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CRS Recovery, Inc. v. Laxton

April 6, 2010

CRS RECOVERY, INC., A VIRGINIA CORPORATION; DALE MAYBERRY, PLAINTIFFS-APPELLEES,
v.
JOHN LAXTON, AKA JOHNLAXTON@GMAIL.COM; NORTH BAY REAL ESTATE, INC., DEFENDANTS-APPELLANTS, AND TIGER-CDM; BARNALI KALITA, AKA BARNALI.KALITA@GMAIL.COM; LI QIANG, AKA JONATHAN LEE, AKA NAMEOWNER@YAHOO.COM; RL.COM; MAT.NET; BULK REGISTER; WILD WEST DOMAINS, DBA DOMAINCITY.COM; GUAN YU, DEFENDANTS.



Appeal from the United States District Court for the Northern District of California. Claudia Wilken, District Judge, Presiding. D.C. No. 4:06-cv-07093-CW.

The opinion of the court was delivered by: Hawkins, Circuit Judge

FOR PUBLICATION

Argued and Submitted January 13, 2010 -- San Francisco, California.

Before: John T. Noonan, Michael Daly Hawkins and Milan D. Smith, Jr., Circuit Judges.

Opinion by Judge Hawkins; Dissent by Judge Noonan

OPINION

This case requires application of traditional choice-of-law, tort, and property principles to an increasingly common factual setting, a dispute over the ownership of an Internet domain name. John Laxton ("Laxton") and his assignee North Bay Real Estate, Inc. appeal the adverse summary judgment for Dale Mayberry ("Mayberry") and his assignee CRS Recovery, Inc. ("CRS"). The district court was correct to apply California law, but we find disputed issues of material fact and remand.

I. BACKGROUND

A. Background Facts

On July 23, 1995, Mayberry, a citizen of Virginia, registered the domain name "rl.com". The registration was effected by a contract with domain name registrar Network Solutions, Inc., a Delaware corporation headquartered in Herndon, Vir- ginia. Network Solutions is one of the largest domain name registrars in the world and for a $100 fee registers a client's domain name with the Internet Corporation for Assigned Names and Numbers, commonly referred to as ICANN. Mayberry's registration of rl.com was renewable for $50 per year. After the initial registration, Mayberry renewed the domain name periodically, last doing so on July 23, 2002, when he paid in advance for three years so that the registration would expire on July 24, 2005.

Mayberry's contract with Network Solutions identified the administrator of the website as Micro Access Technologies, Inc. ("MAT"), a company owned by Mayberry. Specifically, Mayberry made MAT, through "mat.net", the administrative contact for both domain names, mat.net and rl.com. He thus exercised administrative control over both websites through the e-mail address "dale@mat.net". In 2001 mat.net ceased operation. Mayberry failed to notify Network Solutions that mat.net was no longer operative.

The parties dispute the precise circumstances of Mayberry's loss of mat.net and, therefore, the loss of rl.com. Laxton asserts that Mayberry let the registration expire by its terms, but Mayberry contends he attempted to renew the domain name. Laxton's expert claimed that Mayberry is "incorrect" in insisting the registration still belonged to Mayberry on December 19, 2003, and that Mayberry "abandoned Mat.net by letting it expire on its own terms on October 2." At his deposition, Mayberry stated that he was still the registrant of mat.net on December 19, 2003, a claim Laxton vigorously contested both at the district court and on appeal. The district court concluded that "[t]he circumstances surrounding the transfer of mat.net are not entirely clear."*fn1

Despite these unresolved factual issues, we can establish the following from the record. On December 19, 2003, a new registration of mat.net was made by a man named Li Qiang ("Qiang"). The registration was made on Beijing Sinonets Network & Telecom Co. Qiang's control of mat.net permitted him to designate his e-mail address as dale@mat.net and to receive e-mail at this address in place of Mayberry. Using this e-mail address, Qiang transferred ownership of the domain name rl.com to himself. Network Solutions accepted the transfer, acting in the belief that it was being made by May-berry, who in fact was unaware of Qiang's actions. Qiang later transferred the domain name to Barnali Kalita ("Kalita"), a citizen of India. In May 2005, Kalita sold the name to Laxton, a citizen of California, for $15,000. Prior to the purchase, Laxton contends he checked rl.com with the World Intellectual Property Organization ("WIPO") to ensure there were no disputes involving the domain name. Determining there were none, Laxton consummated the purchase and assigned the name to Real Estate Loans, Inc., a California corporation he owns.

Mayberry, meanwhile, discovered that he had lost control of both domain names. He assigned his interest in rl.com to CRS, a Virginia corporation, in exchange for an undisclosed sum of cash and the company's promise to help him recover the lost names. Contact was made with Laxton, who, having just spent thousands of dollars successfully defending rl.com from a WIPO action brought by Ralph Lauren, declined to surrender his control over the domain name. This lawsuit followed.

B. Procedural History

On October 30, 2007, Mayberry and CRS filed their second amended complaint against Laxton, Kalita, Qiang, and others, charging them with theft of the two domain names. Count 1 charged conversion of the domain names and conspiring to convert them. Count 2 charged the defendants with interference with Mayberry's contracts with Network Solutions. Count 3 charged unfair competition. Count 4 asked for declaratory relief under 28 U.S.C. § 2201, affirming the plaintiffs' right to control the identity of the registrants of the two domain names. The plaintiffs prayed for a return of the domain names and disgorgement of the defendants' profits from them. Each side moved for summary judgment. After hearing and argument, the district court granted judgment for the plaintiffs on Counts 1 and 4 and ordered the defendants to turn over rl.com. The plaintiffs voluntarily dismissed their other causes of action.

The district court saw the primary question before it as a choice of law: Virginia's or California's. Laxton, a California defendant, urged application of Virginia law. Mayberry, a Virginia plaintiff, wanted California law to govern. Under Virginia law, the defendants claimed, the plaintiffs had only a contract. Under California law, all parties agree, the plaintiffs' domain names were intangible personal property. The court conducted a government interest analysis, concluding California had the "greater interest" and giving judgment for the plaintiffs. On appeal, Laxton alleges this choice of California law was error.

II. ANALYSIS

A. Standard of ...


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