Designer Skin LLC v. S & L Vitamins, Inc., et al.
Je Ho Lim v. The.TV Corporation International
Case B151987 (Cal. Crt. App., 2d Dist., June 24, 2002)
Reversing the decision of the court below, an intermediate California appellate court holds that plaintiff had adequately plead a breach of contract claim arising out of defendant's failure to deliver a domain name put up for auction on the Internet. The court accordingly allows plaintiff to proceed with his claim, and seek redress as a result of defendant The.TV corporation's failure to register plaintiff as the owner of the domain name golf.tv.
Defendant The.TV Corporation acquired the top level domain name .tv through an agreement with the island of Tuvalu, which owns the rights to that geographic designation. Defendant offers some .tv domain names for sale via public auction.
Plaintiff, an individual, alleged that defendant offered the golf.tv domain name for sale via auction. Plaintiff submitted a bid of $1050, which was the highest bid defendant received. Defendant thereafter sent plaintiff an e-mail titled "e-mail invoice for domain registration" which informed plaintiff that he had "won the auction" for the domain name " -- golf.tv" and sought payment of $1050 for the first year's registration fee. Plaintiff authorized defendant to collect this sum from his credit card, and defendant did so.
Defendant thereafter refused to recognize plaintiff as the owner of the domain name, sending him an e-mail purporting to "release you from your bid." When defendant put the domain name up for sale, this lawsuit followed.
Reversing the court below, California's Court of Appeals held that plaintiff had adequately pled a breach of contract claim, and allowed the lawsuit to proceed. Such was the case whether one considered the statements defendant made in announcing its auction an offer, which was accepted by plaintiff's bid, or whether one considered defendant's statements as an invitation to make an offer, which plaintiff did by its bid and which defendant accepted by its confirmatory e-mail. In reaching this conclusion, the court rejected defendant's claim that its e-mail could not be considered an acceptance of plaintiff's offer, because it related to the domain name "--golf.tv" while plaintiff's offer was for the domain name "golf.tv." "Communications between the parties relating to the formation of a contract must be read in context." Plaintiff had only bid on the "golf.tv" domain name. In addition, there was no domain name "--golf.tv", which, given the use of "--", would not be operable on the Internet. As a result, the court held that defendant's communication must be deemed a response to plaintiff's offer for "golf.tv."
It should be noted that defendant asserted that its auction was subject to a reserve. Defendant argued that this accords with the general rules applicable to auctions, that hold that they are "with reserve" unless otherwise stated. Defendant asserted that in a "with reserve" action, the auctioneer has the right to reject all bids he receives for a given item. The court did not resolve this issue at the pleading stage of the litigation and thus did not determine if defendant's auction was "with reserve." This case should bear watching to see how it is resolved in the future, particularly when the actual language defendant used to solicit bids is placed in the record.