Mo. Ozarks Radio, Network, Inc. v. Luke Baugh, & JGR Techs., LLC

• Decision Date: 27 January 2020
• Docket Number: No. SD 35569,SD 35569
• Parties: MISSOURI OZARKS RADIO, NETWORK, INC., and Central Ozarks Radio Network, Inc., Plaintiffs-Respondents, v. Luke BAUGH, and JGR Technologies, LLC, d/b/a Jaggar Technologies, and Ray Gobel, Guy Ramseur, and John Negri, Defendants-Appellants.
• Court: Missouri Court of Appeals

598 S.W.3d 154

MISSOURI OZARKS RADIO, NETWORK, INC., and Central Ozarks Radio Network, Inc., Plaintiffs-Respondents,

v.Luke BAUGH, and JGR Technologies, LLC, d/b/a Jaggar Technologies, and Ray Gobel, Guy Ramseur, and John Negri, Defendants-Appellants.

No. SD 35569

Missouri Court of Appeals, Southern District, Division Two.

Filed: January 27, 2020

Motion for Rehearing and/or Transfer Denied February 18, 2020

Application for Transfer Denied April 28, 2020

Attorneys for Appellants: Jacob Y. Garrett and Justin H. Nelson of West Plains, MO.

Attorney for Respondents: Zane A. Privette of Willow Springs, MO.

JEFFREY W. BATES, J.

This case arises from a conversion action involving the internet domain name "kuku.com." The domain name was the internet presence of a radio station, which was one of several local radio stations owned by Missouri Ozarks Radio Network, Inc. (MORN) and Central Ozarks Radio Network, Inc. (CORN). Both MORN and CORN are owned by Ozarks Radio Network, Inc. (ORN). Following the unauthorized sale of the domain name, the stockholder of ORN, Tom Marhefka (Marhefka), initiated this conversion action against: Luke Baugh (Baugh), individually and as an agent of JGR Technologies, LLC (JGR); JGR; and JGR’s three LLC members, Ray Gobel (Gobel), Guy Ramseur (Ramseur) and John Negri (Negri) (hereinafter collectively referred to as Defendants). The conversion petition listed only MORN as the plaintiff.

Following a bench trial, but before judgment was entered in the matter, MORN moved to add CORN as a plaintiff pursuant to Rule 52.06.¹ The trial court granted the motion. Thereafter, the court found in favor of CORN and against Baugh, JGR and each of JGR’s LLC members by piercing "the LLC veil" of the limited liability company. The court entered judgment against Defendants jointly and severally for $50,000, plus interest from the date of the conversion.

On appeal, Defendants present eight points. These points essentially present three challenges to the judgment. First, Points 1-4 challenge the trial court’s decision to add CORN as a plaintiff. Second, Point 5 challenges the court’s decision that the domain name is personal property that may be converted. Third, Points 6-8 challenge the court’s decision to impose personal liability upon the JGR members. Finding no merit in any of these points, we affirm.

Standard of Review

The judgment is presumed correct, and the party challenging the judgment bears the burden of proving it erroneous. Denny v. Regions Bank , 527 S.W.3d 920, 924-25 (Mo. App. 2017). In this court-tried case, our review is governed by Rule 84.13(d) and Murphy v. Carron , 536 S.W.2d 30, 32 (Mo. banc 1976). We are required to affirm the trial court’s judgment unless it is not supported by substantial evidence, it is against the weight of the evidence, or it erroneously declares or applies the law. Murphy , 536 S.W.2d at 32. "We review issues of law de novo. " Denny , 527 S.W.3d at 925. With respect to factual determinations, we defer to the trial court’s credibility determinations and assessment of the weight of witness testimony. Metzger v. Franklin , 496 S.W.3d 547, 549 (Mo. App. 2016). "The trial court is free to believe all, none, or part of the testimony of any witness." Id .

We review the trial court’s decision to add CORN as a plaintiff for an abuse of discretion. When a ruling is discretionary "it is presumed correct and appellant bears the burden of showing an abuse of discretion." State ex rel. Webster v. Lehndorff Geneva, Inc. , 744 S.W.2d 801, 804 (Mo. banc 1988). Such discretion "is abused when a trial court’s ruling is clearly against the logic of the circumstances then before the court and is so arbitrary and unreasonable as to shock the sense of justice and indicate a lack of careful consideration[.]" Id .

Factual and Procedural Background

All evidence and reasonable inferences therefrom are viewed in the light most favorable to the trial court’s judgment, and all evidence and inferences to the contrary are disregarded. Landewee v. Landewee , 515 S.W.3d 691, 694 (Mo. banc 2017). So viewed, the following facts were adduced at trial.

In 1998, when the internet was first developing and an online presence was becoming more prevalent for businesses, Marhefka began working with JGR’s predecessor, "Ozarks Internet, Incorporated, d/b/a Town Square Internet" (Town Square). Marhefka and Town Square worked together for their mutual benefit under a barter agreement. As part of this agreement, Town Square, by its then owner/manager Bill Davis (Davis), registered domain names, including kuku.com, for each of the radio stations owned by MORN and CORN (hereinafter referred to collectively as Plaintiffs). Marhefka, on behalf of Plaintiffs, paid for each registration and relied on the technical expertise of Town Square to perform and maintain the registrations.

In addition to registering the domain names, Town Square provided web hosting and other services to a number of local businesses, including Plaintiffs, using a server owned by Marhefka. All of the hosting services for Plaintiffs’ websites were performed on the server owned by Marhefka, and all of the content on the sites was created by Plaintiffs’ agents and stored on that server. In addition, Plaintiffs provided Town Square with advertising on Plaintiffs’ websites. Plaintiffs later allowed Town Square’s successor, JGR, to use Plaintiffs’ radio towers to provide internet service to JGR’s clients.² Pursuant to this arrangement, one party would be reimbursed only for out-of-pocket expenses incurred for the benefit of the other party. This included the renewal fees for the various domain names paid by Defendants and reimbursed by Plaintiffs. Defendants paid these fees because a Town Square or JGR employee acted as the "administrative contact" for the various domain names registered on behalf of Plaintiffs. Through the years, a succession of such employees acted as the administrative contact, beginning with Davis and culminating with JGR employee Brian Holland (Holland).

For many years, this arrangement with Town Square’s successor, JGR, its members, and Marhefka, on behalf of Plaintiffs, worked well without interruption. At no time during that period did JGR, its members, employees or anyone acting on its behalf, ever claim ownership of Plaintiffs’ domain names. Rather, the domain names were owned by the business associated with each domain name.

In the summer of 2011, JGR hired Baugh. Shortly thereafter, the relations between the parties began to break down. Baugh began asserting that Plaintiffs’ use of bandwidth was costing JGR a substantial amount each month. Baugh demanded significant changes in the terms of the barter arrangement to require several thousand dollars per month in fees. In December 2011, Marhefka received a bill for $7,000. When he refused to pay, Defendants retaliated by "seizing" the domain names and turning off all of Plaintiffs’ websites, preventing them from making any use of the websites. In response, Marhefka, on behalf of Plaintiffs, demanded the return of the domain names and restoration of service. Defendants refused.

The withheld domain names included kuku.com. With respect to its ownership, there was some confusion as to whether the domain name was owned by MORN or CORN. Marhefka testified that kuku.com was originally associated with KUKU Radio owned by MORN. This is why MORN was the initial plaintiff in the case. After discovery in the matter, however, Marhefka learned that an early JGR administrative contact mistakenly registered kuku.com with a different station, KKDY Radio owned by CORN.

In late December 2011, Baugh and the JGR members decided to sell the kuku.com domain name. On December 20, 2011, Baugh "ordered" Holland, on pain of being fired, to transfer the domain name credentials from the current holder, (KKDY Radio), to Baugh. Holland accomplished this transfer by first changing the credentials to himself, thereby making him the legal owner of the website, although Holland himself never claimed any ownership interest therein. Following that transaction, Holland again changed the ownership credentials from himself to Baugh.

Once ownership of kuku.com was in Baugh’s name, Baugh arranged for, and then sold, the domain name to a Chinese buyer for $50,000 in cash. Ownership of the domain name was formally transferred by a written contract, which was admitted at trial without objection as Exhibit 1 by Plaintiffs. The sale was accomplished without any notice to Plaintiffs or Marhefka and before Marhefka could regain control of the domain name. Marhefka testified that he believed the domain name of kuku.com was worth at least $50,000. In May 2012, the initial petition for conversion was filed against Baugh and JGR. Later that month, an amended petition was filed, which added JGR members Gobel, Ramseur and Negri.

A one-day bench trial in the matter was conducted on March 3, 2017. Despite testimony that CORN, not MORN, owned kuku.com, neither party raised the issue that CORN was not a plaintiff. At the end of trial, the court granted each party 30 days to file suggestions in the matter.

On April 6, 2017, Defendants filed a "motion for judgment," asserting for the first time that the wrong party was pursuing the action. Four days later, MORN filed its motion to add a plaintiff. Thereafter, the court denied Defendants’ motion, granted MORN’s motion, and added CORN as a plaintiff.

The court determined that Defendants converted the domain name on December 20, 2011, when Baugh ordered Holland to transfer the domain name credentials from the existing holder, (KKDY Radio), first to Holland and then to Baugh. The court entered judgment against Defendants, jointly and severally, for $50,000, plus interest from the date of conversion. In an initial judgment, the court entered judgment in favor of both MORN and CORN. Following Defendants’ motion to amend, the court entered an amended judgment in favor of CORN only, as the owner of kuku.com....