THE CALIFORNIA LONG-ARM STATUTE

IVAN HOFFMAN, B.A., J.D. 



California has passed a law that may have a substantial impact upon site owners and their web site designers. On the face of the statute, the law seems to apply not only to those sites within the geographical borders of the state but potentially throughout the entirety of the electronic world. If you are a site owner or a designer, no matter where you are located, it appears this statutes is one to which you should pay some attention.

The statute, Business and Professions Code § 17538, reads in part (in typically legalese run-on):

(a) It is unlawful in the sale or lease or offering for sale or lease of goods or services, for any person conducting sales or leases by telephone, Internet or other electronic means of communication, mail order, or catalog in this state, including, but not limited to, the offering for sale or lease on television, radio, Internet, or other electronic means of communication or telecommunications device of goods or services which may be ordered by mail, telephone, Internet, or other electronic means of communication or telecommunications device, or for any person advertising in connection with those sales, leases, or advertisements a mailing address, telephone number, or Internet or other electronic address, to accept payment from or for a buyer, for the purchase or lease of goods or services ordered by mail, telephone, Internet, or other electronic means of communication or telecommunications device, whether payment to the vendor is made directly, through the mails, by means of a transfer of funds from an account of the buyer or any other person, or by any other means, and then permit 30 days, unless otherwise conspicuously stated in the offering or advertisement, or unless a shorter time is clearly communicated by the person conducting the sale or lease, to elapse without doing any one of the following things:

Let me stop here to digest this statute in its key elements. The words "in this state" are the key to the problem for site owners and designers. Over the Internet these words may mean not only having a geographical presence in the state of California, however pleasant that may be to some, but having a site anywhere in the world that is accessible to anyone who is in the physical boundaries of the state-which is of course every site everywhere.

Thus, the statute's legal reach may apply to every site owner in every place anywhere on the World Wide Web. Apparently, anyone whose site deals in "goods or services" is in theory subject to the provisions of the statute.

AS BETWEEN SITE OWNER AND DESIGNER

The statute goes on to say that if the offering party does not fulfill the customer's order within 30 days or otherwise complies with some alternatives to actually fulfilling the order, then the offering party may be in violation of the statute. Now while this requirement may not seem particularly onerous or indeed even novel, since it now may have application all over the world, it is significant because of its reach and because it imposes requirements on the site owner, and in turn the site designer, to include some rather specific language on the site. Failing to include such language is also a violation of the statute.

There are a great number of issues that arise with regard to this issue including but not limited to the express language of the contract which may shift the burden of such compliance to the site owner.  If there is any reason to have such a written and executed web site design contract, this is it, although there are many other such reasons.  But without the contractual provision I mention, the designer could find herself or himself in potential legal jeopardy.  The site owner may argue that he or she relied on the expertise of the designer in all aspects when the site was created and that part of that reliance was as to compliance with all laws.

The designer's reply may be that the designer relied upon content created by the site owner and merely then embodied that content within the HTML or other programming but otherwise the designer had no discretion as to content.

While both arguments seem on their face to have some merit, the contract may go a long way toward resolving this open question.

THE NOTICE REQUIREMENTS

If the statute applies to the site because it offers goods or services, then the law requires that the site owner provide certain notices to at least certain consumers who order over the site. The statute states that this information must be provided either via email or in certain specified locations on the site. This is where the designer's liability may come into play.

The information required to be disclosed to a buyer "located in California" is:

the vendor's return and refund policy, the legal name under which the business is conducted and, except as provided in paragraph (3), the complete street address from which the business is actually conducted.
(2) If the disclosure of the vendor's legal name and address information required by this subdivision is made by on-screen notice, all of the following shall apply:
(A) The disclosure of the legal name and address information shall appear on any of the following: (i) the first screen displayed when the vendor's electronic site is accessed, (ii) on the screen on which goods or services are first offered, (iii) on the screen on which a buyer may place the order for goods or services or (iv) on the screen on which the buyer may enter payment information, such as a credit card account number. The communication of that disclosure shall not be structured to be smaller or less legible than the text of the offer of the goods or services.
(B) The disclosure of the legal name and address information shall be accompanied by an adjacent statement describing how the buyer may receive the information at the buyer's E-mail address. The vendor shall provide the disclosure information to the buyer at the buyer's E-mail address within five days of receiving the buyer's request.

Going back to the arguments each party, site owner and site designer may raise, the owner may say that while he or she provided content, it was the designer's responsibility to insure that the site complied with the above provisions. Without a contract specifying anything to the contrary, the situation is extremely cloudy.

There are a number of exceptions to the street address information requirements. And there is an additional exception that may make the statute inapplicable to the site in all respects but there are requirements for this exception as well. They are contained in 17538.3 and you should read it fully to see if these exceptions apply to your circumstances. And even these exceptions require an examination of whose responsibility it may be to effect compliance with the terms of the exceptions.

THE PENALTIES

The statute means business! This is what it provides for a violation of its provisions:

(g) Any violation of the provisions of this section is a misdemeanor punishable by imprisonment in the county jail not exceeding six months, by a fine not exceeding one thousand dollars ($1,000), or by both that imprisonment and fine.

If the site owner has a successful claim against the designer for failure of the designer to make the site comply with the terms of the statute and the site owner is subjected to any of the penalties provided by the statute, the designer may face a substantial liability lawsuit by the owner for breach of a contract, of a warranty of merchantability or otherwise, for misrepresentation, as well as for other various forms of action.

Note here that there are two aspects to the liability: the first is the failure to ship the goods or provide the services within 30 days. That liability it appears attaches to the site owner. But the statute also provides that the site must comply with certain notice provisions and it is this latter portion that may create the designer's liability. And the penalty section applies to "any violation of the provisions of this sectionů." meaning that both aspects may create liability.

Further, if the party uses a mail box, whether a post office or a private mail box, there are additional requirements for notice including but not limited to as to street addresses set forth in section 17538.5 that also provide for criminal penalties for failure to comply.  It says:
Any violation of the provisions of this section is a misdemeanor punishable by imprisonment in the county jail not exceeding six months, or by a fine not exceeding two thousand fivehundred dollars ($2,500), or by both.

CONCLUSION

All site owners and their designers should read this statute including all its subparts with great care and seek the advice of a lawyer with experience in this area of the law for its potential applicability to the site, to the designer and otherwise.

Whether the statute is constitutional under United States' laws is an open question. The current state of the law with regard to jurisdiction on the Net, which laws apply to who and whether geopolitical state and/or international boundaries have meaning any longer is much in debate.

But no one wants to be the test case. And while it may not be totally possible to avoid this occurrence, having a written web design agreement that attempts to cover this issue may go a long way toward resolving the question, at least as between designer and owner. The issues raised in this article along with others about the effect of the statute will remain however.

Copyright © 1997 Ivan Hoffman.  All Rights Reserved.


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This article is not legal advice and is not intended as legal advice.  This article is intended to provide only general, non-specific legal information.  This article is not intended to cover all the issues related to the topic discussed.  The specific facts that apply to your matter may make the outcome different than would be anticipated by you.  This article is based on United States law.  You should consult with an attorney familiar with the issues and the laws of your country.  This article does not create any attorney client relationship and is not a solicitation.

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