Docket No.

08-17306
In the

United States Court of Appeals

for the

Ninth Circuit
CBS RECOVERY, INC., A Virginia Corporation, and DALE MAYBERRY, Plaintiffs-Appellees, v. JOHN LAXTON, AKA johnlaxton@gmail.com, NORTH BAY REAL ESTATE, INC., Defendants-Appellants. TIGER-CDM, BARNALI KALITA, AKA barnali.kalita@gmail.com, LI QIANG, AKA Jonathan Lee, AKA nameowner@yahoo.com, RL.COM, MAT.NET, BULK REGISTER, WILD WEST DOMAINS, DBA domaincity.com, and GUAN YU, Defendants.
_______________________________________

Appeal from a Decision of the United States District Court for the Northern District of California, No. 06-CV-07093 Honorable Claudia Wilken

BRIEF OF APPELLEES
STEVAN LIEBERMAN, ESQ. GREENBERG & LIEBERMAN 2142 Wisconsin Avenue Northwest Suite C-2 Washington, District of Columbia 20007 (202) 625-7001 Telephone CHARLES CARREON, ESQ. ONLINE MEDIA LAW, PLLC 2165 South Avenida Planeta Tucson, Arizona 85710 (530) 841-0835 Telephone

Attorneys for Appellees, CBS RECOVERY, INC., A Virginia Corporation, and DALE MAYBERRY

COUNSEL PRESS (800) 3-APPEAL

PRINTED ON RECYCLED PAPER

CORPORATE DISCLOSURE STATEMENT This statement is made pursuant to Federal Rule of Appellate Procedure 26.1. Plaintiff-Appellee CRS Recovery, Inc. is a corporate entity and has no parent corporation, subsidiaries or affiliates that have issued shares to the public.

TABLE OF CONTENTS CORPORATE DISCLOSURE STATEMENT .................................................. ante TABLE OF AUTHORITIES ................................................................................ iii JURISDICTIONAL STATEMENT ........................................................................1 NINTH CIRCUIT LOCAL RULE 28-2.6 STATEMENT .......................................1 STATEMENT OF THE ISSUES PRESENTED FOR REVIEW ............................1 STANDARD OF REVIEW ....................................................................................1 STATEMENT OF THE CASE ...............................................................................2 STATEMENT OF THE FACTS .............................................................................3 CRS's Acquisition of Lawful Title to RL.Com..............................................3 Dale Mayberry, The Original Registrant of RL.Com and MAT.Net..............4 Li Qiang, User # 1775470, Acquires Control of MAT.Net............................5 Li Qiang Usurps the dale@mat.net Email Address ....................................6 Li Qiang Uses dale@mat.net to Transfer RL.Com To Himself .....................6 Li Qiang Approves His Own Transfer Request .............................................7 Laxton Refuses To Return The Stolen Domain .............................................8 Plaintiffs-Appellees Motion For Summary Adjudication ..............................9 Laxton's Arguments Below ......................................................................... 10 Oral Argument on September 18, 2008 ....................................................... 10

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The Order Granting Summary Adjudication ............................................... 13 SUMMARY OF THE ARGUMENT .................................................................... 18 I. II. III. THE DISTRICT COURT PROPERLY APPLIED CALIFORNIA LAW ........................................................................ 18 THE DORMANT COMMERCE CLAUSE ARGUMENT WAS FORFEITED WHEN NOT RAISED BELOW ........................ 29 CONCLUSION ................................................................................ 33

CERTIFICATE OF COMPLIANCE..................................................................... 34 STATEMENT OF RELATED CASES ................................................................. 35 CERTIFICATE OF SERVICE.............................................................................. 36

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TABLE OF AUTHORITIES CASES A-1 Ambulance Serv., Inc. v. County of Monterey, 90 F.3d 333 (9th Cir. 1996) ................................................................... 29, 31 Abogados v. AT&T, Inc., 223 F.3d 932 (9th Cir. 2000) ....................................................................... 21 Bolker v. C.I.R., 760 F.2d 1039 (9th Cir. 1985) ............................................................... 30, 31 Butler v. Adoption Media, LLC, 486 F. Supp. 2d 1022 (N.D. Cal. 2007) ....................................................... 22 Canyon Ferry Road Baptist Church of East Helena, Inc. v. Montana Commissioner of Political Practices, F.3d 2009 U.S. App. LEXIS 3693 (9th Cir. Feb. 25, 2009) ...........................2 Downing v. Abercrombie & Fitch, 265 F.3d 994 (9th Cir. 2001) ....................................................................... 23 Express Media Group, LLC v. Express Corp., 2007 WL 1394163 (N.D. Cal.) .............................................................. 16, 28 Gieg v. DDR, Inc., 407 F.3d 1038 (9th Cir. 2005) ..................................................................... 29 Hormel v. Helvering, 312 U.S. 552 (1941) .................................................................................... 29 Hurtado v. Superior Court, 11 Cal. 3d 574, 114 Cal. Rptr. 106, 522 P.2d 666 (Cal. 1974) .................................................... 14, 20, 25, 26, 27 Insurance Co. of North Am. v. Federal Express Corp., 189 F.3d 914 (9th Cir. 1999) ....................................................................... 19 - iii -

Int'l Union of Bricklayers & Allied Craftsman Local Union v. Martin Jaska, Inc., 752 F.2d 1401 (9th Cir. 1985) ..................................................................... 29 Kimes v. Stone, 84 F.3d 1121 (9th Cir. 1996) ....................................................................... 32 Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941) .................................... 19 Kremen v. Cohen, 337 F.3d 1024 (9th Cir. 2003) ............................................................... 19, 27 Moore v. Czerniak, No. 04-15713 (9th Cir. 07/28/2009) ............................................................ 29 Naftzger v. Am. Numismatic Socy, 42 Cal. App. 4th 421, 432 (1996) ................................................................ 28 Network Solutions Inc. v. Umbro, 259 Va. 759 (2000) ............................................................................... 19, 22 Pereira v. Utah Transport, Inc., 764 F.2d 686 (9th Cir.1985), cert. dismissed, 475 U.S. 1040, 106 S.Ct. 1253, 89 L.Ed.2d 362 (1986) .........................................................2 Pike v. Bruce Chruch, Inc., 397 U.S. 137 (1970) .................................................................................... 31 Reich v. Purcell, 67 Cal. 2d 551, 432 P.2d 727, 63 Cal. Rptr. 31 (1967) .................... 25, 26, 27 Rothman v. Hospital Service of Southern California, 510 F.2d 956 (9th Cir. 1975) ....................................................................... 30 Schroeder v. Auto Driveway Co., 11 Cal.3d 908 (1974) .................................................................................. 28 Sims Snowboards, Inc. v. Craig Kelly and Burton Corp., 863 F.2d 643 (1988).................................................................................... 19 - iv -

Socy of Cal. Pioneers v. Baker, 43 Cal. App. 4th 774 (1996).................................................................. 15, 28 Tucci v. Club Mediterraneee, S.A., 89 Cal.App. 4th 180 (2001)............................................................. 16, 19, 24 United States v. Greger, 716 F.2d 1275 (9th Cir. 1983) ..................................................................... 30 United States v. Patrin, 575 F.2d 708 (9th Cir. 1978) ....................................................................... 30 United States v. Whitten, 706 F.2d 1000 (9th Cir. 1983) ..................................................................... 30 Yeater v. United States, 397 F.2d 975 (9th Cir. 1968) ....................................................................... 30 Zimmerman v. Allstate Ins. Co., 179 Cal.App. 3d 840 (1986) .................................................................. 15, 22 STATUTES 28 U.S.C. Sec. 1291 ................................................................................................1 Cal. Civil Code 3379-3380............................................................................... 18

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JURISDICTIONAL STATEMENT The District Court had jurisdiction to entertain this matter because the parties are diverse with Plaintiffs-Appellees being citizens of Virginia and Defendants-Appellants being citizens of California. In addition, the amount in controversy is $425,000. The Ninth Circuit Court of Appeals has jurisdiction to entertain this appeal pursuant to 28 U.S.C. Sec. 1291. Final judgment was rendered on October 6, 2008. NINTH CIRCUIT LOCAL RULE 28-2.6 STATEMENT Plaintiff-Appellees have no knowledge of any pending cases related to the issues herein. STATEMENT OF THE ISSUES PRESENTED FOR REVIEW 1. Whether the District Court properly applied California law to decide a

lawsuit for conversion of the RL.Com Internet domain name against a California resident who had purchased the domain in California. 2. Whether Defendant-Appellant may attack the judgment on grounds

not raised below, to wit, that the District Courts choice of California law violates the dormant commerce clause. STANDARD OF REVIEW The standard of review of the trial courts order of summary judgment is de novo. Canyon Ferry Road Baptist Church of East Helena, Inc. v. Montana Commissioner of Political Practices, F.3d 2009 U.S. App. LEXIS 3693 (9th Cir. -1-

Feb. 25, 2009). A district courts decision concerning the appropriate choice of law is reviewed de novo. Pereira v. Utah Transport, Inc., 764 F.2d 686, 689 (9th Cir.1985), cert. dismissed, 475 U.S. 1040, 106 S.Ct. 1253, 89 L.Ed.2d 362 (1986). STATEMENT OF THE CASE This is an action by Plaintiffs-Appellees, CRS Recovery, Inc. (CRS) and Dale Mayberry (collectively Plaintiffs-Appellees) to recover the RL.COM domain name that was hijacked by a third party and subsequently purchased and ultimately used by Defendants-Appellants, John Laxton and Northbay Realestate, Inc. (collectively Laxton or Defendants-Appellants). Dale Mayberry

(Mayberry) originally registered the domain name RL.COM in 1995 through Network Solutions, Inc. and the domain was stolen from that registrar in or about 2003 by Li Qiang, a citizen of China, who usurped the dale@mat.net email address through which Mayberry exercised control over the registration. Subsequently, Li Qiang sold the domain to Barnali Kalita, a citizen of India, who in turn sold it to John Laxton. When John Laxton took possession of the domain in 2005, he registered the RL.COM domain with Bulk Register in the name of his company Northbay Real Estate, Inc., a California corporation, and leased the domain to a seller of Internet advertising in exchange for a share of the advertising revenues. Mayberry, the rightful owner of the domain name, and CRS Recovery, Inc., standing in Mayberrys shoes as an assignee for value, brought this action under

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California law on the grounds that R.Com had been hijacked /stolen from Mayberrys rightful control, and that by purchasing the domain from Kalita, Laxton had acquired only void title. The District Court found, by applying California law, that Appellant Laxton was liable for conversion and ordered the domain name RL.COM to be returned to Appellees. Plaintiffs-Appellees moved for summary judgment on their conversion and declaratory relief claims, and defendant-appellants opposed, contending, inter alia, that Virginia law applied to the case, and barred the claims of Plaintiff-Appellees. The District Court found that there was no conflict between California and Virginia law, and on the undisputed facts, granted summary judgment for conversion under California law. STATEMENT OF THE FACTS CRS's Acquisition of Lawful Title to RL.Com On July 21, 2005, Richard Lau, a principal of CRS Recovery, Inc. (CRS) acquired the legal right to recover and possess RL.Com from the first and only lawful registrant, Dale Mayberry (Mayberry), in exchange for monetary consideration and the promise to recover MAT.Net and return it to Mayberry. (Mayberry Dec., 16; SER 196; Exhibit 1, pages 3 5; SER 204-205; Lau Dec. 5; SER 090.) The terms of the original assignment were fully performed, and prior to filing the instant action, CRS had established its position as the holder of all

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Mayberry's rights to RL.Com without reservation. (Mayberry Dec., 16 and 19; SER 196-197; Exhibit 1, pages 1 2; SER 202-203; Lau Dec. 11; SER 091.) Dale Mayberry, The Original Registrant of RL.Com and MAT.Net Mayberry was the first person to register RL.Com, which he did on July 23, 1995, choosing RL.Com as an acronym for "Real Life," a term used in online gaming parlance to describe a gamer's role in the real world. (Mayberry Dec. 2; SER 191; Rony Dec. 16; SER 027.) At that time, Mayberry was active in online game-playing. (Mayberry Dec. 2; SER 191.) From approximately 1999 until 2001, Mayberry operated Micro Access Technologies, Inc., a company that provided Internet access and email service to users in the Washington D.C. area using the domain MAT.Net. (Mayberry Dec. 2; SER 191.) When Micro Access Technologies, Inc. ceased operations in or about 2001, Mayberry maintained the registration on the MAT.Net domain. (Mayberry Dec. 2; SER 191.) RL.Com and MAT.Net are the only two domains Mayberry ever owned. (Mayberry Dec. 2; SER 191.) Domain registrants pay yearly registration fees, sometimes for years in advance. (Mayberry Dec. 5; SER 192.) Mayberry paid registration fees for RL.Com and MAT.Net to Network Solutions, Inc. (NSI).1 (Mayberry Dec. 6;

NSIs Virginia presence does not make the Internet Virginia-centric. Like many other Internet institutions, NSIs corporate parent Verisign is located in California. California has a strong nexus with all of the primary institutions of Internet -4-

SER 193.) On July 23, 2002 Mayberry renewed his registration of RL.Com for three years, and NSI confirmed a new expiration date of July 24, 2005. (Order, 15:20-22; ER 112; Mayberry Dec. 6; SER 193; NSI Dec. 6 - 9; SER 096; NSI Att. C, pages 41 and 44 - 47; SER 181 and 184-187; Rony Dec. 17 and Exh. B; SER 027 and 059.) Mayberry made dale@mat.net his contact email as the

Registrant of RL.Com. (Mayberry Dec. 5; SER 192-193.) Since Mayberry had paid his registration fees for years in advance, he reasonably believed his ownership of RL.Com was secure.2 (Rony Dec. 18; SER 027; Supp. Mayberry Dec. 3; SER 018.) Li Qiang, User # 1775470, Acquires Control of MAT.Net According to NSI, on Dec 19, 2003, the domain MAT.Net was transferred from Micro Access Technologies by Beijing Sinonets Network & Telcom Co, Ltd. (NSI Dec. 11; SER 096-097.) Pursuant to the transfer, the Admin Contact for MAT.Net became Qiang, Li, and the Network Solutions account for MAT.Net was deleted. (NSI Dec. 11; SER 096-097; Page 4 and 14 of Att. B; SER 112 and 122.) Li Qiang was NSI User # 1775470. (NSI Dec. 17; SER 097.) governance. (Rony Dec. 5 10; SER 024-025.) 2 Laxton argues Mayberry had to maintain a website to avoid abandoning RL.Com, and should have updated his NSI contact information, even though Li Qiang had usurped dale@mat.net. Plaintiffs-Appellees rebutted these contentions (Rony Dec. 42 and 64; SER 034-035 and 040), and the District Court rejected them as a matter of law. (Order, 16:5-13; ER 113.) -5-

Li Qiang Usurps the dale@mat.net Email Address As soon as Li Qiang transferred MAT.Net from Mayberry to BSNT, he changed the hosting from NSI's servers to another set of servers at BIM.Com. (Mayberry Dec. 9; SER 194; NSI Dec. 12; SER 097.) By controlling

MAT.Net, Li Qiang also blocked Mayberry's receipt of emails at dale@mat.net. (Mayberry Dec. 9; SER 194; Rony Dec. 21 and 23; SER 028, 029.) The person able to send and receive emails from dale@mat.net was Li Qiang. (Mayberry Dec. 9; SER 194; Rony Dec. 21 and 23; SER 028, 029.) Mayberry did not know Li Qiang had usurped his dale@mat.net email account, or that his three-year registration with NSI could be undermined by forgery. (Mayberry Dec. 6 and 13; SER 193 and 195; Supp. Mayberry Dec. 4 7; SER 018-019.) Li Qiang Uses dale@mat.net to Transfer RL.Com To Himself On December 23, 2003, Li Qiang, NSI User # 17754740, changed his official email address from lee@bim.com to dale@mat.net. (Rony Dec. 20;

SER 028; NSI Dec. 18; SER 097.) Timing his actions to fall on the day before Christmas Eve, at 2:07:01 am, December 23, 2003, Li Qiang sent an email from dale@mat.net using IP address 218.0.215.159, located in China, requesting that NSI transfer the domain to Li Qiang. (NSI Dec. 19 - 20; SER 097; NSI Att. C, pages 5 and 7; SER 145 and 147; Rony Dec. 24; SER 029.)

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Li Qiang Approves His Own Transfer Request Less than one minute after he sent the request, Li Qiang received the Authorization Email NSI had addressed to Mayberry at dale@mat.net. (Rony Dec. 25; SER 29; NSI Dec. 26 - 27; SER 098-099; NSI Att. C, pages 3, 4, 7, 8, 13, and 15; SER 143, 144, 147, 148, 153, and 155.) The Authorization Email that Li Qiang received at dale@mat.net read as follows: Dear Dale Mayberry, We recently received a request to transfer the following domain name(s) from you: RL.COM To: Li Qiang Date of the original request: December 23, 2003 2:07:01 AM EST Upon completion of the transfer, the registrant for the domain names(s) identified above will be Li Qiang. However, for security reasons, we must have your authorization before we can complete the processing. If this is a valid request and you wish to approve this transfer, please access the secure Web page at https://registrar-transfers.com/...3 or paste the URL into your browser. Then follow the instructions to authorize the domain name registration transfer for the domain names(s). If you don't respond within 15 days from the date of the original request shown above, the request will be canceled. If you have any questions or need assistance, please e-mail us at customersservice@networksolutions.com. Or call to speak to Customer Service at 1-888-642 or +1-703-742-0914 outside the United States and Canada. Network Solutions is committed to delivering high quality services to meet your online needs. We hope to have another opportunity to serve you in the future. Sincerely, Network Solutions Customer Support

This hyperlink has been abbreviated. -7-

Mayberry never saw NSI's Authorization Email. (Mayberry Dec. 12; SER 195.) As soon as Li Qiang received it, misrepresenting himself as Mayberry, he immediately approved the transfer and thus acquired unlawful control over the registration of RL.Com. (Rony Dec. 25; SER 29; NSI Dec. 28; SER 099; NSI Att. C, page 5; SER 145; Mayberry Dec. 14; SER 195-196.) If Mayberry had received the Authorization Email, he would not have authorized the transfer request, and would have actively denied it. (Mayberry Dec. 13; SER 194.) Network Solutions has no record of any documentation communicating that Dale Mayberry sold or otherwise transferred his rights to be the registrant of MAT.Net or RL.Com to Li Qiang. (NSI Dec. 32; SER 099.) Mayberry was not able to recover the domain through reasonable efforts made following his discovery that Li Qiang had hijacked RL.Com, and as set forth infra, transferred all his rights to recover and possess RL.Com to Richard Lau, and thereafter, to CRS. (Order, 15:22-23; ER 112; Mayberry Dec. 15 - 16; SER 196; Lau Dec. 5, 6, and 11; SER 089-090; Supp. Mayberry Dec. 9 10; SER 019-020.) Laxton Refuses To Return The Stolen Domain Laxton bought RL.Com from an individual in India named Barnali Kalita for $15,000, paid via two PayPal payments of $7,500 on May 6, 2005 and May 20, 2005. (Laxton Depo., 8:13 - 22; 10:19 11:1; SER 209, 211, 212; Laxton 30(b)(6) Depo., 47:25 50:9; SER 245-247; Exhibit 5; SER 261-266.) Laxton negotiated

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with Barnali Kalita via email, but testified that he destroyed the emails, and has no substantial recollection of their contents. (Laxton Depo., 8:23 9:04; SER 209210; 10:19 12:4; SER 211-213.) From May 15, 2005 to January 21, 2008, Laxton received at least $2,053.83 in revenue by "renting" RL.Com as advertising space to Thought Convergence, Inc., doing business on the Internet as TRAFFICZ.com (herein TRAFFICZ.com). (Rony Dec. 10; Laxton Depo., 15:13-18; 24:18 25:8; SER 216, 222-223; Supp. Mayberry Dec. 10; SER 020.) On February 27, 2006, counsel for CRS sent a formal demand letter to Laxton, following up on an oral request, asking Laxton to return the domain name to Mayberry. (Lieberman Dec. 2; SER 086-087; Exh. 3; SER 249-251.) Laxton refused to return the domain. (Lieberman Dec. 2; SER 086-087.) PlaintiffsAppellees filed the instant action on November 15, 2006, long before the expiration of the statute of limitations. (Supp. Mayberry Dec. 11; SER 021; Order, 16:24 17:1; ER 113-114.) Plaintiffs-Appellees Motion For Summary Adjudication Based on the foregoing undisputed facts, on July 17, 2009, PlaintiffsAppellees moved for summary adjudication on the grounds that they were entitled to judgment as a matter of law on the first and fourth claims for relief, for Conversion and Declaratory Relief, respectively.

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Laxton's Arguments Below Laxton argued, in opposition to summary adjudication, and in support of his own motion for summary judgment, that: Virginia law does not recognize the tort of conversion of domain names, and must be applied to the case; Mayberry abandoned his claims, waived his rights, and unreasonably delayed in filing suit; Laxton was a good-faith purchaser; and, Mayberrys assignment to CRS was invalid. (Memorandum of Points & Authorities In Support of Defendants Motion for Summary Judgment, herein Laxtons MSJ, SER 063-085.) Laxton attempted to support various of his arguments with a declaration of John Levine, PhD, whose opinions were proffered as those of an expert. Plaintiffs-Appellees rebutted the Levine Declaration with that of Ellen Rony, a Federal Court-qualified domain name expert. (Rony Dec. 2, 3 and 65; SER 023-024 and 040.) Laxton made no constitutional arguments, and made no mention of the dormant commerce clause. Oral Argument on September 18, 2008 On September 18, 2008, the Court held oral argument on the cross-motions. District Judge Claudia Wilken declared from the outset that California law applied to the case, and explained her analysis at the request of counsel: MR. HORNSTEIN: COULD THE COURT ARTICULATE ITS REASONING BEHIND THE APPLICATION OF CALIFORNIA LAW?

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THE COURT: THERE WILL BE A WRITTEN ORDER. THE REASON IS, IT'S THE TEST OF IS THERE AN ACTUAL CONFLICT? IS THERE PREJUDICE? YOU ARE THROWING OUT A LOT OF THINGS ABOUT VENUE, JURISDICTION, AND CONTRACTS, AND THINGS LIKE THAT, BUT THAT -- THIS ISN'T A SUIT ON A CONTRACT. IT ISN'T A SUIT ON A TORT THAT HAPPENED IN A CERTAIN PLACE. WE ARE NOT TALKING ABOUT VENUE OR JURISDICTION, WE ARE TALKING ABOUT THE GOVERNMENTAL INTEREST TEST. MR. HORNSTEIN: YES, EXACTLY. THE COURT: SO WE LOOK AND WE SEE THAT CALIFORNIA LAW AND VIRGINIA LAW ARE DIFFERENT. MR. HORNSTEIN: RIGHT. THE COURT: AND THAT IT MATTERS, AND THEN WE LOOK AT THE INTERESTS. WHAT ARE THE INTERESTS OF VIRGINIA IN PROTECTING SOMEONE WHO IS NOT A VIRGINIA CITIZEN? THE INTEREST OF CALIFORNIA ARE IN MAKING SURE THAT ITS LAW IS APPLIED OR MAKING -PROTECTING PEOPLE IN THE WAY THAT IT WANTS TO PROTECT THEM, BUT VIRGINIA HAS NO INTEREST. VIRGINIA ISN'T TRYING TO PROTECT ANY DEFENDANT. NONE OF THE DEFENDANTS ARE VIRGINIA PEOPLE. MR. HORNSTEIN: THE DEFENDANTS ARE -THE COURT: NOR THE TORTFEASORS ARE NOT VIRGINIA PEOPLE. THE ONLY INTEREST VIRGINIA COULD HAVE WOULD BE TO PROTECT ITS OWN RESIDENTS FROM BEING UN -- WRONGFULLY HELD LIABLE. AND SINCE IT DOESN'T HAVE ANY RESIDENTS IN THAT POSITION, IT DOESN'T HAVE ANY INTEREST, WHEREAS CALIFORNIA DOES. MR. HORNSTEIN: MR. LAXTON WAS THE THIRD OR FOURTH PURCHASER OF THE MARK -- OF THE URL FROM SOMEBODY OVERSEAS. THE INITIAL -- HE HAS SHOWN THAT HE CONVERTED THIS ITEM, IT HAS TO BE SHOWN THAT UNDERLYING AN ORIGINAL CONVERSION - 11 -

OCCURRED. AND ALL THOSE ACTS TOOK PLACE IN VIRGINIA AS WE ARTICULATED. EVERYTHING TOOK -THE COURT: THAT'S A GOOD ARGUMENT FOR JURISDICTION IN VIRGINIA. IT'S AN ARGUMENT FOR VENUE IN VIRGINIA, BUT IT ISN'T -- THAT'S NOT THE PARADIGM --*** MR. HORNSTEIN: I DISAGREE WITH THE -- I THINK IT'S THE GOVERNMENTAL INTEREST. I MEAN, IN ORDER TO SHOW THAT THE CALIFORNIA LAW APPLIES, THERE IS A CONVERSION IN CALIFORNIA, IT HAS -THE COURT: WE ARE NOT SHOWING WHETHER THERE IS A CONVERSION IN CALIFORNIA. WE ARE SHOWING WHETHER CALIFORNIA LAW APPLIES FIRST, AND THEN ONCE WE DECIDE WHAT LAW APPLIES, THEN WE DECIDE WHETHER UNDER THAT LAW THERE IS CONVERSION. (Transcript, 9:6 - 11:8; SER, Vol. I, 10-11.) Laxtons counsel then argued Laxtons asserted abandonment defense, but the District Judge found no facts supporting it, and upon reaching that conclusion, granted summary judgment from the bench: MR. HORNSTEIN: YOUR HONOR, I MISSED SOMETHING AFTER YOU SAID CALIFORNIA LAW APPLIES. WE STILL HAVE THE ISSUE FOR TRIAL ABOUT ABANDONMENT WHICH WE RAISED. THE COURT: I DON'T THINK THEY ABANDONED IT. MR. HORNSTEIN: RIGHT, BUT I THINK -THE COURT: THEY MAY HAVE ABANDONED MAT DOT COM, BUT THEY DIDN'T ABANDON RL DOT COM. THE FACT THAT THEY ABANDONED MAT DOT COM APPARENTLY IS WHAT'S ENABLED THIS PERSON TO GO IN THROUGH THE MAT DOT COM E-MAIL ADDRESS AND STEAL THE RL DOT COM NAME, BUT THE RL DOT COM NAME WAS PAID UP -- 12 -

MR. HORNSTEIN: WE RAISED THE ISSUE -THE COURT: WELL, THE NOTION THAT AFTER SOMETHING HAS BEEN STOLEN FROM YOU, YOU SORT OF GIVE UP TRYING TO GET IT BACK DOESN'T MEAN YOU ABANDONED IT. IF SOMEBODY GRABS MY PURSE ON THE STREET AND I CHASE THEM FOR A WHILE AND THEN I GIVE UP, HAVE I ABANDONED MY PURSE? I DON'T THINK SO. (Transcript 8:3-21; SER Vol. I, 13.) MR. HORNSTEIN: *** I THINK THERE ARE FACTUAL DISPUTES HERE. IN FACT, IN OCTOBER, HE HAD ABANDONED -- WHEN HE ABANDONED MAT DOT NET, HE ABANDONED AND WAIVED HIS RIGHTS FOR RL DOT COM. THAT'S ONE OF THE POINTS WE WERE MAKING IN THE MOTION. THE COURT: YOU MAY BE MAKING THAT POINT, BUT I DON'T KNOW THAT THERE IS ANY EVIDENCE OF THAT. WHAT WOULD BE THE EVIDENCE OF THAT WITH RESPECT TO RL DOT COM? MR. HORNSTEIN: THAT'S CORRECT. THAT HE HAD EVERY OPPORTUNITY TO CHANGE THE ADMINISTRATIVE CONTACT AND DECIDED NOT TO. HIS BUSINESS WENT DOWN. HIS BUSINESS WAS THE -- HE AND THE BUSINESS WERE ABANDONED IN '01. THEY WERE THE OWNERS OF RL DOT COM. BY HIS ABANDONING HIS BUSINESS AND BY ABANDONING THE URL THAT WAS THE ADMINISTRATIVE CONTACT FOR RL DOT COM, HE ABANDONED RL DOT COM. THAT'S OUR POSITION. THAT'S THE FACTS WE SUBMITTED UP HERE, I BELIEVE, SHOW. THE COURT: NO, I DON'T THINK SO. I WILL GRANT SUMMARY JUDGMENT ON THE FIRST AND FOURTH CAUSES OF ACTION. (Transcript, 13:1-20; SER Vol. I, 13.) The Order Granting Summary Adjudication On September 26, 2008, Judge Wilken issued an 18-page Order Granting Plaintiffs Motion for Summary Adjudication and Denying Defendants Cross- 13 -

Motion for Summary Adjudication, addressing every one of Laxtons contentions is considered detail. Applying California choice of law rules as prescribed by Orange Street Partners v. Arnold, the District Court applied Californias governmental interest test, noting inter alia that the fact that Mayberry was originally injured in Virginia did not indicate that Virginia law should apply, because in adopting the governmental interest approach California displaced the previous approach of applying the law of the state where the injury occurred. (Order, note 5 at 11, citing Hurtado v. Superior Court, 11 Cal.3d 574, 579-580 (1974); ER 108.) Laxton failed to articulate any specific policy to be advanced by applying Virginia law. (Order, 9:23-10:2; ER 106-107.) Laxtons argument, held the

District Court, amounts to saying that Virginias interest in having its rule applied is in not having another States rule applied. (Order, 9:23-10:2; ER 106-107.) Mindful of its duty to focus on the specific interests that are advanced by the rule, the District Court discerned Virginias interest in providing [domain] purchasers with a predictable limitation of their potential liability. (Order, 10:1118; ER 107.) If Defendants resided in Virginia or if Laxton had purchased rl.com in Virginia, Virginia could be said to have an interest in applying its rule in this case. (Order, 10:24-26; ER 107.)

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However, Laxton is a citizen of California,4 and starting from that point, the District Court found six governmental interest factors that established that Virginia had no interest in having its law applied, whereas California had strong interests in the application of its law. First, Laxton is a citizen of California and the conduct that gave rise to Defendants liability for conversion is Laxtons purchase of rl.com from Kalita; second, no aspect of the transaction took place in Virginia; third, Laxton had no justifiable expectation that [his] conduct would be shielded from liability; fourth, Virginia had no interest in protecting the conduct of a California resident when that conduct has no connection to Virginia; fifth, application of Virginia law to the case would do nothing to further that States interest in providing its residents with a predictable definition of liability, and sixth, California has an interest in regulating conduct that occurs within its borders and ensuring that redress is available when such conduct is tortious. (Order, 10:26 11:19; citing Zimmerman v. Allstate Ins. Co., 179 Cal.App. 3d 840, 846 (1986) for the sixth factor; ER 107-108.) Based on the foregoing analysis, the District Court concluded that Defendants-Appellants had failed to establish the existence of a true conflict:

The District Court, inter alia, found that Laxton had converted the domain while residing in California, by citing Socy of Cal. Pioneers v. Baker, 43 Cal.App.4th 774, 781-83 (1996) for the longstanding rule that a cause of action for conversion against a subsequent purchaser of the property accrues when the purchaser obtains possession, not at the time of the original conversion. (ER 108.) - 15 -

Because Virginia does not have an interest in the application of its rule to this case whereas California does, the posited conflict is a false one. The Court will therefore apply California law. Tucci v. Club Mediterraneee, S.A., 89 Cal.App. 4th 180, 188-89 (2001) The District Court then applied California law to the undisputed facts: Pursuant to California law Mayberry had a property right to rl.com at the time it was taken from him. He was not lawfully dispossessed of that right by Qiangs seizure of the domain without Mayberrys authorization, and thus it was not possible for Defendants to acquire a right to the domain superior to Mayberrys by virtue of Laxtons purchase from Kalita. Defendants are therefore prima facie liable for conversion. The District Court considered and rejected Laxtons contention that he could assert a good-faith purchaser defense to conversion. Citing with approval Judge Alsups decision in Express Media Group, LLC v. Express Corp., 2007 WL 1394163 (N.D. Cal.)5, the District Court drew the same distinction between involuntary transfers and fraudulent transfers as did Judge Alsup: An involuntary transfer results in void title, while a voluntary transfer, even if fraudulent, results in voidable title. (Order, 14:15-17; ER 111.) Accordingly, mere possession of a domain name that was involuntarily transferred from a rightful owner is sufficient to convey liability for conversion. (Order, 14:27 15:2; SER 111-112; citing Express Media, supra; SER 267-277.) Finding that Defendants have not pointed to any evidence that Mayberry voluntarily transferred the title of rl.com to Qiang,

Submitted as supplemental authority. (SER 267-277.) - 16 -

the District Court held that Laxtons contention that he purchased rl.com in good faith was of no consequence. (Order 14:7 15:6; SER 111-112.) As had been the case at oral argument, the District Court found no facts to support Laxtons asserted abandonment defense: In order to succeed on an abandonment defense to conversion under California law, however, a defendant must show a clear, unequivocal, and decisive act demonstrating a waiver of the plaintiffs property rights. [Citations omitted.] Defendants point to no such affirmative relinquishment of Mayberrys right to exercise control over rl.com. It is undisputed that Mayberry had paid to register the domain with NSI through July 24, 2005. (Order 15:9-21; ER 112.) With respect to Laxtons claim that plaintiffs had delayed unreasonably in filing suit, even though Defendants appeared to have withdrawn this argument, the District Court decided the issue in favor of Plaintiffs-Appellants on two grounds. First, The statute of limitations governs the timeliness of Plaintiffs claim, not the equitable doctrine of laches. (Order, 16:23-25; ER 113.) Second, Plaintiffs did not delay unreasonably in bringing this lawsuit, and thus the doctrine of laches, even if it applied, would not prevent them from asserting their claim. (Order, 17:2-4; ER 114.) The District Court held that the assignment from Mayberry to CRS was valid, disallowing Laxtons contention that Mayberry could not assign the rights to the domain because Mayberrys registration agreement with NSI was nonassignable. The District Court dismissed the suggestion, and found the non-

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assignability clause in the NSI registration agreement was irrelevant to the case. Plaintiffs do not assert claims against defendants for breach of the service agreement; they assert a conversion claim. (Order, 17:5-12; ER 114.) Having thoroughly considered all of Laxtons contentions and having found them unsupported by facts or law, the District Court granted summary judgment on the conversion and declaratory relief claims, and granted Plaintiffs-Appellants specific recovery of the domain under Cal. Civil Code 3379-3380. SUMMARY OF THE ARGUMENT The District Court properly applied California law to decide that the choice of law issue raised by Laxton was merely a false conflict, because California was the only state that had an interest in applying its law to the case, and Virginia had no interest in precluding its citizens from recovering property from a California defendant who converted and exploited the domain name while residing in California. Defendants-Appellants have essentially conceded that when California law is applied to the undisputed facts, Plaintiffs-Appellees must prevail. No other issues in defense are properly before the Court, and accordingly, the District Courts grant of summary judgment must be affirmed. I. THE DISTRICT COURT PROPERLY APPLIED CALIFORNIA LAW The District Court in this case performed its analytical duties rigorously and committed no error. First, the District Court rightly considered the choice of law

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question as a threshold issue, because under the holding of Kremen v. Cohen, 337 F.3d 1024 (9th Cir. 2003), California recognizes domain names as property subject to conversion and judicial recovery, while Virginia does not. Network Solutions Inc. v. Umbro, 259 Va. 759 (2000). Second, the District Court properly applied California choice of law rules to analyze the issue. Sims Snowboards, Inc. v. Craig Kelly and Burton Corp., 863 F.2d 643 (1988), citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021, 85 L.Ed. 1477 (1941). Under California choice of law rules, the party seeking to apply foreign law must establish that the foreign rule of decision will further the interest of that foreign state and therefore that it is an appropriate one for the forum to apply to the case before it. Tucci v. Club Mediterranee, S.A., 89 Cal. App. 4th 180; 107 Cal.Rptr. 2d 401 (2001). Third, the District Court correctly determined that because

Virginia had no interest in having its law enforced, the case presented merely a false conflict, and California was the only state that had an interest in the enforcement of its laws. Even though two states may have different rules applicable to the subject matter, this often generates merely a false conflict. Only if both states have a legitimate but conflicting interest in applying its own law will the court be confronted with a "true conflict" case. Insurance Co. of North Am. v. Federal Express Corp., 189 F.3d 914, 921 (9th Cir. 1999).

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A classic false conflict was found in Hurtado v. Superior Court, 11 Cal. 3d 574, 114 Cal. Rptr. 106, 522 P.2d 666 (Cal. 1974), a wrongful death case brought by the widow and children of a Mexican citizen killed in a car accident in Sacramento County, California. On a petition for writ of mandate, the California Appellate Court entered a writ of mandate directing the trial court to cap damages at 24,334 pesos or $1,946.72 at the applicable exchange rate of 12.5 pesos to the dollar. The California Supreme Court reversed, explaining preliminarily: Although the two potentially concerned states have different laws, there is still no problem in choosing the applicable rule of law where only one of the states has an interest in having its law applied." Hurtado, supra, 11 Cal.3d at 580. Mexico, the court explained, had no interest in having its law applied to the case at bar, because applying it would not further the purpose of its adoption protecting Mexican citizens from excessive damages awards: Since it is plaintiffs and not the defendants who are the Mexican residents in this case, Mexico has no interest in applying its limitation of damages Mexico has no defendant residents to protect and has no interest in denying full recovery to its residents injured by nonMexican defendants. In the case at bench, California as the forum should apply its own measure of damages for wrongful death, unless Mexico has an interest in having its measure of damages applied. Since, as we have previously explained, Mexico has no interest whatsoever in the application of its limitation of damages rule to the instant case, we conclude that the trial court correctly chose California law. Hurtado, supra, 11 Cal.3d at 582.

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In Abogados v. AT&T, Inc., 223 F.3d 932, 934 (9th Cir. 2000), this Court outlined the analytical method to be applied when a claimed conflict of laws appears: California applies a three-step governmental interest analysis to choice-of-law questions. (Citations omitted.) First, the court examines the substantive law of each jurisdiction to determine whether the laws differ as applied to the relevant transaction. (Citations omitted.) Second, if the laws do differ, the court must determine whether a true conflict exists in that each of the relevant jurisdictions has an interest in having its law applied. Id. If only one jurisdiction has a legitimate interest in the application of its rule of decision, there is a `false conflict' and the law of the interested jurisdiction is applied. (Citation omitted.) Abogados v. AT&T, Inc., 223 F.3d at 934. The District Court first found that Virginia law expressed an interest in providing domain name buyers with a predictable limitation for their liability, and then considered whether that interest would actually be furthered by preventing its citizens, like Mayberry, from recovering a domain name that has been stolen from them. (Order 10:7-23; ER 107). Noting that the Defendants have cited no authority to support [that] view, the District Court found that [a]pplying Virginias law in this instance would do nothing to further that States interest in providing its residents with a predictable definition of liability. (Order, 11:13-15; ER 108.) California, however, has a legitimate interest in providing its residents with a predictable definition of liability and in regulating conduct that occurs within

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its borders and ensuring that redress is available when such conduct is tortious. (Order, 11:11-19, citing Zimmerman v. Allstate Ins. Co., 179 Cal.App. 3d 840, 846, 224 Cal.Rptr. 917 (1986); ER 108.) California also has a significant interest in protecting the rights of litigants when failure to apply California law would effectively undermine such law. Butler v. Adoption Media, LLC, 486 F. Supp. 2d 1022, 1052 (N.D. Cal. 2007). As the District Court also found, California residents who buy and use domains in California cannot reasonably expect to be shielded from liability for conversion by invoking the law of a foreign state to which they have no connection. (Order, 11:6-18; ER 108.) Defendants-Appellants argue here that Virginias rule in Network Solutions Inc. v. Umbro, 259 Va. 759 (2000) circumscribes the property rights of Virginia in every state in the nation. Indeed, if Umbro, supra, stood for all that Laxton contends, domains owned by Virginians would become especially desirable items of theft, since their mere provenance would provide a defense to the wrongdoers. Not surprisingly, the rule in Umbro has no such origins. Umbro was grounded in the Virginia District Courts concern that allowing garnishment of domain names would allow garnishment of Network Solutions services and correspondingly, the garnishment of any service of a Virginia resident that resulted in an exclusive right. Umbro, 259 Va. 759, 771 (2000).

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In summary, the Umbro decision protects Virginia entities from property claims, and does not prevent them from asserting property claims, and its holding should not be distorted to preclude Virginia persons and companies from asserting property claims in other jurisdictions against residents of foreign states. Virginia has no interest in preventing its citizens from being treated equally in the California courts with respect to their property rights. Accordingly, the District Court properly concluded that [b]ecause Virginia does not have an interest in the application of its rule to this case whereas California does, the posited conflict is a false one. (Order, 13; 2-5; ER 110.) The holding of Downing v. Abercrombie & Fitch, 265 F.3d 994 (9th Cir. 2001) is directly on point. In that case, the Abercrombie & Fitch clothing

company published the names and photographs of various Hawaiian professional surfers in Spring Quarterly, a publication distributed in California. The district court dismissed the California law claim for statutory misappropriation because the surfers would not have had a statutory claim under Hawaiian law. The Ninth Circuit reversed, finding that although the photographs were of Hawaiians in Hawaii, Spring Quarterly was distributed, and therefore the misappropriation occurred, in California. Abercrombie & Fitch, 265 F.3d at 997. This Court

explained its reasoning in a manner that illuminates the proper result in the case at bar:

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By distributing its catalog within California, Abercrombie was operating within its borders. . . . Hawaii did not place any limitation on recovery; instead it simply did not provide for the extent of relief California does in this type of action. It is pure fancy to believe that Hawaii would wish to restrict its residents from recovery that others could obtain in California solely because it had not enacted a statute like Californias to complement its common law action for the same offense. Abercrombie, 265 F.3d at 997 (emphasis added). Similarly, it is pure fancy to believe that Virginia would wish to restrict its residents from recovering stolen domain names from Californians under California law. Laxton, who has no connection with Virginia, is in no position to advocate the interests of its citizens, or to advance the purposes of its laws. Nor could Laxton, as a California citizen buying RL.Com in California, harbor any justifiable expectation that his actions would be shielded from liability for conversion. Like the Abercrombie defendants, Laxton was a California resident who commercially exploited RL.Com in California, and was properly found liable for conversion under California law. Applying Virginia law to make a transaction lawful that would otherwise be unlawful would undermine Californias interest in controlling property transactions within the state, and make it impossible to define the liability for a crucial California tort without making a survey of all state laws. In Tucci, supra, such concerns compelled the district court to apply the law of the Dominican Republic. Tucci, 89 Cal. App. 4th at 193 (applying foreign law would seriously undermine

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the Dominican Republics vital interest in fostering business investments and development and dealing with injurious conduct within its borders). Laxton invokes Reich v. Purcell, 67 Cal. 2d 551, 432 P.2d 727, 63 Cal. Rptr. 31 (1967) in support of the position that Virginia law should have been applied to this case, but his reliance is based on a fundamental misreading of the case. In Reich, the California Supreme Court renounced the prior rule, adhered to by courts for many years, that in tort actions the law of the place of the wrong was the applicable law in a California forum regardless of the issues before the court.
6

Hurtado, 11 Cal.3d at 579. In Reich, a California resident had a car accident in Missouri and was sued in California by the estate of two deceased Ohio natives, whose estate was being administered in Ohio. Missouri law capped wrongful death recoveries at $25,000, while Ohio and California had no cap. The parties stipulated to liability of either $25,000 (if Missouri law applied) or $55,000 (if Ohio or California law applied), and left it to the trial court to determine the outcome. The trial court applied Missouri law, and the California Supreme Court reversed, finding that the California defendant had no claim to demand the liability

In lieu of the place of the injury approach, Reich established governmental interest analysis. Hurtado, 11 Cal.3d at 579. By arguing that Virginia law should apply because Li Qiang stole RL.Com in Virginia, Laxton urges the very rule Reich renounced. Notably, the District Court found that Qiang does not appear to have stolen rl.com in Virginia [and in any event] the conversion claim is not against Qiang, it is against Defendants. (Order, 13:20-23; ER 110.) - 25 -

protections of Missouri law:

[W]e fail to perceive any substantial interest

Missouri might have in extending the benefits of its limitation of damages to travelers from states having no similar limitation. Reich v. Purcell, 67 Cal. 2d at 556 (emphasis added). Similarly, in this case Virginia has no interest in extending its liability protections to domain name buyers from California. Laxton asserts that Reich supports the proposition that California has no interest in applying its law on behalf of Laxton because it serves no purpose in protecting California residents but instead serves only the purpose of benefiting an out of state resident with no ties to California. (Appellants Brief, page 24.) But Reich did not endorse such result-oriented interest analysis.7 Rather, Reich held that as a forum disinterested in the only issue in dispute, the California court had to choose between the Ohio or the Missouri rule, and chose the Ohio rule, that deprived the California defendant of the benefit of the damages limitations, and accorded the Ohio plaintiffs the larger recovery. Reich, 67 Cal.2d at 556. In Hurtado, after reining in the appellate courts excessive zeal to impose Mexicos parsimonious wrongful-death laws on Mexican nationals suing Californians, the California Supreme Court expounded on the meaning of Reich to

Laxtons argument seems to be that California has an interest in applying its law only when it will protect a California resident, and not when it will benefit an out of state resident. However, if helping residents win domain cases is a California governmental interest, then it is incomprehensible why Virginia would have an interest in forcing its residents to lose domain cases. - 26 -

address a serious misreading of Reich which apparently has not been confined to the parties before us. 11 Cal.3d at 582. The court explained how the State of Californias policy of deterring wrongful conduct within its borders is a significant policy that is advanced by applying its own law: It is manifest that one of the primary purposes of a state in creating a cause of action in the heirs for the wrongful death of the decedent is to deter the kind of conduct within its borders which wrongfully takes life. (Citations omitted.) It is also abundantly clear that a cause of action for wrongful death without any limitation as to the amount of recoverable damages strengthens the deterrent aspect of the civil sanction: "the sting of unlimited recovery . . . more effectively [penalizes] the culpable defendant and [deters] it and others similarly situated from such future conduct." (Citations omitted.) Therefore when the defendant is a resident of California and the tortious conduct giving rise to the wrongful death action occurs here, California's deterrent policy of full compensation is clearly advanced by application of its own law. Hurtado, supra, 11 Cal.3d at 584. Applying California law to the undisputed facts, the District Court properly entered summary judgment for Plaintiffs-Appellees as a matter of law. This Court has recognized that ownership of an Internet domain name is a property right sufficient to support a claim for conversion under California law. Kremen v. Cohen, 337 F.3d 1024, 1031 (9th Circ. 2003). The District Court found Laxton committed actionable conversion when he purchased the domain from Kalita. (Order,10: 26-27 - 11:1; ER 107-108.) As the District Court observed, a cause of action for conversion against a subsequent purchaser of the property accrues when the purchaser obtains possession, not at the time of the original conversion. - 27 -

(Order, 11: 2-6, quoting Socy of Cal. Pioneers v. Baker, 43 Cal. app. 4th 774, 78183, 50 Cal.Rptr. 865 (1996); ER 108.) Under California conversion law, valid title never passes to a subsequent purchaser when the property is stolen: Stolen property remains stolen property, and a thief cannot convey valid title to an innocent purchaser of stolen property. (Naftzger v. Am. Numismatic Socy, 42 Cal. App. 4th 421, 432 (1996). (Order, 14: 24-26; ER 111.) In a recent Northern District conversion action to compel the return of the Express.com domain, District Judge William Alsup rejected the good-faith-purchaser defense, holding that [p]ossession of the property coupled with a refusal to return it is sufficient to support a defendants liability for conversion. (Express Media Group v. Exress Corp., 2007 WL 1394163 (N.D. Cal.) 6:19-21; SER 272; citing Schroeder v. Auto Driveway Co., 11 Cal.3d 908, 918, 114 Cal.Rptr. 622 (1974).) In summary, the District Court properly applied California choice of law rules to conclude that Laxton had raised a mere false conflict, because Virginia had no interest in having its law enforced in this action. Applying established

California law, the District Court further determined that Laxton had raised no disputed issues of fact that would preclude entry of judgment against DefendantsAppellants. The District Court properly granted Plaintiffs-Appellants summary judgment for conversion and ordered specific recovery of the RL.Com domain. Accordingly, the judgment must be affirmed.

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II.

THE DORMANT COMMERCE CLAUSE ARGUMENT WAS FORFEITED WHEN NOT RAISED BELOW Laxton forfeited the opportunity to make an argument based on the dormant

commerce clause by failing to raise it in the Answer, in the Motion for Summary Judgment, or anywhere in the District Court proceeding. (Answer, pages 4 - 11; ER 17-24; Laxton MSJ, generally; SER 063-085; Transcript, SER 1-16.) In Moore v. Czerniak, No. 04-15713 (9th Cir. 07/28/2009),8 this Court reiterated its policy against allowing litigation of issues on appeal not previously raised in the District Court: The forfeiture rule (sometimes erroneously called the waiver rule) applies equally to arguments, factual assertions, and legal theories that were not urged below. Quoting Supreme Court precedent, Justice Reinhardt underlined the

reasons for the rule: The Supreme Court has explained that this forfeiture rule is essential in order that parties may have the opportunity to offer all the evidence they believe relevant to the issues which the trial tribunal is alone competent to decide and that it is equally essential in order that litigants may not be surprised on appeal by final decision there of issues upon which they have had no opportunity to introduce evidence. Moore v. Czerniak, supra, quoting Hormel v. Helvering, 312 U.S. 552, 556 (1941)(emphasis added).

Although a habeas case, Moore cites copious civil law authority for its firm stance against entertaining new litigation theories on appeal that were not advanced below, citing, inter alia, Gieg v. DDR, Inc., 407 F.3d 1038, 1046 n.10 (9th Cir. 2005), Int'l Union of Bricklayers & Allied Craftsman Local Union v. Martin Jaska, Inc., 752 F.2d 1401, 1404-06 (9th Cir. 1985), and A-1 Ambulance Serv., Inc. v. County of Monterey, 90 F.3d 333, 337-39 (9th Cir. 1996). - 29 -

It is a well-established principle that in most instances an appellant may not present arguments in the Court of Appeals that it did not properly raise below. Rothman v. Hospital Service of Southern California, 510 F.2d 956, 960 (9th Cir. 1975). The Ninth Circuit recognizes only three exceptions to this principle.

Bolker v. C.I.R., 760 F.2d 1039, 1042 (9th Cir. 1985). The first exception allows review when necessary to prevent a miscarriage of justice or to preserve the integrity of the judicial process. Bolker, 760 F.2d at 1042 (9th Cir. 1985), citing United States v. Greger, 716 F.2d 1275, 1277 (9th Cir. 1983).9 The second exception applies when a new issue arises while appeal is pending because of a change in the law. Bolker, at id., citing United States v. Whitten, 706 F.2d 1000, 1012 (9th Cir. 1983) (objection to plain view search first raised on appeal), cert. denied, 465 U.S. 1100, 104 S. Ct. 1593, 80 L. Ed. 2d 125 (1984). The third exception applies when the issue presented is purely one of law and either does not depend on the factual record developed below, or the pertinent record has been fully developed. Bolker at id., citing United States v. Patrin, 575 F.2d 708, 712 (9th Cir. 1978). Only if one of these exceptions is applicable, does this Court

have discretion to address the issue. Bolker v. C.I.R., 760 F.2d 1039, 1042 (9th Cir. 1985). To merit appellate consideration, the new issue must be more than an afterthought, and rise to the level of plain fundamental errors invoking appellate cognizance despite the failure to assert them at trial. Yeater v. United States, 397 F.2d 975 (9th Cir. 1968). - 30 9

Hearing Laxtons dormant commerce clause argument would not cure any miscarriage of justice, because there has not been one, and declining to hear it will not put the integrity of the judicial process at risk. Neither has any new issue arisen during the pendency of the appeal due to a change in the law. Finally, Laxtons constitutional argument that applying California conversion law to domain names discriminates against interstate commerce is not purely one of law, nor has the pertinent record been fully developed. Bolker, at id. In A-1 Ambulance Serv., supra, this Court considered and rejected a request to consider a contract argument on appeal not made below because of the mere possibility that gathering the facts necessary to decide the issue might require trial proceedings: After examining the record and the arguments, we cannot rule out the possibility that A-1 might be right and that the merits of the contract argument cannot be resolved without further hearings before the district court. Therefore, we lack the power to consider the contract argument in this appeal. A-1 Ambulance Serv., Inc. v. County of Monterey, 90 F.3d at 39 (emphasis added). Laxton asks this Court to apply the test set forth in Pike v. Bruce Chruch, Inc., 397 U.S. 137, 142 (1970), in which the court balances the burden placed on interstate commerce by the state law against the local benefit derived from the state law, and the state law is invalid if the burden on interstate commerce is clearly excessive compared to the putative local benefit. (Appellants Brief, page 28.) Laxton, of course, has submitted no evidence of any burden on interstate commerce, and is merely indulging in conjecture. - 31 Applying a constitutional

balancing test with nothing in the scales is not possible. To seriously apply the test would require taking testimony from domain name registrars inside and outside California, obtaining extensive financial information and domain registration statistics, and having experts interpret that information to determine whether applying California law discriminates against California citizens in interstate commerce. (Appellants Brief, page 29.) The notion would be

unthinkable if Laxton had not proposed it, and if Laxtons wishes were indulged, Plaintiffs-Appellants would suffer severe prejudice.10 To speak bluntly, the only parties being burdened here are Plaintiffs-Appellants, who have run the gauntlet of Laxtons meritless defenses in the District Court, only to discover yet another frivolous contention waiting to be rebutted in this Court. Laxtons dormant commerce clause argument is a curious imagining that dissolves at its conclusion into the mumbled suggestion that Laxton is seeking a more fair and just result. It would be impossible for Laxton to get a more just and fair result than the judgment rendered by the District Court after patient and thorough consideration of every argument that was actually raised. What the District Court could not do was adjudicate arguments that were not made.

"The decision to consider an issue not raised below is discretionary, and such an issue should not be decided if it would prejudice the other party." Kimes v. Stone, 84 F.3d 1121, 1126 (9th Cir. 1996). - 32 -

10

If Laxton had genuinely wished to gain a hearing on this theory, it was his duty to raise it in the District Court, in pleadings and with proof. This he did not do. Laxtons answer alleges forty-seven (47) affirmative defenses, but the

assertion that Californias law of conversion is void for violation of the dormant commerce clause does not appear among them. (Answer, pages 4 - 11; ER 17-24.) Nor did it appear in Defendants-Appellants motion for summary judgment or at oral argument. (SER 063-085 and 01-16.) Accordingly, this Court should decline to hear it on appeal. III. CONCLUSION The sole issue properly before this Court for determination is whether the District Court properly analyzed the respective governmental interests of the states of California and Virginia in performing California choice-of-law analysis. Defendants-Appellants forfeited their right to raise any other claims in defense by failing to assert them in the District Court. There is no dispute that California law compels the result reached by the District Court, and Defendants-Appellants have conceded that the application of California law to the facts is fatal to their position. In deciding the choice-of-law issue, the District Court had before it a detailed record of undisputed facts from which to draw its conclusions, and carefully applied the governing precedents to determine that only California had an interest in having its law applied to the case. Defendants-Appellants have had their day in

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court, and every issue they raised was conclusively resolved against them. This Court is therefore respectfully requested to affirm the judgment in all particulars and to award Plaintiffs-Appellees their costs on appeal. Dated: August 7, 2008 By: /s/ Stevan Lieberman Stevan Lieberman GREENBERG & LIEBERMAN 2141 Wisconsin Avenue Northwest Suite C-2 Washington, District of Columbia 20007 (202) 625-7000 Telephone (202) 625-7001 Facsimile By: /s/ Charles Carreon Charles Carreon ONLINE MEDIA LAW, PLLC 2165 South Avenida Planeta Tucson, Arizona 85710 (530) 841-0835 Telephone Attorneys for Plaintiffs-Appellees, CRS Recovery, Inc. and Dale Mayberry CERTIFICATE OF COMPLIANCE I certify that this brief complies with the type-volume limitation set forth in Rule 32(a)(7)(B) of the Federal Rules of Appellate Procedure. This brief uses a proportional typeface and 14-point font, and contains 8,348 words.

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STATEMENT OF RELATED CASES There are no related cases pending in this Court.

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CERTIFICATE OF SERVICE I hereby certify that on August 7, 2009, I electronically filed the foregoing with the Clerk of the Court for the United States Court of Appeals for the Ninth Circuit by using the appellate CM/ECF system. I certify that all participants in the case are registered CM/ECF users and that service will be accomplished by the appellate CM/ECF system. By: /s/ Elizabeth Hong

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