Unites States v. Pokerstars, et al

Filing 221

MEMORANDUM OF LAW in Support re: 220 MOTION to Stay In Rem Claims As To Domain Defendants.. Document filed by Commonwealth of Kentucky, ex. rel. J. Michael Brown, Secretary, Justice and Public Safety Cabinet. (Attachments: # 1 Exhibit Second Amended Complaint, # 2 Exhibit Order Of Seizure Of Domain Names, # 3 Exhibit Findings Of Fact & Conclusions Of Law, # 4 Exhibit Service Letter to GoDaddy, # 5 Exhibit Service Letter to Network Solutions, # 6 Exhibit Service Letter to Nom-IQ, # 7 Exhibit Service Letter to Register.com, # 8 Exhibit Notice of Filing Registrar Certificate, # 9 Exhibit Opinion & Order, # 10 Exhibit iMEGA I Opinion, # 11 Exhibit iMEGA II Opinion, # 12 Exhibit Order Of Forfeiture Of Domain Defendants)(Lycan, David)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
UNITED STATES OF AMERICA,
Plaintiff,
v.
POKERSTARS, ET AL.,
Defendants,
ALL RIGHTS, TITLE & INTEREST
IN THE ASSETS OF
POKERSTARS, ETC.,
Defendants-In-Rem.

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Civil Action No. 1:11-cv-02564-LBS

MEMORANDUM OF LAW IN SUPPORT OF
MOTION TO STAY IN REM CLAIMS AS TO DOMAIN DEFENDANTS

TABLE OF CONTENTS
I.

INTRODUCTION _______________________________________________________ 1

II. STATEMENT OF THE CASE ______________________________________________ 1
III. ARGUMENT ____________________________________________________________ 5
A. PLAINTIFF CANNOT MEET ITS BURDEN TO ESTABLISH THIS COURT’S
JURISDICTION __________________________________________________________ 5
B. THE COMMONWEALTH HAS PRIOR EXCLUSIVE JURISDICTION OVER
THE DOMAIN NAMES ___________________________________________________ 6
1. When the State Court Asserts Jurisdiction Over The Res Before the Federal
Court, The Federal Court Cannot Exercise Jurisdiction ________________________ 6
2. It Is Not Within The Discretion Of This Court To Exercise Jurisdiction Over
The Res If The Franklin Circuit Court Previously Asserted Jurisdiction _________ 8
3. The Franklin Circuit Court’s Jurisdiction Attached When The Order of Seizure
Was Issued _____________________________________________________________ 9
4. It Is Improper For This Court To Examine The Sufficiency Of The Franklin
Circuit Court’s Control Of The Res ________________________________________ 11
5. The U.S.’s Attempted Seizure Does Not Affect Kentucky’s Constructive
Possession _____________________________________________________________ 12
IV.

CONCLUSION _______________________________________________________ 13

i

TABLE OF AUTHORITIES
Cases
Chesley v. Union Carbide Corp., 927 F.2d 60, 66 (2nd Cir. 1991). ............................................. 9
Com. ex rel. Brown v. Interactive Media Entertainment and Gaming Ass'n, Inc., 306 S.W.3d
32 (Ky. 2010) .............................................................................................................................. 3
Commonwealth of Kentucky, ex rel. J. Michael Brown, Secretary Justice and Public
Safety Cabinet v. 141 Internet Domain Names .................................................................... 1
Commonwealth of Kentucky, ex rel. J. Michael Brown, Secretary Justice and Public Safety
Cabinet v. Pocket Kings, Ltd, et al.,............................................................................................ 3
Covell v. Heyman, 111 U.S. 176, 184, 4 S. Ct. 355 (1884) ......................................................... 11
Interactive Media Entertainment and Gaming Ass'n v. Wingate, 320 S.W.3d 692 (Ky. 2010) . 3
Jordan v. Verizon Corp., 391 Fed.Appx. 10 (2nd Cir. 2010) ...................................................... 5
Kline v. Burke Const. Co., 260 U.S. 226, 43 S.Ct. 79 (1922) ........................................................ 7
Manway Const. Co., Inc. v. Housing Authority of City of Hartford, 711 F.2d 501, 504 (2nd
Cir. 1983).................................................................................................................................... 6
McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785 (1936). ..... 6
MLC Fishing, Inc. v. Velez, 667 F.3d 140 (2nd Cir. 2011) .......................................................... 5
Moran v. Sturges, 154 U.S. 256, 283-284 (1894). ....................................................................... 10
One 1985 Cadillac Seville ......................................................................................................... 9, 13
One 1985 Cadillac Seville, 866 F.2d at 1145-1146 ..................................................................... 12
One Cadillac Seville ........................................................................................................................ 9
Palmer v. Texas, 212 U.S. 118, 129-130 (1909) ............................................................................ 9
Penn General .............................................................................................................................. 8, 9
Penn General Casualty Co. v. Commonwealth of Pennsylvania ex rel. Schnader, 294 U.S. 189,
55 S.Ct. 386 (1935)..................................................................................................................... 8
Penn General Casualty Co. v. Commonwealth of Pennsylvania ex rel. Schnader, 294 U.S. 189,
55 S.Ct. 386 (1935),.................................................................................................................... 8
Penn General, 294 U.S. at 196 ..................................................................................................... 11
U.S. v. $2,542 In U.S. Currency, 754 F.Supp. 378 (D.Vt. 1990) .............................................. 11
U.S. v. $490,920 in U.S. Currency, 911 F.Supp. 720 (S.D.N.Y. 1996) ..................................... 12
U.S. v. Bank of New York & Trust Co., 296 U.S. 463, 56 S. Ct. 343 (1936) ................................ 7
U.S. v. Bank of New York & Trust Co., supra, 296 U.S. at 479. ................................................ 12

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U.S. v. One 1985 Cadillac Seville, 866 F.2d 1142, 1145 (9th Cir. 1989) ..................................... 8
United Food & Commercial Workers Union, Local 919, AFL-CIO v. CenterMark Properties
Meriden, 30 F.3d 298 (2nd Cir. 19940 ..................................................................................... 6
United States of America v. Pokerstars, et al., All rights, Title & Interest in the Assets of
Pokerstars, etc ............................................................................................................................. 4
v. 13
York Hunter Const., Inc. v. Avalon Properties, Inc., 104 F.Supp.2d 211 (S.D.N.Y. 2000) ...... 12

iii

Comes the Commonwealth of Kentucky, ex rel., J. Michael Brown, Secretary
Justice and Public Safety Cabinet (the “Commonwealth”), by and through counsel, and
for its Memorandum in Support of its Motion To Stay In Rem Claims As To Domain
Defendants, states as follows:
I.

INTRODUCTION

By virtue of the Franklin Circuit Court’s prior assertion of jurisdiction, its prior
forfeiture action and its prior seizure of and interest in the domain names, this Court is
precluded from exercising subject matter jurisdiction over the internet domain names
pokerstars.com, fulltiltpoker.com, absolutepoker.com and ultimatebet.com. Pursuant to
the venerable doctrine of prior exclusive jurisdiction, this Court has no discretion but to
decline to exercise jurisdiction and stay the in rem claims against those domain names in
this action, and remand the domains names to the Franklin Circuit Court for
determination and disposition.
II.

STATEMENT OF THE CASE

The Commonwealth of Kentucky, ex rel. J. Michael Brown, Secretary Justice and
Public Safety Cabinet, brought an in rem civil forfeiture action in the Franklin Circuit
Court on or about August 28, 2008, styled Commonwealth of Kentucky, ex rel. J. Michael
Brown, Secretary Justice and Public Safety Cabinet v. 141 Internet Domain Names, 08-CI-1409
(hereinafter “Kentucky Forfeiture Action”), against certain domain names used in

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illegal gambling in Kentucky in violation of Kentucky law.1 Included among those
domain names were four domains subsequently “seized” by the United States in this
action: pokerstars.com; fulltiltpoker.com; ultimatebet.com; and absolutepoker.com
(collectively, “the Kentucky Domains”).

On the filing of its in rem action, the

Commonwealth issued and served process in the form of an Order of Seizure issued by
the Franklin Circuit Court. See Order of Seizure Of Domain Names dated September
18, 2008, attached as Exhibit 2. The Commonwealth served that Order on the Registrars
of the domains on September 19, 2008 by letter served through a variety of means
approved by the Court in its Order. See Letters to Registrars, attached as Exhibits 4-7.
In response to the Order of Seizure, multiple registrars locked domains from transfer
and took other actions, including delivering physical Registrar Certificates to the
Commonwealth explicitly for the purpose of placing domains under the control of the
Court pending the outcome of the forfeiture proceeding. For example, on October 6,
2008 the Commonwealth deposited the Registrar Certificates from GoDaddy.com
representing its domain names – including ultimatebet.com – by Notice of Filing to the
Franklin Circuit Court, where it remains today.2
The Franklin Circuit Court has clearly asserted its jurisdiction over the domain
names, and Kentucky just as clearly has constructive possession of the Kentucky
Domains. See Findings Of Fact And Conclusions Of Law, ¶¶ 24, 35; Opinion and Order
dated October 16, 2008, attached as Exhibit 9, pp. 12, 28. In furtherance of that Court’s
1

Copies of the Second Amended Complaint, the Order of Seizure and the Court’s Findings Of Fact And Conclusions
Of Law in Kentucky in rem action are attached hereto as Exhibits 1, 2 and 3.
2
The Notice of Filing and the attached Registrar Certificate are attached hereto as Exhibit 8.

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assertion of jurisdiction, it and the Commonwealth have pursued, inter alia, the
following actions:
• Commenced in 2008 and continues to maintain the Kentucky Forfeiture Action;
• Commenced in 2010 and continues to maintain Kentucky In Personam Action,
which it amended as recently as May 30, 2012 as it continues to identify
additional culpable parties; 3
• Defended multiple original actions in the Kentucky Court of Appeals seeking
writs of prohibition, including two appeals of those actions to the Kentucky
Supreme Court (See Com. ex rel. Brown v. Interactive Media Entertainment and
Gaming Ass'n, Inc., 306 S.W.3d 32 (Ky. 2010) (“iMEGA I”) and Interactive Media
Entertainment and Gaming Ass'n v. Wingate, 320 S.W.3d 692 (Ky. 2010) (“iMEGA
II”), attached as Exhibits 10 and 11;
• Has perfected its seizure with a Final Order of Forfeiture as to the domains it
seized, and has defended that Order against collateral attack. See Order Of
Forfeiture Of Domain Defendants, March 8, 2012, attached as Exhibit 12;
• Continues to defend two interlocutory appeals of the denial of intervention for
the sham illegal gambling “trade associations”; and
• Continues to defended a separate direct appeal of the Final Order Of Forfeiture
by those sham associations.
That action has been litigated for almost four years in the courts of the
Commonwealth, and thus far has been the subject of two opinions by the Kentucky
Supreme Court on issues including standing - the anonymous and absconding domain
owners declining to appear in favor of sham internet gambling “trade associations”. As
of this writing, the Franklin Circuit Court has issued final orders of forfeiture as to
approximately 135 of the 141 domain names originally seized. The Franklin Circuit

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The Commonwealth also maintains an in personam civil action against related defendants in the Franklin Circuit
Court styled Commonwealth of Kentucky, ex rel. J. Michael Brown, Secretary Justice and Public Safety Cabinet v.
Pocket Kings, Ltd, et al., 10-CI-0505 (hereafter “Kentucky In Personam Action”).

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Court, by virtue of its prior seizure of the Kentucky Domains service of the Order of
Seizure, has prior exclusive jurisdiction over the Kentucky Domains.
Two years and nine months into the Kentucky court’s continuing exercise of
jurisdiction over the res, the Kentucky Domains were nonetheless “re-seized” by the
United States on or about April 15, 2011 pursuant to an Arrest Warrant In Rem issued in
connection with this judicial civil forfeiture proceeding, styled United States of America v.
Pokerstars, et al., All rights, Title & Interest in the Assets of Pokerstars, etc., United States
District Court, Southern District of New York, Civil Action No. 1:11-cv-02564-LBS. This
is notwithstanding the fact that Kentucky’s Order of Seizure remains in effect, and
Kentucky has continued to defend its prior seizure multiple trips through three levels of
its courts, as well defend it in U.S. District Court in both the District of Maryland and
this Court.
The Commonwealth in its Answer filed in this action specifically denied “that
the domain names and the proceeds thereof are subject to forfeiture pursuant to federal
statutes by reason of the Commonwealth’s prior assertion of jurisdiction, its prior
forfeiture action, [and] its prior seizure of and interest in the property….”

The

Commonwealth has, out of respect for this Court, refrained from asking the Court for a
final order of forfeiture as to the four Kentucky Domains that are the subject of this
motion, until such time as this Court has addressed the issue. The Franklin Circuit
Court’s deadline for owners to appear and make a claim, however, has expired and the
Commonwealth anticipates the court will forfeit the domains upon motion.

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The Franklin Circuit Court clearly exercised jurisdiction over the Kentucky
Domains in its 2008 in rem action, and clearly continues to this very day to exercise that
in rem jurisdiction. The Commonwealth has no intention of abandoning its action, and
has now forfeited all but a handful of the domains and is proceeding to disposition of
same. This Court must decline to exercise its jurisdiction and remand the domain
names to the Franklin Circuit Court.
III.

ARGUMENT

A. PLAINTIFF CANNOT MEET ITS BURDEN TO ESTABLISH THIS COURT’S
JURISDICTION
The burden is on the United States to show that this Court may properly exercise
jurisdiction over the Kentucky Domains. “The burden of demonstrating subject-matter
jurisdiction lies with the party asserting it....” MLC Fishing, Inc. v. Velez, 667 F.3d 140
(2nd Cir. 2011). A plaintiff asserting subject matter jurisdiction has the burden of
proving its existence by a preponderance of the evidence. Jordan v. Verizon Corp., 391
Fed.Appx. 10 (2nd Cir. 2010).
Rule G of the Supplemental Rules Of Federal Procedure For Admiralty and
Maritime Claims does not, as has been suggested by Plaintiff, relieve Plaintiff of its
burden by requiring that determinations of standing be made before consideration of
other motions. Subject matter jurisdiction are to be raised at any time, even on appeal,
and by the Court on its own motion. “It is common ground that in our federal system of
limited jurisdiction any party or the court sua sponte, at any stage of the proceedings,
may raise the question of whether the court has subject matter jurisdiction; and, if it

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does not, dismissal is mandatory.” Manway Const. Co., Inc. v. Housing Authority of City of
Hartford, 711 F.2d 501, 504 (2nd Cir. 1983). “[T]he party asserting jurisdiction bears the
burden of proving that the case is properly in federal court and that party may not `be
relieved of [its] burden by any formal procedure.’” United Food & Commercial Workers Union,
Local 919, AFL-CIO v. CenterMark Properties Meriden, 30 F.3d 298 (2nd Cir.
19940(emphasis added), citing McNutt v. General Motors Acceptance Corp., 298 U.S. 178,
189, 56 S.Ct. 780, 785 (1936).
This Court must consider whether Plaintiff has met its burden of proving this
Court’s subject matter jurisdiction. If it finds, as the Commonwealth believes it must,
that the Franklin Circuit Court had previously asserted jurisdiction over the Kentucky
Domains, it must stay this action as to those domains until the Franklin Circuit Court
action is resolved.
B. THE COMMONWEALTH HAS PRIOR EXCLUSIVE JURISDICTION OVER THE
DOMAIN NAMES
1. When the State Court Asserts Jurisdiction Over The Res Before the Federal Court, The
Federal Court Cannot Exercise Jurisdiction
The Commonwealth has prior exclusive jurisdiction over the four domain names,
and this Court has no discretion but to dismiss the action and remit the domains to the
account of the Commonwealth.
[A]n abundance of federal decisional law, including an impressive array
of Supreme Court decisions, makes it clear that in all cases involving a
specific piece of property, real or personal (including various forms of
intangible property), the federal court's jurisdiction is qualified by the
ancient and oft-repeated rule—often called the doctrine of prior exclusive
jurisdiction—that when a state or federal court of competent jurisdiction
has obtained possession, custody, or control of particular property, that

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authority and power over the property may not be disturbed by any other
court.
13F Charles Alan Wright, Arthur R. Miller, et al., Federal Practice and Procedure § 3631 (3d
ed.) (Jul 15, 2011). “Although the prior-exclusive-jurisdiction rule is based at least in
part on considerations of judicial comity, it very often is referred to as a jurisdictional
limitation…” Id.
That the United States subsequently seized the domains and for a brief time
asserted control does not change the fact that the Franklin Circuit Court first asserted
jurisdiction over the domains, nor does the fact that it is the United States itself that did
the seizing. “The United States, as a plaintiff, must follow the general rule that the
court first acquiring jurisdiction of a res acquires exclusive jurisdiction to control of the
res.” U.S. v. Bank of New York & Trust Co., 296 U.S. 463, 56 S. Ct. 343 (1936).
The United States Supreme Court has reiterated this rule a multitude of times
over the span of a hundred years.
But if a state court is entitled to possession of the property, it is well
established by the precedents that the federal court must decline to assert
its jurisdiction, and federal proceedings may be enjoined to protect the
state court's jurisdiction.
13F Charles Alan Wright, Arthur R. Miller, et al., Federal Practice and Procedure § 3631 (3d
ed.) (Jul 15, 2011). See, e.g., Kline v. Burke Const. Co., 260 U.S. 226, 43 S.Ct. 79
(1922)(“[W]here the jurisdiction of the state court has first attached, the federal court is
precluded from exercising its jurisdiction over the same res to defeat or impair the state
court's jurisdiction.”)

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Perhaps the most-cited and best-articulated iteration of the prior exclusive
jurisdiction rule is found in Penn General Casualty Co. v. Commonwealth of Pennsylvania ex
rel. Schnader, 294 U.S. 189, 55 S.Ct. 386 (1935), wherein the Court made it clear that the
prior exclusive jurisdiction attaches upon filing of the action in the state court:
[T]hat one whose jurisdiction and process are first invoked by the filing of
the bill is treated as in constructive possession of the property and as
authorized to proceed with the cause…. Jurisdiction thus attaches upon
the filing of the bill of complaint in court, at least where process
subsequently issues in due course….
294 U.S. at 196 (citations omitted).

The Kentucky Forfeiture Action was filed on

September 18, 2008, and process issued the very next day. It could not be more clear
that the Franklin Circuit Court has prior exclusive jurisdiction over the Kentucky
Domains.
2. It Is Not Within The Discretion Of This Court To Exercise Jurisdiction Over The Res If
The Franklin Circuit Court Previously Asserted Jurisdiction
In the most-cited modern opinion applying the prior exclusive jurisdiction rule,
the Ninth Circuit on its own motion raised the prior exclusive jurisdiction issue to remit a
U.S. DEA seizure of narcotics funds already seized in Santa Cruz County Superior
Court. It made very clear that Penn General held that the rule against concurrent in rem
proceedings is not discretionary, and district court must yield to a prior state
proceeding. U.S. v. One 1985 Cadillac Seville, 866 F.2d 1142, 1145 (9th Cir. 1989)(“The
language of Penn General indicates that a federal court must yield to a prior state

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proceeding”).4 The Court declined to exercise its jurisdiction over $434,097 in cash,
despite the fact that the prior state forfeiture proceeding was inactive and the state
authority did not seek return of the res from the federal court. In Fact, the Court stated
that it was irrelevant whether the California authority may even have approved the
DEA seizure.
In regard to the Kentucky Domains, the Kentucky Forfeiture Action remains very
active, and the Commonwealth most certainly intends that the forfeiture of the res be
adjudicated in the Franklin Circuit Court. One 1985 Cadillac Seville and Penn General
mandate that this Court respect the Franklin Circuit Court’s right to do exactly that.
3. The Franklin Circuit Court’s Jurisdiction Attached When The Order of Seizure Was
Issued
The United States Supreme Court in Palmer v. Texas clarified that the rule has long
been that jurisdiction is acquired not by possession, but by the assertion of jurisdiction
through issuance of process:
We think the law of this court is well established to be that jurisdiction
over the property was acquired by the state courts when the receiver was
appointed, the judicial process served, and the receiver duly qualified,
although the state receiver had not taken actual possession of the
property. … If this rule is not applied, a court of competent jurisdiction,
which, by the law of its own procedure, has acquired jurisdiction of
property, may find itself, as in this case, after final judgment, maintaining
its right over the property, at the conclusion of the litigation deprived of
the subject-matter of the suit.
Palmer v. Texas, 212 U.S. 118, 129-130 (1909).

4

One Cadillac Seville is followed by the Second Circuit Court of Appeals. See Chesley v. Union Carbide Corp., 927
F.2d 60, 66 (2nd Cir. 1991).

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The concepts of “control” and “possession” in the prior-exclusive-jurisdiction
context do not mean physical possession, but rather constructive possession by
exercising jurisdiction.
If a court of competent jurisdiction, Federal or state, has taken possession
of property, or by its procedure has obtained jurisdiction over the same, such
property is withdrawn from the jurisdiction of the courts of the other
authority as effectually as if the property had been entirely removed to the
territory of another sovereignty.
13F Charles Alan Wright, Arthur R. Miller, et al., Federal Practice and Procedure § 3631 (3d
ed.) (Jul 15, 2011)(emphasis added), citing Palmer, supra. The Supreme Court has for
over one hundred years held that physical possession of the property is not
determinative - it is which court first exercises jurisdiction over the property: “As
between two courts of concurrent and co-ordinate jurisdiction, having like jurisdiction
over the subject matter in controversy, the court which first obtains jurisdiction is
entitled to retain it without interference, and cannot be deprived of this right to do so
because it may not have first obtained physical possession of the property in dispute.”
Moran v. Sturges, 154 U.S. 256, 283-284 (1894).
If this Court continues to exercise jurisdiction over the Kentucky Domains, the
scenario feared by the Court in Palmer will be realized. The Franklin Circuit Court has
litigated this in rem forfeiture action for nearly four years, and would have the property
snatched away by this Court on the eve of its final forfeiture. The overwhelming
weight of precedent is that Kentucky cannot be thus deprived of its prior possession of
the property.

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4. It Is Improper For This Court To Examine The Sufficiency Of The Franklin Circuit
Court’s Control Of The Res
It is not whether the Franklin Circuit Court ultimately prevails on its assertion of
jurisdiction that compels the federal court to decline to exercise jurisdiction, but the
mere fact that the Franklin Circuit Court has asserted its jurisdiction. The Penn General
Court explained that the rationale behind the rule that jurisdiction attaches on the filing
of the complaint, where process subsequently issues, is precisely to avoid such
squabbles between courts with concurrent jurisdiction. Actual possession and priority
of service of process are not matters for the later court to decide.
Jurisdiction thus attaches upon the filing of the bill of complaint in court,
at least where process subsequently issues in due course. [citations
omitted] The confusion and uncertainty are thus avoided which might otherwise
result from the attempt to resolve the troublesome question of what constitutes
actual possession and to determine priority of service of process in the two suits.
Penn General, 294 U.S. at 196 (emphasis added). See also Covell v. Heyman, 111 U.S. 176,
184, 4 S. Ct. 355 (1884)(“It is the bare fact of that possession under claim and color of
that authority, without respect to the ultimate right, to be asserted otherwise and elsewhere, …
that furnishes to the officer complete immunity from the process of every other
jurisdiction that attempts to dispossess him.”)(emphasis added).
The Supreme Court made it clear, therefore, that it is not for this court to
examine the nature and sufficiency of Kentucky’s seizure. Kentucky has exercised its
jurisdiction and issued process on the res.

Whether the state court had in rem

jurisdiction over the res is a matter of state law. U.S. v. $2,542 In U.S. Currency, 754
F.Supp. 378 (D.Vt. 1990). Even setting aside the further fact that Kentucky has litigated

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against the res aggressively for nearly four years, it is clear not only that Kentucky has
exercised jurisdiction and has constructive possession of the Kentucky Domains, but
that it is improper for this Court to examine the sufficiency of its efforts.

5. The U.S.’s Attempted Seizure Does Not Affect Kentucky’s Constructive Possession
The U.S.’s attempt to seize possession of the res does not divest Kentucky of its
exclusive jurisdiction:
In addition we reject, as did the Seventh Circuit, the argument that the fact of
federal possession of the res takes jurisdiction from the state court and
bestows it upon the district court. Although we are familiar with the maxim,
“possession is nine-tenths of the law,” we prefer to apply the remaining onetenth and decline to “substitute a rule of force for the principle of mutual
respect embodied in the prior exclusive jurisdiction doctrine.”
One 1985 Cadillac Seville, 866 F.2d at 1145-1146 (citations omitted). The fact that the
Plaintiff is the United States does not justify a departure from the rule. U.S. v. Bank of
New York & Trust Co., supra, 296 U.S. at 479.
The prior exclusive jurisdiction rule, and the decisions of the United States
Supreme Court and the Ninth Circuit, has been consistently applied in the Southern
District of New York. See, e.g., York Hunter Const., Inc. v. Avalon Properties, Inc., 104
F.Supp.2d 211 (S.D.N.Y. 2000). In fact, this very Court has applied the doctrine even
where the state agency requested the federal forfeiture.

In U.S. v. $490,920 in U.S.

Currency, 911 F.Supp. 720 (S.D.N.Y. 1996), NYPD seized $240,920 and $250,000 in cash
of illegal gambling proceeds from two safe deposit boxes. At the request of the D.A.'s
Office, the FBI commenced administrative forfeiture proceedings against the Funds.
This Court nonetheless held that the funds were within the prior exclusive jurisdiction

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of the state court, citing with approval One 1985 Cadillac Seville: “Absent `some
affirmative act of abandonment’ of the property by the state court, the state court
retains exclusive jurisdiction over the res…” U.S. v. $490,920, 911 F.Supp. at 727.
In summary, the Franklin Circuit Court first asserted jurisdiction and obtained
by service of process the constructive possession of the Kentucky Domains. The fact
that the United States seized the same property by assertion of this Court’s jurisdiction
does not overcome that, and this Court has no discretion but to transfer the Kentucky
Domains to the Franklin Circuit Court.

IV.

CONCLUSION

There is no question that the Kentucky court first asserted its jurisdiction and
served process on the in rem defendant Kentucky Domains. This Court, whether by
motion of the Commonwealth or its own, must decline to exercise its jurisdiction. It has
no discretion but to stay this proceeding (at to the Kentucky Domains) until such time
as the Kentucky Forfeiture Action is resolved. It must therefore order the United States
Attorney to deliver the Kentucky Domains to the possession and control of the
Commonwealth, and for VeriSign to comply with the Franklin Circuit Court’s Order of
Seizure of Domain Names notwithstanding the United States’ Arrest Warrant In Rem.
WHEREFORE, the Commonwealth of Kentucky ex rel., J. Michael Brown,
Secretary Justice and Public Safety Cabinet, respectfully requests the following relief:
1.

That this Court order the United States Attorney to deliver the Kentucky

Domains to the possession and control of the Commonwealth, and for VeriSign to

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comply with the Franklin Circuit Court’s Order of Seizure of Domain Names
notwithstanding the United States’ Arrest Warrant In Rem; and
2.

Any and all such other relief to which the Commonwealth may be

entitled.

Respectfully submitted,

/s/ D. Eric Lycan (pro hac vice)
STEPTOE & JOHNSON, PLLC
1010 Monarch Street, Suite 250
P.O. Box 910810
Lexington, Kentucky 40513
Telephone: [phone]
Facsimile: [phone]
[e-mail]
Attorney for Commonwealth of Kentucky ex rel., J.
Michael Brown, Secretary Justice and Public Safety
Cabinet
To:
Jason H. Cowley
Michael D. Lockard
United States Attorney’s Office
One Saint Andrew’s Plaza
New York, NY 10007
Tel: [phone]
Fax: [phone]
[e-mail]
[e-mail]

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