ON DYING GROUND
Sun Tzu says there are nine kinds of grounds on which battles may be fought. For example, there is ground of contention, which would be beneficial to either side able to seize it. There is light ground, which is when you enter shallowly into enemy territory, intersecting ground, which gives access to a well-trafficked location, and heavy ground, which is deep inside enemy territory. There is also bad ground, like mountain forests, steep defiles and marshes, and dying ground, where Sun Tzu says, “you will survive if you fight quickly and perish if you do not.” Sun Tzu gives particular advice for the conduct of military activities on the various grounds. On light grounds, do not linger; on bad ground, keep going; on heavy ground, plunder. On dying ground, there is just one thing to do -- fight.
As frightening as it sounds to be on dying ground, the old adage is, “put them on dying ground, and they will live.” Sun Tzu explained:
“If they fall into dying ground, then everyone in the army will spontaneously fight. This is why it is said, ‘Put them on dying ground, and then they will live.’”
From May 18 until August 21, 2000, we were on dying ground.
I’d always told Gary, from the very beginning, that it was risky to fight with NSI over the property issue, because if we lost it, Cohen would say that what’s good for the goose is good for the gander, and since it wasn’t property, he couldn’t steal it. And on May 18, 2000, directly on the heels of the court’s order granting summary judgment for NSI, Dorband filed a motion for judgment on the pleadings (“MJOP”) arguing precisely that. The third amended complaint started out with ten claims for relief. We were down to three claims -- conversion, unfair business practices, and declaratory relief. The new tort of domain name theft was proving maddeningly difficult to define in established legal terms. Dorband had moved the judge to dismiss conversion and declaratory relief, attacking conversion first, and using the force of its collapse to take down the declaratory relief claim. Then he would direct a motion at the last remaining claim, for unfair business practices, and the game would be over. There were excellent reasons for this two-step strategy.
The Federal Declaratory Relief Act allows the federal courts to sort out disputes between people and companies even before grounds for a damage lawsuit arises. For example, you can sue an insurance company for declaratory relief if they threaten to refuse to defend you in a lawsuit, even though arguably, you haven’t suffered any damage yet from their refusal to defend. Pleading a claim for declaratory relief is about as simple as saying, “I am the plaintiff, this is the defendant, and we have a dispute I want the court to resolve with a legal judgment.” The only hitch is, declaratory relief cannot operate in a vacuum. The court can only adjudicate your rights if you have some rights to maintain; otherwise, the court will dismiss the case for lack of a “case or controversy.”
If declaratory relief provides no independent source of legal rights, why bother putting it in your complaint? Because it allows the judge great flexibility in fashioning a remedy, allowing him or her to make any order that “justice requires.” Now that’s nifty -- justice with a scalpel. In our case, we needed an order declaring Gary to be the owner of Sex.Com, and directing NSI to transfer the registration into his name. The source of Gary’s rights was his ownership of personal property that had been stolen. The injury to his property rights could best be remedied by a declaration establishing Gary’s ownership and directing NSI to deliver possession of Sex.Com to its rightful owner.
Dorband didn’t quarrel with the basic proposition: “The declaratory claim, by its own terms, arises from plaintiff’s alleged ‘ownership and possession’ of the Sex.Com domain name.” Based on the ruling for NSI, Dorband argued, it was clear that the law of conversion didn’t provide a remedy for Gary’s loss, and since declaratory relief gave him no additional rights, Gary’s declaratory relief claim was meaningless. As Dorband put it: “If a domain name cannot be converted under California law, it stands to reason that whatever the defendants did... it does not amount to an invasion of a legally protected interest under California law....” Dorband also had an excellent fall-back argument. Under the declaratory relief act, the court can exercise discretion not to decide a legal issue, especially a novel issue under state law. So if his argument was not sufficiently convincing to clinch an affirmative win for Cohen, Dorband invited the judge to avoid the issue: “Based on the Court’s recognition that the issue of applying an ancient legal remedy (conversion) to a modern intellectual property concept (domain names) is essentially a determination better left to the State of California, the Court should decline to exercise its discretion.”
Judge Ware had observed in his order granting NSI summary judgment that unfair business practices laws provided a remedy for the theft of intangible property interests, such as business goodwill. But that wouldn’t help much, because if Gary’s claim was for loss of business goodwill, it had no value. Gary had never built a website and had no customers, so he had no good will and lost nothing when Cohen took the registration for Sex.Com. The judge might call Gary’s interest in Sex.Com a “mere expectancy” of future earnings, “too remote” to give rise for a claim of damages. He might end up with an acknowledged, but worthless piece of theoretical property.
So we were entering a narrow pass. At times like this, the mind concentrates, and the past dissolves. If you think about all the time you’ve sunk into the case, and how it’s maybe just a hair’s breadth away from being lost, you can’t think. But if you let yourself go, the fear of imminent destruction will bear you along on a wave of energy. Like shooting the rapids in a rubber raft, moves come to you instinctively, you process the information and steer the right course. Pushed relentlessly forward, the moments bore me along on a swift current. I needed to put the information together, and use Wagstaffe’s people to assemble our most impressive product yet. Since they had only recently joined the case, they knew nothing about the facts, and were still getting up on the law. The opposition to this motion was our first project together, and we worked smoothly to integrate our thoughts and writing. It was exhilarating to have them share the intellectual adventure of the case, and the additional firepower was more than welcome.
Argued as a matter of pure legal theory, the motion was surgically clean. There was no evidence to consider, there were no facts to weigh. There were just abstract issues to decide, let the chips fall where they may. If the law decrees that a thief must go free, then free he must go, and it is the judge’s duty to dismiss him. Plaintiffs go home disappointed every day from the courthouse. It’s no great heartbreak for the average judge, and no surprise that the wealthy often emerge victorious.
Most lawyers, looking at the motion, would not even try to think of a way to bring Cohen’s character into issue, but we had to do it. We had to get some moral suasion going. We had to argue that courts do not sanction thievery, and that where necessary, the law must be stretched and fashioned to respond to new threats to ancient rights.
But in response to a motion for judgment on the pleadings, you’re not supposed to submit any evidence. How could I bring in evidence about Cohen’s past, so the judge could understand that Cohen was a thief, and he should not get the assistance of the court to pull off the theft? Judge Ware had to understand that Cohen was a bad man with a clever lawyer! How could I do it? I decided to submit only a narrow category of documents which are “judicially noticeable.” Court records are always judicially noticeable. Convictions, divorce decrees, bankruptcy filings, declarations filed in litigation, and statements made on the record by judges, are all judicially noticeable, because their accuracy is inherently reliable. As it happened, within the narrow category of judicially noticeable documents, Cohen had generated a plethora of damning records.
In January 2000, I compiled a stack of documents about Cohen I called “The Big Book of Evil Deeds.” It was about two inches thick. I created it for a special occasion that I haven’t discussed yet, that is, when Cohen filed an ethics complaint against me with the Oregon State Bar. Everyone has heard that lawyers are supposed to obey certain ethical rules. Nobody has any idea, of course, what these rules might be, since as the old lawyer joke says, lawyers are replacing rats in lab experiments these days, in part because there are some things even rats won’t do. Lawyers seem to be willing to do any damned thing, from saying toxic waste dumping is ecologically beneficial to making a stolen election a fait accompli. What is it that lawyers can’t do? Well, according to Cohen, I couldn’t do press releases that call him a thief.
When someone makes an ethics complaint to the Oregon State Bar, an ethics investigator immediately sends you a letter with a copy of the complaint, and you get two weeks to respond.
My response to the Bar was essentially this: “I did nothing wrong, and before you get all involved with this, consider the source.” With my letter, I enclosed the Big Book of Evil Deeds, which included copies of Cohen’s conviction for bankruptcy fraud, phony declarations he signed under the name of Frank Butler, the RICO complaint Cohen filed against his wife and her lawyers, and copies of the Oregon RICO lawsuit he had recently filed in Portland against Gary and myself. The Big Book, more than a ream of spiral-bound paper, weighed in at nine pounds, and was certain to receive an honored spot on the ethics investigator’s credenza. Cohen responded to the Big Book in a letter saying it just showed how unethical I was, that when confronted with serious allegations, I would just throw more mud. The ethics complaint died a natural death a few months later.
The Big Book of Evil Deeds, however, became a hot item. Gary loved it, and I had Kinko’s cranking out dozens of copies. I sent them to journalists who appreciated solid documentation to back up their stories on this amazing con man, Steve Cohen.
When the time came to file opposition to the MJOP, I pulled out the Big Book and began work on the second edition. Since January, we had obtained the files of two bankruptcies Cohen had filed in Denver and L.A. We had also obtained records showing that Cohen had incorporated a slew of California and Nevada companies. And I had plucked a beauty of a quote from Judge Judith Keep, denying his request for bail pending sentencing after the jury had convicted him of bankruptcy fraud: “You have lied to the Courts.” The Big Book became a slimmed-down and more substantive packet for Judge Ware entitled Plaintiff’s Request for Judicial Notice (the “RJN”). The RJN provided evidence of four relevant facts:
(1) Cohen had established a pattern of theft by deception and forgery,
(2) Cohen had repeatedly lied to the courts,
(3) Cohen had never claimed prior to 1993, that he had used Sex.Com as a service of the French Connection; and,
(4) Cohen had admitted that Sex.Com was personal property, and thus was barred from disputing that claim.
Although past crimes and conduct are generally not relevant to a court proceeding, the intelligent advocate will try to find ways to fit into the exceptions. Three exceptions applied here. First, past convictions for crimes involving deception are always relevant to a party’s credibility, so the bankruptcy conviction was relevant to Cohen’s entire denial of liability. Second, when past actions add up to a pattern of deceptive conduct, they are admissible to show the deception was part of a conscious plan, not mere happenstance. Third, under the doctrine of “judicial estoppel,” a party cannot “play fast and loose” with the courts by taking inconsistent positions in different cases. For example, in the Portland trademark infringement cases Cohen filed sworn affidavits saying Sex.Com was his personal property; accordingly, he should be “estopped,” i.e., prevented, from disputing that the name was property. And when he stated in his 1986 Denver bankruptcy that he owned no trademarks, copyrights or other intellectual property, that should bar him from now claiming that he used Sex.Com as a trademark since 1979.
The RJN framed the issues as a dispute between a convicted con man who used the law to make his thefts more secure, and a brilliant dot-commer who was playing it straight. Should Cohen get the benefit of his cynical manipulation of the legal system, which had continued nearly unchecked for decades? The answer seems obvious. With that moral argument in place, we just needed to give the judge some case precedent finding it unlawful to appropriate intangible property without the owner’s permission. And that intangible property had to be unprotected by trademark, copyright, or other legal basis. If we could do that, we would be in a good position, because Judge Ware had specifically said, at the status conference in early May 2000, that he would allow Gary to have his “day in court” against Cohen, even though he was granting summary judgment for NSI. Judge Ware wanted to do the right thing, but beyond the moral argument, we needed some support in case law.
Because Dorband was attacking the declaratory relief claim by way of the conversion claim, we wanted to support it by showing we had a valid unfair business practices claim. A California appellate case from 1951 called McCord v. Plotnick, supported this position solidly. The court decided McCord on the basis of a U.S. Supreme Court case called International News Service v. Associated Press. This must have been considered a “high tech” case in its own day. Plaintiff alleged that every day, the Associated Press would buy the plaintiff’s newspaper, and using a newfangled device called a telegraph, would transmit the contents of plaintiff’s newspaper to defendant, who would use it to publish defendant’s paper. When plaintiff sued for unfair competition, the Associated Press objected that the news articles were not copyrighted, that they were publicly distributed, so they were not confidential, and thus plaintiff had no claim. The argument was rejected by the Court:
“If that which complainant has acquired fairly may be sold fairly at a substantial profit, a competitor who is misappropriating it for the purpose of disposing of it to his own profit and to the disadvantage of complainant cannot be heard to say that it is too fugitive or evanescent to be regarded as property. It has all the attributes of property necessary for determining that a misappropriation of it by a competitor is unfair competition because it is contrary to good conscience.”
This language from International News, quoted by McCord, was vitalizing to our case. It provided a good model for the judge to chart his own course in the wilderness of new technology and clever schemes. The Supreme Court’s analysis that theft of evanescent assets is an unfair business practice, seconded by the state courts in McCord, gave us the substance we needed to hang on to the declaratory relief claim. McCord also struck a positive moral tone, supporting the argument that Cohen’s exploitation of the legal system should not be tolerated any longer. While some might have doubted whether Gary’s registration of Sex.Com was something he had acquired “at substantial cost,” few could doubt that it could be “sold fairly at a substantial profit.” And unless we wanted to encourage thievery, that profit should not go to a thief.
We cited another case that had a technological twist, and lightened the brief with a touch of humor. In Downing v. Municipal Court, a fellow who had been selling slugs to cheat the San Francisco parking meters filed suit to prevent the prosecutor from charging him with vending machine theft. The slugs didn’t cheat vending machines, the swindler argued, because the parking meter wasn’t a vending machine, since it dispensed no product, and the privilege of parking a car for a few hours wasn’t “property.” The judicial response to this argument was dismissive:
“The fact that a new machine has been invented, and a new means, method or scheme devised to evade a lawful condition for its use does not destroy the effect of the law.”
Since the theft of Sex.Com was an unfair business practice under the dual authority of International News and McCord, rather than falling with the conversion claim, the declaratory relief claim should remain standing, because it was separately supported by the unfair business practices claim.
On August 21, 2000, Judge Ware’s opinion was filed. The conversion claim was out, but declaratory relief stayed in, because said the judge, it was “at least” supported by the unfair business practices claim. On dying ground, we lived.