Tuesday, October 16, 2018
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Ninth Circuit:
Company That Controls Domain Name System Can’t Be Sued by Disappointed Bidder
Opinion Says Covenant Not to Sue in Guidebook Does Not Contravene California’s CCP §1668 Because Alternate Forum Is Provided
By a MetNews Staff Writer
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The Internet Corporation for Assigned Names and Numbers—known as “ICANN”—is immune from suit by those seeking its services, under the Applicant’s Guidebook, the Ninth U.S. Circuit Court of Appeals declared yesterday. |
The federally established Cyberspace overlord that manages the Internet’s domain name system is impervious to lawsuits by those utilizing its services based on a covenant not to sue contained in its Applicant Guidebook, the Ninth U.S. Circuit Court of Appeals held yesterday, rejecting the contention that this contravenes the California statute forbidding provisions that exempt a party from liability for wrongs.
Defendant in the action is the Internet Corporation for Assigned Names and Numbers, a California not-for-profit, public benefit corporation known as “ICANN,” which, among other things, oversees the generic top-level domains (“gTLDs) such as .com, .gov., and .net.
A three judge panel—comprised of Senior Judge Mary M. Schroeder and Judges Milan Smith and Jacqueline H. Nguyen—yesterday affirmed the decision of District Court Judge Percy Anderson of the Central District of California in dismissing an action by Ruby Glen, LLC, a losing bidder at auction for the gTLD “.web.” The plaintiff contended that ICANN was awarded guardianship of that gTLD without looking into alleged improprieties on the part of the winning bidder, Nu Dot Co.
Ruby Glen’s Position
Ruby Glen explained in its opening brief:
“In June 2016. Nu Dot Co. LLC (‘NDC’), the only .WEB applicant that refused to resolve the gTLD process privately, admitted in writing to Ruby Glen that there had been an undisclosed change in both its management and its ownership in violation of the auction rules. Ruby Glen and other .WEB applicants requested that ICANN conduct a reasonable investigation into these admissions and to postpone the auction. ICANN refused and instead proceeded with the auction as scheduled.”
The brief continued:
“NDC won the auction with a winning bid of S135 million—all of which was paid to ICANN. Within days of the auction, third-party Verisign. Inc. (‘Verisign’) admitted in a press release that it had previously acquired from NDC, the rights to the .WEB and .WEBS gTLDs, and had funded NDC’s bid in direct violation of the auction rules.”
CCP §1668
Ruby Glen contended that the ICANN’s bar on being sued contravenes California’s Civil Code §1668 which provides, as it has since its adoption in 1872:
“All contracts which have for their object, directly or indirectly, to exempt any one from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.”
Disagreeing, the Ninth Circuit panel said in a memorandum opinion:
“As the district court found, the covenant not to sue is not void under California Civil Code section 1668. Ruby Glen is not without recourse—it can challenge ICANN’s actions through the Independent Review Process, which Ruby Glen concedes ‘is effectively an arbitration, operated by the International Centre for Dispute Resolution of the American Arbitration Association, comprised of an independent panel of arbitrators.’ Thus, the covenant not to sue does not exempt ICANN from liability, but instead is akin to an alternative dispute resolution agreement falling outside the scope of section 1668.”
Unconscionability Argument
Ruby Glen also contended that the covenant not to sue is unenforceable because it is an unconscionable provision. The opinion responds:
“Even assuming that the adhesive nature of the Guidebook renders the covenant not to sue procedurally unconscionable, it is not substantively unconscionable….Because Ruby Glen may pursue its claims through the Independent Review Process, the covenant not to site is not ‘so one-sided as to shock the conscience.’ ”
Ruby Glen is a subsidiary of Donuts Inc. It manages the domains “.today. “.serial,” “.agency,” “.life.” “.games,” “.LIVE,” and “.solutions.”
Verisign reigns over the primary gTLD, “.com,” as well as “.net, “.tv,” “.cc.” and “.name.”
The case is Ruby Glen, LLC v. ICANN, No. 16-56890.
Copyright 2018, Metropolitan News Company