In March 2021, the American dollmaker “American Girl” LLC filed a lawsuit against the Chinese company “Zembrka,” accusing them of counterfeiting and trademark infringement.
“Zembrka” was allegedly actively engaged in business transactions with customers residing in New York State by accepting orders and payments. According to “American Girl,” Zembrka operated interactive websites where customers could purchase counterfeit goods by entering their shipping addresses, contact details, and payment information. However, Zembrka claims that though they accepted payment for orders, the products were never shipped, and the transactions were all refunded. “American Girl” then presented supporting evidence showing confirmation emails from purchases made on Zembrka’s interactive website. The emails included titles such as “Order confirmed” and “We’re getting your order ready to be shipped” as well as shipping addresses of people residing in New York. Additionally, PayPal payment confirmations and receipts from these purchases were submitted as evidence in the case. The PayPal evidence revealed that New York customers made 700 purchases of Zembrka products over the past year, totaling $41,369.72.
At first, The District Court concluded that since no products were shipped to New York and the customer payments were refunded, no business transaction occurred as was required to establish personal jurisdiction. After losing the initial case in district court, American Girl appealed the decision, bringing the case to the United States Court of Appeals for the Second Circuit.
The appellate court reviewed the case’s evidence and interpretations explaining why the decision should be reversed. The court stated that New York’s long-arm statute is a “single act statute” and that proof of one transaction in New York is sufficient to invoke jurisdiction even if Zembrka never entered the state. Hence, their conduct was sufficient to establish personal jurisdiction.
“Initiation of transaction”, stated the statute order did not require a “complete sale” but only a “transaction”. This decision represents an important expansion of New York’s jurisdiction in e-commerce.
Accepting online orders and payments is sufficient to establish personal jurisdiction, even when no item was shipped, and the payment is refunded.
The court noted, “Long-arm jurisdiction is appropriately exercised over commercial orders who engage in business with New York residents even if their presence is entirely virtual.
