A company has filed a federal lawsuit against the company that owns the ICANN accredited registrar, BestRegistrar.com a few alleged resellers of BestRegistrar and the owners of the company that owns Bestregistrar.com, to “recover control of approximately 5,000 Internet domain names rightfully owned by SPG, and to recover damages both compensatory and statutory in nature arising out of: (i) Defendants’ wrongful exercise of control over the 5,000 domain names and (ii) unlawful attempts to exact a “ransom” from SPG for the release of those Domain Names.”
Its a pretty unusual case and not sure I have seen one like this before.
Here are the highlights from the 19 page complaint:
Plaintiff SPG is a limited partnership organized under the laws of Delaware, with its principal place of business located in Indianapolis, Indiana.
Defendant CASDNS, Inc. (“CASDNS”) is a corporation organized under the laws of Kentucky, with its principal place of business located in Louisville, Kentucky.
Defendant Cas-Com Internet Services, Inc. d/b/a Bestregistar.com (“Bestregistar”) is a corporation organized under the laws of Kentucky, with its principal place of business located in Louisville, Kentucky.
Defendant Jeffrey S. Smith (“Smith”) is a resident of Jefferson County, Kentucky, and the principal of CASDNS and Bestregistrar.
Defendant COREHub S.R.L.U. (“COREHub”) is an alien organization located in Barcelona, Spain, which transacts business and supplies services in the Commonwealth of Kentucky.
This is an action to recover control of approximately 5,000 Internet domain names rightfully owned by SPG, and to recover damages both compensatory and statutory in nature arising out of: (i) Defendants’ wrongful exercise of control over the 5,000 domain names and (ii) unlawful attempts to exact a “ransom” from SPG for the release of those Domain Names.
SPG owns or has an interest in hundreds of different retail real estate properties located throughout North America, Europe and Asia, including numerous shopping malls, outlets and other similar retail centers (collectively the “Real Estate Holdings”).
Each of SPG’s Real Estate Holdings typically bears a unique name and/or trademark which is well-known in its respective marketplace, and associated with substantial revenues and consumer goodwill.
SPG likewise owns and operates hundreds of different websites which correspond to each of its various Real Estate Holdings.
SPG has incorporated its unique marks into the domain names associated with each website.
Consumers typically locate SPG websites, and information about SPG’s various Real Estate Holdings, by simply searching for or typing into web-browsers the trademarks and/or domain names associated with such Holdings.
By way of example, SPG has an ownership interest in Edinburgh Premium Outlets® in Edinburgh, Indiana. SPG owns domain names incorporating the trademarks associated with this Real Estate Holding, making it easier to find the SPG websites for that center on the Internet. See, e.g., www.edinburghpremiumoutlets.com. SPG likewise owns numerous related domain names which also incorporate those registered trademarks to again direct consumers to that center’s primary website. See, e.g., www.edinburghpremiumoutlets.net, www.edinburghoutletcenter.com, www.edinburghoutletcenter.net
The ownership and control of the SPG Domain Names is a critical aspect of SPG’s marketing and other business endeavors.
The Defendants purport to serve as Registrars.
Contractual and Regulatory Background Applicable To The Defendants
“Accredited Registrars”, in turn, are permitted by ICANN to subcontract with “Resellers.” Resellers, like Accredited Registrars, may solicit the owners of domain names inorder to manage the registration of such domain names. 5
Resellers must comply with the same ICANN and other legal restrictions which govern Accredited Registrars. See id.
Defendant COREHub is an ICANN Accredited Registrar, and party to the 2013 version of ICANN’s Registrar Accreditation Agreement. See http://www.icann.org/registrar- reports/accredited-list.html, last accessed on August 6, 2014.
Upon information and belief, Defendants Bestregistrar and/or CASDNS are Resellers, and operate as such under the umbrella of and pursuant to an agreement with COREHub.
COREHub and its Resellers are also subject to “Policies” promulgated by ICANN.
ICANN by policy prohibits Accredited Registrars, and the Resellers who operate through them, from making misleading statements concerning their pricing, including the imposition of “deceptive notices” and “hidden fees.” See ICANN Registrants’ Benefits and Responsibilities, available at http://www.icann.org/en/resources/registrars/registrant- rights/benefits.
COREHub, in turn, requires that all of its Resellers clearly display all of their fees on a website. See http://corehub.net/pricing/, last accessed on August 6, 2014 and attached hereto as Exhibit 1.
ICANN has also promulgated a detailed policy pertaining to the transfer of domain name registrations between Registrars, which sets forth the very limited circumstances under which a Registrar may preclude an owner of a domain name (a/k/a “Registrant”) from transferring a domain name to a new Registrar. See ICANN Policy on Transfer of Registrations between Registrars, effective June 1, 2012 (the “ICANN Transfer Policy”), published at http://www.icann.org/en/resources/registrars/transfers/policy (last accessed August 6, 2014), and attached hereto as Exhibit 2.
ICANN further requires that Accredited Registrars and their Resellers maintain and publish to Registrants a transfer process which is “clear and concise.” See id.
The Agreement Between SPG, Smith and CASDNS
On or about February 1, 2000, Defendant Smith solicited an agreement from SPG, whereby he and his company – CASDNS – would provide “domain name registration services.” See February 1, 2000 Letter from Smith to SPG, attached hereto as Exhibit 3.
In return for those services, Smith and CASDNS proposed – in pertinent part – that SPG pay $45 [per domain name] for an “initial two year subscription”, with “renewals” to “be billed at the rate of $25 for a one year up to $20 per year for a ten (10) year subscription.” Smith and CASDNS also represented and proposed that there would “be no registration fee charged.”
Smith and CASDNS never proposed or represented to SPG that they would charge a fee in the event SPG decided to cancel or terminate their services, or switch to a competing Registrar.
Nor did the proposal from Smith and CASDNS prescribe any definite term in the contemplated relationship with SPG.
SPG accepted the above-described proposal from Smith and CASDNS in 2000, and timely made all periodic “subscription” and “renewal” payments called for under the resulting agreement.
Defendants Smith, Bestregistrar and/or CASDNS own and operate a website known as www.bestregistrar.com, which may pertain to or reference the services purchased by SPG. Relevant screenprints from www.bestregistrar.com, last accessed on August 6, 2014, are attached hereto as Exhibit 4.
In addition to not disclosing any “transfer” or “termination” fees, Defendants also did not publish, on www.bestregistrar.com or otherwise, their “transfer process” – much less a “clear and concise” transfer process as required by ICANN Policy.
SPG Decides To Switch Registrars In 2013
SPG has acquired many domain names over the past 14 years, and currently owns approximately 5,139 domain names.
The amount of fees which SPG paid annually to Smith and CASDNS increased significantly over that same time period.
Over the last seven years, SPG has paid over $2 million to Smith, CASDNS and/or Bestregistrar
In early 2013, SPG first observed that Smith and CASDNS had been charging were disproportionate to the number of domain names owned by SPG. This was their agreement.
SPG then began to review further the services purportedly provided by Smith and and discovered that an entirely separate company, named Bestregistrar, was actually SPG’s domain names through COREHub.
SPG never entered into a direct agreement with Bestregistrar or COREHub.
SPG also determined that the DNS servers operated by Defendants were subject outages, which rendered SPG’s Domain Names ineffective during such periods.
SPG therefore subsequently sought out and identified a new Registrar to replace Smith and CASDNS.
To move its domain names over to the new Registrar, and because Defendants failed to provide a proper description of their transfer process and failed to provide such requested assistance for a period of time, SPG delivered a formal written request to Smith, CASDNS and/or Bestregistrar on May 20, 2014, to initiate the immediate release and transfer of its Domain Names – in accordance with ICANN Policies. See May 20, 2014 E-mail from Nathan Patterson, attached as Exhibit 5; see also ICANN Transfer Policy, Exhibit 2.
In response, Smith, CASDNS and/or Bestregistrar wrongfully denied SPG’s transfer request. See Exhibit 5 at May 26, 2014 E-mail from Smith.
Smith, CASDNS and/or Bestregistrar then refused to release the SPG Domain Names to SPG’s new Registrar, unless and until SPG paid for future registration fees, which SPG neither needed nor requested. See, e.g., July 21, 2014 Invoice from Bestregistrar, attached as Exhibit 6 (reflecting Defendants’ attempts to collect for future services).
In addition, Smith, CASDNS and/or Bestregistrar has refused to release and permit the transfer of SPG’s Domain Names until SPG paid “termination” and/or “transfer” fees of $75.00 per domain name, which would amount to approximately $375,000.00 for the subject domain names currently owned by SPG. See September 11, 2013 E-mail from Smith, attached as Exhibit 7.
Then, on August 1, 2014, Smith, CASDNS and/or Bestregistrar demanded that SPG pay another $85,633.02 for services which had not been requested or agreed to by SPG, and which were not then due and owing.
Smith, CASNDS and/or Bestregistrar threatened that, if SPG refused to tender a payment of $85,633.02 on or before August 12, 2014, they would “delete all domain names associated with [SPG’s] portfolio of names relating to Simon…”
Defendants did not offer or arrange to release and transfer SPG’s Domain Names in return for the $85,633.02 payment which they demanded from SPG. See id.
Defendants’ threat to delete SPG’s Domain Names, if carried out, would render thousands of websites and e-mail systems which SPG owns and/or operates virtually inaccessible, and leave SPG’s Domain Names vulnerable to takeover by its competitors.
Additionally, the restoration of SPG’s Domain Names and websites would be a “long and expensive operation.” See http://corehub.net/faqs/, at Question No. 6.
ICANN forbids Registrars from denying a transfer request based upon the alleged non-payment of “termination” or “transfer” fees, especially those which were never disclosed or agreed upon. See ICANN Transfer Policy at ¶ A(3), Exhibit 2.
SPG refused to pay the exorbitant “termination” and “transfer” fees demanded, which amounted to an improper ransom.
Earlier in discussions between the parties, and to ensure that critical websites owned by SPG were continually available to consumers, SPG had previously paid Smith, CASDNS and/or Bestregistrar the total amount of $7,737.50 in late 2013, so that they would release 100 key domain names to a new Registrar.
SPG never agreed, contractually or otherwise, to pay such exhorbitant and unadvertised ransom fees to Smith, CASDNS and/or Bestregistar in order to retrieve and transfer SPG’s Domain Names.
Further, in July 2014, SPG repeatedly communicated to COREHub the foregoing circumstances and ransom demands from Smith, CASDNS and Bestregistrar, because COREHub has oversight over those Defendants, and the authority to administer a transfer request from SPG unilaterally.
Despite notice from SPG, and COREHub’s obligations to ensure compliance with ICANN policies and not infringe upon SPG’s rights and property, COREHub has refused to release the hold which Smith, CASDNS and/or Bestregistrar have improperly placed upon the SPG Domain Names – unless SPG agrees to “indemnify” COREHub from any claims made by Smith, CASDNS and/or Bestregistrar.
COUNT I — BREACH OF CONTRACT (As to Defendants Smith and CASDNS)
SPG had an agreement with Defendants Smith and CASDNS whereby they would provide “domain name registration services.” See February 1, 2000 Letter from Smith to SPG, attached hereto as Exhibit 3.
In return for those services, Smith and CASDNS proposed – in pertinent part – that SPG pay $45 for an “initial two year subscription”, with “renewals” to “be billed at the rate of $25 for a one year up to $20 per year for a ten (10) year subscription.”CASDNS proposed that there would “be no registration fee charged.”
SPG further had an agreement with Smith and CASDNS whereby the charges for their services would be proportionate to the number of domain names registered on behalf of SPG.
Smith and CASDNS never proposed or represented that they would charge a fee in the event SPG chose to cancel or terminate their services, or switch to a competing Registrar, Nor did the proposal from Smith and CASDNS prescribe any definite term in the contemplated relationship with SPG.
SPG never agreed to pay any of the Defendants a “transfer”, “termination” or any other similar fee in the event it chose to place its business with another Registrar.
SPG accepted the proposal from Smith and CASDNS, and SPG thereafter performed all of its material obligations under the resulting agreement.
Defendants Smith and CASDNS breached their agreement with SPG by, among other things:
- (a) Charging fees for services they never performed;
- (b) Charging fees which were disproportionate to the number of domain names registered for SPG;
Allowing a third party, Bestregistrar, to take control of and register SPG’s domain names through COREHub, even though SPG had no contractual or other business relationship with Bestregistrar or COREHub;
Attempting to charge fees to SPG which were never disclosed, much less agreed upon, including “transfer” and “termination” fees of $75.00 per domain name;
- (e) Refusing to release the domain names owned by SPG upon request; and
- (f) Otherwise failing to carry out the terms of their agreement with SPG in good faith.
As a result of these breaches by Smith and CASDNS, SPG has been injured and isentitled to damages including, but not limited to, compensatory, expectation, restitution and/or reliance damages and incidental and consequential damages.
COUNT II – VIOLATIONS OF THE ANTICYBERSQUATTING ACT (As to all Defendants)
SPG adopted and began using, and has used continuously, the service marks and trade names associated with its business and the Real Estate Holdings.
SPG’s marks are recognized, well known, and identify SPG’s services and Real Estate Holdings, which individually and collectively have developed substantial goodwill in the markets where SPG conducts business
SPG’s marks have been incorporated into the various SPG Domain Names.
Defendants are aware of the substantial value of the SPG Domain Names.
Defendants have improperly sought to traffic in the SPG Domain Names by demanding from SPG, in bad faith, exorbitant profits and fees to which they are not entitled.
Defendants’ refusal to release the SPG Domain Names without payment of the above-described ransom fee(s) constitutes a violation of the ACPA.
In light of Defendants’ violation of the ACPA, SPG is entitled to injunctive relief pursuant to 15 U.S.C. § 1116(a), recovery of actual damages pursuant to 15 U.S.C. § 1117(a), and an award of statutory damages pursuant to 15 U.S.C. § 1117(d).
COUNT III — CONVERSION (As to all Defendants)
SPG reiterates and incorporates herein by reference all of the foregoing paragraphs as if fully set forth herein.
By engaging in the acts and conduct described above, Defendants intentionally and unlawfully misappropriated the property of SPG for their own use without authority or privilege.
As a result of Defendants’ conversion of SPG’s property, SPG has been injured and is entitled to monetary damages, including punitive damages and the return to SPG of its rightful control over the SPG Domain Names.
COUNT IV – FRAUD/MISREPRESENTATION/FRAUD BY OMISSION (As to Smith and CASDNS)
The proposal to SPG by Smith and CASDNS in 2000 specifically outlined the fees that they would charge to SPG for domain name registration services, and that proposal did not include any transfer or termination fees.The proposal also reflected that Smith and CASDNS would perform the domain name registration services at issue.
SPG relied on the proposal from Smith and CASDNS in choosing to enter into the agreement described above, and entrusted its valuable intellectual property and domain names to Smith and CASDNS.
The failure of Smith and CASDNS to properly disclose all fees they would seek, along with affirmative representations to the contrary, constitutes fraud and/or fraud by omission. 95. As a result of Defendants’ fraud and fraud by omission, SPG has been injured and is entitled to monetary damages, including punitive damages and the return to SPG of its rightful control over the SPG Domain Names.
COUNT V – NEGLIGENT MISREPRESENTATION (As to Smith and CASDNS)
Smith and CASDNS are in the business of supplying information to purchasers of domain name registration services, for purposes of guiding business transactions and earning a profit. As set forth above, Smith and CASDNS, at a minimum, failed to exercise reasonable care on multiple occasions by supplying SPG with false information concerning the nature of the domain name registration services they would provide, and the fees they would charge for services provided.
SPG reasonably relied on Smith and CASDNS to supply it with true and correct information concerning its business transactions, and not to omit material facts.
SPG suffered and continues to suffer damages as a direct consequence of such improper conduct in an amount to be determined at trial, and is also entitled to punitive damages. COUNT VI — NEGLIGENCE (As to all Defendants)
At all times relevant, Defendants had a duty to act as reasonably prudent Registrars, in dealing with SPG and the SPG Domain Names.
Given the improper conduct referenced above, Defendants breached duties owed to SPG and breached the standards of care and conduct applicable to Defendants’ industry.
SPG suffered and continues to suffer damages as a direct consequence of Defendants’ improper conduct in an amount to be determined at trial.
COUNT VII — TORTIOUS INTERFERENCE WITH CONTRACTUAL RELATIONS / PROSPECTIVE BUSINESS ADVANTAGE
The threatened conduct of Defendants, if permitted, would constitute an intentional and unreasonable interference with SPG’s business and its beneficial contractual relationships with its customers (e.g., mall shoppers and mall tenants). Defendants have no contractual or other right to take the threatened action and delete SPG’s domain names, such to make SPG’s websites and e-mail accounts virtually inaccessible, and further jeopardize and/or impair SPG’s trademarks.
Defendants were, at all relevant times, aware of the existence of SPG’s current and prospective business relationships, which hinge in part on the proper operations of its domain names and websites, and SPG’s control over its trademarks.
Defendants’ threatened conduct, if permitted, will cause irreparable damage and injury to SPG’s current and prospective business relationships, for which SPG would be entitled to injunctive relief, actual damages as the jury may find SPG to have sustained, and punitive damages in an amount to be determined by a jury.
COUNT VIII — CIVIL
CONSPIRACY/AIDING AND ABETTING (As to all Defendants)
By virtue of the circumstances, acts and omissions described above, Defendants conspired to harm SPG and/or otherwise aided and abetted each other in carrying out the torts and statutory violations described above – all to the detriment of SPG. SPG suffered damages as a result of the unlawful acts described above, and is therefore entitled to compensation from the Defendants.
COUNT IX – UNJUST ENRICHMENT/QUANTUM MERUIT/RESTITUTION (As to all Defendants)
Defendants misappropriated SPG’s domain names and valuable intellectual property through the acts and omissions set forth above. Defendants further misappropriated monies which they wrongfully collected from SPG, pursuant to Defendants’ improper invocation of unenforceable and/or non-existent contract terms.
To date, SPG has not received any reimbursement, compensation or consideration from Defendants for the property and business interests which they wrongfully took control of for their own benefit.
SPG suffered damages as a result of the improper acts described above, and is therefore entitled to compensation from the Defendants.
COUNT X – ACCOUNTING/CONSTRUCTIVE TRUST (As to all Defendants)
As a consequence of the foregoing, SPG is entitled to a full accounting and a constructive trust to be imposed against all Defendants on all assets, profits, gains and advantages derived from their wrongful conduct, as well as all damages sustained by SPG as a result thereof. COUNT XI – DECLARATORY JUDGMENT AND RELIEF (As to all Defendants)
SPG also requests that the Court declare that it is entitled to the immediate release, by the Defendants, of all domain names belonging to SPG. SPG further requests that the Court declare that it is entitled to all of the relief requested in the Prayer for Relief, as stated below.
PRAYER FOR RELIEF
WHEREFORE, Plaintiff SPG respectfully requests:
A. That the Court issue a Temporary Restraining Order, as well as a Preliminary and Permanent Injunction, restraining and enjoining Defendants: (i) from exercising any further control or authority over the SPG Domain Names, and (ii) from denying SPG’s rightful request for the transfer of its Domain Names to the new Registrar;
B. Judgment in SPG’s favor on all causes of action described herein and that equitable and declaratory relief be granted;
C. That Defendants be ordered to pay damages incurred by SPG in amounts to be determined by the evidence;
D. That Defendants be ordered to pay SPG’s attorneys’ fees and costs;
E. That Defendants be ordered to pay SPG’s expenses and any other costs as allowed by law;
F. That Defendants be ordered to provide a detailed accounting of all services which they purported to provide to SPG, and all monies demanded and collected from SPG;
A trial by jury on all issues so triable
