Grafx Group, Inc. v. Uddin

Filing 34

ORDER denying Defendant's 27 Motion to Dismiss ; denying Defendant's 32 Motion to Strike Plaintiff's Expert Witnesses, signed by U.S. District Judge John C Coughenour. (SWT)

THE HONORABLE JOHN C. COUGHENOUR

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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GRAFX GROUP, INC.,

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CASE NO. C17-0025-JCC
Plaintiff,

ORDER

v.

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GEORGE VAN DER REIT,

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Defendant.

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This matter comes before the Court on Defendant’s motion to dismiss for lack of subject

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matter jurisdiction (Dkt. No. 27) and Defendant’s motion to strike Plaintiff’s expert witnesses

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(Dkt. No. 32). Having thoroughly considered the parties’ briefing and the relevant record, the

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Court finds oral argument unnecessary and hereby DENIES both motions for the reasons

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explained herein.

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I.

BACKGROUND

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Plaintiff was the owner of gfx.com (Domain Name) for over twenty years. (Dkt. No. 31

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at 2.) As of July 2016 the Domain Name was maintained by GoDaddy.com LLC (GoDaddy), a

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domain name registrar. (Id.) In early July 2016 the Domain Name was transferred from Plaintiff

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and GoDaddy to a new registrar allegedly by theft or fraud. (Id.) It is unknown who performed

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the initial transfer. (See id. at 2.) However, around that time, Saad Uddin (Uddin) purchased the

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Domain Name for $500.00 in Bitcoin from a source who called himself “Adam.” (Dkt. No. 27 at

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3.) Plaintiff contacted Uddin shortly after Uddin gained control of the Domain Name. (Dkt. No.

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31 at 3.) Plaintiff notified Uddin that the Domain Name was stolen and unsuccessfully tried to

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negotiate for its return. (Id.) Unbeknownst to Plaintiff, in October 2016 Uddin sold the Domain

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Name to Defendant for $30,000. (Dkt. No. 27 at 4.)

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In January 2017, Plaintiff filed this suit and attempted to serve Uddin via email addresses

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associated with the Domain Name. (Dkt. No. 31 at 3.) Defendant responded to the email and

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explained that he had purchased the Domain Name from Uddin. (Id.) Again, Plaintiff

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unsuccessfully attempted to secure the return of the Domain Name; this time from Defendant.

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(Id.) Consequently, in March 2017, Plaintiff filed an amended complaint updating the defendant

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to reflect the current Domain Name holder. (Dkt. No. 13.)

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Defendant now brings this motion to dismiss for lack of subject matter jurisdiction. (Dkt.

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No. 27.) Defendant argues that it appears to a legal certainty that the amount in controversy is

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well below $75,000 and as such this Court should dismiss. (Id. at 1–2.) Defendant offers three

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arguments to support his motion: (1) Defendant only paid $30,000 for the Domain Name,

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(2) independent offers to purchase the Domain Name ranged from $15,000–$32,000, and

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(3) sales of comparable domain names over the past year were lower than $75,000. (Dkt. No. 27

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at 12–13.)

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Plaintiff provided its own evidence, including: (1) three expert opinions that the value of

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the Domain Name is above $75,000, 1 (2) an estimate of the value of the Domain Name from a

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domain name registrar, (3) listings and sales of comparable domain names that were higher than

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$75,000, and (4) Defendant’s own attempts to sell the Domain Name for $100,000 to $500,000.

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(Dkt. No. 31 at 4–6.)

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In response to Plaintiff’s arguments, Defendant made a motion to strike Plaintiff’s expert
reports as unsworn hearsay evidence. (Dkt. No. 32 at 2.)

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//
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As discussed below, the Court did not consider the expert reports.

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II.

DISCUSSION

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A.

Legal Standard

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Rule 12(b)(1) jurisdictional attacks can be either facial or factual. White v. Lee, 227 F.3d

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1214, 1242 (9th Cir. 2000). On a factual challenge to this Court’s subject matter jurisdiction, the

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Court is not limited to the face of the pleadings, but may review any evidence concerning the

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existence of jurisdiction. McCarthy v. United States, 850 F.2d 558, 560 (9th Cir. 1988). Because

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federal courts are of limited jurisdiction, this Court is presumed to lack subject matter

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jurisdiction and the burden of establishing jurisdiction falls on the party asserting it. Kokkonen v.

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Guardian Life Ins. Co. of America, 511 U.S. 375, 377 (1994). Once the moving party factually

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attacks a District Court’s subject matter jurisdiction, the non-moving party must put forward

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“evidence necessary to satisfy its burden of establishing subject matter jurisdiction.” Safe Air for

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Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004).

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Federal jurisdiction is proper under 28 U.S.C. § 1332(a) where all parties are diverse and

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the amount in controversy “exceeds the sum or value of $75,000.” 28 U.S.C. § 1322(a). The

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amount in controversy claimed by a plaintiff in his or her complaint will satisfy the jurisdictional

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requirement if it is made in good faith. Budget Rent-A-Car, Inc. v. Higashiguchi, 109 F.3d 1471,

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1473 (9th Cir. 1997). “To justify dismissal, ‘[i]t must appear to a legal certainty that the claim is

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really for less than the jurisdictional amount.’” Id. (citing St. Paul Mercury Indem. Co. v. Red

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Cab Co., 303 U.S. 283, 289 (1938)). Legal certainty is established: “1) when the terms of a

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contract limit the plaintiff’s possible recovery; 2) when a specific rule of law or measure of

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damages limits the amount of damages recoverable; and 3) when independent facts show that the

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amount of damages was claimed merely to obtain federal court jurisdiction.” Pachinger v. MGM

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Grand Hotel-Las Vegas, Inc., 802 F.2d 362, 364 (9th Cir. 1986) (internal citations omitted).

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When a defendant challenges the amount in controversy pleaded by a plaintiff, the

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plaintiff must support the alleged amount in controversy with “competent proof.” McNutt v. Gen.

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Motors Acceptance Corp. of Indiana, 298 U.S. 178, 189 (1936). “Competent proof can come in

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the form of facts alleged in the complaint with sufficient particularity, or it can come in the form

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of affidavits that demonstrate that it is possible for the plaintiff to recover more than the

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jurisdictional minimum.” Fin. Inst. Prod. Corp. v. LOS Glob. Sys., LLC, 2016 WL 4479577, at

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*3 (D. Ariz. Aug. 25, 2016).

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In this case it is undisputed there is no contract or law limiting possible recovery.

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Therefore, the Court must decide whether or not “independent facts show that the amount of

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damages was claimed merely to obtain federal court jurisdiction.” Pachinger, 802 F.2d at 364.

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B.

Motion to Strike

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As an initial matter, the Court addresses Defendant’s motion to strike Plaintiff’s expert

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reports. (Dkt. No. 32 at 2–6.) Defendant asks this Court to strike the reports of Andrew Rosner,

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James Booth, and Tessa Holcomb as unsworn hearsay evidence and in violation of Federal Rule

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of Evidence 702. (Id.) However, because the Court does not rely on these reports in reaching its

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decision, it is unnecessary to address the merits of Defendant’s motion to strike. Accordingly,

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Defendant’s motion to strike Plaintiff’s expert reports (Dkt. No. 32) is DENIED AS MOOT.

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C.

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1. Online Valuation

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Plaintiff used a domain name registrar to estimate the value of the Domain Name for its

Plaintiff’s Proof

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complaint ($100,000). (Dkt. No. 8-7 at 5.) Defendant argues Plaintiff’s use of an online valuation

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is unpersuasive because these sites are unreliable. (Dkt. No. 32 at 11.) To support this argument

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Defendant supplied additional online valuations with estimated values lower than $75,000. (Dkt.

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No. 33 at 5–19.) However, Plaintiff need only provide proof that it is “possible to recover more

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than the jurisdictional minimum.” Fin. Inst. Prod. Corp., 2016 WL 4479577, at *3 (emphasis

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added). Ultimately, Defendant’s use of conflicting online valuations does not support the

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conclusion that Plaintiff used the valuation merely to obtain federal jurisdiction. At best,

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Defendant illustrates that the value of the Domain Name may be arbitrary.

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//

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2. Comparable Domain Names

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Plaintiff next offers proof of listings and sales of comparable domain names for more

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than $75,000. (Dkt. No. 31 at 12; Dkt. No. 31-6 at 3.) Defendant argues that the domain names

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Plaintiff references are not similar enough to the Domain Name to be valid benchmarks. (Dkt.

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No. 32 at 10–11.) Defendant asserts that the domain name sales he cites are more analogous.

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(Id.) In support of his argument, Defendant relies on his own belief that the presence of the letter

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“x” lowers the value of a three letter domain name. (Dkt. No. 28 at 4.) Therefore, he argues, the

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Domain Name’s value should only be compared to domains with an “x” present. (Dkt. No. 27 at

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12–13.) However, Plaintiff provided domains with an “x” that sold for amounts over $75,000.

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(Dkt. No. 31 at 12; Dkt. No. 31-6 at 3.) In total, Plaintiff cited 15 three-letter domain names sold

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for, or listed for sale at, over $75,000. (Id.) Even though Defendant maintains the addresses are

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not comparable, the evidence provided by Plaintiff is sufficient to indicate the value of this

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Domain Name is possibly greater than $75,000.

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3. Defendant’s Attempts to Sell the Domain Name

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Finally, Plaintiff points out that Defendant’s arguments related to his purchase price and

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other offers are severely undercut by his own attempts to sell the Domain Name for $100,000;

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$200,000; and $500,000. (Dkt. No. 31 at 10–11.) The Court agrees. Although Defendant

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describes these offers as “aggressive negotiating,” Defendant’s announcement that he “would not

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look at anything under 100k” is in stark contrast to his argument that it is a legal certainty that

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the Domain Name is worth less than $75,000. (Dkt. No. 27 at 5; Dkt. No. 28 at 19.)

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Relatedly, Defendant asserts independent offers to buy the Domain Name are evidence of

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its value. (Dkt. No. 32 at 6.) The offers cited by Defendant ranged from $15,000–$32,000. (Id.)

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However, as Defendant noted, some of these offers were part of negotiations. (Dkt. No. 27 at 5.)

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Just as Defendant argues his selling quotes were inflated, it is to be expected that buying offers

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would be lower than the true value of a product. The Court declines to speculate on the exact

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value of the Domain Name, but notes there is wide range between the buying and selling offers,

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many of which are over $75,000. (See Dkt. No. 28 at 19–24.) While this does not prove that the

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Domain Name’s value is over $75,000, it also does not establish to a legal certainty that the

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value is less than $75,000.01.

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III.

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CONCLUSION
Plaintiff provided competent proof sufficient to establish that the amount in controversy

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possibly exceeds $75,000, and that it did not claim the amount in controversy merely to obtain

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federal jurisdiction. For the foregoing reasons, Defendant’s motion to dismiss (Dkt. No. 27) and

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motion to strike Plaintiff’s expert witnesses (Dkt. No. 32) are DENIED.

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DATED this 18th day of August, 2017.

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A

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John C. Coughenour
UNITED STATES DISTRICT JUDGE

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ORDER
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