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Bittorrent, Inc. v. BitTorrent Marketing GMBH

United States District Court, Northern District of California, San Jose Division

November 5, 2014

BITTORRENT, INC., Plaintiff,

For Bittorrent, Inc., a California corporation, Plaintiff: John W. Crittenden, LEAD ATTORNEY, Cooley LLP, San Francisco, CA; John Paul Oleksiuk, Cooley LLP, Santa Monica, CA.


BETH LABSON FREEMAN, United States District Judge.

Before the Court is the Motion for Default Judgment by plaintiff BitTorrent, Inc., whereby Plaintiff seeks default judgment, an award of statutory damages, costs and reasonable attorney fees, as well as injunctive relief against defendant BitTorrent Marketing GMBH for (1) trademark infringement in violation of 15 U.S.C. § 1114; (2) unfair competition and false designation of origin in violation of 15 U.S.C. § 1125(a); (3) state law unfair competition in violation of California Business & Professions Code § 17200, et seq .; and (4) violation of the Anti-Cybersquatting Consumer Protection Act (" ACPA"), 15 U.S.C. § 1125(d). Compl. ¶ ¶ 37-61; Pl.'s Mot., ECF 39. The Court held a hearing on the motion on August 7, 2014 and ordered additional briefing on a number of issues; Plaintiff submitted the requested supplemental briefing on August 28, 2014. Pl.'s Supp. Br., ECF 44.

Having carefully considered Plaintiff's submissions, the Court hereby GRANTS Plaintiff's Motion for Default Judgment.


A. Plaintiff's Business and the BITTORRENT Mark

Plaintiff is a well-known provider of peer-to-peer digital delivery software. Plaintiff is the owner of the famous BITTORRENT mark, which has been in continuous use since 2001, including for five years after it became a federally registered trademark in 2007. Id. ¶ ¶ 11, 13-15. Plaintiff also owns the BITTORRENT DNA mark, registered on January 20, 2009, and the BITTORRENT & Wave Design mark registered on December 8, 2009. Id. ¶ 13. Collectively, these " BitTorrent Marks" are used to market and distribute Plaintiff's file-sharing products and services and they are federally registered for that purpose. Id. ¶ ¶ 11-13, Exh. A.

Launched in July 2001 by its founder, Bram Cohen, Plaintiff's " BitTorrent" protocol reduces server and network impact associated with distributing large files over the Internet by breaking those files down into smaller pieces and allowing a user to download many different pieces at the same time from a " swarm" of different peer hosts.[1] Compl. ¶ ¶ 8-11. Users of the BitTorrent protocol must download and install a compatible client onto their computers. Since 2001, Plaintiff has offered under the BITTORRENT trademark, in the United States and abroad, a client compatible with the BitTorrent protocol. Id. ¶ ¶ 10, 18. Plaintiff has also offered products and services to assist third parties in delivering digital content since 2007 under the BITTORRENT and BITTORRENT DNA trademarks. Id. ¶ 10. The BitTorrent protocol is one of the most commonly used protocols for transferring large files over the Internet. Id. ¶ 16. As a result of Plaintiff's use and promotion of the BitTorrent Marks and associated products and services, the marks enjoy a high degree of consumer recognition. Id. ¶ 17.

B. Defendant's Use of the BITTORRENT Mark

Defendant is a limited liability company organized under the laws of Germany. In 2003, Defendant's principal contacted Mr. Cohen to seek a partnership with the BitTorrent protocol, and to request permission to register the "" domain name in Germany.[2] Mr. Cohen refused. Id. ¶ 18. Defendant then registered the BITTORRENT trademark in Germany and the European Community and later incorporated the present Defendant entity--BitTorrent Marketing GmbH. Id. Plaintiff has since successfully cancelled these registrations, though the decisions are on appeal. Pl.'s Mot. 5; Decl. of John Paul Oleksiuk ¶ 4, ECF 39-2.

Defendant also registered " hundreds" of domain names " consisting of the BITTORRENT trademark or near-identical approximations thereof." Compl. ¶ 19. Plaintiff identified 54 of these domain names registered to Defendant (collectively, " Infringing Domain Names"), in an exhibit attached to the Complaint. Id. Exh. B. Plaintiff identified 4 more offending domain names subsequent to the filing of the Complaint.[3] See Pl.'s Mot. 1-2. In 2010, Plaintiff initiated litigation in Germany against Defendant concerning these domain names. Compl. ¶ 21. In 2012, Plaintiff learned that Defendant had registered domain names in the United States that purport to provide access to digital content and software and services associated with viewing digital content. Compl. ¶ ¶ 22-23. Specifically, the Infringing Domain Names resolved to ", " which prominently displays the BITTORRENT mark at the top of the page and provides links to places such as " The Best Place to Download Music, Movies & Games! 250 times faster!, " and " Over 3000 TV channels! Watch anytime you want." Id. ¶ 22. Users who selected the links would be redirected to websites enabling them to sign up with digital download and delivery services such as "" and "" Id. ¶ 23.

Plaintiff alleges that Defendant directly competes with Plaintiff's products and services by capitalizing on misdirected users. Defendant allegedly generates revenue from its "" website whenever users sign up for online websites and services available through links on that website. Id. ¶ ¶ 24-26. However, misdirected users of the "" site do not in fact receive the services for which they sign up and pay. Id. ¶ 27. Moreover, Defendant has also allegedly used the Infringing Domain Names to intercept confidential correspondence intended for Plaintiff's executives and employees, and used such intercepted correspondence to further compete with Plaintiff. Id. ¶ 28. Plaintiff alleges that Defendant has also previously registered domain names incorporating the trademarks of other file-sharing companies such as Azureus Marketing GmBH, Kazaa, and Morpheus. Id. ¶ 20.

Based on the foregoing, Plaintiff asserts that Defendant adopted the BITTORRENT trademark " with the intention of capitalizing on the renown and success" of Plaintiff's mark and to " falsely associate its website and services with Plaintiff in order to trade on the substantial and valuable goodwill" surrounding Plaintiff's mark. Id. ¶ ¶ 29-31. Defendant's conduct is allegedly willful, and reflects " an intent to confuse consumers and profit from the goodwill and consumer recognition associated with Plaintiff and its mark." Id. ¶ 36.

C. Procedural History

Plaintiff filed the instant lawsuit on May 16, 2012 and then promptly attempted to serve Defendant with summons in a manner consistent with the provisions of the Hague Convention. Defendant appears to have evaded service for over a year by changing its registered address in Germany. See ECF 4, 18, 25; see also Pl.'s Admin. Mot. For Substituted Service, ECF 27. On October 15, 2013, Plaintiff filed an Administrative Motion for Substituted Service of Summons and Complaint, requesting permission of the Court to effect substituted service consistent with Federal Rule of Civil Procedure 4(f)(3) and the Hague Convention. Pl.'s Admin. Mot. The Court granted Plaintiff's motion on October 29, 2013 and authorized Plaintiff to effect substitute service on Defendant's counsel, Christoph Hoppe. ECF 28. The Court on December 4, 2013 also granted Plaintiff an extension of time in which to effect service. ECF 31. Plaintiff ultimately served Defendant's counsel by overnight mail and by electronic mail on January 20, 2014. See Proof of Service, ECF 32.

Plaintiff sought a clerk's entry of default on April 8, 2014, ECF 33, and the clerk entered default on April 15, 2014, ECF 35. On April 14, 2014, and April 18, 2014 the Court received a letter from Defendant's counsel, Mr. Hoppe, returning the documents that Plaintiff served on him by overnight mail and electronic mail and claiming that he is not authorized to accept service on Defendant's behalf. ECF 34, 36. On April 17, 2014, this case was reassigned to the undersigned. Plaintiff filed the instant motion on May 28, 2014. ECF 39. This Court conducted a Case Management Conference on May 29, 2014 and a hearing on Plaintiff's Motion for Default Judgment on August 7, 2014. Defendant did not appear at either hearing.


Before turning to the merits, the Court must first address its jurisdiction to enter default judgment against Defendant. Subject matter jurisdiction is indisputably available under 28 U.S.C. § § 1331, 1338, and 1367, as three of Plaintiff's claims arise under federal law. The Court must also have personal jurisdiction over a defendant, or else the entry of default judgment is void. Veeck v. Commodity Enterprises, Inc., 487 F.2d 423, 426 (9th Cir. 1973). Here, the Court is satisfied that Defendant has been served and that this Court has specific personal jurisdiction over the Defendant.

A. Service of Process

" A federal court is without personal jurisdiction over a defendant unless the defendant has been served in accordance with Federal Rule of Civil Procedure 4." Travelers Cas. & Sur. Co. of Am. v. Brenneke, 551 F.3d 1132, 1135 (9th Cir. 2009). However, " Rule 4 is a flexible rule that should be liberally construed so long as a party receives sufficient notice of the complaint." United Food & Comm. Workers Union v. Alpha Beta Co., 736 F.2d 1371, 1382 (9th Cir. 1984). What is required is " substantial compliance" with Rule 4, with " neither actual notice nor simply naming the defendant in the complaint" being sufficient. Direct Mail Specialists, Inc. v. Eclat Computerized Techs., Inc., 840 F.2d 685, 688 (9th Cir.1988) (quoting Benny v. Pipes, 799 F.2d 489, 492 (9th Cir.1986), cert. denied, 484 U.S. 870, 108 S.Ct. 198, 98 L.Ed.2d 149 (1987)).

The Court is satisfied that Plaintiff has " substantially complied" with Rule 4. For well over a year, Plaintiff attempted to personally serve Defendant with summons in Germany, using means authorized by the Hague Convention. See ECF 4, 18, 25; see also Pl.'s Admin. Mot. Defendant evaded service by continuously changing its registered address and also appeared in German courts to contest service authorized by the local authorities. Pl.'s Admin. Mot. 2-3. This intervention demonstrates that Defendant has actual notice of the present lawsuit, a fact that is affirmed by Defendant's maintenance of a website at "" that reports on the filings made in this lawsuit.[4] See Pl.'s Mot. 17; Oleksiuk Decl. ¶ 3, 6, 8, Exhs. 2, 4. Consistent with the Court's authorization pursuant to Rule 4(f)(3) to effect substituted service on Defendant's counsel, Plaintiff did so on January 20, 2014. That Defendant's counsel returned the documents claiming lack of authorization to accept service does not obviate the fact that Plaintiff substantially complied with Rule 4 and this Court's order authorizing substituted service. This, coupled with Defendant's actual knowledge of the pending lawsuit, is sufficient for the Court to conclude that Defendant has been appropriately served and afforded fair notice of this action.

B. Personal Jurisdiction

Personal jurisdiction can be either " general" or specific, see Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415-16, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984), though Plaintiff only argues for specific jurisdiction in this case, see Pl.'s Mot. 18. In the absence of a specific statutory provision conferring jurisdiction, federal courts apply the personal jurisdiction laws of the state in which they sit. California's long-arm jurisdictional statute is " coextensive with federal due process requirements." Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1320 (9th Cir.1998). Thus, in order to exercise jurisdiction over a non-resident defendant, the defendant must have sufficient " minimum contacts" with the forum state such that the exercise of jurisdiction " does not offend traditional notions of fair play and substantial justice." Int'l Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945).

The Ninth Circuit Court of Appeals, in Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797 (9th Cir. 2004), established a three-prong test for determining whether a non-resident defendant is subject to specific personal jurisdiction:

(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (2) the claim must be one which arises out of or relates to the defendant's forum-related activities; and (3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.

Id. at 802 (citing Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir.1987).

i. Defendant Purposefully Directed Its Activities at California

When a case sounds in tort, as this one does, [5] the Court considers whether the defendant has " purposefully directed" its activities at the forum state by applying the three-part " effects" test first articulated in Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984). See Panavision, 141 F.3d at 1321. " Under Calder, personal jurisdiction can be based upon: '(1) intentional actions (2) expressly aimed at the forum state (3) causing harm, the brunt of which is suffered-and which the defendant knows is likely to be suffered-in the forum state.'" Id. (quoting Core-Vent Corp. v. Nobel Industries AB, 11 F.3d 1482, 1486 (9th Cir.1993)).

Here, Plaintiff relies on the analogous factual scenario in Panavision to contend that this Court has specific personal jurisdiction over Defendant. Pl.'s Mot. 19-21. Panavision involved a California trademark holder suing an Illinois resident in California federal court. The defendant was a prolific cybersquatter[6] who had registered domain names in a number of trademarks, including the defendant's " Panavision" mark. Much as is the case here, the defendant in Panavision sought to sell the registered domain name to the trademark owner plaintiff. Panavision, 141 F.3d at 1319. The plaintiff instead sued for trademark dilution, and the Ninth Circuit affirmed the California district court's conclusion that it had personal jurisdiction over the out-of-state defendant. Id. at 1327. Applying the Calder test to the Internet context, the court indicated that " simply registering someone else's trademark as a domain name and posting a web site on the Internet is not sufficient to subject a party domiciled in one state to jurisdiction in another" but that the defendant had done " something more" by engaging " in a scheme to register Panavision's trademarks as his domain names for the purpose of extorting money from Panavision." Id. at 1322. This " something more" was sufficient to exercise personal jurisdiction over the defendant consistent with due process and Plaintiff argues that it is sufficient to exercise personal jurisdiction over Defendant here. Pl.'s Mot. 18-22.

In 2014, the Supreme Court revisited the Calder test, and the broader question of minimum contacts, in Walden v. Fiore, __ U.S. __, 134 S.Ct. 1115, 188 L.Ed.2d 12 (2014). Walden involved the somewhat extreme situation of a Bivens action filed in the District of Nevada by residents of Nevada against a DEA agent from Georgia who seized the plaintiffs' money as they were traveling through Atlanta's Hartsfield--Jackson International Airport en route from Puerto Rico to Las Vegas, Nevada. The plaintiffs also accused the agent of drafting a false affidavit to show probable cause for the forfeiture, which was forwarded to the United States Attorney's office in Georgia. Walden, 134 S.Ct. at 1119-20. Undisputed was the fact that all of the DEA agent's suit-related activities occurred in Georgia, but that he was aware of the plaintiffs' connection to Nevada. Id. at 1124-26.

A unanimous Supreme Court reversed a divided panel of the Ninth Circuit, concluding that the DEA agent did not have sufficient contacts with Nevada for the appropriate exercise of personal jurisdiction in Nevada. In so doing, the court stated that " the plaintiff cannot be the only link between the defendant and the forum." Id. at 1122. Rather, " [t]he proper focus of the 'minimum contacts' inquiry in intentional-tort cases is 'the relationship among the defendant, the forum, and the litigation.' And it is the defendant, not the plaintiff or third parties, who must create contacts with the forum State." Id. at 1126 (quoting Calder, 465 U.S. at 788). Although curtailing expansive interpretations of the Calder effects test, the Walden court reaffirmed Calder, emphasizing that " [t]he proper question is not where the plaintiff experienced a particular injury or effect but whether the defendant's conduct connects him to the forum in a meaningful way." Id. at 1125. Given the facts of the case, the Walden court expressly declined to address the question of virtual " contacts" with a forum state. Id. at 1125 n.9.

Because of the Walden court's clarification of Calder, this Court ordered supplemental briefing from Plaintiff regarding the impact of Walden on Panavision, which also depended on Calder . Plaintiff contends that the Panavision analysis of personal jurisdiction in cybersquatting cases still stands after Walden and that this Court has personal jurisdiction over Defendant even under Walden because Defendant's activities extorting money from Plaintiff and intercepting Plaintiff's confidential business communications constitute meaningful contacts with California.[7] Pl.'s Supp. Br. 1-5. After careful consideration of Plaintiff's supplemental briefing, the Court agrees that Walden does not significantly limit the jurisdictional analysis in Panavision .

The Court notes that cybersquatting, as is alleged here, has always been subject to a somewhat different personal jurisdiction analysis:

Although jurisdiction questions in most ordinary domain name disputes are analyzed according to the three-part [ Calder ] test . . . a special jurisprudence seems to have developed for cases involving so-called " cybersquatters" or " cyberpirates." In a substantial number of cases, these so-called " cyberpirates" or " cybersquatters" will purposely register the trademark of a well-known corporation as a domain name with the intention of later selling that domain name to the corporation for an extraordinary profit. . . . [C]ybersquatting cases have developed their own statutory and court-made rules.

4A Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure Civil § 1073.1 (Personal Jurisdiction and the Internet) (3d ed. 2002). As such, courts have routinely found the existence of specific personal jurisdiction where the defendant's alleged conduct amounts to a scheme targeted at a trademark owner designed to extort money from the mark owner for domain names that capitalize on typographical errors and user confusion. See Facebook, Inc. v. Banana Ads LLC, No. CV 11-03619-YGR KAW, 2013 WL 1873289, at *4 (N.D. Cal. Apr. 30, 2013) (" In sum, the Default Defendants made money by confusing Facebook users, including users in California, and capitalizing on this confusion--some of which was based on defendants' misuse of Facebook's marks, typesetting, and color scheme. This constitutes aiming their conduct at Facebook and this forum."); see also Rhapsody Int'l Inc. v. Lester, No. C13-05489 CRB, 2014 WL 709899, at *6-7 (N.D. Cal. Feb. 24, 2014); Panavision, 141 F.3d at 1327. Such is the case here.[8]

Taking allegations in the Complaint as true and drawing reasonable inferences in Plaintiff's favor, there is no question that Plaintiff has alleged that Defendant intentionally engaged in a scheme to infringe Plaintiff's famous mark and force Plaintiff to pay ransom for the Infringing Domain Names. Even when Defendant offered digital download products and services on the Infringing Domain Names, such offers were deceptive because paying customers would not actually receive the purchased services. Compl. ¶ 27. Such conduct evinces an intent to intentionally diminish the value of Plaintiff's trademark through customer confusion and frustration and, in turn, force Plaintiff to eliminate such blemishes on its trademark by acquiring the Infringing Domain Names from Defendant. Through this scheme, Defendant's use of the Infringing Domain Names put Plaintiff's " name and reputation at [its] mercy, " thereby causing injury to Plaintiff in California. Panavision, 141 F.3d at 1327.

The evidence submitted in support of Plaintiff's Motion for Default Judgment further reinforces this conclusion. Defendant made its intent to ransom the Infringing Domain Names clear when it met with Plaintiff's former CFO and General Counsel, Mitchell Edwards, in 2010 and sought to convince Plaintiff to buy its " business." Pl.'s Mot. 8; Decl. of Mitchell Edwards ¶ 5, ECF 39-10. Certainly, this meeting took place in Germany in the context of a meeting to " discuss the dispute between BitTorrent and Defendant." Edwards Decl. ¶ 4. However, the meeting was the culmination of Defendant's cybersquatting scheme targeted at Plaintiff in California, a scheme that Defendant began as early as 2003, when it contacted Mr. Cohen about partnering with BitTorrent. See Compl. ¶ 18. Given the length of time that Defendant has operated this scheme, it would be reasonable to infer that Defendant was aware its conduct would have the effect of injuring Plaintiff in California, Plaintiff's principal place of business. Thus, Defendant's intentional and systematic conduct of registering an ever-increasing number of domain names incorporating Plaintiff's trademark in an effort to extort money from Plaintiff connects Defendant to California in a meaningful way sufficient for the exercise of personal jurisdiction.

Exercising specific personal jurisdiction over a cybersquatter who, as here, knowingly registers confusingly similar domain names in a scheme to extort money from a trademark owner does not give rise to de facto universal jurisdiction. Cf. Advanced Tactical Ordnance Sys., LLC v. Real Action Paintball, Inc., 751 F.3d 796, 801-02 (7th Cir. 2014). The cybersquatter is subject to suit in the forum where the trademark owner is located and experiences the brunt of the injury to its trademark. In this case, that would be California, where Plaintiff is incorporated and maintains its principal place of business. Because Plaintiff was the target of Defendant's scheme to extract money in exchange for domain names that incorporate Plaintiff's trademark, Defendant's contact with California is " not based on the 'random, fortuitous, or attenuated' contacts [it] makes by interacting with other persons affiliated with the State, " but rather by its extortion scheme expressly aimed at Plaintiff in Plaintiff's principal place of business. Walden, 134 S.Ct. at 1123 (quoting Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 85 L.Ed.2d 528 (1985)).

Based on the foregoing, the Court concludes that Defendant has " purposefully directed" its conduct at California.

ii. Plaintiff's Claims Arise Out of Defendant's Forum-Related Activities

The second requirement for specific personal jurisdiction, the relation between a defendant's forum-related activities and the claims at issue, asks whether Plaintiff would have been injured " but for" Defendant's conduct directed toward Plaintiff in California. Panavision, 141 F.3d at 1322. There is no doubt that this requirement is satisfied here because but for Defendant's serial registration of numerous domain names incorporating Plaintiff's trademark or misspellings thereof, Plaintiff's injury would not have occurred. As such, Plaintiff's claims arise out of Defendant's California-related activities.

iii. Exercising Jurisdiction Over Defendant is Reasonable

If a plaintiff satisfies its burden as to the first two elements of the specific personal jurisdiction analysis, the burden then shifts to the defendant to " present a compelling case" that exercising jurisdiction would be unreasonable. See, e.g., Burger King, 471 U.S. at 476. Here, Plaintiff has successfully demonstrated that Defendant purposefully directed its conduct at California, and that Plaintiff's claims arise from that conduct. Defendant is in default and has not appeared in this Court to " present a compelling case" that the exercise of personal jurisdiction would be unreasonable.

In any event, the Court is satisfied that the exercise of personal jurisdiction is reasonable here because Defendant interjected itself into California by targeting a California company through its elaborate cybersquatting and typosquatting scheme. As such, Defendant had fair warning that it might be haled into the courts of this state. Banana Ads, 2014 WL 1873289, at *5. Furthermore, there does not appear to be any conflict in sovereignty between courts of the United States and Germany, given Plaintiff's success in cancelling Defendant's trademark registrations in Europe, and California has an interest in redressing the tortious injuries caused to its residents. Furthermore, Defendant's refusal to appear in this action forecloses any argument that litigating in this forum is overly burdensome, and exercising personal jurisdiction to enter default judgment in this case would be an efficient resolution of Plaintiff's claims, particularly because some of the relief that Plaintiff seeks is not available in other forums. Pl.'s Mot. 21-22; see generally Core-Vent, 11 F.3d at 1487-88.

As such, this Court has specific personal jurisdiction over Defendant.


Pursuant to Federal Rule of Civil Procedure 55(b), the Court may enter default judgment against a defendant who has failed to plead or otherwise defend an action. " The district court's decision whether to enter a default judgment is a discretionary one." Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980).

In exercising its discretion to enter default judgment, a district court considers seven factors set forth by the Ninth Circuit in Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986) (" Eitel factors"): (1) the possibility of prejudice to the plaintiff; (2) the merits of plaintiff's substantive claim; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of dispute concerning material facts; (6) whether default was due to excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. In considering these factors after a clerk's entry of default, the court takes all well-pleaded factual allegations in the complaint as true, except those with regard to damages. Televideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-18 (9th Cir. 1987). The Court may, in its discretion, consider competent evidence and other papers submitted with a motion for default judgment to determine damages. Id.

Only the merits and sufficiency of Plaintiff's claims (second and third factors) and the amount of money at stake (fourth factor) warrant in-depth analysis. The Court turns to those first.

A. Merits of Plaintiff's Claims and Sufficiency of the ...

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