FOLLOW US

The U.S. Supreme Court on Tuesday refused to hear a petition from China-based e-commerce company Zembrka, which sought clarity on whether a "virtual presence" in a state meets the jurisdictional threshold for "minimum contacts." The decision leaves unresolved a growing divide among federal circuits over the application of this jurisdictional test in e-commerce cases.

Zembrka is battling a trademark counterfeiting and infringement lawsuit filed by doll maker American Girl LLC. The case has been closely watched as a potential benchmark for determining when online sellers can be sued in states where they do not physically operate.

Second Circuit’s Ruling

The controversy stems from a September decision by the Second Circuit, which revived American Girl’s lawsuit after a Manhattan federal court had dismissed it for lack of personal jurisdiction. The Second Circuit ruled that Zembrka’s virtual transactions—despite later cancellations—constituted sufficient minimum contacts under New York law.

Zembrka’s petition to the Supreme Court argued that this decision contradicts rulings in other circuits, which generally require evidence of actual sales or distribution to consumers within the forum state to establish jurisdiction.

"The federal circuits are sharply divided on whether virtual presence and conduct constitute 'minimum contacts,'" Zembrka’s petition stated. "This divergence among the circuits underscores the urgent need for this court's review."

The Case Against Zembrka

American Girl accused Zembrka of selling counterfeit goods online. After being alerted to the lawsuit, Zembrka canceled orders placed by American Girl and refunded the payments. However, the Second Circuit found that offering counterfeit items for sale to New York consumers—even without completed transactions—exposed Zembrka to litigation in the state.

The Second Circuit emphasized that New York’s jurisdiction laws do not require shipment to establish a business transaction. While it acknowledged the burden on Zembrka, a company based in China, the appeals court held that Zembrka “ran the risk of being haled into court” by targeting New York consumers with allegedly infringing products.

Circuit Split Deepens

Zembrka’s petition highlighted conflicting rulings among circuits. For instance, the Third Circuit has previously ruled that online sales originating in Spain and directed at New Jersey were insufficient to meet minimum contacts requirements. Zembrka argued that such inconsistencies create an incentive for plaintiffs to file lawsuits in jurisdictions most favorable to their claims, resulting in legal uncertainty for e-commerce businesses.

Key Takeaways and Representation

The Supreme Court’s decision not to hear the case leaves the Second Circuit's ruling intact, further muddying the waters for e-commerce sellers facing litigation in the U.S.

American Girl is represented by Kerry Brenae Brownlee of Epstein Drangel LLP. Zembrka is represented by Tao Liu and Tianyu Ju of Glacier Law LLP.