VIRTUAL JUSTICE AS REALITY: MAKING THE RESOLUTION OF E-COMMERCE DISPUTES MORE CONVENIENT, LEGITIMATE, EFFICIENT, AND SECURE Fred Galves† ―Without Justice, There Is No Peace.‖ ** INTRODUCTION I. THE NEED FOR AN EFFECTIVE ONLINE JUSTICE SYSTEM One of the most significant changes in society over the last decade has been the pervasive use of the Internet in our everyday lives.1 Indeed, Time magazine even named ―You‖ as its Person of the Year for 2006, acknowledging the prolific growth and undeniable importance of Internet users worldwide.2 On-demand entertainment, instantaneous personal communication, and immediate access to virtually any information in the world are features of the Internet age that we live in.3 Perhaps the most † Fred Galves, a 1986 graduate of Harvard Law School, is a Professor of Law at the University of the Pacific, McGeorge School of Law. He teaches Civil Procedure, Evidence, Computer-Assisted Litigation, and Street Law International. My thanks to the very able research and editorial assistance of my research assistants: Dan Boyle, Emily Hirsekom, Kelly Mosby, Tony Storm and Amber Burroff. ** MARIO I. AGUILAR, THE RWANDA GENOCIDE AND THE CALL TO DEEPEN CHRISTIANITY IN AFRICA 95 (1998). 1. The growth in the use of the Internet can be measured in several ways: increases in Internet sales revenue, advertising revenue, number of users, domain sites, etc. See Press Release, Computer Industry Almanac Inc., Worldwide Internet Users Top 1.2 Billion in 2006 (Feb. 12, 2007), http://www.c-i- a.com/pr0207.htm (―The worldwide number of Internet users surpassed 1.2 billion in 2006—up from only 2M+ in 1990, 45M in 1995 and 430M in 2000.‖); see also Stuart Elliott, Television Stations are Urged to Break a Few Rules, N.Y. TIMES, Apr. 1, 2006, at C7 (stating Internet site ad revenues of $12.5 billion for 2005, up 30.2% from advertising revenues in 2004); Internet World Stats, Internet Usage Statistics: The Internet Big Picture, http://www.Internetworldstats.com/stats.htm (last visited Jul. 1, 2009) (over 1.4 billion people worldwide use the Internet, more than 21% of the total world population as of May 12, 2008). 2. Lev Grossman, Time Person of the Future:You, TIME, Dec. 25, 2006, at 38. 3. The internet has redefined convenience. At the fingertips of the modern internet-user lies the ability to report one‘s own news stories on ―iReport,‖ broadcast to thousands of people in real time through 1 2 JOURNAL OF LAW, TECHNOLOGY & POLICY [Vol. 2009 significant aspect of the Internet is the economic phenomenon of ―e- commerce,‖ that is, the purchase and sale of goods and services using the Internet.4 E-commerce is increasing rapidly worldwide, and key indicators predict continued growth in the future.5 The ability of buyers to instantly shop and compare among legions of competing sellers throughout the world, coupled with the ability of vendors to quickly and inexpensively market to millions of potential consumers, makes e-commerce extremely efficient and desirable. This is especially true given the enormous convenience of conducting inexpensive advertising and commerce online, instead of having to pay for traditional advertising and having to physically travel to a particular store to consummate a sale. Twitter.com, search for or edit articles in Wikipedia on millions of topics, surf the profiles of millions of MySpace.com or Facebook.com members, create and upload videos on YouTube.com, transfer and trade money into a personal bank account, purchase a car, place inexpensive calls to anywhere in the world, get a date, and win a hand of Texas Hold-em poker. See iReport, http://www.ireport.com (last visited Jun. 4, 2009) (website displaying citizen-users‘ unedited news stories, some of which are televised in CNN news); see also Posting of David Pogue to Pogue‘s Posts: The Latest in Technology From David Pogue, http://pogue.blogs.nytimes.com/2009/01/15/twittering-tips-for-beginners/ (Jan. 15, 2009, 13:32 EST) (describing the mechanics of the online messaging system, Twitter, and its unmatched capacity for real-time broadcasting); WIKIPEDIA, Wikipedia: About, http://en.wikipedia.org/wiki/Wikipedia:About (stating that Wikipedia, a collaborative online encyclopedia, currently has over 75,000 volunteer-contributors working on over 10,000,000 articles, all with links to related pages for more information); Jessi Hempel, The MySpace Generation: They Live Online, They Buy Online, They Play Online, Their Power is Growing, BUS. WK., Dec. 12, 2005, at 1 (discussing young Americans‘ propensity to use online blogs and social sites, such as MySpace.com and Facebook.com, as primary places to go ―when you need a friend to nurse you through a breakup, a mentor to tutor you on your calculus homework, and an address for the party everyone is going to‖); Rekha Menon, Paying Bills at the Click of a Mouse, THE FIN. TIMES LIMITED, May 10, 2006, at 4 (―online banking sites have evolved from static brochure-ware to sophisticated financial portals that enable customers to access accounts, trade online, and make mortgage payments‖); Burt Helm, Seven Ways to Get Cheap Calls: Internet Services Have Multiplied Your Choices for Phoning Across the Country, or Across the World Inexpensively–Sometimes for Free, Bus. WK., May 22, 2006, at Tech. (discussing a variety of internet phone service providers that offer instantaneous and inexpensive internet voice connections to anywhere in the world with an operating internet connection); Leslie Walker, New Trends in Online Traffic: Visits to Sites for Blogging, Local Information and Social Networks Drive Web Growth, THE WASHINGTON POST, Apr. 4, 2006, at D01 (displaying statistics showing tremendous increases in use of traditional search engines, such as Yahoo and Google, as well as social networking sites); Press Release, Nielsen/NetRatings, Inc.: A Global Leader in Internet Media and Market Research, Social Networking Sites Grow Over 47%, Year over Year, Reaching 45% of Web Users (May 11, 2006), http://www.nielsen-netratings.com/pr/pr_060511 (displaying yearly growth of MySpace.com (a social site which offers music, videos, and blogging) at 376%, and showing a growth of thirty million members from April 2005 to April 2006). 4. See BLACK‘S LAW DICTIONARY 551 (8th ed. 2004) (stating that e-commerce is ―[t]he practice of buying and selling goods and services through online consumer services on the Internet.‖); see also Define and Sell: Where E-Commerce Wins Hands Down, and Where it Doesn’t, ECONOMIST, Feb. 24, 2000, at 76 (explaining that there are four types of e-commerce: business-to-business, business-to-consumer, consumer-to- business, and consumer-to-consumer). Business-to-business transactions are between large corporations, such as General Electric, and their subcontractors or suppliers. Business-to-consumer e-commerce ―embraces normal retail activity on the web, such as bookselling by Amazon.com, or online stock-broking by Charles Schwab.‖ Consumer-to-business ―takes advantage of the Internet‘s power to drive transactions the other way around,‖ where consumers bid on the product, and the business decides whether to accept the offer. Consumer- to-consumer ―cover[s] new fashion for consumers‘ auctions, epitomized by the auction site eBay.com.‖ 5. See Press Release, Forrester, Online Sales To Climb Despite Struggling Economy According To Shop.org/Forrester Research Study: Online Retail Sales to Reach $204 Billion This Year (April 8, 2008), http://www.forrester.com/ER/Press/Release/0,1769,1205,00.html (reporting that online retails sales are expected to rise in 2008 to $204 billion, a seventeen percent increase from 2007); see also Sucharita Mulpuru, US eCommerce Forecast: 2008 to 2012: B2C eCommerce Expected to Top $300B in Five Years, FORRESTER, Jan. 18, 2008, http://www.forrester.com/Research/Document/Excerpt/0,7211,41592,00.html (predicting online retail revenues of $335 billion by 2012, which translates to over ten percent compound annual growth rate). No. 1] VIRTUAL JUSTICE AS REALITY 3 Despite all of the growth, convenience, and economic advantage that e- commerce offers, increased Internet sales activity also brings with it an increase in Internet legal disputes, as legal disputes arising out of typical business transactions have not disappeared merely because those transactions are made online.6 These inevitable e-commerce disputes must be resolved efficiently, fairly, and securely so that online buyers and sellers can place full confidence in e-commerce markets. The Internet must be viewed as a trustworthy online global marketplace fully operating under the rule of law. For this to occur, the principles of fairness, accessibility, and equity available in most physical courts must also be within reach for disputes arising out of online transactions. If e-commerce disputes cannot be resolved efficiently and fairly, then many of the economic and convenience advantages of e-commerce will be threatened due to legal enforcement risks and resulting business uncertainties.7 Courts in the U.S. have been desperately trying to adapt their pre-Internet legal systems to adjudicate post-Internet online legal disputes.8 Despite valiant 6. With a substantial amount of daily sales transactions taking place online, the amount of Internet- based litigation has increased. Because online consumer activity continues to grow by over fourteen percent per year, the amount of litigation resulting from these online transactions is likely to increase. See Mulpuru, supra note 5, at 1 (reporting an e-commerce annual growth rate in the double digits); E-Consumer.gov, E- Consumer Complaints January 1-June 30, 2007, http://www.econsumer.gov/english/contentfiles/ pdfs/econsumer_stats.pdf (reporting almost 6,500 online consumer complaints and about 4,500 online business complaints worldwide from January 1 through June 30, 2007)(last visited Mar. 23, 2009); See also Alan Wiener, Opportunities and Initiatives in Online Dispute Resolution, 24 SPIDR NEWS, (Summer 2000) at 2, available at http://www.mediate.com/articles/awiener1.cfm (―The characteristics of the Internet community and of e-commerce transactions increase both the likelihood of online disputes arising and the difficulty of efficiently resolving them.‖).