Antitrust Law Daily Wrap Up, RICO—N.D. Tex.: Internet domain name holder fails to show compensable injury, (Sep 30, 2015)

By Linda O’Brien, J.D., LL.M.

An owner of Internet domain names was unable to show a compensable injury to pursue racketeering claims against an attorney for allegedly fraudulently attempting to secure certain domain name assets from third party domain name registrars and domain name development service providers, the federal district court in Dallas, Texas has decided (Domain Vault LLC v. McNair, September 28, 2015, Lindsay, S.).

Background. In December 2010, the domain name assets of two Cook Islands limited liability companies, Novo Point, LLC and Quantec, LLC, were subject to receivership in litigation involving the companies’ owner. On March 31, 2014, Domain Vault LLC, a company that owns Internet domain names, filed suit against David McNair, an attorney in the Cook Islands, alleging violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). Domain Vault asserted that McNair attempted to gain control of the two companies’ domain name assets. McNair moved to dismiss the RICO claim for lack of standing.

Standing. McNair contended that the acts alleged in the complaint could not have injured Domain Vault because the company did not exist before March 12, 2014 – the date of its incorporation - when the alleged conduct occurred. McNair acknowledged that his alleged fraudulent conduct was directed at persons or entities other than Domain Vault and therefore could not have proximately caused Domain Vault any injury. To establish standing, a plaintiff must show an injury-in-fact that is concrete and actual or imminent, a causal link between the injury and the defendant’s actions, and that the injury will likely be redressed by a favorable decision, the court explained.

The court determined that the that Domain Vault could not have suffered any compensable injury as a result of McNair’s alleged conduct prior to Domain Vault’s March 12, 2014 incorporation date, because there was no evidence that Domain Vault existed prior to that date, and there is no allegation in the plaintiff’s complaint that any of the alleged conduct occurred after that date. Consequently, any interests in the two LLCs’ assets that Domain Vault expected to receive before it came into existence on March 12, 2014, were “expectancy interests” and insufficient for purposes of standing under RICO.

The court noted that the only specific date alleged in the complaint was March 4, 2014, the date on which Domain Vault alleged that McNair attempted to induce the LLC manager and counsel for Novo Point LLC and Quantec LLC to turn over all company assets to McNair. As this alleged act occurred before March 12, 2014, it could not support standing.

The only other allegation by the plaintiff pertained to McNair’s allegedly fraudulent communications “in March 2014” with third party domain name registrars and domain name development service providers in an attempt to prevent the LLC manager from accessing the LLCs’ domain names and secure the transfer of the LLCs’ assets to himself. The plaintiff claimed this alleged conduct by McNair was taken to prevent the LLC manager, not Domain Vault, from accessing the LLCs’ assets. Plaintiff also alleged that the assets from the domain name registrars and domain name development service providers “were to provide an income stream to Domain Vault LLC.” However, any income that Domain Vault anticipated receiving at some point in the future qualified only as injury to mere expectancy interests and was insufficient to confer RICO standing, the court concluded.

The case is No. 3:14-CV-1126-L.

Attorneys: Andrew C. Powell (Andrew C. Powell PLLC) for Domain Vault LLC. Leonard H. Simon (Pendergraft & Simon LLP) for David R. McNair.

Companies: Domain Vault LLC

Cases: RICO TexasNews