New York v. World Interactive Gaming Corp.

Although at first glance, Internet transactions may appear novel, "traditional jurisdictional standards have proved to be sufficient to resolve all civil Internet jurisdictional issues" People v. Lipsitz, 174 Misc. 2d 571, 578 (Sup. Ct. New York County 1997).

The Internet is at least a medium through which individuals may obtain and transmit text, sound, pictures, moving video images, and interactive services using various methods. The Internet also allows individuals to trade securities, execute banking transactions, purchase consumer merchandise, and engage in many other types of business and personal dealings not possible using more traditional means. What makes Internet transactions shed their novelty for jurisdictional purposes, is that similar to their traditional counterparts, they are all executed by and between individuals or corporate entities which are subject to a court's jurisdiction.

Whether the exercise of personal jurisdiction comports with due process requirements depends, as in any case, upon a finding that respondent has purposefully engaged in significant activities such that he has "availed himself of the privilege of conducting business [in the forum state]." Burger King Corp. v. Rudzewicz, 472 US 462, 475-76 (1985). "The test, though not 'precise' is a simple pragmatic one: [it's] the aggregate of the corporation's activities in the State such that it may be said to be 'present' in the State, 'not occasionally or casually, but with a fair measure of permanence and continuity.'" Laufer v. Ostrow, 55 NY2d 305, 310 (1982), citing, Tauza v. Susquehanna Coal Co., 220 NY 259 (1917).

Respondents in this case are clearly doing business in New York for purposes of acquiring personal jurisdiction. Although WIGC was incorporated in Delaware, WIGC operated its entire business from its corporate headquarters in Bohemia, New York. All administrative and executive decisions as well as the computer research and development of the Internet gambling website were made in New York. The cold-calls to investors to buy WIGC stock were made by WIGC agents employed and operating from this location. Thereafter, respondents sent its prospectus and other solicitation materials about Internet gambling from the Bohemia, New York location. WIGC's continuous and systematic contacts with New York established their physical presence in New York.

Moreover, even without physical presence in New York, WIGC's activities are sufficient to meet the minimum contact requirement of International Shoe Co. v. Washington, 326 US 310, 316 (1945). The nature and quality of the defendant's activity must be such that "the defendant purposefully avails itself of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws" Agrashell, Inc. v. Bernard Sirotta Co., 344 F2d 583, 591 (2nd Cir. 1965). The use of the Internet is more than the mere transmission of communications between an out-of-state defendant and a plaintiff within the jurisdiction.

WIGC and the other respondents are doing business in New York. They worked from New York in conjunction with another New York-based company Imajix Studios, to design the graphics for their Internet gambling casino. From their New York corporate headquarters, they downloaded, viewed, and edited their Internet casino website. Furthermore, respondents engaged in an advertising campaign all over the country to induce people to visit their website and gamble. Knowing that these ads were reaching thousands of New Yorkers, respondents made no attempt to exclude identifiable New Yorkers from the propaganda. Phone logs from respondents' toll-free number (available to casino visitors on the GCC website) indicate that respondents had received phone calls from New Yorkers. Respondents cannot dispute that they do business in New York and that the acts complained of are subject to this court's jurisdiction.

To establish in personam jurisdiction over GCC, the petitioner must show that GCC functioned merely as the alter ego of WIGC. The corporate form will be pierced only if one corporation is so controlled by the other as to be a mere agent, department or alter ego of the other. There must be some proof that the parent company dominates or controls the daily activities of the subsidiary.

The evidence indicates that GCC is a corporation completely dominated by WIGC. Aside from it being a wholly owned subsidiary of WIGC, GCC's primary asset, the website, was purchased by WIGC pursuant to a corporate decision by WIGC's CEO respondent Mr. Burton. The use of the GCC casino website was handled from WIGC's corporate headquarters. From WIGC's New York office, respondents also actively solicited investors to buy WIGC shares. Although WIGC was conducting operations from New York, WIGC failed to register with the State: as a foreign corporation doing business in New York, the stock offering, the brokers, dealers, issuers, or salespersons for the offering. All GCC top employees were hired by and reported to WIGC. WIGC itself contracted to buy GCC casinos website servers from AIE. Whenever GCC's servers required servicing, AIE provided GCC with services pursuant to a contract executed between WIGC and AIE. Furthermore, the licensing agreement with AIE was executed by respondent Burton as CEO of WIGC and GCC. At no time were any formalities observed to maintain a financial distinction between the two entities. GCC did not repay WIGC for the purchase of computer servers, nor did GCC execute any formal documents to commemorate the transfer sale of the servers. Therefore, the corporate form is disregarded and GCC will be deemed an alter ego of WIGC.

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