FriendFinder Networks Inc. v. Penthouse Global Media, Inc.
12436-VCMR
| Del. Ch. | May 26, 2017Background
- FriendFinder sold Penthouse-related subsidiaries to Penthouse Global Media (PGMI) under a Stock Purchase Agreement (SPA); the SPA defined "Intellectual Property" to include domain names and limited transferred IP to that which was “used in, and is material to, the operation and conduct of the business of the Acquired Companies as currently conducted.”
- The SPA did not list specific domains to transfer; post-closing the parties exchanged lists and Penthouse received ~1,000+ domains after iterative identification efforts.
- Nine domains (the Disputed Domains) — e.g., hornywife.com, bookofsex.com, photobookofsex.com, boob-squad.us — were among those transferred; FriendFinder asserts they belonged to Various/FriendFinder and were not Penthouse assets at closing.
- Penthouse contends the parties entered into follow-up agreements (via February and April emails/lists) that authorized transfer of those domains; FriendFinder argues the SPA’s standard governed and those domains were not associated with Penthouse at closing.
- Trial evidence (WhoIs records, Wayback history, internal accounting "silos," revenue/expense allocation) showed most Disputed Domains had been registered to or used by FriendFinder/Various since 2011 and were operated as AdultFriendFinder co-brands or inactive FriendFinder assets.
- Chancellor Montgomery‑Reeves held the SPA governed domain transfers, found the Disputed Domains were not "associated with, used in, or material to" the Penthouse business at closing, and ordered Penthouse to return them within 10 days.
Issues
| Issue | Plaintiff's Argument (FriendFinder) | Defendant's Argument (Penthouse) | Held |
|---|---|---|---|
| Which agreement governs which domains transferred? | SPA governs; domains limited to IP used in or material to Acquired Companies at closing. | Parties formed separate, binding agreements via February/April email exchanges that allocated additional domains to Penthouse. | SPA governed; parties consistently operated under SPA standard; no separate enforceable contract formed. |
| Were the nine Disputed Domains "used in, and material to," or "associated with" Penthouse business at closing? | No — WhoIs, usage history, accounting/financing show ownership/operation by FriendFinder/Various at closing. | Some historical Penthouse connections (pre-2011) and alleged negotiated lists support Penthouse claim of entitlement. | No — indicia (WhoIs, historical use, financing) support FriendFinder ownership; Disputed Domains not Penthouse assets at closing. |
| Is an injunction (return of domains) appropriate remedy? | Yes — actual success on merits, irreparable harm, equities favor return; SPA permits injunctive relief. | No — mandatory injunction is extraordinary; money damages suffice; equities not in FriendFinder’s favor. | Yes — Court exercised discretion, found irreparable harm and that damages inadequate, ordered domains returned. |
| Are post-closing email exchanges enforceable as independent contracts transferring domains? | N/A (Plaintiff denies existence of separate contracts). | Emails and exchanged lists created binding agreements to transfer those domains. | No — emails/lists reflect SPA-driven identification process; no evidence of intent, definiteness, or consideration for separate contracts. |
Key Cases Cited
- United Rentals, Inc. v. Ram Holdings, Inc., 937 A.2d 810 (Del. Ch.) (contract interpretation principles)
- Sonitrol Holding Co. v. Marceau Investissements, 607 A.2d 1177 (Del.) (contracts should not be interpreted to render provisions meaningless)
- Comrie v. Enterasys Networks, Inc., 837 A.2d 1 (Del. Ch.) (contract ambiguity and interpretation standard)
- C&J Energy Services, Inc. v. City of Miami Gen. Empls.' Ret. Trust, 107 A.3d 1049 (Del. Ch.) (standards for issuing mandatory injunctions after trial)
- Draper Communications, Inc. v. Delaware Valley Broad., L.P., 505 A.2d 1283 (Del. Ch.) (permanent injunction requirements)