23 F.4th 529
5th Cir.2022Background
- Domain Protection (formed by Lisa Katz and lawyer Gary Schepps) claimed ownership of thousands of domain names that originated from a prior receivership/settlement dispute involving Quantec and Jeffrey Baron.
- Fabulous registrar had locked the domains during prior litigation; Sea Wasp purchased Fabulous’ assets in 2017 and later restored and relocked names after Katz changed nameservers to redirect traffic in early 2018.
- Domain Protection sued Sea Wasp alleging violations of the Stored Communications Act (SCA), the Texas Theft Liability Act, and common-law claims (conversion, conspiracy, tortious interference); District Court granted a preliminary injunction requiring Sea Wasp to unlock the names and later granted summary judgment on liability (except tortious interference).
- At trial the jury awarded Domain Protection zero damages; the district court entered a take-nothing judgment, denied attorney’s fees to both sides, and sanctioned Schepps $7,110.50 for nondisclosure of his financial interest in Domain Protection.
- Appeals followed: (1) Domain Protection appeals seeking return of property, statutory SCA damages, and fees; (2) Sea Wasp cross-appeals challenging standing and liability and seeking fees under the Texas Theft Liability Act; (3) Schepps appeals the sanctions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Article III standing | Domain Protection alleged it was deprived of domains it owned; that's an injury-in-fact. | Sea Wasp: Katz lacked authority to assign, so Domain Protection had no ownership and no Article III injury. | Ownership dispute goes to the merits, not standing; Article III satisfied because plaintiff alleged loss of property. |
| Conversion / return of property | Domain Protection sought return of domains despite zero damages. | Sea Wasp: it already returned the registration records; some domains lapsed due to Domain Protection. | No property remained to return; district court did not err. |
| SCA statutory $1,000 floor | Domain Protection: statute guarantees at least $1,000 per violation even if no actual damages. | Sea Wasp: $1,000 floor applies only when plaintiff proves actual damages. | Court adopts Doe v. Chao approach: the $1,000 minimum applies only if plaintiff has proven actual damages; Domain Protection proved none. |
| SCA attorney’s fees | Domain Protection: fees are mandatory under §2707(b)(3). | Sea Wasp: fees are discretionary (statute uses "may"). | Fees are discretionary; district court reasonably denied fees given plaintiff’s conduct. |
| Texas Theft Liability Act fees (Sea Wasp cross-appeal) | Sea Wasp: mandatory fees to prevailing party under Texas law because theft claim was dismissed. | Domain Protection: neither side prevailed overall (preliminary injunction in plaintiff's favor; no damages at trial). | Court finds no clear single "prevailing party"; district court reasonably denied fees; Sea Wasp’s cross-appeal on liability should have been raised as alternative ground but fee claim required cross-appeal. |
| Sanctions against Schepps | Sea Wasp: Schepps concealed his financial interest and violated duty of candor; sanctions appropriate. | Schepps: no duty under Rule 7.1 to disclose creditor relationship; procedural defects. | Sanctions vacated and remanded for district court to identify when nondisclosure was required and why it mattered; further proceedings ordered. |
Key Cases Cited
- Lujan v. Defs. of Wildlife, 504 U.S. 555 (standing standard)
- Doe v. Chao, 540 U.S. 614 (interpretation of statutory "person entitled to recover" and requirement of actual damages for minimum recovery)
- Vista Mktg., LLC v. Burkett, 812 F.3d 954 (11th Cir.) (applying Doe reasoning to SCA)
- Van Alstyne v. Elec. Scriptorium, Ltd., 560 F.3d 199 (4th Cir.) (same point on SCA damages)
- Fogerty v. Fantasy, Inc., 510 U.S. 517 (construction of fee provisions and discretion)
- Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health & Human Res., 532 U.S. 598 (definition of "prevailing party")
- Maxim Crane Works, L.P. v. Zurich Am. Ins. Co., 11 F.4th 345 (5th Cir.) (procedural rule on when to cross-appeal vs. brief alternative grounds)
- Cooper Indus., Ltd. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 876 F.3d 119 (5th Cir.) (appellee not aggrieved by final judgment cannot cross-appeal)
- Netsphere, Inc. v. Baron, 703 F.3d 296 (5th Cir.) (background on prior receivership and domain ownership dispute)
- Dearmore v. Garland, 519 F.3d 517 (5th Cir.) (analysis of prevailing-party status when preliminary relief effects a material change)