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News > March 2007

29-Mar-2007

Lawsuit Filed Against RegisterFly & ICANN

Lawyers in the US. have filed a class action lawsuit against domain name registrar, RegisterFly.com, and ICANN.

The suit also names as defendants RegisterFly principals Kevin Medina and John Naruszewicz, in their personal capacity, and as RegisterFly agents, along with a second registrar, eNom, which contracted RegisterFly as a reseller of domains on its behalf.

RegisterFly has been in a collapsed state for some weeks, after more than two years of mismanagement, systems problems, and potential fraud. Tens of thousands of domain names have been lost by owners, while hundreds of thousands of others have been at risk of expiry or forfeiture.

RegisterFly, for one reason or another, has a long history of witholding domains from owners, refusing to provide authorization codes, and preventing transfers.

ICANN has been at the center of the storm as it has fielded complaints from registrants for more than a year. The domain accreditation authority says it has had to deal with restrictive regulatory codes which have limited its capacity to act in a more aggressive manner.

RegisterFly curiously was accredited in just February last year according to its Web site, despite major complaints about its services at that time. ICANN disputes this saying RegisterFly has "never" been accredited, alleging a buy-out of accredited register Top Class Names, Inc., in late 2004, resulted in a change of name to "RegisterFly," some two months later, and in effect, "back-door accreditation." Until that time RegisterFly, founded in 2000 by Medina, was a reseller of domain names through other registrars, principally eNom.

ICANN has been meeting with RegisterFly since June last year, endeavouring to resolve the outstanding issues. It appeared to lose patience in recent weeks as RegisterFly imploded with a bitter ownership dispute, serious financial issues, and a succession of failed promises from the company's principals to rectify the problems.

Threatened with a loss of accreditation, RegisterFly still failed to remedy breaches that were causing considerable stress and frustration for its (one-time) one million customers.

On 16 March, after an obligatory 15 working days notice, ICANN finally severed RegisterFly's accreditation effective March 31 (this Saturday), demanding it immediately remove the authority's logos and discontinue promoting its status as an ICANN-accredited registrar.

RegisterFly in defiance, or by default, has continued to trade, its Web site continues to offer services it cannot provide, and continues to promote itself as an ICANN-accredited registrar, displaying the authority's logos.

The class action lawsuit unsealed on March 23 was believed to have been filed on the 13th of this month but was placed under seal. U.S. District Court Judge William Osteen made the order for it to be unsealed after first denying a temporary restraining order.

Attorney E. Clarke Dummit of The Dummit law firm, made the filing on the instructions of Anne Martinez, a registrant of domain names at RegisterFly. The lawsuit alleges the registrar, 'systematically defrauded its customers who attempted to register or renew Internet domain names.'

'The lawsuit was initially sealed due to fears of retribution by RegisterFly towards Martinez for filing the suit,' Dummit says, 'but since then other concerns have become more pressing, and the case was opened to the public.'

'Anne Martinez has brought the suit as a class action on her own behalf and for the thousands who are still being harmed by RegisterFly and ICANN,' a statement from The Dummit Law Firm, issued Wednesday says.

Martinez claims her Web address, GoCertify.com, which is the primary source of income for her and her children, had a scheduled expiry date of March 18, 2007. Martinez paid for renewal but the domain was not renewed and efforts to transfer the name to another registrar were frustrated.

'If (Kevin) Medina illegally shuts down my registration, I could end up losing my business that has supported me for years, and even my home, and I am only one of thousands of people in this same situation, said Martinez Wednesday. 'I cannot just stand by and let this happen.'

While the class action is primarily aimed at RegisterFly, ICANN appears equally in Martinez and Dummit's crosshairs. 'I only hope that this situation can be brought under control before it becomes even worse, and that the agents responsible for all of this harm and heartache will be held accountable for what they have done,' Martinez said.

In the complaint and subsequent filings, Dummit alleges ICANN had full knowledge of 'RegisterFly's fraudulent activities for over a year, and took no substantive action until the lawsuit was filed. The lawsuit maintains that, 'ICANN profited from RegisterFly's use of its accreditation and posting of ICANN's logo on its site, but failed to enforce the terms of the contract RegisterFly customers relied on when registering domains.'

In the complaint and subsequent filings, Dummit alleges ICANN had full knowledge of 'RegisterFly's fraudulent activities for over a year, and took no substantive action until the lawsuit was filed. The lawsuit maintains that, 'ICANN profited from RegisterFly's use of its accreditation and posting of ICANN's logo on its site, but failed to enforce the terms of the contract RegisterFly customers relied on when registering domains.'

Dummit says it was only after he served ICANN with the class action lawsuit that it 'finally' gave RegisterFly a notice of termination of its accreditation.

Martinez says she was concerned the recently-court-declared owner of RegisterFly, Kevin Medina, would cease displaying her site, and that ICANN was effectively ignoring her peril, and that of thousands of others. 'If Medina illegally shuts down my registration, I could end up losing my business and my home. Unfortunately, it does not appear as if ICANN cares or will do anything to help the thousands of people out there just like me,' she said.

'It seems that after ICANN found out about this lawsuit, it decided to protect its own image, but not to help the many registrants facing the loss of their domains and businesses,' Martinez added.

Martinez was scathing in her criticism, taking a swipe at a Fact Sheet issued by ICANN on Monday to update RegisterFly customers. In the document ICANN claimed it had 'never approved' RegisterFly for accreditaion. 'Even today, while thousands of us are still trying desperately to get our domains protected, ICANN is spending time and energies on spin rather than enforcement,' Martinez alleged.

Whilst Martinez, who is lead plaintiff, 'on behalf of all other persons similarly situated,' lost her application for a temporary restraining order on March 23, the judge accepted her request for an expedited hearing, which will be held on April 11 at 9:30am before Magistrate Judge P. Trevor Sharp in Greensboro.

Sharp in an earlier hearing on March 21, after reviewing Martinez's application for the temporary restraining order, as well as supporting affidavits and exhibits, and arguments presented at two earlier hearings on March 14, and March 20, was sympathetic to Martinez's claims, but signalled there were hurdles ahead in proving the RegisterFly parties acted with 'malicious intent or in bad faith,' or that ICANN had not done what it could.

'The Court finds,' said Judge Sharp, 'that although the named plaintiff, Anne Martinez, has shown some likelihood of success on her claims against RegisterFly, she has failed to show an imminent threat of irreparable harm that requires prohibitive or mandatory injunctive relief by this Court.'

'ICANN has obtained most of the data necessary to protect Plaintiff and similarly situated registrants from losing their domain names,' the judge continued, 'and has set closely approaching deadlines and threatened to seek injunctive relief in the contractually mandated venue should RegisterFly fail to meet those deadlines.'

The judge went on to explain that while there was 'some legitimate concern,' over RegisterFly's servicing, ICANN, in 'acting within the boundaries of its contract,' was obtaining the majority of information that would protect domain name owners from losing their domains or hosting.

Sharp, in addressing information not at that point provided by RegisterFly to ICANN, said Martinez had made 'an insufficient showing,' that RegisterFly or its principals were, 'witholding the information with malicious intent or in bad faith.'

Notwithstanding the very preliminary findings of Judge Sharp, based on initial affidavits primarily aimed at obtaining the restraining order, the filing of a class action suit is likely to trigger a wave of sign-ons by disgruntled RegisterFly clients, and a mountain of new evidence.

Dummit's firm says in a statement on a dedicated Web site, www.registerfly-lawsuit.com, that the aim of the suit, 'first and foremost is to halt the damage and help the hundreds of thousands of domain name owners regain control of domains they have purchased and registered through RegisterFly.'

The suit is also aimed at stopping the registrar continuing to register new domains, to hold it accountable, 'for the damage it has caused,' and 'to hold ICANN responsible for its breach of duty, ranging from accrediting RegisterFly in the first place to letting them keep their accreditation after they time after time violated term after term of the accreditation agreement, and failing to give adequate weight to the endless stream of appeals for help from RegisterFly customers, all during which time ICANN was collecting a fee for each domain RegisterFly registered.'

Dummit also says eNom is to be held, 'accountable for its apparent role in withholding authorization codes that were registered during the time that RegisterFly was an eNom reseller, making it impossible for those domains to be transferred to another registrar, and billing RegisterFly customers (who were registered when RegiseterFly was an agent of eNom) to provide services they were already liable to provide under their agent's (RegisterFly's) agreement.'