Hawaiiweb, Inc. et al v. Experience Hawaii, Inc.
Filing
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OPINION AND ORDER awarding Plaintiffs contractual damages for Defendants breach of contract in the amount of $50,000. Signed by Judge William S. Duffey, Jr on 2/15/17. (ddm)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
HAWAIIWEB, INC. and
DAVID DIETERLE,
Plaintiffs,
v.
1:16-cv-00405-WSD
EXPERIENCE HAWAII, INC.,
d/b/a Experience Hawaii Group,
Defendant.
OPINION AND ORDER
This matter is before the Court following the February 7, 2017, evidentiary
hearing on Plaintiffs Hawaiiweb, Inc. and David Dieterle’s (collectively,
“Plaintiffs”) Motion for Default Judgment [10].
I.
BACKGROUND
On February 10, 2016, Plaintiffs filed a Complaint [1] alleging that
Defendant Experience Hawaii, Inc., d/b/a Experience Hawaii Group (“Experience
Hawaii”), breached a contract (Count I) and willfully infringed Plaintiff Dieterle’s
(“Dieterle”) copyrighted photograph (Count II). ([1]). On February 25, Plaintiffs
served the Complaint on Defendant. ([5]).
On April 5, 2016, Defendant and its counsel agreed that Defendant’s
Counsel should withdraw from its representation of Defendant. ([11] at 1). On
April 18, 2016, after Defendant failed to respond to the Complaint, Plaintiffs filed
their Motion for Clerk’s Default [8], and the Clerk entered default against
Defendant later that day.
On May 2, 2016, Plaintiffs filed their Motion for Default Judgment [10]. On
May 11, 2016, the Court granted Defendant’s Counsel’s Motion to Withdrawal
[11], and a copy of the order was sent to Defendant. In entering the order to
withdrawal, Defendant was admonished that because it is a corporation it had to be
represented in this action by counsel. Defendant was ordered to “provide the Court
. . . with the name, address, and telephone number of its new counsel,” and that
counsel “shall file a notice of appearance” by June 1, 2016. ([12] at 4). The Court
then extended Defendant’s deadline for responding to Plaintiff’s Motion for
Default Judgment to June 14, 2016. (Id.). Defendant has failed to respond to the
motion, and counsel has not appeared on its behalf. On January 27, 2017, the
Court considered [14] Plaintiffs’ Motion for Default Judgment, entered judgment
as to Defendant’s willful violation of Plaintiffs’ copyright, and awarded statutory
damages and permanently enjoined Defendant from further infringing use of
Plaintiffs’ copyright. As to Plaintiffs’ breach-of-contract claim, the Court
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scheduled an evidentiary hearing to determine whether Plaintiffs are entitled to
contractual damages and, if so, in what amount.
On February 7, 2017, the Court held an evidentiary hearing on Plaintiffs’
Motion for Default Judgment. During the hearing, Dieterle testified on the factual
basis for the damages alleged as well as the damages caused by Defendant to the
Hawaiiweb website and the Google Analytics account. Plaintiffs further presented
arguments as to why Plaintiffs’ contractual damages are not limited to the domain
name pledged for the nonrecourse Promissory Note.
II.
DISCUSSION
“[A] defaulted defendant is deemed to admit the plaintiff’s well-pleaded
allegations of fact.” Surtain v. Hamlin Terrace Found., 789 F.3d 1239, 1245 (11th
Cir. 2015) (quoting Cotton v. Mass. Mut. Life Ins. Co., 402 F.3d 1267, 1278 (11th
Cir. 2005) (internal quotation marks omitted)). If these well-pleaded allegations
state a plausible claim for relief, a motion for default judgment is permitted but not
required. See id. at1244-46; cf. id. at 1244-45 (“Because of our ‘strong policy of
determining cases on their merits,’ . . . default judgments are generally disfavored.”
(quoting In re Worldwide Web Sys., Inc., 328 F.3d 1291, 1295 (11th Cir. 2003))).
“The entry of a default judgment is committed to the discretion of the district
court,” Hamm v. DeKalb Cnty., 774 F.2d 1567, 1576 (11th Cir. 1985), cert.
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denied, 475 U.S. 1096 (1986)), and “the court, in its discretion, may require some
proof of the facts that must be established in order to determine liability,”
10A Charles Alan Wright, et al., Federal Practice and Procedure § 2688 (3d ed.
Apr. 2016 Update); see Wooten v. McDonald Transit Associates, Inc., 788 F.3d
490, 496-98 (5th Cir. 2015) (stating that, although plaintiff’s allegations were
sufficient under the pleading requirements, the district court was permitted to hold
a “prove-up hearing” to establish the truth of the allegations by evidence and thus
to determine whether default judgment should be granted).
The threshold issue remaining for Plaintiffs’ breach-of-contract claim is
whether Plaintiffs’ contractual damages are limited to the collateral pledged for the
nonrecourse Promissory Note. The Promissory Note was “secured by the Domain
Name being purchased pursuant to the Domain Name Purchase and Transfer
Agreement” (“Purchase Agreement”), “which shall be held in escrow by Escrow
Agent until this Note is paid in full.” (Promissory Note § 14 [1.2]). Because the
Promissory Note itself does not supply the meaning of the language “Domain
Name being purchased . . . [and] held in escrow,” the Court looks to the Purchase
Agreement and the Escrow Agreement for possible definitions. (See Purchase
Agreement § 3.a.iv. [1.2] (The Purchase Agreement, Promissory Note, and Escrow
Agreement were entered contemporaneously, and “the terms of the [Promissory
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Note] are incorporated [in the Purchase Agreement] for all intents and
purposes.”)). The Purchase Agreement defines the term “Domain Name” in two
ways: (1) the Internet domain name hawaiiweb.com (Purchase Agreement,
Background) and (2) the collection of the domain name, the look and feel of the
website, the trademarks and trade names, and any goodwill associated (Purchase
Agreement § 1). And the Escrow Agreement defines the “Domain Names” as “the
domain name(s) HawaiiWeb.com.” (Escrow Agreement § A [1.2]).
“Delaware adheres to the ‘objective’ theory of contracts, i.e. a contract’s
construction should be that which would be understood by an objective, reasonable
third party.” Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153, 1159 (Del. 2010)
(quoting Twin City Fire Ins. Co. v. Delaware Racing Ass’n, 840 A.2d 624, 628
(Del. 2003); see also Rhone–Poulenc Basic Chem. Co., 616 A.2d at 1195 (“[A]
contract is ambiguous only when the provisions in controversy are reasonably or
fairly susceptible of different interpretations or may have two or more different
meanings.”). If a contract is ambiguous, courts will apply the doctrine of contra
proferentem against the drafting party and interpret the contract in favor of the
non-drafting party. Id. The determination of ambiguity lies within the sole
province of the court. Id.
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It is clear from the Purchase Agreement that Defendant received more than
just the domain name hawaiiweb.com.1 Defendant’s purchase, stated in the
Purchase Agreement, includes, in addition to the domain name, the look and feel of
the website associated with the domain name as well as any goodwill. The
website’s look and feel is how the site looks to a user and how it feels when the
user is interacting with it, and is defined by “the computer code on which Dieterle
built the website.” (See id. ¶ 34). The business goodwill represents an intangible
asset that is associated with Hawaiiweb’s tourism business, and the value of which
was tracked by Hawaiiweb’s Google Analytics account based on “the number of
unique sessions by visitors to www.hawaiiweb.com.” (See id. ¶ 23). Both the
computer code and the Google Analytics account were transferred to Defendant.
The most reasonable interpretation of the term “Domain Name” as used in
the Promissory Note, therefore, should include all assets listed in the Purchase
Agreement, notwithstanding that the domain name hawaiiweb.com was the sole
asset held in escrow until the sale price is paid in full. This interpretation comports
with the common conditional sales agreement where a buyer takes possession of an
item, but the title and right of repossession remains with the seller until the buyer
1
Plaintiffs’ Complaint alleges that Defendant purchased “Hawaiiweb” in
order to “integrate [Hawaiiweb’s] business model into Experience Hawaii.” ([1] ¶
19).
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pays the full purchase price. Here, instead of the legal title being held in escrow, it
was the domain name hawaiiweb.com that was held in escrow. Although Plaintiffs
have regained possession of the domain name, Defendant has failed to return the
computer code of the website and the Google Analytics account associated with
the domain name. ([1] ¶¶ 34-35). Because Plaintiffs only had a partial recovery,
the Court concludes that Plaintiffs are entitled to damages in order to place
Plaintiffs in the same position as they expected to be in.
The minimum sale price under the Purchase Agreement is $90,000.2
Plaintiffs have received $40,000 as earnest money. The domain name, which is
now in Plaintiffs’ possession, without the computer code amounts to nominal
value. The Court determines that the contractual damages in the amount of
$50,000 is reasonable, and is awarded.
III.
CONCLUSION
For the foregoing reasons,
IT IS HEREBY ORDERED that Plaintiffs be awarded contractual
damages for Defendant’s breach of contract in the amount of $50,000.
2
Plaintiffs alleged that Defendant is liable for unpaid principal in the amounts
of $63,750.00, plus interest. Plaintiffs did not provide sufficient support
evidencing how these sums were calculated or why that amount is reasonable.
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SO ORDERED this 15th day of February, 2017.
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