Tom THOMPSON, Plaintiff,
v.
HANDA-LOPEZ, INC., Defendant.
No. CIV.A. SA97-CA1008EP.
March 25, 1998.

PRADO, District J.
On this date came on to be considered Defendant’s Motion to Dismiss for Improper Venue and for Lack of Personal Jurisdiction, or in the Alternative, to Transfer the Action to the United States District Court for the Northern District of California for Improper Venue or for the Convenience of the Parties and Witnesses, filed August 22, 1997, and the Plaintiff’s Response, filed September 5, 1997 in the above-styled and numbered cause. After careful consideration, this Court is of the opinion that Defendant’s motion should be denied.

BACKGROUND

Plaintiff Tom Thompson brought this action alleging breach of contract, fraud, and violations of the Texas Deceptive Trade Practices Act by Defendant Handa-Lopez, Inc. Defendant operates an arcade site on the Internet advertised as “Funscape’s Casino Royale,” the “World’s Largest” Internet Casino. Individuals purchase game tokens (“Funbucks”) with a credit card, which are used to play blackjack, poker, keno, slots, craps, easy lotto, and roulette. If the player wins he is entitled to receive $1.00 for each 100 Funbucks, in the form of either cash or prizes. Plaintiff alleges that on or about June 9, 1997, he was in Texas, playing games on Defendant’s Internet casino when he won 19,372,840 Funbucks. He attempted to redeem them for $193,728.40 pursuant to the rules of Defendant’s Internet site, but Defendant refused to pay the owed money. Plaintiff therefore brought this lawsuit.

Plaintiff is a Texas domiciliary while Defendant is a California corporation with its principal place of business in California. It maintains an Internet site on the World Wide Web, which can be accessed at “www.funscape.com” by any Internet user. The server for the Web site is located in California. The Web site is at present continually accessible to every Internet-connected computer in Texas and the world. Plaintiff entered into a contract to play the game on Defendant’s Web site. Buried within the contract was an inconspicuous provision which provided that any disputes:

shall be governed by the laws of the State of California, excluding choice of law principles, and shall be resolved exclusively by final and binding arbitration in the City of San Jose, County of Santa Clara, State of California, USA under the rules of the American Arbitration Association, and, in the event of such arbitration, no punitive, special, incidental, or consequential damages may be recovered by any party and the arbitrator shall not have the power to award any such damages…

PERSONAL JURISDICTION

A court must conduct a two-step analysis to establish personal jurisdiction in a diversity case. First, the court must determine that nonresident defendants can be served under the law of the forum state. Second, the court must examine whether the grant of jurisdiction under state law comports with the due process clause of the fourteenth amendment. Stuart v. Spademan, 772 F.2d 1185, 1189 (5th Cir.1985). In Texas, federal courts must only examine the second step because the Texas long arm statute extends as far as constitutionally permissible. See U-Anchor Advertising, Inc. v. Burt, 553 S.W.2d 760, 762 (Tex.1977), cert. denied 434 U.S. 1063, 98 S.Ct. 1235, 55 L.Ed.2d 763 (1978); Stuart, 772 F.2d at 1189.
Due process analysis for personal jurisdiction also requires a two-step analysis. As the Fifth Circuit stated in Stuart:
(a) the nonresident must have some minimum contact with the forum which results from an affirmative act on his part; (b) it must be fair and reasonable to require the nonresident to defend the suit in the forum state.

Id. To be amenable to suit in a forum, the nonresident defendant must have purposely conducted activities in the state which invoke the benefits and protections of the forum state’s laws. The contacts with the state must put the defendant on notice “that he should reasonably anticipate being haled into court there.” World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S.Ct. 559, 567, 62 L.Ed.2d 490 (1980).

Minimum contacts analysis takes two forms. Jurisdiction can be specific or general. Specific jurisdiction focuses the minimum contacts analysis on the relationship between the defendant, the forum, and the litigation. A court has specific jurisdiction when a cause of action arises out of a defendant’s contact with the forum. In such cases, a single act can support jurisdiction. Bearry v. Beech Aircraft Corporation, 818 F.2d 370, 374 (5th Cir.1987). When the cause of action is not predicated on the defendant’s contacts with the forum, the court may exercise general jurisdiction. Unlike specific jurisdiction, general jurisdiction requires more than one contact. General jurisdiction requires a set of continuous and systematic contacts between the defendant and the forum state. Id. Given the nature of general jurisdiction, corporations have a right to structure their affairs to avoid the general jurisdiction of a state’s courts. Id. at 375-76.

When a defendant challenges personal jurisdiction, the plaintiff bears the burden of proof on the issue. D.J. Investments v. Metzeler Motorcycle Tire Agent Gregg, Inc., 754 F.2d 542, 545 (5th Cir.1985). However, The plaintiff does not need to prove personal jurisdiction by a preponderance of the evidence. The plaintiff need only establish a prima facie case for personal jurisdiction. Furthermore, the Court must accept uncontroverted allegations in the plaintiff’s complaint as true and all factual disputes in the parties’ affidavits must be resolved in favor of the plaintiff. Id. at 545-46.

The Internet and Jurisdiction

The Internet is a global communications network which makes it possible to conduct business throughout the world entirely from a desktop. It is currently estimated that there are over 30 million Internet users worldwide. Zippo Manuf. Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119, 1122 (W.D.Pa.1997) (citing Panavision Intern., L.P. v. Toeppen, 938 F.Supp. 161 (C.D.Cal.1996)). Despite the evolution of a global Internet, the case law concerning the permissible scope of personal jurisdiction based on the Internet is very limited. In a recent opinion from the Western District of Pennsylvania, the Court discussed the “sliding scale” that courts have used to measure jurisdiction. Zippo, 952 F.Supp. at 1124.[1] This sliding scale is consistent with well developed personal jurisdiction principles. At one end are situations where a defendant clearly does business over the Internet by entering into contracts with residents of other states which involve the knowing and repeated transmission of computer files over the Internet. See > CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir.1996). At the other end are passive Web site situations. A passive Web site that solely makes information available to interested parties is not grounds for the exercise of personal jurisdiction. See Bensusan Restaurant Corp. v. King, 937 F.Supp. 295 (S.D.N.Y.1996), aff’d, 126 F.3d 25 (2nd Cir.1997). Interactive Web sites, where a user can exchange information with the host computer, represent the middle ground. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity between the parties on the Web site. See Maritz, Inc. v. Cybergold, Inc., 947 F.Supp. 1328 (E.D.Mo.1996).
Minimum Contacts
Due process limitations require that a nonresident corporate defendant have minimum contacts with the forum state such that it could “reasonably anticipate being haled into court there.” World-Wide Volkswagen, 444 U.S. at 297. Further, maintenance of the suit in the forum state cannot offend traditional notions of “fair play and substantial justice.” International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945).

The Defendant claims that personal jurisdiction does not exist here because the Defendant does not have sufficient minimum contacts within Texas to satisfy due process. Minimum contacts are lacking, according to the Defendant, because it is a California corporation with its principal place of business in California, and its server is located in California. It does not maintain an office in Texas nor does it have a sales force or employees in the state.

The Plaintiff responds that mimimum contacts comporting with due process have been satisfied because the Defendant has advertised its Casino over the Internet knowing that Texas citizens will see its advertisement. Further, it has conducted business within the state of Texas by entering into contracts with Texas citizens to play those games, which the Texas citizens played while in Texas.

The Court agrees with Plaintiff. In the present case, Defendant Handa-Lopez has directed the advertising of its Casino toward all states. It advertises itself as the “World’s Largest” Internet Casino. Defendant’s argument that it “did not direct any of its advertising specifically towards Texas residents” is unpersuasive. The Internet is designed to communicate with people in every state. Advertisement on the Internet can reach tens of thousands of users within Texas alone. In Inset Sys., Inc. v. Instruction Set, Inc., 937 F.Supp. 161, 163 (D.Conn.1996), the Court exercised personal jurisdiction, reasoning that, unlike newspapers, in which advertisements are often disposed of rapidly, or television and radio, in which advertisements are only broadcast at certain times, advertisements over the Internet are available continually to any Internet user.

In Inset, a Connecticut corporation sued a Massachusetts corporation in the District of Connecticut for trademark infringement based on the use of an Internet domain name. Id. at 162. The Defendant’s contacts with Connecticut consisted of posting a Web site that was accessible to approximately 10,000 Connecticut residents and maintaining a toll free number. Id. at 165.

In Maritz, the Court likewise exercised jurisdiction over a corporation that advertised over the Internet. In Maritz, the Defendant had put up a Web site as a promotion for its forthcoming Internet service. Maritz, 947 F.Supp. at 1330. The service consisted of assigning users an electronic mailbox and then forwarding advertisements for products and services that matched the users’ selected interests. Id. The Defendant planned to provide user incentives for reading the advertisements and to charge advertisers for access to the Internet users on its mailing list. Id. The service was not yet in operation, but users were encouraged to add their address to a mailing list to receive updates about the service. The Court found jurisdiction, reasoning that the Defendant’s conduct consisted of “active solicitations” which were designed to develop a mailing list of Internet users. The Court added that it was significant that the Defendant “indiscriminately responded to every user” who accessed the site. Id. at 1333-34.