Opinion
Case No. 01-09283-A11, Adv. No. 02-90004-A11
May 15, 2002
Jeffrey D. Schreiber, Esq., San Diego, California, Attorney for Debtor/Plaintiff.
Catherine Larocca, Esq., Jolla, California, Attorney for Defendant.
AMENDED MEMORANDUM DECISION
I. INTRODUCTION
Defendant Register.com, Inc. ("Defendant") moves to dismiss the Debtor's amended complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), which is made applicable by Federal Rule of Bankruptcy Procedure 7012(b)(6). The amended complaint seeks declaratory and injunctive relief regarding the Debtor's right to the internet domain name, "internetexpress.com." Additionally, it seeks damages of $150,000 for violation of the automatic stay.
The Defendant argues the declaratory and injunctive relief claims are moot because the domain name has already been registered to a third party. Additionally, the Defendant argues the automatic stay does not prevent termination of the Debtor's use of the domain name where the contract expired by its own terms.
The Court's tentative ruling granted the motion to dismiss the claims for declaratory and injunctive relief as moot pursuant to the reasoning of Seven Words LLC v. Network Solutions, 260 F.3d 8 (9th Cir. 2001), and denied the motion to dismiss the remaining claims. Upon a further review of the amended complaint and the arguments of counsel, the Court denies the motion in its entirety without prejudice. However, the Court also directs that the complaint be further amended.
II. FACTUAL BACKGROUND
The Debtor filed a chapter 11 petition on September 6, 2001. Prior to the petition date, the Debtor purchased the right to use the domain name "internetexpress.com" from a third party who had originally registered the name through the Defendant. The terms and conditions of the use of the domain name are governed by the Registration Services Agreement ("RSA").
The RSA is attached to the amended complaint.
The RSA provides that it is a contract for "Domain Name Registration, Administration, and Renewal." At least thirty days prior to the expiration, the Defendant must notify the Debtor that a renewal fee is due. If the Debtor fails to pay the renewal fee, the Defendant must automatically renew the registration for one year using the Debtor's most recent credit card information. If the credit card has expired or is invalid, the Defendant must provide additional notice of this fact. Thereafter, if the Defendant does not receive actual payment or reasonable assurance of payment, the registration will not be renewed.
The Debtor alleges it used the domain name from 1999 until December 14, 2001 at which time the Defendant terminated the Debtor's use of the name. When the Debtor inquired why the Defendant terminated the usage, the Defendant indicated the registration period had expired on November 8, 2001 and it had been terminated after expiration of the 35-day grace period.
The Debtor alleges it never received any of the renewal notices that the Defendant purportedly sent. Further, if notices were sent, they were sent to the wrong e-mail address. Finally, it alleges that even if the e-mail address was correct, e-mail is not a commercially reasonable method of sending notice, and the Defendant was required to notify the Debtor by the methods provided in ¶ 17 of the RSA.
After the Debtor's usage was terminated, a company in Hong Kong registered the domain name through an unrelated domain name registrar.
On January 3, 2002, the Debtor filed an adversary proceeding against the Defendant for declaratory and injunctive relief, and damages for violation of the automatic stay. The Defendant responded with this motion to dismiss the complaint. Thereafter, the Debtor filed an amended complaint with a statement that the motion to dismiss was moot. The Defendant asks us to treat its motion as one to dismiss the amended complaint.
III. ISSUES
1. What is the scope of the motion to dismiss?
2. Does a third party's registration of the domain name render the claims for declaratory and injunctive relief moot?
3. Can the Debtor state a claim for damages for violation of the automatic stay?
IV. LEGAL ANALYSIS
1. What is the Scope of the Motion to Dismiss?
On a motion to dismiss for failure to state a claim upon which relief may be granted, the court's review is limited to the contents of the complaint, the exhibits appended to the complaint where their authenticity is not disputed, and matters that are properly the subject of judicial notice. In re Hemmeter, 242 F.3d 86, 1189 (9th Cir. 2001) ; In re Warfel, 268 B.R. 205, 208 n. 2 (9th Cir. BAP 2001); In re Ritter Ranch Dev. LLC, 255 B.R. 760, 2 n. 4 (9th Cir. BAP 2000). In deciding the motion, the court must take as true all material factual allegations and construe them in the light most favorable to the plaintiff. Hemmeter, 242 F.3d at 1189. Dismissal is improper unless it appears beyond a doubt that the plaintiff can prove no set of facts which would entitle the plaintiff to relief. Id. at 1189.
If the court considers materials outside the complaint, the motion must be converted to a motion for summary judgment and the parties must be afforded a reasonable opportunity to present material that would be pertinent to a summary judgment motion. In re Rothery, 143 F.3d 546, 549 (9th Cir. 1998).
In the present case, the Defendant submitted the declarations of Alice Greene and Catherine Larocca filed February 11, 2002 which speak to matters outside the complaint. The Court strikes the declarations in their entirety. Additionally, Ms. Larocca's declaration requests the Court to take judicial notice of the public records attached as Exhibits "A"-"E."
Ms. Larocca personally downloaded Exhibits "A"-"E" fromhttp://www.icann.org, which is the official web site of the Internet Corporation for Assigned Names and Numbers ("ICANN"), a non-profit, private corporation designated by the Department of Commerce to manage the domain name system. The Defendant argues the public documents downloaded from ICANN's official web site are properly the subject of judicial notice.
The Debtor has not objected to introduction of these documents, and its amended complaint alleges the parties are bound by these documents. [ See Amended Complaint at ¶¶ 6 and 23] Accordingly, the Court has considered these documents and the RSA in ruling on the motion to dismiss.
2. Are the Claims for Declaratory and Injunctive Relief Moot?
The Defendant seeks dismissal of the declaratory and injunctive relief claims because they are moot. It argues the Ninth Circuit's case in Seven Words LLC v. Network Solutions, 260 F.3d 1089, 1095 (9th Cir. 2001) is on point.
In Seven Words, the plaintiff sought declaratory and injunctive relief requiring the domain registrar (NSI) to abandon its policy of prohibiting registration of domain names containing certain words, and directing NSI to register the sixteen domain names that the plaintiff sought to register. Id. at 1095. The Ninth Circuit held these claims were moot because NSI had abandoned its policy of prohibiting registration of certain domain names, and most importantly, because a third party had already registered the domain names. Id. Here, a third party has already registered the domain name "internetexpress.com." Therefore, the Defendant argues the declaratory and injunctive relief claims fall squarely within the holding of Seven Seas, and they must be dismissed as moot.
The Debtor argues Seven Words is distinguishable because it did not involve a domain name that was terminated due to a mistake. Because of the different facts, the Ninth Circuit did not analyze the various contracts or the ICANN adopted policies; nor did it address a court's power to direct a domain registrar to transfer or change a domain name registration where it was improperly terminated.
The Court agrees that Seven Words is distinguishable. Seven Words involved a situation where the plaintiff never had the right to use the sixteen domain names that it sought to register. In contrast, the amended complaint alleges the Debtor had the right to use the domain name, the right to receive renewal notices, and the right to have the registration automatically renewed. [Amended Complaint at ¶¶ 16-21]
Further, the amended complaint alleges the Court has the power to direct the Defendant and ICANN to transfer or cancel the domain name registration where termination of the Debtor's domain name was by mistake. Specifically, ¶ 23 alleges that ICANN has the authority over the Defendant and the third party domain registrant, and the power pursuant to Section 3 of the ICANN Uniform Domain Name Dispute Resolution Policy ("UDRP"), to cancel, transfer or otherwise change the domain name registration if a court orders it to do so. Paragraph ¶ 24 alleges the Defendant and the Court can direct ICANN to reinstate the Debtor's domain name registration where the domain name was terminated by mistake.
Finally, the governing documents appear to support the Court's authority to order a domain name registrar to cancel, transfer or otherwise make changes to a domain name registration in the appropriate circumstances where the appropriate parties are named.
The Defendant urges the action should be dismissed for
other reasons, including the argument that the third party registrant is a necessary and indispensable party to the action. These arguments were not part of the motion to dismiss, and must be raised through a properly noticed motion.
As more fully set forth above, on a motion to dismiss the Court must construe all factual allegations and all reasonable inferences in favor of the nonmoving party, and the complaint should be dismissed only where it appears beyond a doubt that the plaintiff can prove no set of facts which would entitle the plaintiff to relief. Based upon this liberal standard, the Court concludes the Debtor has sufficiently stated claims for declaratory and injunctive relief even though a third party has registered the domain name.
3. Can the Debtor State a Claim for Violation of the Automatic Stay?
Additionally, the Defendant seeks dismissal of the claim for damages for violation of the automatic stay. The Defendant relies upon Moody v. Amoco Oil Co., 734 F.2d 1200 (7th Cir. 1984), which held that § 108(b) does not extend the time period to cure a default in a contract that irreversibly terminated before the petition date. Moody, 734 F.2d at 1212-13. Because the contract had irreversibly terminated, the automatic stay did not prevent termination of the contract upon expiration of the remaining ninety day term. Id. at 1213. Similarly, in this case, the Defendant argues the automatic stay did not prevent termination of the contract because the Debtor's right to use the domain name had irreversibly expired.
Moody is factually distinguishable because it involved a contract that was in default and irreversibly terminated before the petition date. Rather, this case is more closely analogous to the Ninth Circuit's case In re Carroll, 903 F.2d 1266 (9th Cir. 1990). In Carroll, the debtor and Tri-Growth were parties to an executory management contract that was property of the estate. Carroll, 903 F.2d at 1270-71. Without seeking relief from stay, Tri-Growth gave notice that it intended to terminate the management agreement upon 90 days notice. Id. at 1269.
In contrast, it does not appear that this contract had irreversibly terminated on the petition date. Accordingly, unlike Moody, § 108(b) arguably extended the deadline to renew the domain name registration until the later of sixty days from the petition date, or the date that the renewal option irreversibly expired. In re Santa Fe Dev. Mtg. Corp., 16 B.R. 165, 168 (9th Cir. BAP 1981) (holding § 108(b) applies to an option to renew a lease); see also 2 L. King, Collier on Bankruptcy, ¶ 108.03[1] at 108-8 (15th ed. Rev. 2001) (providing that § 108(b) extends a contractual deadline to exercise an option to renew a lease). The amended complaint reveals the Defendant terminated the RSA after the sixty day extension had already passed. Accordingly, § 108(b) did not keep the contract alive.
The Debtor argued that Tri-Growth's unilateral termination of the contract violated the automatic stay. Tri-Growth argued no stay violation occurred because the debtor's rights were only as great as the rights conferred by the agreement, and under the agreement both sides had the unqualified right to terminate upon days notice. Id. at 1271. The Ninth Circuit held that Tri-Growth's termination of the agreement violated the automatic stay. Id. at 1271-72. It reasoned the language in the agreement created only a conditional right to terminate as opposed to an unconditional right. Id. at 1272. Therefore, even in breach, the agreement was protected by the automatic stay and Tri-Growth was required to seek relief from stay before terminating the agreement. Id. It left open the question of whether relief from stay was necessary where the right to terminate was unconditional.
Similarly, in this case, the Debtor alleges the domain name registration was property of the estate and protected by the automatic stay. The Defendant should have sought relief from stay before terminating the registration. The only exceptions would be if the registration had irreversibly expired or the Defendant's right to terminate was unconditional. In those limited instances, arguably the Defendant could terminate the registration without seeking relief from stay.
The Court cannot determine the parties' rights from the amended complaint. The amended complaint does not allege the date that the Debtor's initial registration expired; nor does it allege the final deadline that the Debtor had to renew the registration. Rather, the amended complaint alleges the Debtor used the domain name up until December 14, 2001 at which time the Defendant took away the Debtor's use of the domain name. [Amended Complaint at ¶¶ and 12]. When asked why, the Defendant told the Debtor the original registration expired on November 8, 2001 and the name was terminated after the 35-day grace period. [Amended Complaint at ¶ 12]. The amended complaint does not admit the Defendant is correct. Further, the RSA does not assist the Court, as it contains no final expiration date.
The Defendant is relying upon Ms. Greene's declaration to establish its rights. She states the Defendant's system records indicate the original registration expired on November 8, 2001, and after a 35-day grace period the Defendant's computer automatically deleted the domain name from its system. As more fully explained above, the Court cannot consider Ms. Greene's declaration on a motion to dismiss.
Because the Court is unable to ascertain the parties' rights, the Court will require amendment of the complaint to provide this information. Specifically, the Debtor must allege the date the original domain name registration expired, and whether there was a final expiration date.
Finally, the Defendant argues the amended complaint does not allege a claim for breach of the RSA. Although not separately pled, the amended complaint alleges "[t]he actions of the Defendant in terminating the Plaintiff's use of the domain name . . . is a breach of the Services Agreement," and it prays for $150,000 in damages for breach of the RSA. [Amended Complaint at ¶ Prayer at ¶ 6] The Court agrees this claim, and the others, are inartfully pled and directs the Debtor to amend its complaint to separately plead each claim for relief.
V. CONCLUSION
The amended complaint states a claim for declaratory and injunctive relief, and the Court is sufficiently satisfied these claims remain ripe even though a third party registered the domain name. The Court is unable to determine whether the Debtor can state a claim for violation of the automatic stay, and requires amendment of the complaint to specify the date the original domain name registration expired, and whether there was a final expiration date. Accordingly, the Court denies the motion to dismiss without prejudice on condition of timely amendment.
The Court is cognizant that the Defendant believes it has other grounds to dismiss the complaint. These grounds were not properly included in the motion to dismiss. The Court will consider these grounds when they are properly raised. The Debtor is directed to file an order consistent with the terms of this Memorandum Decision within ten days of its date, and to file an amended complaint within ten (10) days after entry of the order denying this motion.