Simon Property Group, L.P. v. CASDNS, Inc et al

Filing 75

MEMORANDUM OPINION AND ORDER by Senior Judge Charles R. Simpson, III on 3/1/2018 - Hearing set for 3/22/2018 11:00 PM in Louisville Courtroom before Senior Judge Charles R. Simpson III.cc: Counsel, Michael E. Wheatley, Charles R. Merrill (DAK)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
PLAINTIFF

SIMON PROPERTY GROUP, L.P.
v.

CIVIL ACTION NO. 3:14CV-566-CRS

CASDNS, INC., et al.

DEFENDANTS

MEMORANDUM OPINION AND ORDER

This matter is before the court on motion of defendants CASDNS, Inc. (“CASDNS”),
Cas-Com Internet Services, Inc. d/b/a Bestregistrar.com (“Bestregistrar”), and Jeffrey S. Smith
(“Smith”) for leave to file amended counterclaims, crossclaims and third-party complaint (DN
69).
This action was filed by Simon Property Group, L.P. (“SPG”) against CASDNS,
Bestregistrar, Smith, COREHub S.R.L.U. a/k/a The Internet Council of Registrars (“CORE”),
and John Does 1-10 on August 12, 2014.
Briefly stated, SPG is a business entity that owns a large number of internet domain
names. SPG is in the present dispute with CASDNS, Bestregister, Smith, and CORE over sums
purportedly owed for domain name registration services and over alleged actions taken in 2014
to prevent or impede SPG’s transfer of its domain names to Corporation Service Company, Inc.
(“CSC”).
This lawsuit was filed in August, 2014. In its response brief filed August 4, 2017, SPG
states that “no discovery has been exchanged between the parties in nearly three years, and not a

single deposition has been taken in this matter.”

DN 70, PageID #732.

SPG argues in

opposition to defendants’ motion for leave to amend that the defendants have been

“dilatory”

and seek to “send this litigation in an entirely different direction without adequate excuse.” DN
70, PageID #733.
On February 2, 2015, the parties entered into an agreed amended scheduling order which
established a deadline for amendment of pleadings of June 30, 2015, a discovery cutoff of
September 30, 2015, expert discovery cutoff of December 18, 2015, and a dispositive motion
deadline of December 31, 2015. DN 39, PageID #428-429. A letter was filed in the record on
February 2, 2015 indicating that CORE, located in Barcelona, Spain, had not been served, as the
documentation for service was deficient and was returned. There is no indication that CORE has
ever been served and there is no counsel of record for CORE. Two months later on April 2,
2015, Smith noticed the court of his filing of a Chapter 7 petition in bankruptcy. DN 41, PageID
#435. The court stayed the action as to Smith, but indicated that the case would proceed as to the
other defendants. DN 46, PageID #452. The court granted SPG’s motion to dismiss the
defendants’ counterclaim for breach of contract (DNs 44, 45), and no action was taken in the
case thereafter for a year.
On June 3, 2016, the court ordered the parties to file a status report within twenty-one
days. DN 47. Twenty-one days later, counsel for CASDNS1 and CAS-COM2 filed a motion to
withdraw as counsel. DN 48, PageID #453. SPG filed a status report on that same date
indicating that it had recently contacted both the bankruptcy trustee3 and counsel for Smith in the
bankruptcy proceeding. The bankruptcy trustee was, at that time, uncertain whether the estate
1

CASDNS has been administratively dissolved and has been inactive since 2002.
And also counsel for Smith, prior to his filing for bankruptcy.
3
Of note, Neil Charles Bordy of Seiller Waterman was employed to represent Trustee Michael E. Wheatley in the
Smith bankruptcy. Seiller Waterman now represents defendants Smith, CASDNS, and CAS-CAN in this action,
entering appearances in January, 2017.
2

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would pursue Smith’s remaining unjust enrichment counterclaim in this action, and bankruptcy
counsel indicated that she did not represent Smith, CASDNS or CAS-COM in the civil action.
SPG indicated that, based upon information it had received, it believed that CASDNS and CASCOM were no longer going concerns.
In September, 2016, the United States Magistrate Judge held a status conference, and
then permitted counsel for Smith, CASDNS, and CAS-COM to withdraw, affording the
corporate defendants thirty days in which to obtain new counsel, and staying the entire matter
until January 6, 2017, pending a further status report. DN 52. Counsel did not appear on behalf
of the corporations. The magistrate judge extended the deadline to December 20, 2016, noting
the possibility of sanctions including striking pleadings or rendering of default judgment against
the disobedient party. DN 56, PageID #480. Another thirty-day extension was granted at the
request of the defendants. DN 58.
SPG again filed the requested status report, noting that the case has “languished
somewhat because Mr. Smith owned Defendants CASDNS, Inc. and CAS-COM Internet
Services, Inc….and counsel for the Corporate Defendants ultimately withdrew from representing
them in this case.” DN 59, PageID #486. SPG also indicated, and this court has confirmed, that
Smith’s bankruptcy petition was granted and the case was closed on October 31, 2016, the
trustee having determined that there was no property available for distribution from the estate.
Chapter 7 Trustee Report of No Distribution, dated October 28, 2016.
On January 19 and 20, 2017, counsel entered appearances on behalf of Smith, CASDNS,
and CAS-COM. The magistrate judge then entered an order requiring the parties to file an
amended agreed scheduling order no later than February 22, 2017. DN 62. The parties did so,
setting new deadlines for motions for amendment of pleadings, pretrial and expert discovery, and

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dispositive and Daubert motions. DN 63, PageID #503-504. The present motion for leave to file
amended counterclaims, crossclaims, and third-party complaint (DN 69) was thus timely filed.4
The magistrate judge had scheduled a settlement conference in this matter, but remanded it at the
request of SPG, in light of the filing of the motion for leave to amend. DN 71, PageID #745.
SPG has opposed the motion to amend on the ground that it is filed much too late in the
proceedings and would change the scope of the action significantly. DN 70, PageID # 730. It
also urges that the proposed amendments should be denied as futile. Id.
The court is unsure what to make of the “lateness” argument. On the one hand, as SPG
readily admits, no discovery has been taken in this case at all for three years. SPG obtained its
preliminary injunction early on in the case, by agreement, and apparently has been in no hurry to
bring the matter to resolution. One party remains unserved even as of this date. The defendants
have avoided participation in discovery, Smith took personal bankruptcy, and his companies
appear to no longer be operating. Yet on the other hand, the parties seemed inclined to have a
“do over” when they reopened discovery and reset all of the significant deadlines in the case,
including the deadline to move for amendment of pleadings.
The proposed amended pleading would add three new third-party defendants, and include
six entirely new causes of action. Conspicuously, the motion for leave to amend contains
nothing more that the cryptic statement that “additional and supplemental conduct has been
undertaken since the filing of their original Counterclaim, and additional parties have engaged in
such additional and supplemental conduct, all involving the same subject matter giving rise to
this dispute. Accordingly, Defendants/Claimants seek to bring all related and justiciable claims
and all parties properly before the Court.” DN 69, PageID #518. The reply brief (DN 74)

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An order of the magistrate judge granted the defendants until July 14, 2017, two weeks beyond the agreed date, in
which to file their motion.
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provides a little more substantive detail concerning the identity of the parties to be joined and the
“conduct” referenced in the motion, however there remain many vagaries which render it
impossible for the court to evaluate whether the amendments should be permitted.
One issue now of concern relates to Smith’s bankruptcy. The court has looked at the
schedules filed by Smith and finds that he failed to list any contingent and unliquidated claim as
an asset of personal property on Schedule B. Yet he listed and obtained discharge of SPG’s
“domain name legal dispute” valued at $500,000 on Schedule F. Thus any claims by Smith, or
companies such as CASDNS and CAS-COM which apparently are solely owned by Smith,
would arguably be undisclosed property of the bankruptcy estate. The court has carefully
reviewed the proposed claims. It appears that these matters arose prior to Smith’s discharge in
bankruptcy.5 Additionally, Smith indicated on Schedule B that he had no patents, copyrights,
other intellectual property, or licenses, franchises, or other general intangibles. Smith now seeks
to recover for the alleged conversion of negative domain names he created and claims to own,
having a purported intrinsic value in excess of $175,000. Again, it would appear that such
property was omitted from Smith’s bankruptcy schedules and recovery therefore would belong to
the estate.
For these reasons, the court will set this matter for a hearing, and notice the bankruptcy
trustee and the U.S. Trustee in order to ascertain whether there are any claims which may be
pursued independently by Smith and/or his companies, or whether the bankruptcy should be
reopened and these claims and property listed on amended schedules.

5

Some of the claims are deficient for other reasons, such as the counterclaim for breach of contract which would not
be permitted to be refiled in light of the court’s prior ruling, and the defamation claim which is so devoid of requisite
detail such that it would not withstand a Fed.R.Civ.P. 12(b)(6) motion.
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Accordingly, IT IS HEREBY ORDERED that this matter scheduled for a HEARING on
March 22, 2018 at 11:00 a.m. prevailing local time to discuss this pending motion.

March 1, 2018

C al R Smpo I , ei J d e
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IT IS SO ORDERED.

cc:

Counsel of Record
Michael E. Wheatley, Bankruptcy Trustee
P.O. Box 1072
Prospect, KY 40059
Charles R. Merrill
U.S. Trustee
601 West Broadway #512
Louisville, KY 40202

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