Opinion
CV-00-235-ST
March 9, 2001
FINDINGS AND RECOMMENDATION
INTRODUCTION
Plaintiff, Stephen M. Cohen ("Cohen"), brought this action against defendants, Charles Carreon ("Carreon") and Gary Kremen ("Kremen"), asserting claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961-1968, the Oregon Racketeer Influenced and Corrupt Organization Act ("ORICO"), ORS 166.715-.735, and state tort law. By Order dated April 24, 2000 (docket #19), this court stayed all proceedings in this case pending a final ruling in a related case entitled Kremen v. Cohen, et al., Civil No. C-98 20718 JW, currently pending in the Northern District of California, San Jose Division (the "California action").
This court has federal question jurisdiction over the RICO claim under 28 U.S.C. § 1331 and supplemental jurisdiction over the state law claims under 28 U.S.C. § 1367.
On December 28, 2000, Cohen filed a Notice of Dismissal without prejudice pursuant to FRCP 41(a)(1) (docket #23). Kremen now moves to set aside that dismissal (docket #31). For the reasons set forth below, Kremen's motion should be denied.
BACKGROUND
Kremen, dba Online Classifieds, Inc. ("Online Classifieds"), contends that he created the "Sex.com" Internet domain name as an item of personal property and as part of a plan involving the wholesome aspects of sex and personal relations, namely public health issues such as sexually transmitted disease education, underage pregnancy, and women's health. California action Third Amended Complaint ("CTAC"), ¶ 23; attached as Exhibit ("Ex") A to the Affidavit of Susan K. Eggum ("Eggum Aff"). On May 19, 1994, Kremen maintains that he delivered the "Sex.com" Internet domain name by electronic and registered mail to Network Solutions, Inc. ("NSI"), a company which had contracted with the United States government to serve as the register of Internet domain names for a term extending through September 30, 1998. He claims that by registering this domain name, he has acquired all financial benefit derived from its use in commerce. Id, ¶¶ 20, 24.
Kremen alleges that on or after February 1, 1995, Cohen established certain sex-related businesses over the Internet. Id, ¶ 26. Allegedly, Cohen had previously managed a profitable sex-related business involving computer networking, realized the lucrative potential of the "Sex.com" domain name, and sought to register it with NSI. Id, ¶ 27. Kremen further alleges that upon learning that "Sex.com" had already been registered, Cohen devised and executed a plan to convert to himself the domain name and the revenue it would generate. Id.
Cohen allegedly carried out this plan on November 15, 1995, by sending a letter to NSI on what purported to be official Online Classified letterhead and signed by a person acting as an Online Classifieds officer. Id, ¶ 29. The letter purportedly stated that Online Classifieds relinquished any interest in the "Sex.com" domain name and expressed no opposition to Cohen taking over the right to register it. Id. Kremen also alleges that Cohen sent an electronic mail message to NSI at about the same time purportedly from Kremen further authorizing the transfer of ownership of the domain name and providing Cohen's own telephone number as the location at which to contact Kremen. Id. Based on this information, NSI registered the "Sex.com" domain name to Cohen and cancelled Kremen's registration. Id, ¶ 30. Kremen has since demanded the return of the "Sex.com" domain name to him which NSI has refused. Id, ¶¶ 31-32.
On July 19, 1999, Kremen and Online Classifieds, through their attorney Carreon, filed a Third Amended Complaint against Cohen and various other defendants based on Cohen allegedly falsely obtaining Kremen's Internet domain name "Sex.com" from NSI. Kremen and Online Classifieds brought claims against Cohen and various other defendants connected to Cohen for Conversion, Conspiracy to Convert, Unfair Competition, False Advertising, violation of the Lanham Act, Slander of Title, and violations of RICO, and also sought a declaratory judgment as to respective rights to the Internet domain name "Sex.com." Id. Kremen and Online Classifieds also brought claims against only NSI for Conversion by Bailee, Breach of Trust, Negligent Misrepresentation, Breach of Contract, and Breach of Third Party Beneficiary Contract based on NSI's position as the company responsible for registering Internet domain names and ensuring their proper registration and protection. Id.
The basis for the lawsuit in this court originated on February 2, 2000, when Cohen alleges that Carreon, upon instruction and direction from Kremen, sent a press release via electronic mail to various individuals in the media, including Jon Swartz ("Swartz") at Forbes magazine. Complaint, ¶ 8. The message allegedly identified Cohen by name and labeled him a "con man," identified his company as a "brothel management company," falsely accused him of forgery and theft of the "Sex.com." domain name, falsely accused him of using the legal process to "waste" Carreon's client's funds, falsely accused him of intentionally stalling the legal process, and implied that his companies are not legitimate. Id. This message was allegedly used by Swartz as a basis for his article published in Forbes' online magazine. Id, ¶ 10. Based on the release of this message, Cohen filed suit in this court on February 15, 2000, against Carreon and Kremen.
This court previously concluded that the claims in this case are substantially similar to Cohen's counterclaims in the California action, and any different claims here will be impacted by a final ruling in the California action. Carreon is a defendant in this case but is not a party in the California action. However, he is Kremen's attorney in the California action and presumably is fully aware of the adjudication of the claims in that case such that their adjudication may have preclusive effect against him on the claims in this case.
Cohen's First Counterclaim in the California action alleges Defamation based on statements made by Kremen to the effect that Cohen had stolen the "Sex.com" domain name. Answer in the California action ("CA"), p. 14 (attached as Ex B to the Eggum Aff). In this case, Cohen's First Claim for Relief alleges Defamation based on statements Kremen's attorney made upon instruction by Kremen to the effect that Cohen is a con man and that he stole the "Sex.com" domain name. Complaint, ¶¶ 7-18. Although Cohen is now suing Kremen and Carreon, his attorney, for allegedly defamatory remarks made by Carreon, the two Defamation claims are similar in that the essence of both originate with ownership to the "Sex.com" domain name. Further, truth is a complete defense to a claim for Defamation under Oregon law. Bahr v. Ettinger, 88 Or. App. 419, 422, 745 P.2d 807, 808 (1987). If the California action decides the true owner of the "Sex.com" domain name, then this claim will be easily adjudicated in this case based on that ruling.
Cohen's Third Counterclaim in the California action alleges Intentional Interference With Prospective Economic Advantage based primarily on Kremen's statements that he owned the "Sex.com" domain name and for bringing the California action. CA, p. 15. This is exactly the same claim Cohen alleges in the Fourth Claim for Relief in this case. Complaint, ¶¶ 40-51. Cohen's Fourth Counterclaim in the California action alleges Civil Conspiracy based on Kremen's attempts to wrest control of the "Sex.com" domain name from him and his corporate entities. CA, pp. 15-16. This claim is exactly the same claim Cohen alleges in the Third Claim for Relief in this case. Complaint, ¶¶ 35-39. Further, this claim is substantially similar, if not completely similar, to the Fifth and Sixth Claims for Relief alleged in this case. The Fifth Claim for Relief alleges that defendants violated RICO based entirely on Kremen's actions in bringing the California action. Id, ¶¶ 52-59. Similarly, the Sixth Claim for Relief alleges that defendants also violated ORICO based entirely on Kremen's actions in bringing the California action. Id, ¶¶ 60-68.
Cohen's Seventh Counterclaim in the California action alleges Unfair Competition under California law based on Kremen's actions preceding the California action. CA, pp. 18-19. In this case, the Seventh Claim for Relief alleges that defendants violated Oregon's Unlawful Trade Practices Act based on Kremen's actions preceding the California action. Complaint, ¶¶ 69-71. In the California action, Cohen does not allege which section of the California Business and Professions Code Kremen and the other plaintiffs in that action violated. He only alleges that their actions constitute unfair competition under that Code. However, his allegations supporting that claim are the same allegations relied upon to support his Oregon unlawful trade practices claim.
In this case, he only alleges that defendants violated ORS 646.608(h) which states that it is an unlawful trade practice to "[d]isparage the real estate, goods, services, property or business of a customer of another by false or misleading representations of fact." Resolution of the true owner of the "Sex.com" domain name will clearly determine whether Kremen violated ORS 646.608(h). If Kremen owned the "Sex.com" domain name, then he would not have made a "false or misleading representation of fact."
Thus, the only claim alleged in this case not alleged in the California action is the Second Claim for Relief for Intentional Infliction of Emotional Distress claim. Complaint, ¶¶ 19-29. However, this claim is based entirely on the alleged mental or emotional distress Cohen suffered as a result of Carreon distributing the February 2, 2000 press release. As discussed above, truth is a complete defense to a claim for Defamation. If the press release does not give rise to a claim for Defamation, then it also may not give rise to a claim for Intentional Infliction of Emotional Distress.
ANALYSIS
FRCP 41(a) provides that:
an action may be dismissed by the plaintiff without order of court (i) by filing a notice of dismissal at any time before service by the adverse party of an answer or of a motion for summary judgment, whichever first occurs, or (ii) by filing a stipulation of dismissal signed by all parties who have appeared in the action. Unless otherwise stated in the notice of dismissal or stipulation, the dismissal is without prejudice.
After Cohen filed the Complaint, the court stayed all further proceedings in this case. Thus, neither Carreon nor Kremen, the adverse parties, have filed an answer or motion for summary judgment. Accordingly, Cohen has the right to dismiss this action under FRCP 41(a)(1) by filing a notice of dismissal. Aamot v. Kassel, 1 F.3d 441, 443 (6th Cir 1993). Because dismissal is a matter of right running to the plaintiff, the court may not extinguish or circumscribe that right. Pedrina v. Chun, 987 F.2d 608, 610 (9th Cir 1993).
Kremen's motion to set aside the dismissal stems from the fact that the dismissal is without prejudice, rather than with prejudice. Kremen is concerned that Cohen may use the dismissal procedure as a litigation tactic and expose Kremen to defending Cohen's claims in other jurisdictions. This fear is unfounded for several reasons.
First of all, pursuant to the Order to stay, nothing has happened in this case since the filing of the Complaint — no discovery or dispositive motions. Therefore, even if this case is filed in another jurisdiction in order to avoid a determination on the merits here, Kremen has expended no time or effort in the preparation of a defense to this case. All existing defenses available to Kremen now, as well as other possible defenses based on collateral estoppel, will still be available in any future case between the same parties. Second, Cohen's counsel advised the court at oral argument that all of Cohen's counterclaims in the California action against Kremen had been dismissed with prejudice and that trial on the remaining claims was scheduled for March 8 and 9, 2001. Therefore, this dispute is nearing a conclusion. Third, Cohen's counsel also represented that at present, Cohen has no intention of filing this case in another jurisdiction.
Kremen did not appear at oral argument and Carreon takes no position on Kremen's motion.
RECOMMENDATION
For the reasons set forth above, defendant Gary Kremen's Motion to Set Aside Dismissal Without Prejudice Entered Pursuant to FRCP 41(a)(1) (docket #31) should be DENIED.
SCHEDULING ORDER
Objections to these Findings and Recommendations, if any, are due March 26, 2001. If no objections are filed, then the Findings and Recommendations will be referred to a district court judge and go under advisement on that date.
If objections are filed, the response is due no later than April 12, 2001. When the response is due or filed, whichever date is earlier, the Findings and Recommendations will be referred to a district court judge and go under advisement.