Internet and Jurisdiction Intermixed: Desjean V. Intermix Media, Inc. and the Evolution of the Real and Substantial Connection Test

• Author: Shaun Finn and Louis Brousseau
• Pages: 154-179

154

INTERNET AND JURISDICTION

INTERMIXED:

DESJEAN V. INTERMIX

MEDIA, INC.

AN D THE EVO LUT ION

OF THE REAL AND SUBSTANTIAL

CONNECTION TEST

Shaun Finn and Louis Brousseau, McCarthy Tétrault LLP*

A. INTRODUCTION

The last decade has witnessed two important developments that are

quickly reshaping Canadian society. On the one hand, the Internet revo-

lution has changed the way that we access information, communicate

with one another, and trade goods and services throughout the world.

On the other hand, the proliferation of class actions, which can group

together thousands and even millions of consumers into a single law-

suit, has radically transformed the legal landscape. In Desjean v. Intermix

Media, Inc.,1 a class proceeding filed in the Federal Court of Canada,

these two phenomena — the emergence of the Internet and class action

litigation — intersect in a compelling way. The issue raised by the case

is a relatively novel one: Can an individual who acquires a web product

sue the provider in the forum where that product was downloaded? What

test should be applied to determine whether a Canadian court can assert

jurisdiction?

In analyzing these issues, we will begin with a detailed discussion

of the facts involved in this case. We will then review the previous state

of the law in the US and Canada, and proceed to examine the effect of

Intermix on these issues.

* Me Brousseau, partner, and Me Finn, associate, are both members of McCarthy

Tétrault’s litigation group in Montréal. The authors represented Intermix

Media, Inc. in the litigations discussed in this article. They wish to thank Me

Delia Cristea and Me Jean-Philippe Dallaire for their generous assistance. Any

error is that of the authors only.

1 [2007] 4 F.C.R. 151 (Fed. Ct.), aff ’d 2007 FCA 365 [Intermix].

VOL UME 5, No 2, august 2009 155

B. INTERMIX — FACTS

On 13 May 2005, Mr. Patrick Desjean filed a statement of claim before

the Federal Court for a proposed class action against Intermix Media,

Inc. (Intermix), a Delaware corporation having its principal place of

business in California. In his statement of claim, Desjean alleged, among

other things, violation of the misleading representation provisions of the

Competition Act.2

According to Desjean, Intermix had violated the Competition Act by

failing to disclose the bundling of “spyware” or “adware” programs deliv-

ering ads and other invasive content with free software (i.e., the screen-

savers and games it offered to consumers on various Internet websites).

Desjean alleged that the free software led to the permanent installation

of the programs on the user’s hard drive, which would continue to post

advertisements and report information about the user even after he had

left these websites. Desjean alleged that the programs were difficult to

uninstall and that their bundling had not been disclosed to the users.

Desjean contended that Intermix’s failure to warn constituted false

advertising and deceptive, fraudulent, and illegal practices, thereby violat-

ing subsections 52(1), 52(1.1) and paragraph 52(2)(e) of the Competition

Act. Desjean submitted that Intermix’s behaviour had resulted in wasted

time and money, and had subjected him to abusive money-making

schemes. He asked the Federal Court to enter a money judgment against

Intermix as a civil penalty, and sought further damages under paragraph

36(1)(a) and subsection 36(3) of the Competition Act.

While Intermix contested Desjean’s allegations, it asked the Federal

Court to dismiss his statement of claim on one of three preliminary

grounds: (i) the Federal Court lacked jurisdiction over both Intermix

and the matter in issue; (ii) the claim was frivolous or vexatious; or

(iii) the claim constituted an abuse of the process of the court. Intermix

further argued that the Federal Court was not the appropriate forum

for the claim, and that the claim contained allegations not based on the

Competition Act or the “laws of Canada” and were therefore beyond the

remit of the Federal Court.

The filing of Desjean’s action with the Federal Court raised a number

of jurisdictional questions. The Federal Court considered that Intermix’s

physical and business links with Canada were weak. The place where

Desjean’s damages were allegedly suffered, Canada, was the principal

2 R.S.C. 1985, c. C-34 [Competition Act].