Ninth Circuit Gives Sex.com to Supremes

Reluctant to extend tort law into the high-tech arena, the Ninth U.S. Circuit Court of Appeals on Friday asked the California Supreme Court to decide the last remaining questions in the battle over the lucrative sex.com domain name. Over a vigorous dissent by Judge Alex Kozinski, the majority on a three-judge panel decided to ask California's high court whether intangible property is subject to the tort of conversion.

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Reluctant to extend tort law into the high-tech arena, the Ninth Circuit U.S. Court of Appeals on Friday asked the California Supreme Court to decide the last remaining questions in the battle over the lucrative Sex.com domain name. Over a dissent that accused the court of passing off its “overflow laundry,” the majority on a three-judge panel that heard oral arguments several months ago decided to ask California’s high court whether intangible property is subject to the tort of conversion. “Although we are quite capable of resolving the issue presented, we should not reach out to grab the question in the first instance simply because the case involves a novel and ‘sexy’ issue,” the majority’s order reads. Since state rules required that the senior judge of a panel sign a certification request, the order was, technically, written by Judge Alex Kozinski. However, he also dissented. The two other members of the panel were Judge M. Margaret McKeown and U.S. District Judge James Fitzgerald of Alaska, sitting by designation. Turning over possession of personal property can give rise to a tort claim. But the law is less clear for intangible property because, seemingly, it lacks one critical element of the tort of conversion — possession. In Kremen v. Cohen, 01-15899, Gary Kremen sued Stephen Michael Cohen for appropriating his Internet domain name, Sex.com, by sending a fraudulent letter to what was then the exclusive registrar of all Internet domains, Network Solutions Inc. U.S. District Judge James Ware sided with Kremen, hitting Cohen with a $65 million judgment, which included $25 million in punitive damages. Cohen is reportedly in Mexico. But Ware dismissed claims against NSI. Those claims were the focus of oral arguments in August, but Friday’s order spawned another issue — this one about comity. Kozinski’s vociferous dissent urged the court to decide the case, diminished the importance of the question and raises enough of a ruckus that the majority’s order went beyond pro forma certification requests to engage Kozinski in a debate over when the Ninth Circuit should ask for state court help. The reason, he said, was that the California Supreme Court had better things to do. “Cyberspace will not implode if the Supreme Court confronts the majority’s questions at some point in the future rather than today; the issues may well be sharpened by common law development in the meantime,” Kozinski wrote. He included a table showing that the Ninth Circuit had certified 15 cases to the Supreme Court since 1998. Two were companion cases, but of the 14 unique questions, the court declined to hear five. Of those it decided, Kozinski noted, none took fewer than 500 days, delaying the final resolution of the cases. “These are the sorts of things that make lawyers rich but litigants understandably frustrated. The prospect in this case is particularly troublesome — Kremen has already spent the past four years in litigation trying to get compensation for the profits he lost because of Cohen’s theft and NSI’s alleged bungling,” Kozinski wrote. The majority addressed the Supreme Court: “We would not presume to certify a run-of-the-mill case to your court nor would we use the certification process to sidestep our diversity jurisdiction.” University of Pittsburgh School of Law professor Arthur Hellman, who follows the Ninth Circuit closely, was surprised that so many questions had been certified to the state high court. He said certification leads to delay, one of the consequences of diversity. “Underlying a lot of the controversy over certification is the question of whether diversity jurisdiction is a good thing,” Hellman said. Gray Cary Ware & Freidenrich partner Kathryn Karcher declined to comment on the certification, citing NSI’s wishes. Kremen’s lawyer, James Wagstaffe of San Francisco’s Kerr & Wagstaffe, said he was pleased with the two opinions despite the prospect of delay. “I think these opinions you’re reading today, particularly Kozinski’s, will be read for a long time. They represent the future and not the past,” Wagstaffe said. NSI probably represents Kremen’s best chance to recover his lost earnings. Cohen is a wanted man after failing to appear before Ware, and although Kremen did secure a house in Rancho Santa Fe that belonged to Cohen, NSI’s pockets are probably deeper than the fugitive pornographer’s.

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