Kremen v. Cohen

• Decision Date: 30 May 2000
• Docket Number: No. C 98-20718 JW.,C 98-20718 JW.
• Citation: 99 F.Supp.2d 1168
• Parties: Gary KREMEN, et al., Plaintiffs, v. Stephen Michael COHEN, et al., Defendants.
• Court: U.S. District Court — Northern District of California

99 F.Supp.2d 1168

Gary KREMEN, et al., Plaintiffs, v. Stephen Michael COHEN, et al., Defendants.

No. C 98-20718 JW.

United States District Court, N.D. California.

May 30, 2000.

COPYRIGHT MATERIAL OMITTED

Richard S. Diestel, Beldsoe, Cathcart, Diestel, Livingston & Pedersen, San Francisco, CA, Charles H. Carreon, Medford, OR, James M. Wagstaffe, Pamela Urueta, Kerr & Wagstaffe, San Francisco, CA, for Gary Kremen.

Joel Dichter, Campeau & Thomas, San Jose, CA, Kathryn L. Diemer, San Jose, CA, Sheri Lynn Falco, Law Offices of Sheri L. Falco, San Francisco, CA, Sean Moynihan, Klein Zelman Rothermel & Dichter, New York City, for Online Classifiers, Inc.

Robert Selvidge, Duboff & Ross, San Francisco, CA, Steven G. Ross, Duboff & Ross, Porland, OR, Robert S. Dorband, Duboth & Ross, Hampton Oaks, Portland, OR, for Steven Michael Cohen, Ocean Fund International Ltd., Sand Man International Limited.

David Henry Dolkas, Gray Cary Ware & Friedenrich, Palo Alto, CA, Philip L. Sbarbaro, Hanson and Malloy, Washington, DC, for Network Solutions, Inc.

ORDER GRANTING DEFENDANT NETWORK SOLUTION, INC.'S MOTION FOR SUMMARY JUDGMENT

WARE, District Judge.

I. INTRODUCTION

Defendant Network Solutions, Inc., ("NSI") filed a motion for summary judgment and noticed it for hearing on January 24, 2000. In response, Plaintiff Gary Kremen filed a motion pursuant to Federal Rule of Civil Procedure 56(f). The Court granted the Rule 56(f) motion in part, permitting Plaintiff to conduct further discovery and allowing the parties to submit supplemental briefing. Based upon all papers filed to date and the oral argument of counsel, the Court grants Defendant's motion for summary judgment.

II. FACTUAL BACKGROUND

Plaintiff Gary Kremen registered the domain name sex.com with NSI on May 9, 1994. Plaintiff identified Online Classified, Inc. ("Online Classified") as the registering organization.¹ Plaintiff never constructed a Web site or otherwise commercially exploited the domain name. In a letter dated October 15, 1995, Sharon Dimmick, purportedly on behalf of Online Classified, informed Defendant Stephen Cohen that Online Classified had "decided to abandon the domain name sex.com" and requested that Mr. Cohen "notify the internet registration on our behalf, to delete [their] domain name sex.com." Graves Decl.Ex. C. It further stated that "we have no objection to your use of the domain name sex.com and this letter shall serve as our authorization to the internet registration to transfer sex.com to your corporation." Id. The letter was on Online Classified letterhead and was signed by Ms. Dimmick, who represented herself as the President of the company. Shortly thereafter, Mr. Cohen registered sex.com in the name of a company he operated.

Plaintiff contends that the October 15, 1995 letter is a forgery by Mr. Cohen. On October 16, 1998, Plaintiff filed suit against numerous defendants, including NSI, for its deletion of the domain name. Plaintiff alleges the following causes of action against NSI: (1) breach of contract, (2) breach of intended third-party beneficiary contract, (3) breach of fiduciary duty, (4) negligent misrepresentation, (5) conspiracy to convert property and (6) conversion of bailee. NSI now moves for summary judgment as to all claims against it.

III. LEGAL STANDARD

Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R.Civ.P. 56(c).

The moving party "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any' which it believes demonstrate the absence of a genuine issue of material fact." Celotex v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If he meets this burden, the moving party is then entitled to judgment as a matter of law when the non-moving party fails to make a sufficient showing on an essential element of his case with respect to that which he bears the burden of proof at trial. See id. at 322-23, 106 S.Ct. 2548. To defeat summary judgment, the nonmoving party "must set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). The facts brought forth must be material, i.e., "facts that might affect the outcome of the suit under the governing law.... Factual disputes that are irrelevant or unnecessary will not be counted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

It is the court's responsibility "to determine whether the `specific facts' set forth by the nonmoving party, coupled with undisputed background or contextual facts, are such that a rational or reasonable jury might return a verdict in its favor based on that evidence." T.W. Elec. Service v. Pacific Elec. Contractors, 809 F.2d 626, 631 (9th Cir.1987). "[S]ummary judgment will not lie if the dispute about a material fact is `genuine,' that is if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). However, "[w]here the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no `genuine issue for trial.'" Matsushita Elec. Indus. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

IV. ANALYSIS

A. Breach of Contract

A party must prove the following to establish a claim for breach of contract: the existence and terms of the contract, plaintiff's performance, defendant's breach, and damages. See Student Loan Marketing Ass'n v. Hanes, 181 F.R.D. 629, 633 (S.D.Cal.1998). The essential elements required to demonstrate the existence of a contract are: "(1) parties capable of contracting, (2) their consent, (3) a lawful object, and (4) a sufficient cause or consideration." Cal.Civ.Code § 1550. "Consideration is a benefit conferred or agreed to be conferred upon the promisor or prejudice suffered or agreed to be suffered `as an inducement' to the promisor." Conservatorship of O'Connor, 48 Cal.App.4th 1076, 56 Cal.Rptr.2d 386 (1996); see also Cal.Civ.Code § 1605.

Plaintiff contends NSI breached the contract governing Kremen's registration of the domain name sex.com. Plaintiff registered the domain name on May 4, 1994. In 1994, the registration process involved completing a short administrative template which was then submitted to NSI via e-mail. See Graves Decl. ¶ 20. At that time, NSI received no registration fee or other form of payment from registrants in exchange for the service. See id. at ¶ 5. Thus, the registration form is not supported by consideration because there was no benefit conferred or agreed to be conferred upon NSI. See Oppedahl & Larson v. Network Solutions, Inc., 3 F.Supp.2d 1147, 1160 (D.Colo.1998) (holding that the registration forms used in 1994 by NSI lacked consideration). Accordingly, Plaintiff's motion for summary judgment as to the breach of contract claim is granted because Plaintiff has failed to demonstrate an essential element of the claim — the existence of a contract.

B. Breach of Intended Third-Party Beneficiary Contract

NSI became the registrar of domain names pursuant to a Cooperative Agreement with the United States Government. See 31 U.S.C. § 6305. National Science Foundation ("NSF") administered the agreement on behalf of the federal government. Plaintiff contends that domain registrants are third-party beneficiaries of the government's contract with NSI. Thus, NSI's failure to comply with certain obligations under the agreement constitutes breach of a third-party beneficiary contract.

Interpretation of the Cooperative Agreement is governed by federal law because the "contract was entered into pursuant to authority conferred by federal statute." United States v. Seckinger, 397 U.S. 203, 209-210, 90 S.Ct. 880, 25 L.Ed.2d 224 (1970). In determining whether a party is a third-party beneficiary, Ninth Circuit law provides as follows:

To sue as a third-party beneficiary of a contract, the third party must show that the contract reflects the express or implied intention of the parties to the contract to benefit the third party. See Montana v. United States, 124 F.3d 1269, 1273 (Fed.Cir.1997). The intended beneficiary need not be specifically or individually identified in the contract, but must fall within a class clearly intended by the parties to benefit from the contract. See id.

Klamath Water Users Protective Ass'n v. Patterson, 204 F.3d 1206, 1211 (9th Cir. 1999). Moreover, "[p]arties that benefit from a government contract are generally assumed to be incidental beneficiaries, and may not enforce the contract absent a clear intent to the contrary." Id. (citing Restatement (Second) of Contracts § 313(2) (1979)).

Plaintiff points to Article 6, titled "Responsibilities," as reflective of NSI and the NSF's intent to benefit domain name registrants. Article 6 contains numerous provisions outlining the respective duties of NSI and the NSF under the contract. However, it contains no language manifesting a clear intent to confer anything but an incidental benefit to domain name registrants. Based upon Plaintiff's failure to adduce any evidence creating an issue of triable fact regarding its status as an intended beneficiary under the Cooperative Agreement, Defendant's motion for summary judgment as to the breach of a third party beneficiary claim is granted. See Oppedahl & Larson v. Network Solutions, Inc., 3 F.Supp.2d 1147, 1159 (D.Colo.1998) (finding domain name registrant was not a third-party beneficiary of the Cooperative Agreement between NSI and the NSF).

C. Conversion and...