Docket No. 08-17306

In the

United States Court of Appeals for the

Ninth Circuit

CBS RECOVERY, INC., A Virginia Corporation, and DALE MAYBERRY,

Plaintiffs-Appellees, v.

JOHN LAXTON, AKA johnlaxton@gmail.com, NORTH BAY REAL ESTATE, INC.,

Defendants-Appellants.

TIGER-CDM, BARNALI KALITA, AKA barnali.kalita@gmail.com, LI QIANG, AKA Jonathan Lee, AKA nameowner@yahoo.com,

RL.COM, MAT.NET, BULK REGISTER, WILD WEST DOMAINS, DBA domaincity.com, and GUAN YU,

Defendants.

_______________________________________ Appeal from a Decision of the United States District Court for the Northern District of California,

No. 06-CV-07093 · Honorable Claudia Wilken

BRIEF OF APPELLEES

STEVAN LIEBERMAN, ESQ. GREENBERG & LIEBERMAN 2142 Wisconsin Avenue Northwest Suite C-2 Washington, District of Columbia 20007 (202) 625-7001 Telephone

CHARLES CARREON, ESQ. ONLINE MEDIA LAW, PLLC 2165 South Avenida Planeta Tucson, Arizona 85710 (530) 841-0835 Telephone

Attorneys for Appellees, CBS RECOVERY, INC., A Virginia Corporation, and DALE MAYBERRY

COUNSEL PRESS · (800) 3-APPEAL

PRINTED ON RECYCLED PAPER

CORPORATE DISCLOSURE STATEMENT

This statement is made pursuant to Federal Rule of Appellate Procedure

26.1. Plaintiff-Appellee CRS Recovery, Inc. is a corporate entity and has no parent

corporation, subsidiaries or affiliates that have issued shares to the public.

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TABLE OF CONTENTS

CORPORATE DISCLOSURE STATEMENT .................................................. ante TABLE OF AUTHORITIES ................................................................................ iii JURISDICTIONAL STATEMENT ........................................................................ 1 NINTH CIRCUIT LOCAL RULE 28-2.6 STATEMENT ....................................... 1 STATEMENT OF THE ISSUES PRESENTED FOR REVIEW ............................ 1 STANDARD OF REVIEW .................................................................................... 1 STATEMENT OF THE CASE ............................................................................... 2 STATEMENT OF THE FACTS ............................................................................. 3

CRS's Acquisition of Lawful Title to RL.Com .............................................. 3 Dale Mayberry, The Original Registrant of RL.Com and MAT.Net .............. 4 Li Qiang, User # 1775470, Acquires Control of MAT.Net............................ 5 Li Qiang Usurps the “dale@mat.net” Email Address .................................... 6 Li Qiang Uses dale@mat.net to Transfer RL.Com To Himself ..................... 6 Li Qiang Approves His Own Transfer Request ............................................. 7 Laxton Refuses To Return The Stolen Domain ............................................. 8 Plaintiffs-Appellees Motion For Summary Adjudication .............................. 9 Laxton's Arguments Below ......................................................................... 10 Oral Argument on September 18, 2008 ....................................................... 10

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The Order Granting Summary Adjudication ............................................... 13

SUMMARY OF THE ARGUMENT .................................................................... 18

I. THE DISTRICT COURT PROPERLY APPLIED CALIFORNIA LAW ........................................................................ 18

II. THE DORMANT COMMERCE CLAUSE ARGUMENT

WAS FORFEITED WHEN NOT RAISED BELOW ........................ 29 III. CONCLUSION ................................................................................ 33

CERTIFICATE OF COMPLIANCE..................................................................... 34 STATEMENT OF RELATED CASES ................................................................. 35 CERTIFICATE OF SERVICE .............................................................................. 36

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TABLE OF AUTHORITIES CASES A-1 Ambulance Serv., Inc. v. County of Monterey,

90 F.3d 333 (9th Cir. 1996) ................................................................... 29, 31 Abogados v. AT&T, Inc.,

223 F.3d 932 (9th Cir. 2000) ....................................................................... 21 Bolker v. C.I.R.,

760 F.2d 1039 (9th Cir. 1985) ............................................................... 30, 31 Butler v. Adoption Media, LLC,

486 F. Supp. 2d 1022 (N.D. Cal. 2007) ....................................................... 22 Canyon Ferry Road Baptist Church of East Helena, Inc. v. Montana

Commissioner of Political Practices, F.3d 2009 U.S. App. LEXIS 3693 (9th Cir. Feb. 25, 2009) ........................... 2

Downing v. Abercrombie & Fitch,

265 F.3d 994 (9th Cir. 2001) ....................................................................... 23 Express Media Group, LLC v. Express Corp.,

2007 WL 1394163 (N.D. Cal.) .............................................................. 16, 28 Gieg v. DDR, Inc.,

407 F.3d 1038 (9th Cir. 2005) ..................................................................... 29 Hormel v. Helvering,

312 U.S. 552 (1941) .................................................................................... 29 Hurtado v. Superior Court,

11 Cal. 3d 574, 114 Cal. Rptr. 106, 522 P.2d 666 (Cal. 1974) .................................................... 14, 20, 25, 26, 27

Insurance Co. of North Am. v. Federal Express Corp.,

189 F.3d 914 (9th Cir. 1999) ....................................................................... 19

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Int'l Union of Bricklayers & Allied Craftsman Local Union v. Martin Jaska, Inc., 752 F.2d 1401 (9th Cir. 1985) ..................................................................... 29

Kimes v. Stone,

84 F.3d 1121 (9th Cir. 1996) ....................................................................... 32 Klaxon Co. v. Stentor Elec. Mfg. Co.,

313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) .................................... 19 Kremen v. Cohen,

337 F.3d 1024 (9th Cir. 2003) ............................................................... 19, 27 Moore v. Czerniak,

No. 04-15713 (9th Cir. 07/28/2009) ............................................................ 29 Naftzger v. Am. Numismatic Soc’y,

42 Cal. App. 4th 421, 432 (1996) ................................................................ 28 Network Solutions Inc. v. Umbro,

259 Va. 759 (2000) ............................................................................... 19, 22 Pereira v. Utah Transport, Inc.,

764 F.2d 686 (9th Cir.1985), cert. dismissed, 475 U.S. 1040, 106 S.Ct. 1253, 89 L.Ed.2d 362 (1986) ......................................................... 2

Pike v. Bruce Chruch, Inc.,

397 U.S. 137 (1970) .................................................................................... 31 Reich v. Purcell,

67 Cal. 2d 551, 432 P.2d 727, 63 Cal. Rptr. 31 (1967) .................... 25, 26, 27 Rothman v. Hospital Service of Southern California,

510 F.2d 956 (9th Cir. 1975) ....................................................................... 30 Schroeder v. Auto Driveway Co.,

11 Cal.3d 908 (1974) .................................................................................. 28 Sims Snowboards, Inc. v. Craig Kelly and Burton Corp.,

863 F.2d 643 (1988).................................................................................... 19

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Soc’y of Cal. Pioneers v. Baker, 43 Cal. App. 4th 774 (1996) .................................................................. 15, 28

Tucci v. Club Mediterraneee, S.A.,

89 Cal.App. 4th 180 (2001)............................................................. 16, 19, 24 United States v. Greger,

716 F.2d 1275 (9th Cir. 1983) ..................................................................... 30 United States v. Patrin,

575 F.2d 708 (9th Cir. 1978) ....................................................................... 30 United States v. Whitten,

706 F.2d 1000 (9th Cir. 1983) ..................................................................... 30 Yeater v. United States,

397 F.2d 975 (9th Cir. 1968) ....................................................................... 30 Zimmerman v. Allstate Ins. Co.,

179 Cal.App. 3d 840 (1986) .................................................................. 15, 22 STATUTES 28 U.S.C. Sec. 1291 ................................................................................................ 1 Cal. Civil Code §§ 3379-3380............................................................................... 18

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JURISDICTIONAL STATEMENT

The District Court had jurisdiction to entertain this matter because the

parties are diverse with Plaintiffs-Appellees being citizens of Virginia and

Defendants-Appellants being citizens of California. In addition, the amount in

controversy is $425,000. The Ninth Circuit Court of Appeals has jurisdiction to

entertain this appeal pursuant to 28 U.S.C. Sec. 1291. Final judgment was rendered

on October 6, 2008.

NINTH CIRCUIT LOCAL RULE 28-2.6 STATEMENT

Plaintiff-Appellees have no knowledge of any pending cases related to the

issues herein.

STATEMENT OF THE ISSUES PRESENTED FOR REVIEW

1. Whether the District Court properly applied California law to decide a

lawsuit for conversion of the RL.Com Internet domain name against a California

resident who had purchased the domain in California.

2. Whether Defendant-Appellant may attack the judgment on grounds

not raised below, to wit, that the District Court’s choice of California law “violates

the dormant commerce clause.”

STANDARD OF REVIEW

The standard of review of the trial court’s order of summary judgment is de

novo. Canyon Ferry Road Baptist Church of East Helena, Inc. v. Montana

Commissioner of Political Practices, F.3d 2009 U.S. App. LEXIS 3693 (9th Cir.

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Feb. 25, 2009). A district court’s decision concerning the appropriate choice of

law is reviewed de novo. Pereira v. Utah Transport, Inc., 764 F.2d 686, 689 (9th

Cir.1985), cert. dismissed, 475 U.S. 1040, 106 S.Ct. 1253, 89 L.Ed.2d 362 (1986).

STATEMENT OF THE CASE

This is an action by Plaintiffs-Appellees, CRS Recovery, Inc. (“CRS”) and

Dale Mayberry (collectively “Plaintiffs-Appellees”) to recover the RL.COM

domain name that was hijacked by a third party and subsequently purchased and

ultimately used by Defendants-Appellants, John Laxton and Northbay Realestate,

Inc. (collectively “Laxton” or “Defendants-Appellants”). Dale Mayberry

(“Mayberry”) originally registered the domain name RL.COM in 1995 through

Network Solutions, Inc. and the domain was stolen from that registrar in or about

2003 by Li Qiang, a citizen of China, who usurped the dale@mat.net email address

through which Mayberry exercised control over the registration. Subsequently, Li

Qiang sold the domain to Barnali Kalita, a citizen of India, who in turn sold it to

John Laxton. When John Laxton took possession of the domain in 2005, he

registered the RL.COM domain with Bulk Register in the name of his company

Northbay Real Estate, Inc., a California corporation, and leased the domain to a

seller of Internet advertising in exchange for a share of the advertising revenues.

Mayberry, the rightful owner of the domain name, and CRS Recovery, Inc.,

standing in Mayberry’s shoes as an assignee for value, brought this action under

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California law on the grounds that R.Com had been hijacked /stolen from

Mayberry’s rightful control, and that by purchasing the domain from Kalita,

Laxton had acquired only void title. The District Court found, by applying

California law, that Appellant Laxton was liable for conversion and ordered the

domain name RL.COM to be returned to Appellees. Plaintiffs-Appellees moved

for summary judgment on their conversion and declaratory relief claims, and

defendant-appellants opposed, contending, inter alia, that Virginia law applied to

the case, and barred the claims of Plaintiff-Appellees. The District Court found

that there was no conflict between California and Virginia law, and on the

undisputed facts, granted summary judgment for conversion under California law.

STATEMENT OF THE FACTS

CRS's Acquisition of Lawful Title to RL.Com

On July 21, 2005, Richard Lau, a principal of CRS Recovery, Inc. (“CRS”)

acquired the legal right to recover and possess RL.Com from the first and only

lawful registrant, Dale Mayberry (“Mayberry”), in exchange for monetary

consideration and the promise to recover MAT.Net and return it to Mayberry.

(Mayberry Dec., ¶ 16; SER 196; Exhibit 1, pages 3 – 5; SER 204-205; Lau Dec. ¶

5; SER 090.) The terms of the original assignment were fully performed, and prior

to filing the instant action, CRS had established its position as the holder of all

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Mayberry's rights to RL.Com without reservation. (Mayberry Dec., ¶¶ 16 and 19;

SER 196-197; Exhibit 1, pages 1 – 2; SER 202-203; Lau Dec. ¶ 11; SER 091.)

Dale Mayberry, The Original Registrant of RL.Com and MAT.Net

Mayberry was the first person to register RL.Com, which he did on July 23,

1995, choosing RL.Com as an acronym for "Real Life," a term used in online

gaming parlance to describe a gamer's role in the “real world.” (Mayberry Dec. ¶

2; SER 191; Rony Dec. ¶ 16; SER 027.) At that time, Mayberry was active in

online game-playing. (Mayberry Dec. ¶ 2; SER 191.) From approximately 1999

until 2001, Mayberry operated Micro Access Technologies, Inc., a company that

provided Internet access and email service to users in the Washington D.C. area

using the domain MAT.Net. (Mayberry Dec. ¶ 2; SER 191.) When Micro Access

Technologies, Inc. ceased operations in or about 2001, Mayberry maintained the

registration on the MAT.Net domain. (Mayberry Dec. ¶ 2; SER 191.) RL.Com

and MAT.Net are the only two domains Mayberry ever owned. (Mayberry Dec. ¶

2; SER 191.)

Domain registrants pay yearly registration fees, sometimes for years in

advance. (Mayberry Dec. ¶ 5; SER 192.) Mayberry paid registration fees for

RL.Com and MAT.Net to Network Solutions, Inc. (“NSI”).1 (Mayberry Dec. ¶ 6;

1 NSI’s Virginia presence does not make the Internet “Virginia-centric.” Like many other Internet institutions, NSI’s corporate parent Verisign is located in California. California has a “strong nexus with all of the primary institutions of Internet

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SER 193.) On July 23, 2002 Mayberry renewed his registration of RL.Com for

three years, and NSI confirmed a new expiration date of July 24, 2005. (Order,

15:20-22; ER 112; Mayberry Dec. ¶ 6; SER 193; NSI Dec. ¶¶ 6 - 9; SER 096; NSI

Att. “C,” pages 41 and 44 - 47; SER 181 and 184-187; Rony Dec. ¶ 17 and Exh. B;

SER 027 and 059.) Mayberry made dale@mat.net his contact email as the

Registrant of RL.Com. (Mayberry Dec. ¶ 5; SER 192-193.) Since Mayberry had

paid his registration fees for years in advance, he reasonably believed his

ownership of RL.Com was secure.2 (Rony Dec. ¶ 18; SER 027; Supp. Mayberry

Dec. ¶ 3; SER 018.)

Li Qiang, User # 1775470, Acquires Control of MAT.Net

According to NSI, “on Dec 19, 2003, the domain MAT.Net was transferred

from Micro Access Technologies by Beijing Sinonets Network & Telcom Co,

Ltd.” (NSI Dec. ¶ 11; SER 096-097.) Pursuant to the transfer, “the Admin

Contact for MAT.Net became “Qiang, Li,” and the Network Solutions account for

MAT.Net was “deleted.” (NSI Dec. ¶ 11; SER 096-097; Page 4 and 14 of Att.

“B”; SER 112 and 122.) Li Qiang was NSI User # 1775470. (NSI Dec. ¶ 17; SER

097.)

governance.” (Rony Dec. ¶¶ 5 – 10; SER 024-025.) 2 Laxton argues Mayberry had to maintain a website to avoid abandoning RL.Com, and should have updated his NSI contact information, even though Li Qiang had usurped dale@mat.net. Plaintiffs-Appellees rebutted these contentions (Rony Dec. ¶¶ 42 and 64; SER 034-035 and 040), and the District Court rejected them as a matter of law. (Order, 16:5-13; ER 113.)

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Li Qiang Usurps the “dale@mat.net” Email Address

As soon as Li Qiang transferred MAT.Net from Mayberry to BSNT, he

changed the “hosting” from NSI's servers to another set of servers at BIM.Com.

(Mayberry Dec. ¶ 9; SER 194; NSI Dec. ¶ 12; SER 097.) By controlling

MAT.Net, Li Qiang also blocked Mayberry's receipt of emails at dale@mat.net.

(Mayberry Dec. ¶ 9; SER 194; Rony Dec. ¶¶ 21 and 23; SER 028, 029.) The

person able to send and receive emails from dale@mat.net was Li Qiang.

(Mayberry Dec. ¶ 9; SER 194; Rony Dec. ¶¶ 21 and 23; SER 028, 029.) Mayberry

did not know Li Qiang had usurped his dale@mat.net email account, or that his

three-year registration with NSI could be undermined by forgery. (Mayberry Dec.

¶¶ 6 and 13; SER 193 and 195; Supp. Mayberry Dec. ¶¶ 4 – 7; SER 018-019.)

Li Qiang Uses dale@mat.net to Transfer RL.Com To Himself

On December 23, 2003, Li Qiang, NSI User # 17754740, changed his

official email address from lee@bim.com to dale@mat.net. (Rony Dec. ¶ 20;

SER 028; NSI Dec. ¶ 18; SER 097.) Timing his actions to fall on the day before

Christmas Eve, at 2:07:01 am, December 23, 2003, Li Qiang sent an email from

dale@mat.net using IP address 218.0.215.159, located in China, requesting that

NSI transfer the domain to Li Qiang. (NSI Dec. ¶¶ 19 - 20; SER 097; NSI Att.

“C,” pages 5 and 7; SER 145 and 147; Rony Dec. ¶ 24; SER 029.)

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Li Qiang Approves His Own Transfer Request

Less than one minute after he sent the request, Li Qiang received the

Authorization Email NSI had addressed to Mayberry at dale@mat.net. (Rony Dec.

¶ 25; SER 29; NSI Dec. ¶¶ 26 - 27; SER 098-099; NSI Att. “C,” pages 3, 4, 7, 8,

13, and 15; SER 143, 144, 147, 148, 153, and 155.) The Authorization Email that

Li Qiang received at dale@mat.net read as follows:

“Dear Dale Mayberry, We recently received a request to transfer the following domain name(s) from you: RL.COM To: Li Qiang Date of the original request: December 23, 2003 2:07:01 AM EST Upon completion of the transfer, the registrant for the domain names(s) identified above will be Li Qiang. However, for security reasons, we must have your authorization before we can complete the processing. If this is a valid request and you wish to approve this transfer, please access the secure Web page at https://registrar-transfers.com/...3 or paste the URL into your browser. Then follow the instructions to authorize the domain name registration transfer for the domain names(s). If you don't respond within 15 days from the date of the original request shown above, the request will be canceled. If you have any questions or need assistance, please e-mail us at customersservice@networksolutions.com. Or call to speak to Customer Service at 1-888-642 or +1-703-742-0914 outside the United States and Canada. Network Solutions is committed to delivering high quality services to meet your online needs. We hope to have another opportunity to serve you in the future. Sincerely, Network Solutions Customer Support”

3 This hyperlink has been abbreviated.

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Mayberry never saw NSI's Authorization Email. (Mayberry Dec. ¶ 12; SER

195.) As soon as Li Qiang received it, misrepresenting himself as Mayberry, he

immediately approved the transfer and thus acquired unlawful control over the

registration of RL.Com. (Rony Dec. ¶ 25; SER 29; NSI Dec. ¶ 28; SER 099; NSI

Att. “C,” page 5; SER 145; Mayberry Dec. ¶ 14; SER 195-196.) If Mayberry had

received the Authorization Email, he would not have authorized the transfer

request, and would have actively denied it. (Mayberry Dec. ¶ 13; SER 194.)

Network Solutions has no record of any “documentation communicating that Dale

Mayberry sold or otherwise transferred his rights to be the registrant of MAT.Net

or RL.Com to Li Qiang.” (NSI Dec. ¶ 32; SER 099.) Mayberry was not able to

recover the domain through reasonable efforts made following his discovery that

Li Qiang had hijacked RL.Com, and as set forth infra, transferred all his rights to

recover and possess RL.Com to Richard Lau, and thereafter, to CRS. (Order,

15:22-23; ER 112; Mayberry Dec. ¶¶ 15 - 16; SER 196; Lau Dec. ¶¶ 5, 6, and 11;

SER 089-090; Supp. Mayberry Dec. ¶¶ 9 – 10; SER 019-020.)

Laxton Refuses To Return The Stolen Domain

Laxton bought RL.Com from an individual in India named Barnali Kalita for

$15,000, paid via two PayPal payments of $7,500 on May 6, 2005 and May 20,

2005. (Laxton Depo., 8:13 - 22; 10:19 – 11:1; SER 209, 211, 212; Laxton 30(b)(6)

Depo., 47:25 – 50:9; SER 245-247; Exhibit 5; SER 261-266.) Laxton negotiated

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with Barnali Kalita via email, but testified that he destroyed the emails, and has no

substantial recollection of their contents. (Laxton Depo., 8:23 – 9:04; SER 209-

210; 10:19 – 12:4; SER 211-213.) From May 15, 2005 to January 21, 2008,

Laxton received at least $2,053.83 in revenue by "renting" RL.Com as advertising

space to Thought Convergence, Inc., doing business on the Internet as

TRAFFICZ.com (herein “TRAFFICZ.com”). (Rony Dec. ¶ 10; Laxton Depo.,

15:13-18; 24:18 – 25:8; SER 216, 222-223; Supp. Mayberry Dec. ¶ 10; SER 020.)

On February 27, 2006, counsel for CRS sent a formal demand letter to Laxton,

following up on an oral request, asking Laxton to return the domain name to

Mayberry. (Lieberman Dec. ¶ 2; SER 086-087; Exh. 3; SER 249-251.) Laxton

refused to return the domain. (Lieberman Dec. ¶ 2; SER 086-087.) Plaintiffs-

Appellees filed the instant action on November 15, 2006, long before the

expiration of the statute of limitations. (Supp. Mayberry Dec. ¶ 11; SER 021;

Order, 16:24 – 17:1; ER 113-114.)

Plaintiffs-Appellees Motion For Summary Adjudication

Based on the foregoing undisputed facts, on July 17, 2009, Plaintiffs-

Appellees moved for summary adjudication on the grounds that they were entitled

to judgment as a matter of law on the first and fourth claims for relief, for

Conversion and Declaratory Relief, respectively.

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Laxton's Arguments Below

Laxton argued, in opposition to summary adjudication, and in support of his

own motion for summary judgment, that: Virginia law does not recognize the tort

of conversion of domain names, and must be applied to the case; Mayberry

abandoned his claims, waived his rights, and unreasonably delayed in filing suit;

Laxton was a good-faith purchaser; and, Mayberry’s assignment to CRS was

invalid. (Memorandum of Points & Authorities In Support of Defendants’ Motion

for Summary Judgment, herein “Laxton’s MSJ,” SER 063-085.) Laxton attempted

to support various of his arguments with a declaration of John Levine, PhD, whose

opinions were proffered as those of an expert. Plaintiffs-Appellees rebutted the

Levine Declaration with that of Ellen Rony, a Federal Court-qualified domain

name expert. (Rony Dec. ¶¶ 2, 3 and 65; SER 023-024 and 040.) Laxton made no

constitutional arguments, and made no mention of the “dormant commerce

clause.”

Oral Argument on September 18, 2008

On September 18, 2008, the Court held oral argument on the cross-motions.

District Judge Claudia Wilken declared from the outset that California law applied

to the case, and explained her analysis at the request of counsel:

MR. HORNSTEIN: COULD THE COURT ARTICULATE ITS REASONING BEHIND THE APPLICATION OF CALIFORNIA LAW?

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THE COURT: THERE WILL BE A WRITTEN ORDER. THE REASON IS, IT'S THE TEST OF “IS THERE AN ACTUAL CONFLICT? IS THERE PREJUDICE?” YOU ARE THROWING OUT A LOT OF THINGS ABOUT VENUE, JURISDICTION, AND CONTRACTS, AND THINGS LIKE THAT, BUT THAT -- THIS ISN'T A SUIT ON A CONTRACT. IT ISN'T A SUIT ON A TORT THAT HAPPENED IN A CERTAIN PLACE. WE ARE NOT TALKING ABOUT VENUE OR JURISDICTION, WE ARE TALKING ABOUT THE GOVERNMENTAL INTEREST TEST.

MR. HORNSTEIN: YES, EXACTLY.

THE COURT: SO WE LOOK AND WE SEE THAT CALIFORNIA LAW AND VIRGINIA LAW ARE DIFFERENT.

MR. HORNSTEIN: RIGHT.

THE COURT: AND THAT IT MATTERS, AND THEN WE LOOK AT THE INTERESTS. WHAT ARE THE INTERESTS OF VIRGINIA IN PROTECTING SOMEONE WHO IS NOT A VIRGINIA CITIZEN? THE INTEREST OF CALIFORNIA ARE IN MAKING SURE THAT ITS LAW IS APPLIED OR MAKING -- PROTECTING PEOPLE IN THE WAY THAT IT WANTS TO PROTECT THEM, BUT VIRGINIA HAS NO INTEREST. VIRGINIA ISN'T TRYING TO PROTECT ANY DEFENDANT. NONE OF THE DEFENDANTS ARE VIRGINIA PEOPLE.

MR. HORNSTEIN: THE DEFENDANTS ARE --

THE COURT: NOR THE TORTFEASORS ARE NOT VIRGINIA PEOPLE. THE ONLY INTEREST VIRGINIA COULD HAVE WOULD BE TO PROTECT ITS OWN RESIDENTS FROM BEING UN -- WRONGFULLY HELD LIABLE. AND SINCE IT DOESN'T HAVE ANY RESIDENTS IN THAT POSITION, IT DOESN'T HAVE ANY INTEREST, WHEREAS CALIFORNIA DOES.

MR. HORNSTEIN: MR. LAXTON WAS THE THIRD OR FOURTH PURCHASER OF THE MARK -- OF THE URL FROM SOMEBODY OVERSEAS. THE INITIAL -- HE HAS SHOWN THAT HE CONVERTED THIS ITEM, IT HAS TO BE SHOWN THAT UNDERLYING AN ORIGINAL CONVERSION

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OCCURRED. AND ALL THOSE ACTS TOOK PLACE IN VIRGINIA AS WE ARTICULATED. EVERYTHING TOOK --

THE COURT: THAT'S A GOOD ARGUMENT FOR JURISDICTION IN VIRGINIA. IT'S AN ARGUMENT FOR VENUE IN VIRGINIA, BUT IT ISN'T -- THAT'S NOT THE PARADIGM --***

MR. HORNSTEIN: I DISAGREE WITH THE -- I THINK IT'S THE GOVERNMENTAL INTEREST. I MEAN, IN ORDER TO SHOW THAT THE CALIFORNIA LAW APPLIES, THERE IS A CONVERSION IN CALIFORNIA, IT HAS --

THE COURT: WE ARE NOT SHOWING WHETHER THERE IS A CONVERSION IN CALIFORNIA. WE ARE SHOWING WHETHER CALIFORNIA LAW APPLIES FIRST, AND THEN ONCE WE DECIDE WHAT LAW APPLIES, THEN WE DECIDE WHETHER UNDER THAT LAW THERE IS CONVERSION. (Transcript, 9:6 - 11:8; SER, Vol. I, 10-11.)

Laxton’s counsel then argued Laxton’s asserted “abandonment” defense, but

the District Judge found no facts supporting it, and upon reaching that conclusion,

granted summary judgment from the bench:

MR. HORNSTEIN: YOUR HONOR, I MISSED SOMETHING AFTER YOU SAID CALIFORNIA LAW APPLIES. WE STILL HAVE THE ISSUE FOR TRIAL ABOUT ABANDONMENT WHICH WE RAISED.

THE COURT: I DON'T THINK THEY ABANDONED IT.

MR. HORNSTEIN: RIGHT, BUT I THINK --

THE COURT: THEY MAY HAVE ABANDONED MAT DOT COM, BUT THEY DIDN'T ABANDON RL DOT COM. THE FACT THAT THEY ABANDONED MAT DOT COM APPARENTLY IS WHAT'S ENABLED THIS PERSON TO GO IN THROUGH THE MAT DOT COM E-MAIL ADDRESS AND STEAL THE RL DOT COM NAME, BUT THE RL DOT COM NAME WAS PAID UP --

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MR. HORNSTEIN: WE RAISED THE ISSUE --

THE COURT: WELL, THE NOTION THAT AFTER SOMETHING HAS BEEN STOLEN FROM YOU, YOU SORT OF GIVE UP TRYING TO GET IT BACK DOESN'T MEAN YOU ABANDONED IT. IF SOMEBODY GRABS MY PURSE ON THE STREET AND I CHASE THEM FOR A WHILE AND THEN I GIVE UP, HAVE I ABANDONED MY PURSE? I DON'T THINK SO. (Transcript 8:3-21; SER Vol. I, 13.)

MR. HORNSTEIN: *** I THINK THERE ARE FACTUAL DISPUTES HERE. IN FACT, IN OCTOBER, HE HAD ABANDONED -- WHEN HE ABANDONED MAT DOT NET, HE ABANDONED AND WAIVED HIS RIGHTS FOR RL DOT COM. THAT'S ONE OF THE POINTS WE WERE MAKING IN THE MOTION.

THE COURT: YOU MAY BE MAKING THAT POINT, BUT I DON'T KNOW THAT THERE IS ANY EVIDENCE OF THAT. WHAT WOULD BE THE EVIDENCE OF THAT WITH RESPECT TO RL DOT COM?

MR. HORNSTEIN: THAT'S CORRECT. THAT HE HAD EVERY OPPORTUNITY TO CHANGE THE ADMINISTRATIVE CONTACT AND DECIDED NOT TO. HIS BUSINESS WENT DOWN. HIS BUSINESS WAS THE -- HE AND THE BUSINESS WERE ABANDONED IN '01. THEY WERE THE OWNERS OF RL DOT COM. BY HIS ABANDONING HIS BUSINESS AND BY ABANDONING THE URL THAT WAS THE ADMINISTRATIVE CONTACT FOR RL DOT COM, HE ABANDONED RL DOT COM. THAT'S OUR POSITION. THAT'S THE FACTS WE SUBMITTED UP HERE, I BELIEVE, SHOW.

THE COURT: NO, I DON'T THINK SO. I WILL GRANT SUMMARY JUDGMENT ON THE FIRST AND FOURTH CAUSES OF ACTION. (Transcript, 13:1-20; SER Vol. I, 13.)

The Order Granting Summary Adjudication

On September 26, 2008, Judge Wilken issued an 18-page Order Granting

Plaintiffs’ Motion for Summary Adjudication and Denying Defendants’ Cross-

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Motion for Summary Adjudication, addressing every one of Laxton’s contentions

is considered detail. Applying California choice of law rules as prescribed by

Orange Street Partners v. Arnold, the District Court applied California’s

“governmental interest” test, noting inter alia that “the fact that Mayberry was

originally injured in Virginia” did not “indicate that Virginia law should apply,”

because “in adopting the governmental interest approach … California displaced

the previous approach of applying the law of the state where the injury occurred.”

(Order, note 5 at 11, citing Hurtado v. Superior Court, 11 Cal.3d 574, 579-580

(1974); ER 108.)

Laxton failed to articulate any specific policy to be advanced by applying

Virginia law. (Order, 9:23-10:2; ER 106-107.) Laxton’s argument, held the

District Court, “amounts to saying that Virginia’s interest in having its rule applied

is in not having another State’s rule applied.” (Order, 9:23-10:2; ER 106-107.)

Mindful of its duty to “focus on the specific interests that are advanced by the

rule,” the District Court discerned Virginia’s interest in “providing [domain]

purchasers with a predictable limitation of their potential liability.” (Order, 10:11-

18; ER 107.) “If Defendants resided in Virginia or if Laxton had purchased rl.com

in Virginia, Virginia could be said to have an interest in applying its rule in this

case.” (Order, 10:24-26; ER 107.)

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However, Laxton is a citizen of California,4 and starting from that point, the

District Court found six governmental interest factors that established that Virginia

had no interest in having its law applied, whereas California had strong interests in

the application of its law. First, “Laxton is a citizen of California and the conduct

that gave rise to Defendants’ liability for conversion is Laxton’s purchase of rl.com

from Kalita;” second, “no aspect of the transaction took place in Virginia;” third,

Laxton had “no justifiable expectation that [his] conduct would be shielded from

liability;” fourth, Virginia had “no interest in protecting the conduct of a California

resident when that conduct has no connection to Virginia;” fifth, application of

Virginia law to the case would “do nothing to further that State’s interest in

providing its residents with a predictable definition of liability,” and sixth,

“California has an interest in regulating conduct that occurs within its borders and

ensuring that redress is available when such conduct is tortious.” (Order, 10:26 –

11:19; citing Zimmerman v. Allstate Ins. Co., 179 Cal.App. 3d 840, 846 (1986) for

the sixth factor; ER 107-108.)

Based on the foregoing analysis, the District Court concluded that

Defendants-Appellants had failed to establish the existence of a true conflict:

4 The District Court, inter alia, found that Laxton had converted the domain while residing in California, by citing Soc’y of Cal. Pioneers v. Baker, 43 Cal.App.4th 774, 781-83 (1996) for the “longstanding rule that a cause of action for conversion against a subsequent purchaser of the property accrues when the purchaser obtains possession, not at the time of the original conversion.” (ER 108.)

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“Because Virginia does not have an interest in the application of its rule to this case whereas California does, the posited conflict is a false one. The Court will therefore apply California law.” Tucci v. Club Mediterraneee, S.A., 89 Cal.App. 4th 180, 188-89 (2001)

The District Court then applied California law to the undisputed facts:

“Pursuant to California law … Mayberry had a property right to rl.com at the time it was taken from him. He was not lawfully dispossessed of that right by Qiang’s seizure of the domain without Mayberry’s authorization, and thus it was not possible for Defendants to acquire a right to the domain superior to Mayberry’s by virtue of Laxton’s purchase from Kalita. Defendants are therefore prima facie liable for conversion.”

The District Court considered and rejected Laxton’s contention that he could

assert a “good-faith purchaser” defense to conversion. Citing with approval Judge

Alsup’s decision in Express Media Group, LLC v. Express Corp., 2007 WL

1394163 (N.D. Cal.)5, the District Court drew the same distinction between

involuntary transfers and fraudulent transfers as did Judge Alsup: “An involuntary

transfer results in void title, while a voluntary transfer, even if fraudulent, results in

voidable title.” (Order, 14:15-17; ER 111.) “Accordingly, mere possession of a

domain name that was involuntarily transferred from a rightful owner is sufficient

to convey liability for conversion.” (Order, 14:27 – 15:2; SER 111-112; citing

Express Media, supra; SER 267-277.) Finding that “Defendants have not pointed

to any evidence that Mayberry voluntarily transferred the title of rl.com to Qiang,”

5 Submitted as supplemental authority. (SER 267-277.)

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the District Court held that Laxton’s contention that he purchased “rl.com in good

faith” was “of no consequence.” (Order 14:7 – 15:6; SER 111-112.)

As had been the case at oral argument, the District Court found no facts to

support Laxton’s asserted “abandonment” defense:

“In order to succeed on an abandonment defense to conversion under California law, however, a defendant must show a ‘clear, unequivocal, and decisive act’ demonstrating a waiver of the plaintiff’s property rights. [Citations omitted.] Defendants point to no such affirmative relinquishment of Mayberry’s right to exercise control over rl.com. It is undisputed that Mayberry had paid to register the domain with NSI through July 24, 2005.” (Order 15:9-21; ER 112.)

With respect to Laxton’s claim that plaintiffs had delayed unreasonably in

filing suit, even though Defendants appeared to “have withdrawn this argument,”

the District Court decided the issue in favor of Plaintiffs-Appellants on two

grounds. First, “The statute of limitations governs the timeliness of Plaintiffs’

claim, not the equitable doctrine of laches.” (Order, 16:23-25; ER 113.) Second,

“Plaintiffs did not delay unreasonably in bringing this lawsuit, and thus the

doctrine of laches, even if it applied, would not prevent them from asserting their

claim.” (Order, 17:2-4; ER 114.)

The District Court held that the assignment from Mayberry to CRS was

valid, disallowing Laxton’s contention that Mayberry could not assign the rights to

the domain because Mayberry’s registration agreement with NSI was non-

assignable. The District Court dismissed the suggestion, and found the non-

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assignability clause in the NSI registration agreement was irrelevant to the case.

“Plaintiffs do not assert claims against defendants for breach of the service

agreement; they assert a conversion claim.” (Order, 17:5-12; ER 114.)

Having thoroughly considered all of Laxton’s contentions and having found

them unsupported by facts or law, the District Court granted summary judgment on

the conversion and declaratory relief claims, and granted Plaintiffs-Appellants

“specific recovery of the domain” under Cal. Civil Code §§ 3379-3380.

SUMMARY OF THE ARGUMENT

The District Court properly applied California law to decide that the choice

of law issue raised by Laxton was merely a false conflict, because California was

the only state that had an interest in applying its law to the case, and Virginia had

no interest in precluding its citizens from recovering property from a California

defendant who converted and exploited the domain name while residing in

California. Defendants-Appellants have essentially conceded that when California

law is applied to the undisputed facts, Plaintiffs-Appellees must prevail. No other

issues in defense are properly before the Court, and accordingly, the District

Court’s grant of summary judgment must be affirmed.

I. THE DISTRICT COURT PROPERLY APPLIED CALIFORNIA LAW

The District Court in this case performed its analytical duties rigorously and

committed no error. First, the District Court rightly considered the choice of law

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question as a threshold issue, because under the holding of Kremen v. Cohen, 337

F.3d 1024 (9th Cir. 2003), California recognizes domain names as property subject

to conversion and judicial recovery, while Virginia does not. Network Solutions

Inc. v. Umbro, 259 Va. 759 (2000). Second, the District Court properly applied

California choice of law rules to analyze the issue. Sims Snowboards, Inc. v. Craig

Kelly and Burton Corp., 863 F.2d 643 (1988), citing Klaxon Co. v. Stentor Elec.

Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). Under

California choice of law rules, the party seeking to apply foreign law must

establish that the foreign rule of decision will further the interest of that foreign

state and therefore that it is an appropriate one for the forum to apply to the case

before it.” Tucci v. Club Mediterranee, S.A., 89 Cal. App. 4th 180; 107 Cal.Rptr.

2d 401 (2001). Third, the District Court correctly determined that because

Virginia had no interest in having its law enforced, the case presented merely a

“false conflict,” and California was the only state that had an interest in the

enforcement of its laws.

Even though two states may have different rules applicable to the subject

matter, this often generates merely a false conflict. Only if both states have a

legitimate but conflicting interest in applying its own law will the court be

confronted with a "true conflict" case. Insurance Co. of North Am. v. Federal

Express Corp., 189 F.3d 914, 921 (9th Cir. 1999).

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A classic false conflict was found in Hurtado v. Superior Court, 11 Cal. 3d

574, 114 Cal. Rptr. 106, 522 P.2d 666 (Cal. 1974), a wrongful death case brought

by the widow and children of a Mexican citizen killed in a car accident in

Sacramento County, California. On a petition for writ of mandate, the California

Appellate Court entered a writ of mandate directing the trial court to cap damages

at “24,334 pesos or $1,946.72 at the applicable exchange rate of 12.5 pesos to the

dollar.” The California Supreme Court reversed, explaining preliminarily:

“Although the two potentially concerned states have different laws, there is still no problem in choosing the applicable rule of law where only one of the states has an interest in having its law applied." Hurtado, supra, 11 Cal.3d at 580.

Mexico, the court explained, had no interest in having its law applied to the case at

bar, because applying it would not further the purpose of its adoption – protecting

Mexican citizens from excessive damages awards:

“Since it is plaintiffs and not the defendants who are the Mexican residents in this case, Mexico has no interest in applying its limitation of damages – Mexico has no defendant residents to protect and has no interest in denying full recovery to its residents injured by non-Mexican defendants. In the case at bench, California as the forum should apply its own measure of damages for wrongful death, unless Mexico has an interest in having its measure of damages applied. Since, as we have previously explained, Mexico has no interest whatsoever in the application of its limitation of damages rule to the instant case, we conclude that the trial court correctly chose California law.” Hurtado, supra, 11 Cal.3d at 582.

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In Abogados v. AT&T, Inc., 223 F.3d 932, 934 (9th Cir. 2000), this Court

outlined the analytical method to be applied when a claimed conflict of laws

appears:

“California applies a three-step ‘governmental interest’ analysis to choice-of-law questions. (Citations omitted.) First, the court examines the substantive law of each jurisdiction to determine whether the laws differ as applied to the relevant transaction. (Citations omitted.) Second, if the laws do differ, the court must determine whether a ‘true conflict’ exists in that each of the relevant jurisdictions has an interest in having its law applied. Id. ‘If only one jurisdiction has a legitimate interest in the application of its rule of decision, there is a `false conflict' and the law of the interested jurisdiction is applied.’ (Citation omitted.) Abogados v. AT&T, Inc., 223 F.3d at 934.

The District Court first found that Virginia law expressed an interest in

providing domain name buyers with “a predictable limitation for their liability,”

and then considered whether that interest would “actually be furthered by …

preventing its citizens, like Mayberry, from recovering a domain name that has

been stolen from them.” (Order 10:7-23; ER 107). Noting that the “Defendants

have cited no authority to support [that] view,” the District Court found that

“[a]pplying Virginia’s law in this instance would … do nothing to further that

State’s interest in providing its residents with a predictable definition of liability.”

(Order, 11:13-15; ER 108.)

California, however, has a legitimate interest in “providing its residents with

a predictable definition of liability” and “in regulating conduct that occurs within

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its borders and ensuring that redress is available when such conduct is tortious.”

(Order, 11:11-19, citing Zimmerman v. Allstate Ins. Co., 179 Cal.App. 3d 840, 846,

224 Cal.Rptr. 917 (1986); ER 108.) California also has a significant interest in

protecting the rights of litigants when failure to apply California law would

effectively undermine such law. Butler v. Adoption Media, LLC, 486 F. Supp. 2d

1022, 1052 (N.D. Cal. 2007). As the District Court also found, California residents

who buy and use domains in California cannot reasonably expect to be shielded

from liability for conversion by invoking the law of a foreign state to which they

have no connection. (Order, 11:6-18; ER 108.)

Defendants-Appellants argue here that Virginia’s rule in Network Solutions

Inc. v. Umbro, 259 Va. 759 (2000) circumscribes the property rights of Virginia in

every state in the nation. Indeed, if Umbro, supra, stood for all that Laxton

contends, domains owned by Virginians would become especially desirable items

of theft, since their mere provenance would provide a defense to the wrongdoers.

Not surprisingly, the rule in Umbro has no such origins. Umbro was grounded in

the Virginia District Court’s concern that allowing garnishment of domain names

would allow garnishment of Network Solutions’ services and correspondingly, the

garnishment of any service of a Virginia resident that resulted in an “exclusive

right.” Umbro, 259 Va. 759, 771 (2000).

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In summary, the Umbro decision protects Virginia entities from property

claims, and does not prevent them from asserting property claims, and its holding

should not be distorted to preclude Virginia persons and companies from asserting

property claims in other jurisdictions against residents of foreign states. Virginia

has no interest in preventing its citizens from being treated equally in the

California courts with respect to their property rights. Accordingly, the District

Court properly concluded that “[b]ecause Virginia does not have an interest in the

application of its rule to this case whereas California does, the posited conflict is a

false one.” (Order, 13; 2-5; ER 110.)

The holding of Downing v. Abercrombie & Fitch, 265 F.3d 994 (9th Cir.

2001) is directly on point. In that case, the Abercrombie & Fitch clothing

company published the names and photographs of various Hawaiian professional

surfers in “Spring Quarterly,” a publication distributed in California. The district

court dismissed the California law claim for statutory misappropriation because the

surfers would not have had a statutory claim under Hawaiian law. The Ninth

Circuit reversed, finding that although the photographs were of Hawaiians in

Hawaii, Spring Quarterly was distributed, and therefore the misappropriation

occurred, in California. Abercrombie & Fitch, 265 F.3d at 997. This Court

explained its reasoning in a manner that illuminates the proper result in the case at

bar:

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“By distributing its catalog within California, Abercrombie was operating within its borders. . . . Hawaii did not place any limitation on recovery; instead it simply did not provide for the extent of relief California does in this type of action. It is pure fancy to believe that Hawaii would wish to restrict its residents from recovery that others could obtain in California solely because it had not enacted a statute like California’s to complement its common law action for the same offense.” Abercrombie, 265 F.3d at 997 (emphasis added).

Similarly, it is “pure fancy” to believe that Virginia would wish to restrict its

residents from recovering stolen domain names from Californians under California

law. Laxton, who has no connection with Virginia, is in no position to advocate

the interests of its citizens, or to advance the purposes of its laws. Nor could

Laxton, as a California citizen buying RL.Com in California, harbor any justifiable

expectation that his actions would be shielded from liability for conversion. Like

the Abercrombie defendants, Laxton was a California resident who commercially

exploited RL.Com in California, and was properly found liable for conversion

under California law.

Applying Virginia law to make a transaction lawful that would otherwise be

unlawful would undermine California’s interest in controlling property transactions

within the state, and make it impossible to define the liability for a crucial

California tort without making a survey of all state laws. In Tucci, supra, such

concerns compelled the district court to apply the law of the Dominican Republic.

Tucci, 89 Cal. App. 4th at 193 (applying foreign law would seriously undermine

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the Dominican Republic’s vital interest in fostering business investments and

development and dealing with injurious conduct within its borders).

Laxton invokes Reich v. Purcell, 67 Cal. 2d 551, 432 P.2d 727, 63 Cal. Rptr.

31 (1967) in support of the position that Virginia law should have been applied to

this case, but his reliance is based on a fundamental misreading of the case. In

Reich, the California Supreme Court “renounced the prior rule, adhered to by

courts for many years, that in tort actions the law of the place of the wrong was the

applicable law in a California forum regardless of the issues before the court.” 6

Hurtado, 11 Cal.3d at 579. In Reich, a California resident had a car accident in

Missouri and was sued in California by the estate of two deceased Ohio natives,

whose estate was being administered in Ohio. Missouri law capped wrongful

death recoveries at $25,000, while Ohio and California had no cap. The parties

stipulated to liability of either $25,000 (if Missouri law applied) or $55,000 (if

Ohio or California law applied), and left it to the trial court to determine the

outcome. The trial court applied Missouri law, and the California Supreme Court

reversed, finding that the California defendant had no claim to demand the liability

6 In lieu of the “place of the injury” approach, Reich established governmental interest analysis. Hurtado, 11 Cal.3d at 579. By arguing that Virginia law should apply because Li Qiang stole RL.Com in Virginia, Laxton urges the very rule Reich renounced. Notably, the District Court found that “Qiang … does not appear to have stolen rl.com in Virginia [and in any event] the conversion claim … is not against Qiang, it is against Defendants.” (Order, 13:20-23; ER 110.)

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protections of Missouri law: “[W]e fail to perceive any substantial interest

Missouri might have in extending the benefits of its limitation of damages to

travelers from states having no similar limitation.” Reich v. Purcell, 67 Cal. 2d at

556 (emphasis added). Similarly, in this case Virginia has no interest in extending

its liability protections to domain name buyers from California.

Laxton asserts that Reich supports the proposition that “California has no

interest in applying its law on behalf of Laxton because it serves no purpose in

protecting California residents but instead serves only the purpose of benefiting an

out of state resident with no ties to California.” (Appellant’s Brief, page 24.) But

Reich did not endorse such result-oriented interest analysis.7 Rather, Reich held

that as “a forum disinterested in the only issue in dispute,” the California court had

to choose between “the Ohio or the Missouri rule,” and chose the Ohio rule, that

deprived the California defendant of the benefit of the damages limitations, and

accorded the Ohio plaintiffs the larger recovery. Reich, 67 Cal.2d at 556.

In Hurtado, after reining in the appellate court’s excessive zeal to impose

Mexico’s parsimonious wrongful-death laws on Mexican nationals suing

Californians, the California Supreme Court expounded on the meaning of Reich to

7 Laxton’s argument seems to be that California has an interest in applying its law only when it will “protect” a California resident, and not when it will “benefit” an out of state resident. However, if “helping residents win” domain cases is a California governmental interest, then it is incomprehensible why Virginia would have an interest in forcing its residents to “lose” domain cases.

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address “a serious misreading of Reich which apparently has not been confined to

the parties before us.” 11 Cal.3d at 582. The court explained how the State of

California’s policy of deterring wrongful conduct within its borders is a significant

policy that is advanced by applying its own law:

“It is manifest that one of the primary purposes of a state in creating a cause of action in the heirs for the wrongful death of the decedent is to deter the kind of conduct within its borders which wrongfully takes life. (Citations omitted.) It is also abundantly clear that a cause of action for wrongful death without any limitation as to the amount of recoverable damages strengthens the deterrent aspect of the civil sanction: "the sting of unlimited recovery . . . more effectively [penalizes] the culpable defendant and [deters] it and others similarly situated from such future conduct." (Citations omitted.) Therefore when the defendant is a resident of California and the tortious conduct giving rise to the wrongful death action occurs here, California's deterrent policy of full compensation is clearly advanced by application of its own law.” Hurtado, supra, 11 Cal.3d at 584.

Applying California law to the undisputed facts, the District Court properly

entered summary judgment for Plaintiffs-Appellees as a matter of law. This Court

has recognized that ownership of an Internet domain name is a property right

sufficient to support a claim for conversion under California law. Kremen v.

Cohen, 337 F.3d 1024, 1031 (9th Circ. 2003). The District Court found Laxton

committed actionable conversion when he purchased the domain from Kalita.

(Order,10: 26-27 - 11:1; ER 107-108.) As the District Court observed, “‘a cause of

action for conversion against a subsequent purchaser of the property accrues when

the purchaser obtains possession, not at the time of the original conversion.’”

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(Order, 11: 2-6, quoting Soc’y of Cal. Pioneers v. Baker, 43 Cal. app. 4th 774, 781-

83, 50 Cal.Rptr. 865 (1996); ER 108.) Under California conversion law, valid title

never passes to a subsequent purchaser when the property is stolen: “Stolen

property remains stolen property,” and a thief “cannot convey valid title to an

innocent purchaser of stolen property.” (Naftzger v. Am. Numismatic Soc’y, 42 Cal.

App. 4th 421, 432 (1996). (Order, 14: 24-26; ER 111.) In a recent Northern

District conversion action to compel the return of the Express.com domain, District

Judge William Alsup rejected the good-faith-purchaser defense, holding that

“[p]ossession of the property coupled with a refusal to return it is sufficient to

support a defendant’s liability for conversion.” (Express Media Group v. Exress

Corp., 2007 WL 1394163 (N.D. Cal.) 6:19-21; SER 272; citing Schroeder v. Auto

Driveway Co., 11 Cal.3d 908, 918, 114 Cal.Rptr. 622 (1974).)

In summary, the District Court properly applied California choice of law

rules to conclude that Laxton had raised a mere false conflict, because Virginia had

no interest in having its law enforced in this action. Applying established

California law, the District Court further determined that Laxton had raised no

disputed issues of fact that would preclude entry of judgment against Defendants-

Appellants. The District Court properly granted Plaintiffs-Appellants summary

judgment for conversion and ordered specific recovery of the RL.Com domain.

Accordingly, the judgment must be affirmed.

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II. THE DORMANT COMMERCE CLAUSE ARGUMENT WAS FORFEITED WHEN NOT RAISED BELOW

Laxton forfeited the opportunity to make an argument based on the “dormant

commerce clause” by failing to raise it in the Answer, in the Motion for Summary

Judgment, or anywhere in the District Court proceeding. (Answer, pages 4 - 11;

ER 17-24; Laxton MSJ, generally; SER 063-085; Transcript, SER 1-16.) In Moore

v. Czerniak, No. 04-15713 (9th Cir. 07/28/2009),8 this Court reiterated its policy

against allowing litigation of issues on appeal not previously raised in the District

Court: “The forfeiture rule (sometimes erroneously called the waiver rule) applies

equally to arguments, factual assertions, and legal theories that were not urged

below.” Quoting Supreme Court precedent, Justice Reinhardt underlined the

reasons for the rule:

“The Supreme Court has explained that this forfeiture rule ‘is essential in order that parties may have the opportunity to offer all the evidence they believe relevant to the issues which the trial tribunal is alone competent to decide’ and that ‘it is equally essential in order that litigants may not be surprised on appeal by final decision there of issues upon which they have had no opportunity to introduce evidence.’” Moore v. Czerniak, supra, quoting Hormel v. Helvering, 312 U.S. 552, 556 (1941)(emphasis added).

8 Although a habeas case, Moore cites copious civil law authority for its firm stance against entertaining new litigation theories on appeal that were not advanced below, citing, inter alia, Gieg v. DDR, Inc., 407 F.3d 1038, 1046 n.10 (9th Cir. 2005), Int'l Union of Bricklayers & Allied Craftsman Local Union v. Martin Jaska, Inc., 752 F.2d 1401, 1404-06 (9th Cir. 1985), and A-1 Ambulance Serv., Inc. v. County of Monterey, 90 F.3d 333, 337-39 (9th Cir. 1996).

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“It is a well-established principle that in most instances an appellant may not

present arguments in the Court of Appeals that it did not properly raise below.”

Rothman v. Hospital Service of Southern California, 510 F.2d 956, 960 (9th Cir.

1975). The Ninth Circuit recognizes only three exceptions to this principle.

Bolker v. C.I.R., 760 F.2d 1039, 1042 (9th Cir. 1985). The first exception allows

review when “necessary to prevent a miscarriage of justice or to preserve the

integrity of the judicial process.” Bolker, 760 F.2d at 1042 (9th Cir. 1985), citing

United States v. Greger, 716 F.2d 1275, 1277 (9th Cir. 1983).9 The second

exception applies “when a new issue arises while appeal is pending because of a

change in the law.” Bolker, at id., citing United States v. Whitten, 706 F.2d 1000,

1012 (9th Cir. 1983) (objection to plain view search first raised on appeal), cert.

denied, 465 U.S. 1100, 104 S. Ct. 1593, 80 L. Ed. 2d 125 (1984). The third

exception applies “when the issue presented is purely one of law and either does

not depend on the factual record developed below, or the pertinent record has been

fully developed.” Bolker at id., citing United States v. Patrin, 575 F.2d 708, 712

(9th Cir. 1978). Only if one of these exceptions is applicable, does this Court

“have discretion to address the issue.” Bolker v. C.I.R., 760 F.2d 1039, 1042 (9th

Cir. 1985). 9 To merit appellate consideration, the new issue must be more than an “afterthought,” and rise to the level of “plain fundamental errors invoking appellate cognizance despite the failure to assert them at trial.” Yeater v. United States, 397 F.2d 975 (9th Cir. 1968).

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Hearing Laxton’s dormant commerce clause argument would not cure any

“miscarriage of justice,” because there has not been one, and declining to hear it

will not put the “integrity of the judicial process” at risk. Neither has any “new

issue” arisen during the pendency of the appeal due to a change in the law.

Finally, Laxton’s constitutional argument that applying California conversion law

to domain names discriminates against interstate commerce is not “purely one of

law,” nor has “the pertinent record been fully developed.” Bolker, at id. In A-1

Ambulance Serv., supra, this Court considered and rejected a request to consider a

contract argument on appeal not made below because of the mere possibility that

gathering the facts necessary to decide the issue might require trial proceedings:

“After examining the record and the arguments, we cannot rule out the possibility that A-1 might be right and that the merits of the contract argument cannot be resolved without further hearings before the district court. Therefore, we lack the power to consider the contract argument in this appeal.” A-1 Ambulance Serv., Inc. v. County of Monterey, 90 F.3d at 39 (emphasis added).

Laxton asks this Court to apply “the test set forth in Pike v. Bruce Chruch,

Inc., 397 U.S. 137, 142 (1970),” in which “the court balances the burden placed on

interstate commerce by the state law against the local benefit derived from the state

law, and the state law is invalid if the burden on interstate commerce is clearly

excessive compared to the putative local benefit.” (Appellant’s Brief, page 28.)

Laxton, of course, has submitted no evidence of any burden on interstate

commerce, and is merely indulging in conjecture. Applying a “constitutional

- 32 -

balancing test” with nothing in the scales is not possible. To seriously apply the

test would require taking testimony from domain name registrars inside and

outside California, obtaining extensive financial information and domain

registration statistics, and having experts interpret that information to determine

whether “applying California law … discriminates against California citizens in

interstate commerce.” (Appellant’s Brief, page 29.) The notion would be

unthinkable if Laxton had not proposed it, and if Laxton’s wishes were indulged,

Plaintiffs-Appellants would suffer severe prejudice.10 To speak bluntly, the only

parties being burdened here are Plaintiffs-Appellants, who have run the gauntlet of

Laxton’s meritless defenses in the District Court, only to discover yet another

frivolous contention waiting to be rebutted in this Court.

Laxton’s dormant commerce clause argument is a curious imagining that

dissolves at its conclusion into the mumbled suggestion that Laxton is seeking “a

more fair and just result.” It would be impossible for Laxton to get a more just and

fair result than the judgment rendered by the District Court after patient and

thorough consideration of every argument that was actually raised. What the

District Court could not do was adjudicate arguments that were not made.

10 "The decision to consider an issue not raised below is discretionary, and such an issue should not be decided if it would prejudice the other party." Kimes v. Stone, 84 F.3d 1121, 1126 (9th Cir. 1996).

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If Laxton had genuinely wished to gain a hearing on this theory, it was his

duty to raise it in the District Court, in pleadings and with proof. This he did not

do. Laxton’s answer alleges forty-seven (47) affirmative defenses, but the

assertion that California’s law of conversion is void for violation of the dormant

commerce clause does not appear among them. (Answer, pages 4 - 11; ER 17-24.)

Nor did it appear in Defendants-Appellants’ motion for summary judgment or at

oral argument. (SER 063-085 and 01-16.) Accordingly, this Court should decline

to hear it on appeal.

III. CONCLUSION

The sole issue properly before this Court for determination is whether the

District Court properly analyzed the respective governmental interests of the states

of California and Virginia in performing California choice-of-law analysis.

Defendants-Appellants forfeited their right to raise any other claims in defense by

failing to assert them in the District Court. There is no dispute that California law

compels the result reached by the District Court, and Defendants-Appellants have

conceded that the application of California law to the facts is fatal to their position.

In deciding the choice-of-law issue, the District Court had before it a detailed

record of undisputed facts from which to draw its conclusions, and carefully

applied the governing precedents to determine that only California had an interest

in having its law applied to the case. Defendants-Appellants have had their day in

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court, and every issue they raised was conclusively resolved against them. This

Court is therefore respectfully requested to affirm the judgment in all particulars

and to award Plaintiffs-Appellees their costs on appeal.

Dated: August 7, 2008 By: /s/ Stevan Lieberman

Stevan Lieberman GREENBERG & LIEBERMAN 2141 Wisconsin Avenue Northwest Suite C-2 Washington, District of Columbia 20007 (202) 625-7000 Telephone (202) 625-7001 Facsimile

By: /s/ Charles Carreon

Charles Carreon ONLINE MEDIA LAW, PLLC 2165 South Avenida Planeta Tucson, Arizona 85710 (530) 841-0835 Telephone Attorneys for Plaintiffs-Appellees, CRS Recovery, Inc. and Dale Mayberry

CERTIFICATE OF COMPLIANCE

I certify that this brief complies with the type-volume limitation set forth in

Rule 32(a)(7)(B) of the Federal Rules of Appellate Procedure. This brief uses a

proportional typeface and 14-point font, and contains 8,348 words.

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STATEMENT OF RELATED CASES

There are no related cases pending in this Court.

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CERTIFICATE OF SERVICE

I hereby certify that on August 7, 2009, I electronically filed the foregoing

with the Clerk of the Court for the United States Court of Appeals for the Ninth

Circuit by using the appellate CM/ECF system.

I certify that all participants in the case are registered CM/ECF users and

that service will be accomplished by the appellate CM/ECF system.

By: /s/ Elizabeth Hong