Domain Prot., LLC v. Sea Wasp, LLC, Civil Action No. 4:18-cv-792

DOMAIN PROTECTION, LLC, Plaintiff, v. SEA WASP, LLC, ET. AL. Defendants.

Civil Action No. 4:18-cv-792

United States District Court EASTERN DISTRICT OF TEXAS SHERMAN DIVISION

November 22, 2019

Judge Mazzant

MEMORANDUM OPINION AND ORDER

Pending before the Court is Plaintiff Domain Protection's Rule 12 Motion to Dismiss Sea Wasp's Counterclaims and Strike Sea Wasp's Insufficient Defenses (Dkt. #136). Having considered the motion and the relevant pleadings, the Court finds that Domain Protection's Motion is GRANTED in part and DENIED in part.

BACKGROUND

On June 18, 2018, Domain Protection filed its initial Complaint against Sea Wasp, LLC and Doe 1 - Doe 5 (Dkt. #1). Domain Protection alleged that by placing executive locks on Domain Protection's Domain Names, Sea Wasp encroached on its proprietary interests in the Domain Names since it could not transfer them or update their nameserver records (Dkt. #1). Domain Protection consequently alleges the following against the original defendants: interference with contract, civil conspiracy, conversion, and respective violations of the Texas Theft Liability Act and the Stored Communications Act (Dkt. #1). On February 13, 2019, Domain Protection filed its First Amended Complaint (Dkt. #93). The First Amended Complaint added Vernon Decossas and Gregory Faia as Individual Defendants (Dkt. #93). The allegations remain the same (Dkt. #93). On April 18, 2019, Sea Wasp filed Sea Wasp, LLC's Answer to First Amended Complaint and Counterclaims (Dkt. #117). In its Answer, Sea Wasp denies the allegations that were originally enumerated in the Initial Complaint and subsumed in the First Amended Complaint (Dkt. #117). Sea Wasp also, however, provides a number of affirmative defenses and counterclaims (Dkt. #117). Those affirmative defenses and counterclaims are the subject of this opinion.

Sea Wasp asserts three affirmative defenses. First, Sea Wasp argues that "Domain Protection has not demonstrated special interest in the subject domain names which qualifies it to demand the relief it seeks" (Dkt. #117). Sea Wasp labels this affirmative defense as: "No Standing" (Dkt. #117). Second, Sea Wasp argues that "Domain Protection has acted inconsistently with the right to seek the relief it seeks and has miscited to the Court the nature and extent of prior Court rulings, and particularly those Netsphere, Inc., et al, v. Baron, et al, CA 3:09-CV-0988-L [Dkt. 1368]" (Dkt. #117). Sea Wasp labels this affirmative defense as: "Lack of Demonstrated Ownership" (Dkt. #117). Third, Sea Wasp argues that:

Domain Protection and/or its owners or members has/have not demonstrated ownership right in any properly constituted legal entity to be entitled to the relief it seeks and has miscited to the Court the nature and extent of prior Court rulings, and particularly those Netsphere, Inc., et al, v. Baron, et al, CA 3:09-CV-0988-L [Dkt. 1368]. More specifically, by misciting justification for bringing this action, but failing to do so based on facts, Domain waives any other evidence of interest or method to prove ownership interest. Domain has limited itself to the miscited legal authority. That assertion waives all other potential sources of explanation of ownership.

(Dkt. #117). Sea Wasp labels this affirmative defense as: "Waiver" (Dkt. #117). Sea Wasp also asserts six counterclaims for declaratory relief under 22 U.S.C. § 2201. Those counterclaims include:

(1) Domain has no standing to bring this action against Sea Wasp;

(2) Domain has waived its right to assert any basis for ownership or control of the domain names in question, except the cited Judge Lindsay Netsphere order [Dkt. 1368];

(3) Judge Lindsay's Netsphere order [Dkt. 1368] does not vest title in Domain or any of Domain's affiliates;

(4) Sea Wasp abided by the law in receiving the domain names in issue when it purchased those names when they were under "lock;"

(5) Sea Wasp abided by the law in maintaining the "lock;" and(6) Sea Wasp possessed an immunity to maintain the "lock," as here.

(Dkt. #117). Domain Protection opposes the inclusion of these affirmative defenses and counterclaims (Dkt. #136).

On May 13, 2019, Domain Protection filed Plaintiff Domain Protection's Rule 12 Motion to Dismiss Sea Wasp's Counterclaims and Strike Sea Wasp's Insufficient Defenses (Dkt. #136). In its Motion, Domain Protection contends that none of Sea Wasp's affirmative defenses are recognized by law (Dkt. #136). Thus, Domain Protection argues that the affirmative defenses should be stricken from Sea Wasp's Answer (Dkt. #136). As to Sea Wasp's counterclaims, Domain Protection offers a variety of arguments for why the counterclaims should be dismissed (Dkt. #136). Those arguments include, among other things, that the counterclaims are conclusory, not supported by any plausible factual allegations, and not proper subjects for declaratory judgment (Dkt. #136).¹ Sea Wasp disagrees.

Sea Wasp filed Sea Wasp, LCC's Response to Motion to Dismiss Counterclaims and Strike Insufficient Defenses on May 28, 2019 (Dkt. #152). In its Response, Sea Wasp argues that Sea Wasp's pleadings are proper and the issues raised therein "should be determined on the merits after Plaintiff fully responds to discovery requests" (Dkt. #152). More specifically, as to the affirmative defenses, Sea Wasp argues that it is a drastic remedy to strike a pleading, the affirmative defenses go directly to the central issue, as Sea Wasp characterizes it, of ownership, and that Domain Protection is not prejudiced by the inclusion of these affirmative defenses (Dkt. #152). As to the counterclaims seeking declaratory relief, Sea Wasp argues that the issue of ownership is squarely before the Court due to Domain Protection's first Amended Complaint and various pleadings (Dkt. #152). Accordingly, Sea Wasp maintains that its counterclaims shouldremain so that they may be resolved by the Court. The Court now turns Domain Protection's Motion.

LEGAL STANDARD

The Federal Rules of Civil Procedure require that each claim in a complaint include a "short and plain statement . . . showing that the pleader is entitled to relief." FED. R. CIV. P. 8(a)(2). Each claim must include enough factual allegations "to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

A Rule 12(b)(6) motion allows a party to move for dismissal of an action when the complaint fails to state a claim upon which relief can be granted. FED. R. CIV. P. 12(b)(6). When considering a motion to dismiss under Rule 12(b)(6), the Court must accept as true all well-pleaded facts in the plaintiff's complaint and view those facts in the light most favorable to the plaintiff. Bowlby v. City of Aberdeen, 681 F.3d 215, 219 (5th Cir. 2012). The Court may consider "the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint." Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). The Court must then determine whether the complaint states a claim for relief that is plausible on its face. "A claim has facial plausibility when the plaintiff pleads factual content that allows the [C]ourt to draw the reasonable inference that the defendant is liable for the misconduct alleged." Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). "But where the well-pleaded facts do not permit the [C]ourt to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not 'show[n]'—'that the pleader is entitled to relief.'" Iqbal, 556 U.S. at 679 (quoting FED. R. CIV. P. 8(a)(2)).

In Iqbal, the Supreme Court established a two-step approach for assessing the sufficiency of a complaint in the context of a Rule 12(b)(6) motion. First, the Court should identify and disregard conclusory allegations, for they are "not entitled to the assumption of truth." Iqbal, 556 U.S. at 664. Second, the Court "consider[s] the factual allegations in [the complaint] to determine if they plausibly suggest an entitlement to relief." Id. "This standard 'simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence of the necessary claims or elements.'" Morgan v. Hubert, 335 F. App'x 466, 470 (5th Cir. 2009) (citation omitted). This evaluation will "be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 679.

Thus, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face."' Id. at 678 (quoting Twombly, 550 U.S. at 570).

ANALYSIS

The Court will address the arguments surrounding Sea Wasp's affirmative defenses first, then proceed to the arguments surrounding Sea Wasp's counterclaims.

I. Affirmative Defenses

Under Federal Rule of Civil Procedure 8(c), "when responding to a pleading, a party must, affirmatively state any avoidance or affirmative defense . . . ." FED. R. CIV. P. 8(c). An affirmative defense not pleaded is considered waived. See Woodfield v. Bowman, 193 F.3d 354, 362 (5th Cir. 1999); McDaniel v. IntegraCare Holdings, Inc., 901 F. Supp. 2d 863, 868 (N.D. Tex. 2012). Rule 8(c) provides nineteen affirmative defenses. See FED. R. CIV. P. 8(c). Those affirmative defenses, however, are not exhaustive. Rather, 8(c) states that "any other matter constituting an avoidance or an affirmative defense" may qualify as a Rule 8(c) affirmative defense. Id. To qualify as anaffirmative defense under Rule 8(c)'s residuary clause, the Fifth Circuit has instructed courts to "look to the logical relationship between the defense and the cause of action and assess whether failure to timely plead the defense will result in unfair surprise." Oden v. Oktibbeha County, Miss., 246 F.3d 458, 466 (5th Cir. 2001) (citing Ingraham v. United States, ...