Domain Prot., LLC v. Sea Wasp, LLC
| Decision Date | 15 October 2019 |
| Docket Number | Civil Action No. 4:18-cv-792 |
| Parties | DOMAIN PROTECTION, LLC, Plaintiff, v. SEA WASP, LLC, ET. AL. Defendants. |
| Court | U.S. District Court — Eastern District of Texas |
MEMORANDUM OPINION AND ORDER
Pending before the Court are: (1) Motion to Dismiss for Lack of Personal Jurisdiction by Individual Defendants Vernon Decossas and Gregory Faia ("Individual Defendants") (Dkt. #173); (2) Sea Wasp, LLC's ("Sea Wasp") Rule 17 Motion to Dismiss Regarding Real Party in Interest (Dkt. #180); (3) Defendants' Motion to Dismiss for Lack of Standing (Dkt. #228) ("Defendants" refers to Sea Wasp, Vernon Decossas, and Gregory Faia collectively); (4) Defendants' Motion to Extend Page Limit for Reply in Support of Motion to Dismiss for Lack of Standing (Dkt. #247); and (5) Defendants' Motion to Schedule Hearing on Defendants' Motion to Dismiss for Lack of Standing (Dkt. #253). Having considered the Motions and the relevant pleadings, the Court finds that each Motion is DENIED save Defendants' Motion to Extend Page Limit for Reply in Support of Motion to Dismiss for Lack of Standing (Dkt. #247) which is GRANTED.
Domain Protection is the registered name holder for over 50,000 domain names (the "Domain Names"). Sea Wasp is the registrar over those names. This suit concerns whether Sea Wasp is encroaching on Domain Protection's proprietary interest in the Domain Names by turning the executive lock on them, which prevents Domain Protection from selling the Domain Names or updating their registration information. Sea Wasp insists that Domain Protection lacks any proprietary interest in the Domain Names in light of a dispute over their ownership.
A summary on how Domain Protection came into possession of the Domain Names may be helpful at this point. In 2014, three parties filed suit in the Northern District of Texas against Jeffrey Baron and one of his companies for misappropriating their domain names. The court found Baron to be a vexatious litigator and, on this basis, appointed a receiver (the "Receiver") over his assets while the dispute was pending (Dkt. #54, Exhibit 15). The court also placed assets belonging to Novo Point, LLC ("Novo Point") and Quantec, LLC ("Quantec") (collectively, the "LLCs'"), two limited liability companies with ties to Baron (Dkt. #54, Exhibit 13), in the Receiver's custody. The LLCs' assets included the Domain Names.
On appeal, Baron argued that the court lacked jurisdiction to enter the receivership order, and the Fifth Circuit agreed. This prompted the district court to unwind the receivership (the "Unwind Order") (Dkt. #54, Exhibit 17). Assets held in Baron's name would be returned to him. But it was not immediately apparent whom to return the LLCs' assets to in light of a dispute over who could properly act for them. Without resolving the dispute, the court directed the Receiver to return the Domain Names to Lisa Katz, the Local Operations Manager for the LLCs. Katz was entrusted to manage the LLCs' assets, including the Domain Names, until the dispute over control of the LLCs was resolved (Dkt. #54, Exhibit 14 at pp. 4-5 n.2; Dkt. #54, Exhibit 17).
Baron-affiliates Mike Robertson and David McNair (the "Baron Affiliates") tried to induce the registrar over the Domain Names, fabulous.com ("Fabulous"), into giving them control of the Domain Names anyway. But the Receiver intervened, instructing Fabulous to handover the Domain Names to Katz, pursuant to the Unwind Order (Dkt. #54, Exhibit 17). Katz then assumed control over the Domain Names. Katz explains that the LLCs had racked up substantial debt whilethey were under receivership, prompting "creditors [to] threaten[] to place the LLCs in bankruptcy for liquidation." (Dkt. #54, Exhibit 31 at p. 2). To prevent this, Katz assigned the Domain Names to Domain Protection, a company where she is also manager. The plan was for Domain Protection to liquidate the Domain Names as needed to pay off the LLCs' debts (Dkt. #54, Exhibit 31 at p. 2). But Baron had contemporaneously filed suits in Texas and Australia challenging Katz's possession of the LLCs' assets. This prompted Fabulous to place an "executive lock" on the Domain Names while these actions were pending, which prevented Domain Protection from liquidating the Domain Names during the duration of the suits.
Neither suit was successful (Dkt. #54, Exhibit 9; Dkt. #54, Exhibit 12). In August 2017, after the suits had been dismissed, Domain Protection asked Fabulous to restore its access to the Domain Names. Sea Wasp purchased Fabulous roughly at the same time. While the Parties dispute what immediately followed, they agree that, "[a]t least between January 28, 2018 to February 11, 2018, there was not an 'Executive Lock' on the [D]omain [N]ames." (Dkt. #42 at p. 1). Domain Protection began managing the affairs over the Domain Names shortly after. It started by replacing Bidtellect as the advertisement revenue manager (the "Advertising Manager") for the Domain Names on receipt of a "concerning" letter from Bidtellect (Dkt. #54 at p. 10). Bidtellect was apparently exasperated with the series of disputes over the Domain Names and proposed certain non-negotiable terms to continue their contractual relationship. Domain Protection responded by terminating its contract with Bidtellect, contracting with a new Advertising Manager, and updating the registration information for the Domain Names accordingly. This involved updating the Domain Names' "nameserver records," which ensured that, when a user typed a Domain Protection domain name in a web browser, the user would be directed to a placeholder website hosted by the new Advertising Manager.
By late February 2018, two or three weeks after the lock was removed, Baron filed another suit (the "Underlying Dispute") challenging Katz's authority to transfer the Domain Names. See In re Payne, No. 16-04110 (Bankr. E.D. Tex. 2018). Domain Protection believes that Baron filed this suit simply to lock the Domain Names indefinitely, citing correspondence to that effect from Baron's attorneys (see Dkt. #54, Exhibit 28). Sure enough, Sea Wasp responded by reverting the changes Domain Protection had made to the Domain Names' nameserver records and turning the executive lock back on. Domain Protection notes that Robertson, one of the Baron Affiliates who tried to take control of the Domain Names in violation of the Unwind Order, is now a principal or "key person" at Sea Wasp (Dkt. #54, Exhibit 31 at pp. 3-4).
On June 18, 2018, Domain Protection brought this present action against Sea Wasp for interference with contract, civil conspiracy, conversion, and respective violations of the Texas Theft Liability Act and the Stored Communications Act. Domain Protection alleges that, by turning the executive lock back on, Sea Wasp is encroaching on its proprietary interests in the Domain Names since it cannot transfer them or update their nameserver records. Sea Wasp, however, insists that it can and must place a lock on the Domain Names while a dispute is pending, citing its obligations as a registrar accredited with the Internet Corporation for Assigned Names and Numbers ("ICANN"). On July 17, 2019, the Court entered a Preliminary Injunction which enjoined Sea Wasp from "interfering with Domain Protection's control over the Domain Names, including its ability to update the nameserver records associated with the Domain Names" (Dkt. #192). Despite the Court's Order, matters have only further deteriorated between the parties.
Since the filing of this action—only a little over one year ago—over 250 docket entries have occurred. One of those docket entries was Domain Protection's Amended Complaint (Dkt. #93). In its Amended Complaint, Domain Protection added Gregory Faia ("Faia") andVernon Decossas ("Decossas") as Individual Defendants. It does well to provide a brief discussion of who the Individual Defendants are at this point. Faia and Decossas "are the owners and officers and directors of Sea Wasp" (Dkt. #173). Faia is domiciled in Lousiana (Dkt. #93; Dkt. #173) and Decossas is domiciled in Florida (Dkt. #93; Dkt. #173). Sea Wasp, on the other hand, was "created in 2017 as a Nevada limited liability company, [and] is a citizen of Louisiana whose members reside in Louisiana" (Dkt. #93). According to Domain Protection, "Faia and Decossas directly own, control and use Sea Wasp to accomplish the actions complained of in this Complaint (Dkt. #181) (citing Dkt. #93). Thus, Domain Protection claims that Sea Wasp is nothing more than a shell entity which the Individual Defendants use to evade existing legal obligations, rely upon as protection of a crime, and rely upon to justify any wrongs or torts (Dkt. #93). For these reasons, Domain Protection amended its complaint to add the Individual Defendants to the present action.
The vast amount of docket activity previously referenced has not occurred without discord. The parties have vehemently disputed each claim, motion, and order and have continually engaged in ad hominem attacks unbecoming of officers of the Court.1 Among these contentious disputes, the parties have now turned to debating the capacity of this suit to be brought in the Court. On June 25, 2019, Vernon Decossas and Gregory Faia filed a Motion to Dismiss for Lack of Personal Jurisdiction by Individual Defendants Vernon Decossas and Gregory Faia (Dkt. #173).2 On July5, 2019, Sea Wasp followed this Motion up with Sea Wasp, LLC's Rule 17 Motion to Dismiss Regarding Real Party in Interest (Dkt. #180).3 On August 19, 2019, Vernon Decossas, Gregory Faia, and Sea Wasp filed Defendants' Motion to Dismiss for Lack of Standing (Dkt. #228). This Motion includes a Motion to Dismiss under Rule 12(h)(3) and Rule 12(b)(6) (Dkt. #228). Defendants' Motion to Dismiss for Lack of Standing was followed by Defendants' Motion to Extend Page Limit for Reply in Support of Motion to Dismiss for Lack of Standing (Dkt. #247) and Defendants' Motion to Schedule...
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