Fifth Circuit Denies Yahoo’s Jurisdictional Appeal in American Airlines Case

By Eric Goldman

In re: Yahoo! Inc; Overture Services, Inc., No. 09-10098 (5th Cir. March 11, 2009)

In January, the Texas district court denied Yahoo’s request to transfer the American Airlines keyword advertising lawsuit out of Texas and into Yahoo’s home court in California. Yahoo appealed that ruling to the Fifth Circuit, and yesterday the Fifth Circuit denied the request.

Yahoo’s principal argument was that the parties’ lawsuit was governed by its Sponsored Search Agreement, which had a mandatory venue clause requiring litigation in Yahoo’s home court. The district court judge did not respond well to that argument, calling it “completely nonsensical.” The appeals court wasn’t as harsh but still concludes that Yahoo didn’t make the extraordinary showing required to obtain the relief Yahoo sought–even though American Airlines is seeking disgorgement of its payments under the Sponsored Search Agreement as one of the requested remedies.

This case remains at an early procedural stage, but already I’m struck by how aggressively Yahoo is fighting to get the case out of Texas. There may be good reasons for this–naturally, a litigant prefers to be in its home court and not in its opponent’s home court, plus there may be substantive doctrinal benefits in the Ninth Circuit instead of the Fifth Circuit. However, Yahoo is spending a fair amount of money over this procedural point, signaling that it isn’t looking for a quick or cheap settlement.

The only remaining jurisdictional question is what, if anything, Judge Fogel in Northern District of California will do with Yahoo’s declaratory judgment suit. The most logical thing would be for Judge Fogel to stand down in the face of the continued litigation in Texas, but I don’t know if that’s the only possible result.