Comments
Comment posted May 14, 2004 2:14 pm PDT — by Rod Dixon I agree that federal courts face an unfortunate quandary in cases like Kremen v. Cohen, where the State’s highest court declines to accept, for whatever reason, a federal court invitation to rule on a matter of state law before the federal court does so.
Even so, federal courts, generally, ought to be loathe to “interpret” state law in manner that ostensibly converts the court into a super-legislature, which is exactly how I view the repudiation or declaration of a new property interest. Though the Ninth Circuit indicated that its opinion was equivalent to an interpretation of state law, the fact that the court requested the Supreme Court of California to address a critical aspect of the conversion issue in the case and the court’s acknowledgement in footnote 10 of its opinion that the issue it was addressing was a question of state law (that the state courts had not provided an answer to) supports the view that the Ninth Circuit recognized that it was treading in new waters of state law.
Of course, novel questions of state law do not preclude federal courts from using legal reasoning to interpret state law, but federal courts should be halting and languid in extending state law to areas where the state has been clearly reticent. Rather than follow this prescription, the Ninth Circuit’s opinion is quite the contrary.
Notwithstanding the Ninth Circuit’s analysis of conversion - - which as you correctly indicate was thorough - - the analysis, ultimately, did not drive the result. Instead, the court’s opinion was outcome driven. As you indicated, what was the court to do, dismiss the case and leave Kremen nothing for his pain? The court’s opinion is filled with very similar sentiment.
We are mindful, however, that sentimentality is not a court’s first priority. Sentimentality may lead to erroneous reasoning such as confusing the value of a website with the value of a domain name; that a well developed website may be viewed as valuable property need not require the same conclusion for domain names. Though websites and domain names are frequently related in valuations, a valuable website need not have a domain name. The distinction is not pedestrian, but of critical importance in reasoning about what legal theory best captures the nature of a domain name or a domain name transaction. Although there is no practical distinction for Network Solutions (especially given the dicta in the opinion), you are correct that the Ninth Circuit held that registrars should be liable, rather than that Network Solutions is liable.
What the impact of the Ninth Circuit decision will be on the business of registrars remains to be observed.
Admittedly, I have not noticed the competitive price of domain name registration increasing; one reason may be that lawyers who counsel registrars have just begun to advise registrars on the likely insurance implications of the decision or that registrars are awaiting the complete results of ICANN’s domain name transfer policy/initiative. Undoubtedly, if other state courts or federal circuits follow the lead of the Ninth Circuit, we will see precisely the impact of the propertization of domain names for the purpose of holding registrars liable for domain name theft by third parties. At bottom, I think it is undisputable that there are better remedies than the Ninth Circuit solution for the type of negligent domain name transfer involved in Kremen v. Cohen. Leaving aside monetary recovery - - which should not be applicable in most cases - - a well-managed ICANN should be best equipped to address this genuine concern.
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