Sprinkler Warehouse, Inc., Plaintiff-Appellant, Vs. Systematic Rain Inc .

I. STANDARD OF REVIEW Statutory interpretation presents a question of law over which this Court exercises de novo review. State v. Zacher, 504 N.W.2d 468, 470 (Minn. 1993). "When the material facts are not in dispute, [Minnesota appellate courts] review the lower court's application of the law de novo." In re Collier, 726 N.W.2d 799, 803 (Minn. 2007). "No deference is given to a lower court on questions of law." Modrow v. JP Foodservice, Inc., 656 N.W.2d 389, 393 (Minn. 2003). II. THE DISTRICT COURT PROPERLY RULED THAT THE DOMAIN NAME AND WEBSITE ARE NOT PROPERTY SUBJECT TO GARNISHMENT UNDER MINNESOTA LAW. In Minnesota, creditors may garnish property as defined under Minn. Stat. §571.73, which provides: Subject to the exemptions provided by sections 550.37 and 571.922 and any other applicable statute, the service of a garnishment summons under this chapter attaches: (2) all other nonexempt indebtedness, money, or other property due or belonging to the debtor and owing by the garnishee or in the possession or under the control of the garnishee at the time of service of the garnishment summons, whether or not the same has become payable . (3) all other nonexempt intangible or tangible personal property of the debtor in the possession or under the control of the garnishee at the time of service of the garnishment summons . Minn. Stat.§ 571.73, subd. 3(2-3). 7

The statute further provides that: The following property is not subject to attachment by garnishment . any disposable earnings, indebtedness, money, or property that is exempt under Minnesota or federal law. Minn. Stat.§ 571.73, subd. 4(6). The purpose of interpretation and construction of statutes is to "ascertain and effectuate the intention of the legislature." Minn. Stat.§ 645.16. A court's determination of the legislature's intent may be guided by the presumption that the legislature does not intend an absurd, impossible of execution, or unreasonable result. Minn. Stat.§ 645.17. All provisions within a statute must be construed to "limit rather than to extend the operation of the clauses to which they refer." Minn. Stat.§ 645.19. When the meaning of a statute is unambiguous, courts construe a statute's text according to its plain language. Brua v. Minn. Joint Underwriting Ass'n, 778 N.W.2d 294, 300 (Minn. 2010). Domain names and websites do not fall into any of the categories of items subject to garnishment under the language of the Minnesota statute. Based on a plain reading of the relevant statue, a domain name and website are not subject to garnishment in Minnesota. 8

Ill. A DOMAIN NAME AND WEBSITE ARE NOT INTANGIBLE OR TANGIBLE PERSONAL PROPERTY WITHIN THE MEANING OF THE MINNESOTA STATUTES GOVERNING GARNISHMENT. Sprinkler argues that a website and domain name are subject to garnishment because Minn. Stat.§ 571.73 covers "intangible or tangible personal property." (A 47). However, Sprinkler fails to recognize the difference between a domain name and a website. This distinction is important, as they are not one and the same. First, a domain name is "any alphanumeric designation which is registered with or assigned by any domain name registrar, domain name registry, or other domain name registration authority as part of an electronic address on the internet." 15 U.S.C.A. § 1127. In comparison, a website is "a group of World Wide Web pages usually containing hyperlinks to each other and made available online by an individuat company educational institution, government, or organization." Merriam-Webster Collegiate Dictionary (11th ed. 2003), available at e. In other words, a website is the content that is viewable when a person navigates an internet browser to a particular domain. In order to obtain the result it seeks, Sprinkler must separately establish both the domain name and the website as intangible personal property subject to garnishment. The plain language of the Minnesota Statute governing garnishment does not support Sprinkler's argument that a domain name and a website are intangible personal 9

property. Black's Law Dictionary defines an 11 intangible asset" as 11 [p]roperty that is a 'right' such as a patent, copyright, [or] trademark." Black's Law Dictionary 558 (6th ed. 1991). In the New York Case, Wornow v. Register. Com, Inc., the court held that a 11 domain name that is not trademarked or patented is not personal property." 778 N.Y.S.2d 25, 26 (N.Y.A.D. 2004) (citing Network Solutions v. Umbra Inti., 529 S.E.2d 80, 86 (Va. 2000)). Palm's domain name is not trademarked or protected by any other means aside from the domain name registration process. Accordingly, Palm's domain name GPLAWN.COM should not be considered personal property subject to garnishment. No Minnesota case law supports Sprinkler's assertion that Minn. Stat.§ 571.73 encompasses domain names and websites as garnishable property. Sprinkler attempted to support its proposition by misconstruing Minnesota Court of Appeals case, Schwartz v. Virtucom, Inc., asserting that the case declared domain names and websites as intangible personal property subject to garnishment. No. A08-1059, 2009 WL 1311816 (Minn. Ct. App. May 12, 2009). Although the unreported case does state that the defendant's domain name is an asset with some measurable value, the court does not go so far as to say the domain name is garnishable or how it can be valued. ld. at *5. To date, neither party has been able to locate Minnesota case law discussing whether a domain name falls within the scope of property subject to garnishment under Minn. Stat.§ 571.73. The fact that this is a case of first impression demonstrates that 10

the scope of Minn. Stat.§ 571.73 has not traditionally been interpreted to include domain names and websites. Further, this Court should not endorse Sprinkler's interpretation of Minn. Stat.§ 571.73 because Sprinkler s expansive reading of the statute would convolute the traditional process of garnishing property. Typically, garnished property is taken and sold, with the proceeds used to satisfy some portion of the judgment. However, in this case, it appears that Sprinkler intends to take the domain name to use for itself. If that is the case, it would be extremely difficult, if not impossible, to place a value on the domain name and website. In addition, there would be no reasonable way to determine when the judgment is satisfied. Sprinkler could potentially take the domain name and website to use for an indefinite length of time until Sprinkler determines the judgment is satisfied. This approach is not what the garnishment procedure was intended for. Sprinkler is trying to abuse the garnishment process to obtain control of the website and domain name as a way to divert customers and ultimately, eliminate its competition. Sprinkler's improper interpretation and application of Minn. Stat. § 571.73 must not be allowed. Where websites and domain names are not even considered within the meaning of the Minnesota statute, it would be unreasonable to infer that the legislature intended to include them as "intangible property." In addition, where no case law in this jurisdiction supports the inclusion of domain names and websites within the terms used 11

to define garnishable property in the relevant statute, this Court must not expand the statute beyond its logical and intended reach. Accordingly, this Court should find that domain names and websites are not within Minnesota Statute's § 571.73 meaning of "personal property." IV. OTHER COURTS HAVE HELD THAT DOMAIN NAMES AND WEBSITES ARE NOT ATTACHABLE PROPERTY AND ARE EXEMPT FROM GARNISHMENT UNDER SIMILAR STATUTES. Case law from other jurisdictions supports Respondents' position that domain names are not attachable property and should be viewed as property exempt from garnishment under Minn. Stat.§ 571.73, subd. 4{6). See In re Alexandria Surveys lnt'! LLC, 500 B.R. 817, 822 (E. D. Va. 2013) (citing Network Solutions, Inc., 529 S.E.2d, at 769- 72). In Alexandria Surveys lnt'l, LLC, the United States District Court for the Eastern District of Virginia held that, in both garnishment and bankruptcy proceedings, "the use of a domain name is a 'contractual right' that does 'not exist separate and apart from [the provider]'s services that make the domain names operational Internet addresses." /d. (citing Network Solutions, Inc., 529 S.E.2d, at 769-72). The Court went on to explain that: While telephone numbers and web addresses are important branding tools and certainly have value to those who use them, that subjective value does not equate to ownership under Virginia law. The Virginia Supreme Court confirmed in Network Solutions that neither telephone numbers nor domain names were garnishable personal property because 'neither one exists separate from its respective service that created it.' ld. at 87. Therefore, because Virginia does not recognize an ownership interest in telephone numbers and web addresses, neither were property 12

of [petitioner's] estate and neither were subject to sale by the trustee (nor would they be subject to sale in any future proceeding). In re Alexandria Surveys lnt'l, LLC, 500 B.R., at 822. This analysis is directly applicable to the situation at hand. Respondents' use of the domain name and website does not indicate any ownership on their behalf. Although the website has been valuable to Respondents in the sense that it helps to obtain business, such subjective value does not equate to ownership. Just as a phone number is useless without a phone service to support the number, a domain name is of no value without the support of a service provider. The service provider makes the domain name functional, meaning that it allows customers to access the website. Obtaining the domain name without the underlying service renders it useless, as no customers would be able to view the website. Therefore, per the holding in Alexandria Surveys lnt'l, the domain name and website in question should not be classified as personal property subject to garnishment. Another Virginia court case that utilized a similar analysis is Network Solutions, Inc. v. Umbro lnt'l, Inc., 529 S.E.2d 80 (Va. 2000). In Network Solutions, the defendant managed domain name registrations, meaning that the company prevented registration of identical domain names, and then matched unique domain names to the corresponding IP number for the desired website. 529 S.E.2d, at 767. The plaintiff obtained a judgment against the defendant for using a domain name similar to the plaintiff's company name, and the plaintiff attempted to garnish the domain name 13

serviced by the defendant. The court found that the domain name was not subject to garnishment and stated that: a domain name registrant acquires the contractual right to use a unique domain name for a specified period of time . [W]hatever contractual rights the judgment debtor has in the domain names at issue . those rights do not exist separate and apart from [debtor's] services that make the domain names operational Internet addresses. Therefore, we conclude that a domain name registration is the product of a contract for services between the registrar and registrant. A contract for services is not 'a liability' . and hence is not subject to garnishment. Network Solutions, Inc., 529 S.E.2d, at 770. Although the circumstances are somewhat different, Network Solutions is still applicable and persuasive. Palm has a contractual relationship with the domain name provider which allows Palm to use the domain name. Neither Palm nor Rain owns the domain name, but rather they are granted permission to use the name so long as the registration fee is paid and all contractual obligations are complied with. If the registration fee is not paid, the domain name will become available to anyone else who wishes to register the name. Therefore, the domain name itself does not have any inherent intrinsic value. As an aside, even if a non-trademarked domain name and its website content could theoretically have intrinsic value, the burden of establishing that value would be on the party seeking attachment of these business tools as "property." Sprinkler has not established an intrinsic value of the domain name and website it seeks. In fact, because of the nature of these items, they have no transferable value. 14

A domain name and website are used as part of a business to generate contracts and sales, meaning that a domain name's value can only be meaningfully calculated by referencing the financial data of the business that operates it. Even if a value could be assigned to a domain name and website through reference to the owner-company's financial statistics, that value would not survive the transfer of the domain name and website to a new company with different business practices and goals. Because of the special nature of domain names and websites, and the unique way that their value, if any, must be calculated, garnishment processes such as the one initiated by Sprinkler in this case simply cannot be applied to these business tools. There is no rational method of calculating the value that a particular domain name and website would bring to a new company. The attachment of a domain name and website for the purpose of transferring these tools to a new company effectively renders the tools valueless. Without any transferable value, it is not possible to use these business tools to satisfy a particular judgment, so allowing garnishment proceedings to be used in this manner is pointless. Sprinkler's argument in opposition to the district court's reliance on Network Solutions rests on the idea that the decision in Network Solutions was focused around the word 11 liability'' in the Virginia Code §8.01-511. (App. Brief, p. 8}. However, this argument is misplaced. The Network Solutions court clearly defines what a 111iability" is: 15

"[l]iability in this context means a legal obligat[ion], enforceable by civil remedy, a financial or pecuniary obligation, or a debt." /d. at 768. The use of "liability" in Virginia Code §8.01-511 is parallel to the use of "indebtedness" in Minn. Stat. §571.73. Indebtedness is: "[t]he state of being in debt . [and] may mean anything that is due and owing." Black's Law Dictionary 528. Here, as in Virginia Code §8.01-511, the term is used to signify a debt owed to another, not a substantive aspect of the interpretation of either statute. The court's analysis in Network Solutions focused on the term . liability . because of the specific facts of that case and the wording of the statute at issue. However, the Virginia and Minnesota statutes are still similar enough that the Network Solutions analysis may be viewed as instructive in this case. Sprinkler s focus on the term . liability . from the Network Solutions case is a diversion from the true issue in this case: whether a domain name and website constitute garnishable . property . under Minn. Stat.§ 571.73. Additionally, Network Solutions was not used by the district court for the proposition that domain names are not intangible property, but for the premise that domain names are not intangible property subject to garnishment. The district court in this case applied the Minnesota statute, but with guidance from Network Solutions on the issue of whether domain names and websites have been subject to garnishment under similar statutes. As such, Sprinkler's argument that it is improper for the Court to 16

rely on such case fails, as Network Solutions is on-point and persuasive in demonstrating that domain names and websites are exempt from garnishment. Despite the holdings of Network Solutions and Alexandria Surveys lnt'l, Sprinkler continues to argue that domain names are intangible property that may be garnished, relying primarily on the Ninth Circuit case Office Depot, Inc. v. Zuccarini, 596 F.3D 696 (9TH Cir. 2010), to support its argument. However, Zuccarini is distinguishable. In Zuccarini, the court allowed the use of domain names to satisfy an outstanding judgment when Zuccarini was in the business of buying domain names and such domain names constituted the company's inventory. Zuccarini had around 248 different domain names. Zuccarini, 596 F.3d at 698. The facts of Zuccarini were very different from Respondents' situation, which involves only one website backed by an existing business. The sole purpose of the domain name GPLAWN.COM and the corresponding website was to support and compliment Rain's business. Garnishing the domain name and website of an operating business would effectively eliminate a portion of the business. In Zuccarini, the domain names were simply "inventory'' of the business, which could be sold off individually to satisfy the outstanding debt owed. The domain name and website here are not "inventory'' of Rain, and following the Zuccarini approach would set a precedent that ultimately allows creditors to deplete a competitor's business to the point of closing. Again, this is not what a garnishment pr

On February 11, 2014, Sprinkler filed a notice of objection to Palm and Rain's claim of exemption from garnishment. (A 3-7). In its objection, Sprinkler alleged that Palm was the owner of Rain, and that Rain was the owner of a website titled Gplawn.com. (/d.) Based on these assertions, Sprinkler argued that Palm erroneously