Brief – Japan's House of Representatives, the lower chamber of the Diet, has approved two bills by a majority vote that are intended to address the misuse of social media during election campaigns. The bills, which must next be considered by...

UK CMA Joins the Apple and Google App Store Global Regulation Parade

Report from Reuters In Brief – Britain’s Competition and Markets Authority (CMA) has announced its proposed new regulations to require Apple’s and Google’s app stores to allow app developers to direct users to third-party payment options to increase competition and...

Platform Economy Insights produces a short email four times a week that reviews two top stories with concise analysis. It is the best way to keep on top of the news you should know. Sign up for this free email here.

* indicates required