California Business Lawyer Blog

The Ninth Circuit affirmed the district court's ruling in Office Depot v.
Zuccarini agreeing that a creditor may levy against a domain name in the jurisdiction
where the domain name registry is located. The decision is significant for two
reasons. First, it affirms (or reaffirms) that domain names are property
subject to the claims of creditors. Second, it allows creditors to proceed
against domain names where the registry is located, thus allowing creditors to
proceed against domain names in one proceeding and more importantly levy
against domain names located abroad (where the registry is located in the
United States). Overall, this makes getting at a domain name much easier for
creditors says California Collection Attorney Steven C. Peck.

Background: Office Depot originally obtained a judgment against frequent cybersquatting defendant John Zuccarini. Office Depot then assigned the judgment to DS Holdings. Office Depot obtained the judgment in 2000 and it's surprising that 10 years later the judgment is finally being enforced against something. Although Zuccarini is proceeding pro se, it seems
like he was or became well versed in putting up roadblocks and delaying resolution of the litigation.

DS went after 190 .com domain names that were registered in Zuccarini's
name. DS originally tried unsuccessfully to have the domain names transferred
directly to it. (This was the technique successfully used by the plaintiff in Bosh
v. Zavala.) Later, DS sought to have a receiver appointed over the domain
names. The district court granted DS's request to have the receiver appointed,
and Zuccarini appealed. Zuccarini's appeal focused on whether it was proper to
appoint the receiver in the Northern District of California, since the domain
names were not necessarily "located" there.
The court's ruling: The court runs through basic principles
of in rem jurisdiction and what rules apply. The court then looks to federal
rules to determine where the receiver should be appointed in this case. Finding
no applicable federal rule, the court looks to California law. California law
provides that a writ of execution may be issued "in the county where the
levy is to be made." With this in the background, the two questions
presented by the court are: (1) "are domain names property that is subject
to execution?" and (2) "if so, where are the domain names located for
purposes of execution?"

With respect to the first question, the court cites to Kremen v. Cohen, and
easily concludes that (under California law) "domain names are intangible
property subject to a writ of execution." Kremen undermined Network
Solutions, Inc. v. Umbro Int'l, Inc., 259 Va. 759, 770 (Va. 2000), a Virginia
case widely cited for the proposition that creditors cannot get at domain names
because domain names are contract rights rather then property. To the extent
Kremen did not refute Umbro, this decision definitely provides the necessary
ammunition to creditors. (Again, collection is state-specific, and apart from
the analysis of the nature of domain names, the outcome in these cases turns on
the statute in question, which vary from state to state. That said, I think
given the robust marketplace in domain names, Umbro's conception of the domain
name as a personal services agreement seems outdated, and most courts will
easily recognize this.)

With respect to the second question, the court acknowledges that
"attaching a situs to intangible property is ... a legal fiction,"
and the determination must be made in a "context-specific" manner.
Fairness was relevant to the court's determination of the appropriate situs,
and the court was understandably not receptive to Zuccarini's policy arguments
that allowing a court to issue an order directed to the registry would mean
that every .com and .net domain name could be levied through courts in the
Northern District of California. The court also looked to the ACPA, which
provides for in rem jurisdiction over certain cases where the "registrar,
registry, or other domain name authority" is located. Although this was
not an ACPA case, the court found the structure set up by the statute
persuasive and that the writ was appropriately issued from Northern District of
California since VeriSign (the registry for .com domains) is located there.
The decision clears up two things: Although
post Kremen v. Cohen there shouldn't have been much dispute that domain names
are property which are subject to the claims of creditors, the case clears up
any lingering doubt that may have existed. (Kremen and this case applied
California law, but the result shouldn't vary much across other states.)
Second, the decision makes clear that a court which has jurisdiction over the
registry can issue an order allowing the creditor to get at the domain names.
The case also implicitly affirms that getting a receiver appointed to sell the
domain names is the appropriate route for the creditor. Getting the name
transferred to the creditor is not a remedy allowed under California law
(Palacio Del Mar Homeowners Ass'n, Inc. v. McMahon). Additionally, a transfer
of domain names from a cybersquatter to a judgment creditor raises some issues
around potential infringement of third party rights through sales or other
exploitation of the domain names. (See this
post on Bosh v. Zavala for some discussion of those issues.) The method
ultimately used by DS in this case (a receiver) avoids all of these issues, or
at least shifts them over to the receiver rather than the creditor.

As mentioned above, this ruling makes clear that regardless of
whether a domain name is registered through a foreign registrar, a court having
jurisdiction over the registry can issue an order directing transfer of the
domain names to a receiver. With respect to .com and .net domain names, this
means that creditors can try to get at these domain names through proceeding in
the Northern District of California (as the court notes, VeriSign is the
registry for .com and .net domain names and is headquartered in Mountain View).
While the ACPA allows plaintiffs to file in rem suits where the registry is
located, it's nice (for creditors) to have a similar ruling in the
post-judgment context, and one from the Ninth Circuit as well.

Will this cause a rush of similar claims to be filed in the Northern
District of California? It's tough to say, but even post Kremen, it does not
seem like there's been a ton of post-judgment collections activity with respect
to domain names. From a practitioner's standpoint, it's certainly nice to have
this rule on the books.

Continue reading "Creditor May Levy Against a Domain Name in the Jurisdiction Where the Domain Registry is Located" »

While filing for bankruptcy can ruin one's credit record, it can protect consumers from debt collection actions, including being taken to court.
Mounting medical bills and job losses have pushed many U.S. residents to seek protection from creditors by filing for bankruptcy in federal court, which saw a 68 percent increase in bankruptcy filings over the past year.

Steven Peck, a California Business Attorney, says chronic medical conditions are triggering a rise in bankruptcy filings because some of the major medical bills consumers face aren't always fully covered by health insurance.
"Most clients who come to see me have done everything they can do to avoid bankruptcy, and every penny of available income has been spent, but debts are still owed, including late fees, interest, penalties, court costs, etc.," Peck says.
Debt-burdened consumers also can get overwhelmed as garnishments, repossessions and foreclosures loom, he added.

The National Bankruptcy Research Center reported that bankruptcy filings rose by nearly a third last year."As foreclosure and unemployment rates rise, consumers and businesses turn to bankruptcy for reprieve. A fundamental goal of the bankruptcy code is to grant the debtor a "fresh start" from burdensome debts, according California Bankruptcy Attorney Steven Peck.

But while the bankruptcy code offers a fresh financial start for those crumbling under the weight of heavy debts, debtors who must list their assets and liabilities, by business professionals who must disclose their relationships and financial arrangements, and by trustees who must zealously attend to their fiduciary duties.

There are several bankruptcy filing categories in which a debtor can file, and the most common are filings under Chapter 7 and Chapter 13 of the bankruptcy code.

Under Chapter 7, in return for having debts discharged -- meaning debtors are no longer obligated to pay them -- a debtor must turn over certain non-exempt property to a bankruptcy court trustee to be sold and the proceeds distributed to creditors.

Non-exempt properties include tax returns, real property other than the debtor's home, or a second car for a single filer. In order for a debtor to keep any property subject to liens and mortgages, such as cars or homes, the debtor must continue to make regular payments to retain the property, indicates California Business Attorney Peck.

Under Chapter 13, debtors propose a repayment plan to make installments of past-due debts to creditors for a period of three to five years. During the repayment plan period, the law forbids creditors from starting or continuing collections efforts against the debtor. But if agreed-upon payments fall behind, the trustee and/or the creditor can ask the court to allow foreclosure proceedings against the debtor.

The surge in bankruptcy filings have occurred even after the bankruptcy laws were substantially changed in 2005 to make it more difficult for individuals," according to Peck, to have their debts discharged under Chapter 7 of the bankruptcy code.

The National Bankruptcy Research Center, which compiles and analyzes bankruptcy data, stated that personal bankruptcy filings across the nation rose to 1.41 million last year, representing a 32-percent jump from 2008. It added that 2009 saw the highest bankruptcy filings since 2005 when reforms made bankruptcy filing tougher.
The 2005 bankruptcy law overhaul pushed more consumers into Chapter 13 filings instead of Chapter 7, according to the center. However, to file under Chapter 13, an individual must have a regular income, and with the national unemployment rate at 10 percent, many filings may not met that standard.

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Continue reading "Medical Bills and Job Losses Have Pushed U.S. Residents To Seek Bankruptcy Protection" »

California provides a distinct and orderly process to sell real property
under a writ of execution. Code of Civil Procedure §§701.510, et. seq. This
method has a number of important safeguards for the debtor built in. These
include:
• Personal service of notice on the debtor;
• An opportunity for the debtor to respond;
• Title report or equivalent is obtained and reviewed;
• Fair Market Value and homestead exemptions are determined;
• Debtor given minimum 120 days from notice to sale; and
• Homestead Property must sell for at least 90% of determined Fair Market
Value.
Due to the strictures of this process, there are a number of reasons why a
judgment creditor might not obtain satisfaction in the end. Consider these
common issues:
• The execution method requires cash on sale or within 10 days and these
days, buyers with cash are looking for a better deal than 10% under fair
market value
• Buyers are not able to walk through and inspect the property before
buying resulting in a lower bid price, especially on questionable properties
• A mistake is made in the process, where the process must begin again
• The sale lacks the benefit of common open market sales like listings on
the Multiple Listing Service, aggressive marketing by a licensed real
estate agent, ability for buyers to obtain financing, inspections and repairs,
etc.
• The sheriff or levying officer has numerous responsibilities and cannot
devote any significant amount of time toward insuring completion of the
sale or other "special attention"
If you are in a situation where you have gone through an execution sale
without success or have a business or collection matter appointment of a receiver may well provide some satisfaction in your case.

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Continue reading "The Realities of Execution Sales in California" »