The Ninth Circuit affirmed the district court’s ruling in Office Depot v. Zuccarini [Scribd link], agreeing that a creditor may levy against a domain name in the jurisdiction where the domain name registry is located. The decision is significant for two reasons. First, it affirms (or reaffirms) that domain names are property subject to the claims of creditors. Second, it allows creditors to proceed against domain names where the registry is located, thus allowing creditors to proceed against domain names in one proceeding and more importantly levy against domain names located abroad (where the registry is located in the United States). Overall, this makes getting at a domain name much easier for creditors.

Background: Office Depot originally obtained a judgment against frequent cybersquatting defendant John Zuccarini. Office Depot then assigned the judgment to DS Holdings. Office Depot obtained the judgment in 2000 and it’s surprising that 10 years later the judgment is finally being enforced against something. Although Zuccarini is proceeding pro se, it seems like he was or became well versed in putting up roadblocks and delaying resolution of the litigation.

DS went after 190 .com domain names that were registered in Zuccarini’s name. DS originally tried unsuccessfully to have the domain names transferred directly to it. (This was the technique successfully used by the plaintiff in Bosh v. Zavala.) Later, DS sought to have a receiver appointed over the domain names. The district court granted DS’s request to have the receiver appointed, and Zuccarini appealed. Zuccarini’s appeal focused on whether it was proper to appoint the receiver in the Northern District of California, since the domain names were not necessarily “located” there.

The court’s ruling: The court runs through basic principles of in rem jurisdiction and what rules apply. The court then looks to federal rules to determine where the receiver should be appointed in this case. Finding no applicable federal rule, the court looks to California law. California law provides that a writ of execution may be issued “in the county where the levy is to be made.” With this in the background, the two questions presented by the court are: (1) “are domain names property that is subject to execution?” and (2) “if so, where are the domain names located for purposes of execution?”

With respect to the first question, the court cites to Kremen v. Cohen, and easily concludes that (under California law) “domain names are intangible property subject to a writ of execution.” Kremen undermined Network Solutions, Inc. v. Umbro Int’l, Inc., 259 Va. 759, 770 (Va. 2000), a Virginia case widely cited for the proposition that creditors cannot get at domain names because domain names are contract rights rather then property. To the extent Kremen did not refute Umbro, this decision definitely provides the necessary ammunition to creditors. (Again, collection is state-specific, and apart from the analysis of the nature of domain names, the outcome in these cases turns on the statute in question, which vary from state to state. That said, I think given the robust marketplace in domain names, Umbro’s conception of the domain name as a personal services agreement seems outdated, and most courts will easily recognize this.)

With respect to the second question, the court acknowledges that “attaching a situs to intangible property is ... a legal fiction,” and the determination must be made in a “context-specific” manner. Fairness was relevant to the court’s determination of the appropriate situs, and the court was understandably not receptive to Zuccarini’s policy arguments that allowing a court to issue an order directed to the registry would mean that every .com and .net domain name could be levied through courts in the Northern District of California. The court also looked to the ACPA, which provides for in rem jurisdiction over certain cases where the “registrar, registry, or other domain name authority” is located. Although this was not an ACPA case, the court found the structure set up by the statute persuasive and that the writ was appropriately issued from Northern District of California since VeriSign (the registry for .com domains) is located there.

My reaction: The decision clears up two things. Although post Kremen v. Cohen there shouldn’t have been much dispute that domain names are property which are subject to the claims of creditors, the case clears up any lingering doubt that may have existed. (Kremen and this case applied California law, but the result shouldn’t vary much across other states.) Second, the decision makes clear that a court which has jurisdiction over the registry can issue an order allowing the creditor to get at the domain names. The case also implicitly affirms that getting a receiver appointed to sell the domain names is the appropriate route for the creditor. Getting the name transferred to the creditor is not a remedy allowed under California law (Palacio Del Mar Homeowners Ass’n, Inc. v. McMahon). Additionally, a transfer of domain names from a cybersquatter to a judgment creditor raises some issues around potential infringement of third party rights through sales or other exploitation of the domain names. (See this post on Bosh v. Zavala for some discussion of those issues.) The method ultimately used by DS in this case (a receiver) avoids all of these issues, or at least shifts them over to the receiver rather than the creditor.

Finally, as mentioned above, this ruling makes clear that regardless of whether a domain name is registered through a foreign registrar, a court having jurisdiction over the registry can issue an order directing transfer of the domain names to a receiver. With respect to .com and .net domain names, this means that creditors can try to get at these domain names through proceeding in the Northern District of California (as the court notes, VeriSign is the registry for .com and .net domain names and is headquartered in Mountain View). While the ACPA allows plaintiffs to file in rem suits where the registry is located, it’s nice (for creditors) to have a similar ruling in the post-judgment context, and one from the Ninth Circuit as well.

Will this cause a rush of similar claims to be filed in the Northern District of California? It’s tough to say, but even post Kremen, it does not seem like there’s been a ton of post-judgment collections activity with respect to domain names. From a practitioner’s standpoint, it’s certainly nice to have this rule on the books.

An odd footnote: Zuccarini is a colorful character whose internet exploits have gotten him in trouble with the law. He was arrested in 2003. (Here’s a post at CircleID rounding up reactions to his arrest.) According to his Wikipedia entry which contains a link to a Bureau of Prisons search, he was released in 2005.