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Having a Receiver Appointed in aid of Execution to Sell a Judgment Debtor's domain name & other intellectual property By Davidson, Peter* In the Summer 2008 issue of Receivership News, “Ask the
Receiver” discussed the concept of having a receiver appointed in aid of
execution to sell a judgment debtor’s domain name and other intellectual
property. A district court in northern California had appointed a receiver
to take control of internet domain names owned by a judgment debtor, so
they could be sold to satisfy a judgment. The defendant appealed and the
court stayed the sale, but not the receivership, pending the appeal. In
February, the Ninth Circuit in Office Depot Inc. v. Zuccarinini, 596 F.3rd
696 (9th Cir. 2010) finally ruled, affirming the appointment of the
receiver and the receiver’s ability to sell the domain names to help
satisfy the judgment. The case provides a powerful new tool for judgment
creditors to obtain satisfaction of judgments against persons or entities
owning valuable intellectual property, such as domain names. The Ninth Circuit explained that there are three primary actors in the domain name system. Companies called “registries” which operate a database (or “registry”) for all domain names within the scope of their authority. There are companies called “registrars”, which register domain names with registries on behalf of those who own the names. There are “registrants” who own the domain names. The VeriSign is for the registry for domain names “.com” and “.net”. DSH initially filed a request for turnover in the District Court to compel the registrars of certain of the domain names owned by Zuccarini to transfer ownership to DSH. The District Court denied that request, holding that under California Code of Civil Procedure §699.040 it could not order third parties to turn over property. Stymied, DSH moved for the appointment of a receiver to obtain and sell the “.com” domain names and apply the proceeds in satisfaction of the judgment. The court first held it had quasi in rem jurisdiction over the domain names. A district court can obtain quasi in rem jurisdiction over property situated within its geographical borders by seizing the property in the manner provided by state law. It held that quasi in rem jurisdiction can be asserted over intangible property. The court then cited to California Civil Code §695.010(a) which provides that “except as otherwise provided by law, all property of the judgment debtor is subject to enforcement of a money judgment.” §699.710 goes on to provide “[a]ll property that is subject to enforcement of a money judgment…is subject to a levy under a writ of execution to satisfy a money judgment.” The court concluded, under these provisions, that all property of a judgment debtor can be used to satisfy a writ of execution. The court acknowledged that generally under §699.040 property must be levied upon by “taking into custody.” However, the court noted that “the taking into custody” language in §699.040 does not appear in §708.620, which governs the appointment of receivers in aid of execution. The court, therefore, concluded that while a domain name may not be levied upon, it is still subject to execution through the use of a receiver. While California law says nothing about the specific location of domain names, the Anti-cybersquatting Consumer Protection Act does. It provides that in rem jurisdiction over a domain name shall be “in the judicial district in which the domain name registrar, domain name registry or other domain name authority that registered or signed the domain name is located…” 15 USC §1125(d)(2)(A). In other words, domain names are personal property subject to execution and are located wherever the registry or registrar are located. Because Verisign has its headquarters in the Northern District of California, the Ninth Circuit affirmed the district court’s order appointing a receiver over Zuccarini’s domain names registered with VeriSign so that the receiver could sell the domain names to satisfy the judgment. This case will be extremely useful for judgment creditors and should provide a new source of work for receivers because, based on the Ninth Circuit’s opinion, only by having a receiver appointed will a judgment creditor be able to execute on a judgment debtor’s domain names. *Peter A. Davidson is a Partner of Ervin Cohen & Jessup LLP a Beverly Hills Law Firm. His practice includes representing Receivers and acting as a Receiver in State and Federal Court. |