Opinion
08-Civ-7527 (SHS).
December 16, 2008
OPINION ORDER
Plaintiff Citigroup Inc. brings this action against defendants VDN Systems, Inc., Citi.net, Inc., and Truc V. Tran, for claims arising out of defendant Tran's alleged threats to sell the internet domain name citi.net to a third party unless Citigroup purchases the name for several million dollars. Citigroup asserts claims for breach of contract and for violation of the Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d).
The breach of contract claim is based on allegations that, in a 1998 written agreement, defendants promised not to "use, seek to register, register or assist others in using or registering any domain name . . . which contains the term CITI," with certain exceptions not applicable to this case. (Am. Compl. ¶¶ 29-30.) According to Citigroup, defendant Tran's "plans . . . to transfer the [d]omain [n]ame to a third party constitute a willful and flagrant breach" of that contractual provision. (Am. Compl. ¶ 49.) Citigroup does not allege that it has suffered any loss from Tran's activities. Instead, it alleges that the contract provides that in the event of a breach, defendants' rights in the citi.net domain name are to be transferred to Citigroup. (Am. Compl. ¶ 31.)
The cybersquatting claim is based on the allegation that defendants are using or trafficking in the citi.net domain name with the bad faith intent to profit from Citigroup's "CITI" trademark. (Am. Compl. ¶ 44.) Citigroup does not claim that it has suffered any loss due to defendants' alleged cybersquatting.
Citigroup does not seek any compensatory damages in this action. Rather, it seeks only equitable relief. Specifically, Citigroup seeks (1) to enjoin defendants from transferring the citi.net domain name to any third party, and (2) a declaration that it holds title to the citi.net domain name and an order transferring the name from defendants to Citigroup.
The complaint also seeks an award of costs and attorneys' fees. However, costs and attorneys' fees are not compensatory damages and do not give rise to a jury trial right. Design Strategy, Inc. v. Davis, 469 F.3d 284, 300 (2d Cir. 2006); Emmpresa Cubana del Tabaco v. Culbro Corp., 123 F. Supp. 2d 203, 211 (S.D.N.Y. 2000).
In their answer to the complaint, defendants have demanded a jury trial pursuant to the Seventh Amendment to the United States Constitution, which provides: "In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved." Defendants assert that Citigroup's breach of contract claim is legal, not equitable, in nature and that they are therefore entitled to have a jury interpret the contract and determine whether it has been breached. The Court disagrees.
Defendants do not assert that they are entitled to a jury trial with respect to the cybersquatting claim.
In order to determine whether a particular action is a suit at law that triggers the Seventh Amendment's civil jury guarantee, courts apply the two-step test set forth by the United States Supreme Court in Granfinanciera, S. A. v. Nordberg, 492 U.S. 33, 42, 109 S. Ct. 2782, 106 L. Ed. 2d 26 (1989). Under the Supreme Court's test, "[f]irst, we ask whether the action would have been deemed legal or equitable in 18th century England. Second, we examine the remedy sought and determine whether it is legal or equitable in nature. We then balance the two, giving greater weight to the latter." Pereira v. Farace, 413 F.3d 330, 337 (2d Cir. 2005) (internal citations, quotation marks, and emphases omitted).
It is true, as defendants contend, that actions seeking damages for breach of contract are traditionally considered to be legal in nature. See, e.g., Brown v. Sandimo Materials, 250 F.3d 120, 126 (2d Cir. 2001). However, under the second and "more important" prong of the test, Granfinanciera, 492 U.S. at 42 (citing Tull v. United States, 481 U.S. 412, 421, 107 S. Ct. 1831, 95 L. Ed. 2d 365 (1987)), where a party asserts an arguably legal cause of action but seeks only non-compensatory, equitable remedies, the right to a jury does not inhere. Design Strategy, 469 F.3d at 299. Accordingly, where, as here, a party alleging breach of contract seeks only equitable relief, there is no right to a jury under the Seventh Amendment. Id. at 299-300; United States v. Stein, 452 F. Supp. 2d 276, 279 (S.D.N.Y. 2006); CSC Holdings, Inc. v. Westchester Terrace at Crisfield Condominium, 235 F. Supp. 2d 243, 264 (S.D.N.Y. 2002); see also 8 James Wm. Moore et al., Moore's Federal Practice § 38.30[4] (3d ed. 2008) ("[While a]ctions for money damages for breach of contract are legal in nature and are triable to a jury[, a]ctions seeking reformation of contract, rescission or cancellation of contract, or specific performance of contract are all equitable in nature, and [do not give rise to a Seventh Amendment jury trial right].").
Defendants rely on Searles v. First Fortis Life Ins. Co., 98 F. Supp. 2d 456 (S.D.N.Y. 2000), for the proposition that the right to a jury applies where a party asserting breach of contract seeks declaratory relief. That argument is unavailing. In this case, Citigroup seeks injunctive relief preventing defendants from transferring the citi.net domain name to any third party and instead requiring defendants to transfer the name to plaintiff. As explained above, there is no jury trial right where a plaintiff seeks such equitable relief. That Citigroup also seeks a declaration that it holds title to the domain name does not transmute the nature of the relief from equitable to legal. In contrast, the plaintiff in Searles sought a declaration that an insurance company breached a long term disability insurance contract by miscategorizing the plaintiff's disability in such as way as to limit the payments due under the contract. Id. at 458-59. In essence, the claim in Searles was for compensatory damages arising out of the insurance company's alleged breach of contract. As set forth above, where a party seeks compensatory damages for a breach of contract, as in Searles, that party is entitled to a jury under the Seventh Amendment.
Further, whether the relief sought by the plaintiff had any impact on his right to a jury trial does not appear to have been at issue in Searles. In that case, the defendant moved to strike the plaintiff's jury demand not on the basis of the relief sought, but rather on the ground that the plaintiff's breach of contract claim was preempted by ERISA and that, construed as an ERISA claim, it was "equitable in nature." Id. at 463-64. Because there was a genuine issue as to whether ERISA preempted the breach of contract claim, the district court declined to strike the plaintiff's demand for a jury. Id. There is no indication that the district court was asked to consider whether, if the breach of contract claim was not preempted by ERISA, it nevertheless failed to trigger the Seventh Amendment because the plaintiff sought declaratory relief. Given that the court was apparently not presented with the issue, Searles cannot plausibly stand for the proposition urged by defendants — namely, that a breach of contract claim will always give rise to a jury trial right when joined with a request for declaratory relief. Searles cannot bear the weight defendants place on it in this action.
Because plaintiff seeks only equitable relief in this action, defendants are not entitled to a jury pursuant to the Seventh Amendment. Accordingly, the case will be tried to the Court.
SO ORDERED: