.XYZ has just won another court battle against Verisign (VRSN).
Back three weeks ago a Federal Court dismissed a case brought by Verisign against XYZ.com, the registry for .XYZ and Daniel Negari personally alleging false advertising by granting XYZ and Negari a short summary judgment opinion.
Now in a second case in Verisign sued XYZ.COM, DANIEL NEGARI and CentralNic, which is the back-end provider for the .XYZ registry, for tortuous interference and business conspiracy relating to changing the back-end provider for the new gTLD strings .theater and .protection which XYZ registry bought from Key Brand Entertainment, Inc. (“‘KBE”) and Symantec respectively from Verisign to CentralNic.
Federal Court Judge, Liam V Grndy (pdf) granted CentralNic’s Motion to Dismiss for Lack of Personal Jurisdiction and XYZ.COM and Daniel Negari’s Motion to Dismiss for Failure to State a Claim.
XYZ, Negari and CentralNic were all represented by Eugene Rome of Rome & Associates, Los Angeles.
In this case the Federal Judge issued a long opinion with a finding of facts:
In 2008, the Internet Corporation for Assigned Names and Numbers (“ICANN”) approved a program for the launch of new generic top level domains (‘”gTLDs”) in the Internet’s addressing system. (First Amended Complaint (“FAC”) ,8). A top level domain is, in simple terms, the letters to the right of the “dot” in a domain name, e.g., or . As part of ICANN’s new gTLD program, persons and entities were permitted to apply, for a fee, for the rights to serve as the exclusive registry for proposed gTLDs, e.g. . (FAC ,9). Each applicant for a gTLD was required to demonstrate to ICANN that it was able to provide technically competent registry services for its proposed gTLD.
Plaintiff Verisign is an experienced operator of registry services for gTLDs; accordingly, it has entered into agreements with applicants for some of the new gTLDs to provide back-end registry services.
This case involves Verisign’ s agreements with two companies, Key Brand Entertainment, Inc. (“‘KBE”) and Symantec to provide back-end registry services for several gTLDs.
In June of 2012, KBE submitted its initial application for to ICANN.
As required by its agreements with Verisign, KBE’s initial application to ICANN identified Verisign as the exclusive provider of back-end registry services.
This application passed ICANN’s initial evaluation process in June of 2013.
In October of 2014, KBE submitted to ICANN a req uest to change its application removing the reference to Verisign as the provider of back-end registry services, and deleted Verisign’ s specifications and responses regarding technical and operational capability for and replaced Verisign with Defendant CentralNic as the provider of back-end registry services, and substituted CentralNic’s specifications and responses regarding technical and operational capability.
In June of 2012, Symantec submitted its initial applications for and to ICANN. (FAC 135, Ex. 3 & 4). As required by its agreements with Verisign,
Symantec’s initial applications identified Verisign as the exclusive provider of back-end registry services.
In September of 2014, Symantec sought to terminate agreements it had entered into with Verisign.
After doing so, in February 2015, Symantec submitted to ICANN requests to change its applications, by removing the reference to Verisign as the provider of back-end registry services, and by deleting Verisign’s specifications and responses regarding technical and operational capability for and dentified CentralNic as the provider of back-end registry services, and substituted CentralNic’s specifications and responses regarding technical and operational capability of and where Verisign’s previously had appeared.
KBE and Symantec made the changes to their ICANN applications because they sold their applications to Defendant XYZ.com (“XYZ”), which is owned and/or controlled by Defendant Daniel Negari.
. XYZ and Negari required KBE and Symantec to breach their agreements with Verisign as part of those sales and to remove Verisign as the provider of back-end registry services.
XYZ and Negari agreed with CentralNic to have CentralNic replace Verisign as the provider of back-end registry services for
Verisign brought three causes of action against XYZ, Negari, and CentraINic:
Count 1, tortuous interference with its contract with KBE;
Count 2, tortious interference with its contract with Symantec; and
Count 3, business conspiracy.
Verisign originally filed this case in Virginia State Court in Fairfax County. Defendants removed the case to this Court on August 13, 2015.
Shortly thereafter, CentralNic moved to dismiss the claims against it on the grounds that the Court lacks personal jurisdiction over it and because the First Amended Complaint fails to state a claim against it. Defendants XYZ and Negari moved to dismiss Count 3 on the grounds that the First Amended Complaint failed to state a claim of business conspiracy.
On the issue of Jurdiction the court found although Verisign asserted that in 2014 CentralNic derived over $140,000 in revenue from Virginia (1.5% of CentralNic’s reported total revenue from 2014), this Court must conclude that CentraNic’s contacts with Virginia are so few that this Court does not have general jurisdiction over it.
B. XYZs and Negari ‘s Partial Motion to Dismiss for Failure to State a Claim
Defendants XYZ and Negari next argue that Count 3-business conspiracy under VA Code §§ 18.2-499, -500-should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6), failure to state a claim upon which relief can be granted.
To recover in an action under the Virginia business conspiracy statute a plaintiff must establish that (I) a combination of two or more persons acted; (2) for the purpose of willfully and maliciously injuring plaintiff in his business; and (3) the plaintiff was damaged as a result.
Defendants argue that Verisign has not sufficiently alleged the first or second elements.
XYZ and Negari argue that Verisign has not alleged the first element-a combination of two or more persons-because of the intra-corporate immunity doctrine. Under the intra-corporate immunity doctrine, as a matter of law, “a corporation cannot conspire with its wholly owned subsidiary or with its officers and directors
Negari is an officer of XYZ.
Therefore, XYZ and Negari argue that if CentralNic has been dismissed from this action a conspiracy could not exist because the only remaining defendants in this case are a corporation and one of its officers.
However, the case law makes clear that so long as one alleged co-conspirator is not covered by the intra-corporate immunity doctrine, a conspiracy claim will survive a motion to dismiss, even if the party not covered by the doctrine is not named as a party to a lawsuit.
Verisign argues that it has stated a claim of business conspiracy, even if CentralNic has been dismissed by this Court, because it has alleged in its First Amended Complaint that Negari and XYZ conspired with CentralNic.
Verisign has correctly stated the law; CentralNic need not be a defendant in this action for Verisign to allege a claim of business conspiracy.
However, the Court finds Verisign has not sufficiently alleged that Negari and XYZ actually conspired with CentralNic
“This pleading standard, though low, “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action.”
The facts alleged in the complaint “must be enough to raise a right to relief above the speculative level.”
Verisign has alleged that ”XYZ, Negari and CentralNic combined, associated, agreed, mutually undertook and concerted together for the purpose of willfully and maliciously injuring Verisign in its business, by seeking to circumvent Key Brands’, KBE Holdings’ and Symantec’s contractual requirements.”
However, this is a mere recitation of a legal conclusion.
The First Amended Complaint has not alleged specific facts that support the conspiracy allegations.
The facts put forth in the FAC show that KBE and Symantec replaced Verisign with CentralNic as the provider of back-end registry services. But no specific facts raise an inference that Centa!Nic actively conspired with XYZ and Negari to induce KBE and Symantec to breach their contracts beyond a speculative level. Because the allegation s are merely conclusory, Verisign has not sufficiently alleged a claim of business conspiracy. Accordingly, the Court finds good cause to grant XYZ and Negari’s Motion lo Dismiss for Failure to State a Claim.
