CRS Recovery Inc et al v. Laxton et al

Filing 396

ORDER by Judge Claudia Wilken DENYING 349 MOTION FOR JUDGMENT AS A MATTER OF LAW AND DENYING 387 MOTION TO MODIFY PRELIMINARY INJUNCTION OR REQUIRE AN ADDITIONAL BOND. (Attachments: # 1 Certificate/Proof of Service) (ndr, COURT STAFF) (Filed on 1/10/2013)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA

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5

CRS RECOVERY, INC., a Virginia
corporation; and DALE MAYBERRY,
Plaintiffs,

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7
8
9

v.
JOHN LAXTON, aka
[e-mail]; and
NORTHBAY REAL ESTATE, INC.,
Defendants.

United States District Court
For the Northern District of California

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________________________________/

No. C 06-7093 CW
ORDER DENYING
MOTION FOR
JUDGMENT AS A
MATTER OF LAW
(Docket No. 349)
AND DENYING MOTION
TO MODIFY
PRELIMINARY
INJUNCTION OR
REQUIRE AN
ADDITIONAL BOND
(Docket No. 387)

Defendant Northbay Real Estate, Inc., through its Chapter 7
12
Bankruptcy Trustee, moves for judgment as a matter of law.
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Defendant John Laxton joins in its motion.

Plaintiffs CRS

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Recovery, Inc. and Dale Mayberry oppose Defendants’ motion.
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Plaintiffs also move to modify the permanent injunction imposed by
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the Court or to require Defendants to post a bond.

For the

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reasons set forth below, the Court DENIES both motions.
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BACKGROUND
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On July 1995, Mayberry registered the domain name “rl.com”
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with Network Solutions, Inc., a registrar of domain names.

See

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Docket No. 381, 155:8-9, 160:2-161:16; Docket No. 251:9-16; Pls.’
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Trial Ex. 1.

Mayberry was the original owner of rl.com.

Docket

No. 164:3-4.

After he registered rl.com, on October 3, 1995,

23
24
Mayberry also registered the domain name “mat.net” with Network
25
Solutions.

Id. at 153:20-22, 163:25-164:2; Docket No. 382,

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268:10-269:6.

After Mayberry registered mat.net, he updated the

27
administrative contact information for rl.com to reflect the email
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1

address “[e-mail],” in addition to his mailing address and

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telephone numbers, and to show his company, Micro Access

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Technologies, as the account holder.

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165:19; Pls.’ Trial Ex. 3.

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Docket No. 381, 163:14-

When an individual registers a domain name, he or she, as the

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registrant, can pay for the registration in one year increments

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for between one and ten years at a time, and can renew the

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registration repeatedly when the original registration expires.

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Docket No. 382, 260:12-18.

The date when the domain name comes up

United States District Court
For the Northern District of California

10

for renewal is referred to as the anniversary date.

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263:22-25.

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pays the registry to renew the domain name, even if the registrant

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has not yet paid the registrar for the renewal.

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263:1.

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domain names.

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the renewal fee to the registry by the anniversary date, the

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domain name goes into an “auto renew grace period.”

18

16.

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Verisign was forty-five days.

20

Id. at

On the anniversary date, the registrar automatically

Id. at 262:18-

Verisign is the registry for the .com and .net top level
Id. at 254:13-17.

If the registrant has not paid

Id. at 264:9-

In late 2003, this grace period for Network Solutions and
Id. at 264:17-20.1

If, by the end of the grace period, the registrant has still

21

not paid the renewal fee, the registrar sends a “delete command”

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to the registry.

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command does not actually delete the domain name.

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266:1.

Id. at 265:18-25.

Despite its name, the delete
Id. at 265:25-

Instead, among other things, it puts the domain name into

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26
1

27
28

At this time, Network Solutions had recently been spun out
of Verisign and certain documents created by Verisign continued to
be used by Network Solutions to govern its relationships with
registrants. Docket No. 383, 440:2-7.
2

1

a status called a redemption grace period with the registry.

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at 266:2-5.

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thirty days.

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fee during that time period, the domain name is restored to active

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status for the registrant.

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Id.

In late 2003, this redemption grace period lasted for
Id. at 266:6-8.

If a registrant pays the renewal

Id. at 266:9-12.

If the domain name is not restored during the grace period,

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it goes into a five-day pending delete queue, at the end of which

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the domain name is deleted and “drops,” which means that it is

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made available for registration by the general public.

Id. at

United States District Court
For the Northern District of California

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260:5-11, 267:3-11.

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allows them to register the domain name as soon as it drops.

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at 282:4-12.

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redemption grace period, no one other than the registrant can

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acquire the domain name or request restoration of the domain name,

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and in order to be re-registered through a back order, the domain

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name must expire, go through each grace period and then be

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formally deleted at the end of the pending delete period.

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267:12-19, 334:20-25.

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Individuals can place a “back order,” which
Id.

However, during the auto renew grace period and the

Id. at

Mayberry generally received annual renewal notices and

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invoices for the registration of the domain names by mail and

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email.

22

11.

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one or two months before the annual renewal date, which was in

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October.

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governed Network Solutions’s relationship with registrants in 2003

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provided that it would “endeavor to provide you notice prior to

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the renewal of your services at least fifteen (15) days in advance

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of the renewal date,” although it further provided that “you are

Docket No. 381, 162:6-17, 167:10-13, 178:12-179:3, 182:8-

He usually got these for the registration of mat.net about

Id. at 178:21-179:1.

The service agreement that

3

1

solely responsible for ensuring the services are renewed.”

2

No. 383, 440:1-22; Defs.’ Ex. 137-2.

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Docket

Mayberry last renewed the registration for mat.net on

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February 19, 2002 for the time period from October 4, 2001 through

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October 4, 2003; that renewal was completed prior to the

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establishment of the grace periods and process described above,

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which were newly established in 2003.

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Docket No. 382, 327:24-328:14; Pls.’ Trial Ex. 37.

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renewed the registration for rl.com on July 23, 2002, when he paid

Docket No. 381, 179:3-22l;
He last

United States District Court
For the Northern District of California

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in advance for three years so that the registration would expire

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on July 24, 2005.

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Pls.’ Trial Ex. 17.

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Docket No. 381, 157:20-158:6, 167:10-169:10;

In the fall of 2003, Mayberry did not receive renewal or

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expiration notices or invoices related to mat.net.

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381, 182:8-21.

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when the renewal date was coming up and did not send in a renewal

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payment because he did not receive an invoice.

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227: 2-4.

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email address, although it was no longer his primary email

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address.

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Docket No.

Mayberry relied on receiving an invoice to know

Id. at 183:4-12,

At that time, Mayberry still used the [e-mail]

Id. at 166:1-6, 225:14-18.

On its anniversary date on October 3, 2003, mat.net expired

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and its forty-five day auto renew grace period began.

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382, 278:15-279:12.

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issued for mat.net and the thirty-day redemption grace period

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began.

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Docket No.

On November 17, 2003, the delete command was

Id. at 280:2-23.

However, mat.net never completed the redemption grace period,

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went into the pending delete queue or became available for anyone

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in the public to register because, during the thirty day
4

1

redemption grace period, on December 15, 2003, Verisign processed

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a restore command for it.

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Docket No. 383, 466:18-467:7.

4

Solutions issue a restore code for mat.net.

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185:13-15.

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only to restore mat.net to the original registrant, Micro Access

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Technologies, and mat.net was restored to it.

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281:12-19; Docket No. 383, 467:8-17, 479:3-23.

Docket No. 382, 281:3-282:1, 335:15-22;
Mayberry had not asked that Network
Docket No. 381,

As previously noted, the restore command could be used

Docket No. 382,

Once a domain name is restored, there is no authorized

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United States District Court
For the Northern District of California

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process for anyone other than the original registrant to update

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the administrative contact or primary user information for the

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domain name.

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was restored to Micro Access Technologies, on December 19, 2003,

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someone other than Mayberry changed the name servers associated

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with mat.net and changed the primary user for that domain name

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from Mayberry to Li Qiang, without Mayberry’s permission to do so.

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Docket No. 381, 172:4-174:7; Docket No. 383, 469:3-473:8, 479:3-

18

23.

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email account.

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not acquire the domain name through the back order process.

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at 468:24-469:2.

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Docket No. 382, 282:13-18.

However, after mat.net

Through that change, Qiang took control of the [e-mail]
Docket No. 383, 469:3-473:8, 479:3-23.

Qiang did
Id.

On the morning of December 23, 2003, using the [e-mail]

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email address, Qiang initiated a request to transfer rl.com to

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himself.

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Ex. 82-63.

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request to [e-mail] as the email address associated with

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rl.com, requesting authorization for the transfer.

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382, 359:16-360:13, 361:22-362:9; Pls.’ Trial Exs. 18, 82-61, 82-

Docket No. 382, 359:16-360:13, 364:10-20; Pls.’ Trial
Network Solutions then sent an automated authorization

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Docket No.

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63.

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minute after the email was sent.

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363:18-364:2; Pls.’ Trial Exs. 18, 82-61, 82-63.

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receive the email, give permission for the transfer or authorize

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Qiang to take any of these actions.

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169:24-1, 175:2-176:25.

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from Network Solutions to another registrar based in China.

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Docket No. 382, 366:2-367:7.

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Solutions to another registrar on March 28, 2004.

United States District Court
For the Northern District of California

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11

Authorization was given in response to the email less than a
Docket No. 382, 360:4-19,
Mayberry did not

Docket No. 381, 157:2-7,

Later that day, Qiang transferred rl.com

Mat.net was transferred from Network
Docket No. 383,

451:8-18.
In May 2005, Laxton purchased rl.com from Bernali Kalita.

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Docket No. 382, 405:5-11, 417:19-20.

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had acquired it from Qiang.

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Northbay.

Sometime before that, Kalita

Laxton later assigned rl.com to

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On July 21, 2005, Mayberry signed two relevant documents.

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The first was titled “Agreement for Domain Name Transfer,” and the

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second was attached to the agreement as Exhibit A and titled

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“Assignment.”

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Decl. ¶ 4, Docket No. 271, Ex. A, 3-5.

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Mayberry, in exchange for “good and valuable consideration,”

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assigned “CRS Recovery Services, LLC . . . all right, title and

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interest in and to the domain name ‘RL.COM’ . . . and the right to

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bring actions and to recover damages for past infringement of any

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of the foregoing.”

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referred to “CRS Recovery Services, LLC” as the recipient of the

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rights to rl.com, the company is referred to as “CRS Recovery

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Services, Inc.” above the signature line.

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CRS Recovery agreed to pay Mayberry a fee and to attempt to

Donaldson Decl., Docket No. 261, ¶ 2, Ex. A; Lau

Id.

In the latter document,

Although the body of the agreement also

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Id.

In the agreement,

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recover both rl.com and mat.net and turn the latter over to

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Mayberry.

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of rl.com if it was recovered.

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all actions necessary for the execution and performance of the

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agreement and assignment and “the consummation of the transactions

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contemplated” therein, including the attempt to recover mat.net

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and rl.com.

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9

Id.

In exchange, CRS Recovery would retain ownership
Id.

Mayberry also agreed to take

Id.

At the time that these documents were executed, neither CRS
Recovery Services, Inc. nor CRS Recovery Services, LLC had been

United States District Court
For the Northern District of California

10

formed.

11

CRS Recovery, Inc., reached the agreement with Mayberry because he

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intended to establish CRS Recovery in some form shortly thereafter

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and wanted to obtain the rights to rl.com on behalf of it.

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Lau Decl. ¶ 4.

Richard Lau, who is now the President of

Id.

Almost five months later, on December 13, 2005, Lau and

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Steven Lieberman incorporated CRS Recovery, Inc. in Virginia.

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Donaldson Decl. ¶ 7, Ex. F; Lau Decl. ¶ 5, Ex. B; see also Docket

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No. 382, 243:7-11.

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382, 299:8-10.

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Lieberman, LLC as one of the initial directors of the entity.

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Decl. ¶ 5, Ex. B.

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ever formed.

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Lieberman was also Lau’s attorney.

Docket No.

The articles of incorporation listed Greenberg &
Lau

No entity called CRS Recovery Services, LLC was

Lau Decl. ¶ 5.

In January 2006, Lau and Lieberman called Laxton on the phone

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and demanded the return of rl.com.

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299:8-10; see also id. at 397:9-398:20 (Laxton’s testimony

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regarding the phone call, including that Lieberman told him that

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he “was in possession of . . . a stolen domain name and that they

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wanted it back, his client wanted it back”).

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conversation, they offered to reimburse him what he had paid to
7

Docket No. 382, 290:12-15,

During that

1

acquire the domain name.

2

to send him this in writing.

Id. at 290:20-291:2.

Laxton told them

Id. at 290:16-19, 291:3-5.

3

On February 27, 2006, Lieberman sent Laxton a demand letter

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on Greenberg & Lieberman, LLC letterhead, “intended only for the

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purpose of settling any disputes between my client, Brian D.

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Mayberry, Jr., and yourself.”

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Trial Ex. 86.

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unequivocal that Mr. Mayberry is the rightful owner of the domain

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name RL.com” and stated that “my client has authorized me to offer

Docket No. 382, 291:6-19; Pls.’

In the letter, Lieberman stated that “it is

United States District Court
For the Northern District of California

10

to reimburse you for your acquisition costs in order to avoid

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extended litigation regarding this matter.”

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Pls.’ Trial Ex. 86.

CRS Recovery, Inc. and Mayberry filed this action on November

13

15, 2006, against, among others, Laxton, Northbay and Qiang.

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Docket No. 1.

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amended complaint (2AC).

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allege, “In July, 2005, Mayberry transferred all of his right,

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title and interest in RL.Com to CRS for valuable consideration.”

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2AC ¶ 16.

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pursuant to a written assignment to recover possession of RL.Com

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and MAT.Com, and to recover pecuniary damages suffered by

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Mayberry.”

22

for conversion, intentional interference with contract,

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declaratory relief and unfair competition.

24

On October 30, 2007, Plaintiffs filed their second
Docket No. 51.

In the 2AC, Plaintiffs

They also allege that “CRS stands in Mayberry’s shoes

Id. at ¶¶ 24, 31.

In the 2AC, they asserted claims

In early 2008, CRS Recovery recovered mat.net from Liang and

25

returned it to Mayberry.

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¶ 8.

Donaldson Decl. ¶ 6, Ex. E; Lau Decl.

27

In February 2008, after mat.net had been returned to

28

Mayberry, he and Lau, personally and on behalf of CRS Recovery,
8

1

Inc., signed a document entitled “Confirmation of Contract

2

Performance and Unqualified Assignment of Rights.”

3

Decl. ¶ 5, Ex. D; Lau Decl. ¶ 9, Ex. A, 1-2.

4

they described the 2005 agreement as a contract between Mayberry

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and Lau and stated that Lau had subsequently conveyed all rights

6

to recover rl.com to CRS Recovery, Inc.

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D; Lau Decl. ¶ 9, Ex. A, 1.

8

Mayberry again agreed that he conveyed to CRS Recovery, Inc.

9

irrevocably and without qualification, all rights to the ownership

United States District Court
For the Northern District of California

10

of rl.com.

11

Donaldson

In this document,

Donaldson Decl. ¶ 5, Ex.

In the February 2008 agreement,

Id.

On June 13, 2008, Plaintiffs filed a motion for leave to file

12

a third amended complaint.

13

stated, “Plaintiff Mayberry should be dismissed from the action,

14

as he has recovered MAT.Net, and seeks no further relief.”

15

3.

16

100.

17

Docket No. 76.

In the motion, they

Plaintiffs later withdrew this motion for leave.

Id. at

Docket No.

On September 26, 2008, the Court granted Plaintiffs’ motion

18

for summary adjudication on its claims against Laxton and Northbay

19

for conversion and declaratory relief.

20

also dismissed Plaintiffs’ claims for intentional interference

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with contract and unfair competition, because at the hearing,

22

Plaintiffs agreed to dismiss these claims if they prevailed on the

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motion for summary adjudication of the other claims.

24

Subsequently, the Ninth Circuit reversed in part this Court’s

25

summary adjudication order, finding that, under the facts

26

presented at that time, material disputes remained regarding the

27

circumstances under which Mayberry lost control of rl.com,

28
9

Docket No. 170.

The Court

Id. at 18.

1

including whether this was the result of theft, fraud or

2

abandonment.

3

On May 4, 2012, the Court denied Plaintiffs’ motion to amend

4

their complaint to withdraw their claims for conversion,

5

intentional interference with contract and any requests for

6

damages, to strike their jury demand and to reset the matter for a

7

bench trial.

8

claims and requests for damages was conditional on the Court

9

granting their request to strike the jury demand and proceed with

Docket No. 322.

Plaintiffs’ request to withdraw the

United States District Court
For the Northern District of California

10

a bench trial, which the Court denied.

11

had noted, “Regardless of the ruling on this motion, Plaintiffs do

12

not intend to pursue their claim for intentional interference with

13

contract,” and that “if the Court denies the request to amend the

14

complaint and strike the jury demand, Plaintiffs will simply

15

proceed with a jury trial as scheduled on all of their claims

16

except intentional interference with contract, and will separately

17

seek leave to withdraw that claim before trial.”

18

1-2 n.1.

19

In that motion, Plaintiffs

Docket No. 316,

On May 4, 2012 as well, the Court denied Northbay’s motion to

20

dismiss the complaint.

21

argued that neither Mayberry nor CRS Recovery, Inc. had standing

22

at the outset of this case to pursue the claims as to rl.com.

23

Northbay stated that Mayberry lacked standing because, in 2005,

24

Mayberry assigned his interest in rl.com to CRS Recovery Services,

25

LLC and that, even if he had standing at the outset of the case to

26

bring claims related to rl.com, he asserted only claims related to

27

mat.net and had abandoned any claims related to rl.com.

28

also argued that CRS Recovery, Inc. lacked standing, because

Docket No. 323.

10

In its motion, Northbay

Northbay

1

Mayberry’s 2005 assignment was in favor of the LLC and not the

2

corporation, the assignment took place before the corporation was

3

formed and it was invalid.

4

In denying the motion, the Court found that CRS Recovery,

5

Inc. obtained the rights to RL.com through the 2005 agreement and

6

assignment and that, even if the 2005 transfer were invalid,

7

Mayberry had standing when the action was filed, and he

8

subsequently transferred rights to CRS Recovery, Inc. in the 2008

9

confirmation and agreement.

Id. at 5-6.

The Court also rejected

United States District Court
For the Northern District of California

10

Northbay’s argument that the operative complaint could be read

11

only to assert claims by Mayberry related to mat.net and found

12

that it was “susceptible to a broader construction.”

13

The Court noted that, although Plaintiffs have stated that they

14

would remove Mayberry as a named plaintiff, they did so with the

15

understanding that CRS Recovery, Inc. would be able to pursue the

16

claims that it gained through assignment from Mayberry.

17

Id. at 6.

Id.

A four day trial was held on May 7 through 10, 2012.

Docket

18

Nos. 339-42.

19

dismiss voluntarily their claim for intentional interference with

20

contract, which the Court granted.

21

Defendants did not object.

22
23

On the first day of trial, Plaintiffs moved to

Docket No. 381, 4:17-20.

On May 9, 2012, Northbay filed a motion for judgment as a
matter of law.

24

Docket No. 333.

On May 10, 2012, the jury returned a verdict that Plaintiffs

25

proved that Laxton and Northbay had converted rl.com.

26

345.

27

their affirmative defenses.

28

Defendants had not established that Plaintiffs abandoned rl.com

Docket No.

The jury also found that Defendants had not proved either of
Id.

In particular, the jury found

11

1

before Defendants acquired it or that Qiang had obtained rl.com by

2

fraud rather than by theft and therefore gained title to it, which

3

could be passed to Defendants as good faith purchasers.

4

After the jury returned its verdict, Plaintiffs voluntarily

5

dismissed their claim for violation of California’s Unfair

6

Competition Law (UCL), Cal. Bus. & Prof. Code section 17200, with

7

the Court’s permission.

8

did not object to the dismissal.

Docket No. 384, 565:15-24.

Id.

Defendants

On May 14, 2012, the clerk entered judgment in favor of

10
United States District Court
For the Northern District of California

9

Plaintiffs against Defendants on the first and fourth claims for

11

conversion and declaratory relief, stating that Plaintiffs are the

12

lawful owners of the domain name rl.com and noting that the second

13

and third claims for intentional interference with contract and

14

unfair competition had been dismissed.

15

same date, the Court entered a permanent injunction.

16

343.

17

Docket No. 344.

On the

Docket No.

On May 31, 2012, Northbay filed the instant renewed motion

18

for a judgment as a matter of law pursuant to Federal Rule of

19

Civil Procedure 50(b).

20

joined in the motion.

21

Docket No. 349.

On June 4, 2012, Laxton

Docket No. 352.

On November 8, 2012, Plaintiffs filed a motion to modify the

22

permanent injunction or to require Defendants to post an

23

additional bond, and for a case management conference.

24

387.

25
26
27
28

Docket No.

DISCUSSION
I.

Motion for judgment as a matter of law
Defendants request that, under Federal Rule of Civil

Procedure 50, the Court set aside the jury’s verdict in favor of
12

1

Plaintiffs on the claims for conversion and declaratory relief and

2

that the Court enter judgment in favor of Defendants on the

3

remaining claims pursuant to Federal Rule of Civil Procedure 52.

4

A. Legal standard

5

A motion for judgment as a matter of law after the verdict

6

renews the moving party’s prior Rule 50(a) motion for judgment as

7

a matter of law at the close of all the evidence.

8

P. 50(b).

9

granted only when the evidence and its inferences, construed in

Fed. R. Civ.

Judgment as a matter of law after the verdict may be

United States District Court
For the Northern District of California

10

the light most favorable to the non-moving party, permits only one

11

reasonable conclusion as to the verdict.

12

443 F.3d 1050, 1062 (9th Cir. 2006).

13

conflicting evidence, or if reasonable minds could differ over the

14

verdict, judgment as a matter of law after the verdict is

15

improper.

16

772, 775 (9th Cir. 1990); Air-Sea Forwarders, Inc. v. Air Asia

17

Co., 880 F.2d 176, 181 (9th Cir. 1989).

18

Josephs v. Pac. Bell,

Where there is sufficient

See, e.g., Kern v. Levolor Lorentzen, Inc., 899 F.2d

Federal Rule of Civil Procedure 52 governs findings and

19

conclusions made by the Court in actions tried on the facts

20

without a jury or with an advisory jury.

21

that, after making such findings, on a party’s timely motion after

22

the entry of judgment, “the court may amend its findings--or make

23

additional findings--and may amend the judgment accordingly.”

24

Fed. R. Civ. P. 52(b).

25

fully heard on an issue during a nonjury trial and the court finds

26

against the party on that issue, the court may enter judgment

27

against the party on a claim or defense that, under the

It provides in part

It also provides, “If a party has been

28
13

1

controlling law, can be maintained or defeated only with a

2

favorable finding on that issue.”

3

B. Discussion

4
5

Fed. R. Civ. P. 52(c).

1. Standing of Mayberry and mootness of his claims
In their motion, Defendants argue that Mayberry no longer had

6

standing to prosecute his claims at the time of trial because he

7

lacked a stake in the case at that point and his claims were moot.

8

Defendants base their arguments on the fact that Mayberry assigned

9

his rights to rl.com to CRS Recovery, recovered mat.net prior to

United States District Court
For the Northern District of California

10

trial and did not seek monetary damages at trial.

11

contend that, as a result, judgment should be entered in their

12

favor on all claims asserted by Mayberry.

Defendants

13

Standing and mootness are distinct issues that underlie

14

whether the Court has jurisdiction under Article III to adjudicate

15

a case and are separate from the merits of the claims asserted.

16

See, e.g., Friends of the Earth, Inc. v. Laidlaw Envtl. Servs.

17

(TOC), Inc., 528 U.S. 167, 189-190 (2000) (discussing the

18

conflation of standing and mootness); Warth v. Seldin, 422 U.S.

19

490, 500-01 (1975) (“standing in no way depends on the merits of

20

the plaintiff’s contention that particular conduct is illegal”).

21

The standing requirement is “perhaps the most important” of

22

the doctrines under Article III of the Constitution that limit

23

“the federal courts to adjudicating actual ‘cases’ and

24

‘controversies.’”

25

“Those two words confine ‘the business of federal courts to

26

questions presented in an adversary context and in a form

27

historically viewed as capable of resolution through the judicial

28

process.’”

Allen v. Wright, 468 U.S. 737, 750-751 (1984).

Massachusetts v. Envtl. Prot. Agency, 549 U.S. 497,
14

1

516 (2007) (quoting Flast v. Cohen, 392 U.S. 83, 95 (1968)).

2

bottom, ‘the gist of the question of standing’ is whether

3

petitioners have ‘such a personal stake in the outcome of the

4

controversy as to assure that concrete adverseness which sharpens

5

the presentation of issues upon which the court so largely depends

6

for illumination.’”

7

(1962)).

8

except mootness, standing is determined as of the date of the

9

filing of the complaint . . . . The party invoking the

“At

Id. (quoting Baker v. Carr, 369 U.S. 186, 204

“As with all questions of subject matter jurisdiction

United States District Court
For the Northern District of California

10

jurisdiction of the court cannot rely on events that unfolded

11

after the filing of the complaint to establish its standing.”

12

Wilbur v. Locke, 423 F.3d 1101, 1107 (9th Cir. 2005), abrogated in

13

part on other grounds by Levin v. Commerce Energy, Inc., 130 S.

14

Ct. 2323 (2010) (quotation marks and citations omitted).

15

plaintiff need have standing to assert a claim for the Court to

16

have jurisdiction under Article III.

17

F.3d 789, 798 (9th Cir. 2012) (“‘Because we find [one plaintiff]

18

has standing, we do not consider the standing of the other

19

plaintiffs.’”) (quoting Watt v. Energy Action Educ. Found., 454

20

U.S. 151, 160 (1981)).

21

Only one

See Kaahumanu v. Hawaii, 682

"Mootness can be characterized as the doctrine of standing

22

set in a time frame: The requisite personal interest that must

23

exist at the commencement of the litigation (standing) must

24

continue throughout its existence (mootness).”

25

v. Mink, 322 F.3d 1101, 1116 (9th Cir. 2003) (quoting Cook Inlet

26

Treaty Tribes v. Shalala, 166 F.3d 986, 989 (9th Cir. 1999)); see

27

also Friends of the Earth, 528 U.S. at 191 (explaining that this

28

description of mootness “is not comprehensive”).
15

Or. Advocacy Ctr.

“Thus, ‘[a]n

1

actual controversy must be extant at all stages of review, not

2

merely at the time the complaint is filed.’”

3

Bernhardt v. County of Los Angeles, 279 F.3d 862, 871 (9th Cir.

4

2002).

5

are no longer live and therefore the parties lack a legally

6

cognizable interest for which the courts can grant a remedy.”

7

(internal quotation marks and citations omitted).

8

asserting mootness has the heavy burden of establishing that there

9

is no effective relief remaining for a court to provide.’”

Id. (quoting

“Generally, an action is mooted when the issues presented

Id.

“‘The party

Id. at

United States District Court
For the Northern District of California

10

1116-17 (quoting Tinoqui-Chalola Council of Kitanemuk & Yowlumne

11

Tejon Indians v. United States Dep’t of Energy, 232 F.3d 1300,

12

1303 (9th Cir. 2000)).

13

In the instant motion, Defendants have not challenged the

14

standing of CRS Recovery or asserted that its claims are moot, and

15

have not disputed that Mayberry had standing at the time that the

16

case was filed.

17

justiciable case or controversy properly before this Court both at

18

the time of filing and at the time of trial.

19

Article III jurisdiction inquiry were limited to Mayberry’s

20

individual stake in the case, contrary to Defendants’

21

characterization, Mayberry has retained an interest in its outcome

22

throughout its duration and did not concede at trial that his

23

claims were moot, as Defendants have averred without citation.

24

Among other things, Plaintiffs have sought a declaratory judgment

25

that rl.com was improperly taken from Mayberry through identity

26

theft and forged transfer documents and that the transfers based

27

on these wrongful actions should be reversed, even if he would

28

then transfer the domain name to CRS Recovery.

Thus, there is no dispute that there was a

16

Further, even if the

2. Whether domain names are subject to a conversion
claim

1
2

Defendants argue that the jury’s verdict on the conversion

3

claim should be reversed because domain names are not property

4

subject to a conversion claim.

5

To establish the tort of conversion, “a plaintiff must show

6

‘ownership or right to possession of property, wrongful

7

disposition of the property right and damages.’”

8

337 F.3d 1024, 1029 (9th Cir. 2003) (quoting G.S. Rasmussen &

9

Assoc., Inc. v. Kalitta Flying Service, Inc., 958 F.2d 896, 906

Kremen v. Cohen,

United States District Court
For the Northern District of California

10

(9th Cir. 1992)).

11

domain names in this case are property subject to conversion

12

claims:

13
14
15
16
17
18
19
20
21
22
23
24

The Ninth Circuit previously found that the

Like the majority of states to have addressed the issue,
California law recognizes a property interest in domain
names. As we explained in Kremen v. Cohen, domain names
are intangible property subject to conversion claims.
337 F.3d 1024, 1030 (9th Cir. 2003). To this end,
“courts generally hold that domain names are subject to
the same laws as other types of intangible property.”
Jonathan D. Hart, Internet Law 120 (2008); see, e.g.,
Office Depot Inc. v. Zuccarini, 596 F.3d 696, 701-02
(9th Cir. 2010) (domain name subject to receivership in
the district of domain name registrar). We have
previously explained the logic of California
understanding domain names as intangible property
because domain names are well-defined interests,
exclusive to the owner, and are bought and sold, often
for high values. Kremen, 337 F.3d 1024. Domain names
are thus subject to conversion under California law,
notwithstanding the common law tort law distinction
between tangible and intangible property for conversion
claims. Id.
CRS Recovery, Inc. v. Laxton, 600 F.3d 1138, 1142 (9th Cir. 2010).

25

Defendants contend that, despite the Ninth Circuit’s

26

discussion in this case and in Kremen, this Court should hold

27

that, as a matter of law, “under California law, a domain name is

28

not property that may be converted.”
17

Renewed Mot. 6.

Defendants

1

argue that, in Kremen, because no California court had squarely

2

decided the issue, the Ninth Circuit found that domain names were

3

property subject to conversion based on its prediction of how

4

California courts would resolve the question.

5

that a subsequent California Court of Appeal decision, In re

6

Forchion, 198 Cal. App. 4th 1284 (2011), showed that this

7

prediction was erroneous.

8
9

Defendants contend

However, Forchion does not compel this conclusion.

In that

case, the California Court of Appeal considered whether an

United States District Court
For the Northern District of California

10

individual could statutorily change his name to the name of his

11

website, “NJWeedman.com.”

12

The court found that he could not and, in so holding, discussed

13

the confusion that could ensue if the plaintiff were allowed to

14

change his name this way but later lost the use of NJWeedman.com

15

as a domain name, thereby allowing someone else to register it.

16

Id. at 1287, 1309-12.

17

domain name, the court quoted several passages from a discussion

18

in a note published in a law journal that explained the author’s

19

belief that a domain name is not property but is instead the

20

product of a contract for services between the registrant and the

21

registrar.

22

“Knotty” Saga of Sex.Com 45 Jurimetrics J. 75, 84–91 (2004)).

23

court also pointed out that other notes urged the contrary

24

approach, which the Ninth Circuit had adopted.

25

court, however, went on to state, “Regardless of whether a domain

26

name is a registrant’s property or merely the product of a

27

services contract, a registrant may lose any proprietary interest

28

in the domain name if he or she fails to pay periodic renewal fees

Forchion, 198 Cal. App. 4th at 1286.

During its discussion of the nature of a

Id. at 1308-09 (quoting Note, Kremen v. Cohen: The

18

Id. at 1309.

The

The

1

or breaches the registration agreement with the registrar.”

2

at 1309.

3

express its own views on whether domain names are property.

4

Rather, it raised the issue only as background in a very different

5

context, before moving on to consider the matters relevant to the

6

case before it.

7

contrary determination as law of the case, as well as its

8

controlling holding in Kremen.

9

Id.

Thus, the court did not directly address or even clearly

This Court is bound to follow the Ninth Circuit’s

Accordingly, the Court denies Defendants’ motion to reverse

United States District Court
For the Northern District of California

10

the jury’s verdict on this claim based on their contention that

11

domain names are not property subject to conversion.

12
13

3. Demand for return of rl.com by CRS Recovery
Under California law, “where a person entitled to possession”

14

of property “demands it, the wrongful, unjustified withholding is

15

actionable as conversion.”

16

Defendants argue that Plaintiffs did not present evidence that a

17

demand for the return of rl.com was made on behalf of CRS

18

Recovery, and thus the jury verdict on the conversion claim should

19

be reversed.

CRS Recovery, 600 F.3d at 1145.

20

Plaintiffs offered evidence that Lieberman and Lau requested

21

the return of rl.com from Laxton on multiple occasions, through a

22

phone call and a letter.

23

and Lau made these demands or that Laxton understood them as such,

24

and instead argue that these demands were made on behalf of

25

Mayberry, who was not entitled to possession at that time, and not

26

on behalf of CRS Recovery.

Defendants do not dispute that Leiberman

27

Defendants’ arguments are unavailing for a number of reasons.

28

The jury found in favor of Plaintiffs collectively, including both
19

1

CRS Recovery and Mayberry.

2

that CRS Recovery agreed to try to recover both domain names, with

3

the full assistance of Mayberry, by exercising the rights of

4

Mayberry to the domain names.

5

a proper plaintiff, CRS Recovery was, and it was the principals of

6

CRS Recovery who made the demands.

7

any authority requiring that CRS Recovery demand return of the

8

domain name while identifying itself as the entity with the right

9

to possession.

Plaintiffs have presented evidence

Further, even if Mayberry were not

Defendants have not offered

That Lau and Lieberman asserted that they were

United States District Court
For the Northern District of California

10

acting on behalf of their client, Mayberry, is consistent with the

11

arrangement that Lau had made with Mayberry on behalf of CRS

12

Recovery to try to use his rights to recover the domain names.

13

Accordingly, Plaintiffs offered sufficient evidence to

14

support the jury’s finding that they made a demand for the return

15

of rl.com, and the Court denies Defendants’ motion to vacate the

16

verdict on the conversion claim for this reason.

17

4. Declaratory judgment claim

18

Defendants argue that the Court should reverse the judgment

19

on the declaratory relief claim because the “predicate for or

20

substance of plaintiffs’ declaratory relief claim was their

21

conversion claim” and “judgment must be rendered against

22

plaintiffs and in favor of defendants on plaintiffs’ conversion

23

claim.”

24

Defendants’ arguments regarding the conversion claim.

25

Defendants’ contention on the declaratory relief claim is merely

26

derivative of their unmeritorious arguments on the conversion

27

claim, the Court also denies their motion as to the declaratory

28

relief claim.

Renewed Mot. 9.

However, the Court has rejected

20

Because

1

5. UCL and wrongful interference with contract claims

2

Defendants argue that, pursuant to Rule 52, the Court should

3

make findings that Plaintiffs failed to offer evidence in support

4

of their UCL claim and enter judgment against them on the claim.

5

Defendants alternatively contend that the Court should amend the

6

judgment to reflect that Plaintiffs dismissed their UCL claim with

7

prejudice or to state that they may not bring it again in the

8

future.

9

the wrongful interference with contract claim.

United States District Court
For the Northern District of California

10

In a footnote, Defendants ask that the same be done for

As Defendants acknowledge, the UCL claim “was a nonjury

11

claim.”

12

dismissed their UCL claim after the jury had returned a verdict on

13

the conversion and declaratory relief claims.

14

offered no authority to support that the Court may make such

15

findings or enter judgment as a matter of law on a claim after it

16

has been dismissed voluntarily with Court permission.

17

Renewed Mot. 10.

As explained above, Plaintiffs

Defendants have

In addition, the Court declines to modify the judgment to

18

reflect that the dismissal of the claims for violation of the UCL

19

and wrongful interference with contract was with prejudice.

20

Defendants argue that the dismissal of the UCL claim should

21

be with prejudice “in light of plaintiffs’ purported dismissal of

22

their Section 17200 claims after the jury returned its verdict and

23

before the Court ruled on their claims . . . as well as in view of

24

the fact that plaintiffs dismissed the same claims in 2008.”

25

Renewed Mot. 10.

26

interference claim has been dismissed multiple times.

27

n.5.

Defendants also argue that the wrongful

28
21

Id. at 11

1

In support, Defendants cite language set forth in Rule

2

41(a)(1)(B), which provides in part that “if the plaintiff

3

previously dismissed any federal- or state-court action based on

4

or including the same claim, a notice of dismissal operates as an

5

adjudication on the merits.”

6

to dismissal of an action by the plaintiff without a court order

7

through the filing of a notice of dismissal or stipulation.

8

41(a)(2) governs the dismissal of actions by court order and

9

provides that, unless the order states otherwise, a dismissal

However, this subpart is applicable

Rule

United States District Court
For the Northern District of California

10

under that paragraph is without prejudice.

11

granted Plaintiffs permission to dismiss the claims; Plaintiff did

12

not act without a court order.

13

eliminated claims but did not dismiss the action.

14

Canyon Pres. Council v. United States Forest Serv., 403 F.3d 683,

15

687-689 (9th Cir. 2005) (Rule 41(a) does not encompass dismissal

16

of individual claims; instead, this is properly considered an

17

amendment under Rule 15(a)); Ethridge v. Harbor House Restaurant,

18

861 F.2d 1389, 1392 (9th Cir. 1988); see also Hells Canyon, 504

19

F.3d at 690 (“It is axiomatic that prejudice does not attach to a

20

claim that is properly dropped from a complaint under Rule 15(a)

21

prior to final judgment.”).

22

conditionally dismissed the UCL and wrongful interference claims

23

only if the motion for summary judgment on their claims for

24

conversion and declaratory relief were granted, in order to obtain

25

a final judgment.

26

other claims, it dismissed the UCL and wrongful interference

27

claims.

Here, the Court

Further, here, Plaintiffs
See Hells

Finally, in 2008, Plaintiffs

Because the Court granted the motion as to the

However, the Ninth Circuit then reversed the order

28
22

1

granting summary judgment on those claims, thereby removing the

2

condition that Plaintiffs had placed on their dismissal.

3

In support of their request, Defendants cite Williams v. Ford

4

Motor Credit Co., 627 F.2d 158, 159-60 (8th Cir. 1980).

5

in that case, the court discussed a dismissal of an action under

6

Rule 41(a), which is inapplicable here.

7

jury returned a verdict for the plaintiff and the defendant filed

8

a motion for a judgment notwithstanding the verdict.

9

In response, the plaintiff argued that the motion should be denied

However,

Further, in Williams, the

Id. at 159.

United States District Court
For the Northern District of California

10

and requested in the alternative that, if the court decided the

11

verdict should not stand, the action be dismissed without

12

prejudice to refiling in state court.

13

the latter action.

14

the trial court to rule on the motion for judgment

15

nothwithstanding the verdict.

16

the only apparent reason for the plaintiff’s request was

17

apprehension of the court’s ruling on the pending motion and that

18

the dismissal would prejudice the defendant by subjecting it to

19

more litigation in state court after the federal action had

20

already progressed to trial.

21

Id.

Id.

The trial court took

The appellate court reversed and directed

Id. at 161.

The court found that

Id. at 159-60.

Here, in contrast, Plaintiffs did not seek to dismiss the

22

entirety of the action.

23

motion for judgment as a matter of law pending, they sought to

24

dismiss the wrongful interference claim, and Defendants did not

25

object.

26

they had already obtained their desired relief through the

27

favorable verdict on their other claims.

28

reason for the Court to rule on the UCL claim.

Before the trial began, and without any

Further, they sought to dismiss the UCL claim because

23

Thus, there was no
Especially in

1

light of the fact that Plaintiffs’ voluntary dismissal of the UCL

2

claim was again occasioned by a favorable finding on their other

3

claims, it would be inequitable for the Court to hold, as

4

Defendants apparently request, that, if the jury verdict were

5

reversed during Defendants’ pending appeal, Plaintiffs would be

6

barred under any circumstance from pursuing the UCL claim.

7

Accordingly, the Court denies Defendants’ request to modify

8

the final judgment to dismiss the UCL and wrongful interference

9

claims with prejudice or to state that Plaintiffs are foreclosed

United States District Court
For the Northern District of California

10

from pursuing them under any circumstance.

11

II.

12

Motion to modify permanent injunction or to require an
additional bond
Plaintiffs seek to modify the permanent injunction that is

13
currently in place so that they can alienate the domain name
14
rl.com prior to the resolution of the appeal, or to require
15
Defendants to post a $500,000 bond as security for any damages
16
caused by Plaintiffs’ inability to alienate the domain name during
17
the appeals process.
18
The permanent injunction entered by the Court stated that
19
Plaintiffs are the lawful owners of rl.com and enjoined Defendants
20
from interfering with Plaintiffs’ rights to possession, control
21
and use.

Docket No. 343.

The Court also stated,

22
23
24
25
26
27
28

In the event an appeal is taken from the Judgment
herein, this Order shall remain in effect pending
decision of the appeal, without any bond being required
of Plaintiffs, except upon the prior application of
Defendants, supported by a showing of good cause.
However, in such event, Plaintiffs shall not be
permitted to alienate RL.com until mandate of the Ninth
Circuit issues and the time to petition for a writ of
certiorari has passed. If a petition for a writ of
certiorari is filed, Plaintiffs shall not be permitted
to alienate RL.com until the petition is denied or, if
the petition is granted, until the matter is decided.
24

1
2

Id. at 1-2.2
Plaintiffs argue that the condition in the permanent

3

injunction restricting alienation is akin to a stay of the

4

injunction pending appeal pursuant to Rule 62 and thus that the

5

Court must require a bond or other appropriate terms for their

6

security.

7

be altered to prevent them from incurring substantial economic

8

harm during the pendency of the appeal.

9

Plaintiffs contend that the permanent injunction should

The Court notes that, in connection with Defendants’ motion

United States District Court
For the Northern District of California

10

to stay the injunction imposed after the motion for summary

11

adjudication, Plaintiffs themselves proposed, and stipulated to,

12

the requirement that they refrain from alienating the domain name

13

during the appeals process.

14

Stay, Docket No. 195, 9; Carreon Decl., Docket No. 195, ¶ 13; see

15

also Carreon Decl. ¶ 16 (requesting that the Court impose either

16

the condition that the domain not be alienated or require that the

17

registrar “lock” the domain name, so that its registration

18

information cannot be modified).

19

name was raised shortly before trial, Plaintiffs informed the

20

Court that they did not intend to sell the domain name and rather

21

that CRS Recovery, through Lau, intended to use it.

22

No. 385, 37:12-38:2 (stating that Lau “is not interested in

23

divesting himself of the domain name and selling it”); see also

See Pls.’ Opp. to Defs.’ Mot. to

Further, when sale of the domain

See Docket

24
25
26
2

27
28

The condition included in the permanent injunction that
contemplated the possibility of a bond in Defendants’ favor was
proposed verbatim by Plaintiffs and is not at issue in the present
motion. See Docket No. 171 (Pls.’ Proposed Permanent Injunction).
25

1

Carreon Decl. ¶ 15 (stating that CRS Recovery intended to use the

2

domain name while the appeal was pending).

3

Plaintiffs also have not offered any evidence to support

4

their assertions that the appeal condition in the permanent

5

injunction is causing them to suffer harm.

6

their motion that the injunction means that they cannot use the

7

domain “for a commercial website or otherwise commercialize it,”

8

“mortgage it,” “challenge a third party who wishes to use RL as

9

one of the new” generic top level domains (gTLDs) or sell it.

Plaintiffs state in

United States District Court
For the Northern District of California

10

Mot. to Modify 5.

11

that this appeal condition prevents them from using the domain

12

name for a commercial purpose or to produce income during the

13

appeal and it is not clear how this term could interfere with

14

Plaintiffs’ ability to challenge third parties who may wish to use

15

RL in connection with a different generic top level domain.

16

However, Plaintiffs have not submitted evidence

In addition, the Court declines to require Defendants to post

17

a bond at this time.

18

is currently in bankruptcy and is represented by the Trustee of

19

its estate and that Laxton is proceeding pro se due to his

20

inability to pay counsel.

21

The record contains evidence that Northbay

Accordingly, the Court DENIES Plaintiffs’ motion.

However,

22

if the parties are able to reach an agreement, the Court will

23

entertain a stipulation to modify the injunction to allow

24

Plaintiffs to sell the domain name and invest the proceeds pending

25

appeal.

26
27
28

CONCLUSION
For the reasons set forth above, the Court DENIES Defendants’
renewed motion for a judgment as a matter of law (Docket No. 349)
26

1

and DENIES Plaintiffs’ motion to modify the permanent injunction

2

or to require the posting of a bond (Docket No. 387).

3

Because Plaintiffs’ request for a case management conference

4

appears to be to discuss the status of Defendants’ motion, which

5

the Court has resolved in this Order, the Court declines to set a

6

case management conference at this time.

7

IT IS SO ORDERED.

8
9

United States District Court
For the Northern District of California

10

Dated: 1/10/2013

CLAUDIA WILKEN
United States District Judge

11
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