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04|29|2009 12:18 pm EDT

Network Solutions Front-Running Leads to $1 Million Class Action Settlement

by Adam Strong in Categories: Featured, Legal Issues

Network Solutions just emailed notices regarding a class action settlment that came about from the NSI front running domains incident back in January 2008.   The email which can be seen after the jump details a class action lawsuit settlement which could cost the domain name registrar up to $1 million .  The complaint was originally filed against both NSI and ICANN by plaintiffs Chris McElroy, Todd Matzke and James Lee Finseth in  The US District Court for the Central District of California. The Court has approved the proposed settlement.  Anyone who has registered a domain at NSI between December 14  2007 and March 15 2008, may want to look in to this settlement.

According to the notice, the class action involves anyone who purchased a domain name registration and have not received a refund.  Any domains searched on NSI between December 14  2007 and March 15 2008 that were reserved by NSI and then subsequently registered with NSI within that same session (sub class 1) or up to 4 days later (sub class 2).

There are 2 classes of registrants in this case.  The first are those who purchased the domain name during the same session as when the initial search for the domain availability was conducted. The second class are those who purchased a domain name up to 4 days after having conducted a search for the domain availability .

A $6 credit applicable to any NSI purchase will be issued to the first sub class for each “same session” domain purchased and $9.91 will be issued for each domain purchased in the 4 day sub-class.

NSI will be paying out up to $375,966 to the first sub-class of registrants who purchased the domain names in the same session, meaning they searched for the domain and then bought the domain from NSI .  The  second sub-class involves registrations made within four (4) days of having conducted a search for that domain name’s availability with Network Solutions, but not within the same session in which they conducted the original search.  NSI will pay up to $500,000 to members of this class.  NSI estimates approximately 113,094 domains were registered during the period, 62,661 in the same session class and 50,433 within the 4 day class. NSI will be shelling out $171,995 to the plaintiffs legal team as well.

It should be noted that Network Solutions continues to deny any wrong doing .

There has been no finding of any wrongdoing by Network Solutions, and Network Solutions does not admit to any liability. Network Solutions wishes to settle to avoid further costly, disruptive, and time-consuming litigation. This settlement is the result of extensive negotiations between Network Solutions, the Plaintiffs, and the Plaintiffs’ attorneys (“Class Counsel”). Class Counsel believe that the settlement is fair, reasonable, and in the best interests of the Plaintiffs and the Class.

The practice of front running has been eliminated by the new tasting rules put in to effect by ICANN at the beginning of April.  When this news broke some legal experts weighed in on this incident and felt that NSI might be liable base on consumer protection laws.

If you believe you are part of this class, please consult the document below for contact information. Full contents of the class action notice appear below :

IN THE UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA

In The Matters of
McElroy v. Network Solutions LLC, et. al, Case No. CV 08-01247 PSG (VBKx)
Finseth v. Network Solutions LLC, Case No. CV 08-01537 PSG (VBKx)

NOTICE OF CLASS ACTION SETTLEMENT

To: All persons who, on or between December 14, 2007 and March 15, 2008, searched for the availability of an internet domain name through Network Solutions, LLC’s services, had the searched-for domain name reserved by Network Solutions and subsequently registered that domain name through Network Solutions, LLC’s services in the same internet session or within four days of having conducted the internet domain search, and who have not already received a full refund for the registration.

PLEASE READ THIS NOTICE CAREFULLY. IT MAY AFFECT YOUR LEGAL RIGHTS. YOU MAY BE ENTITLED TO AN AWARD FROM THIS SETTLEMENT.
PLEASE DO NOT CONTACT THE COURT OR THE COURT CLERK REGARDING THIS ACTION.

I. INTRODUCTION

This “NOTICE OF CLASS ACTION SETTLEMENT” (“NOTICE”) is to inform you that this court has preliminarily approved a class action settlement between the Class Representative Plaintiffs, Chris McElroy, Todd Matzke and James Lee Finseth, on behalf of themselves and all others similarly situated, who searched for internet domain names through Network Solutions, LLC (hereinafter “Network Solutions”) on or between December 14, 2007 and March 15, 2008, had the searched-for domain name reserved by Network Solutions and subsequently registered that domain name through Network Solutions in the same internet session or within four days of having initially conducted the domain name search, and who have not already received a full refund for the registration, on the one hand, and Defendant Network Solutions LLC, on the other hand.

THIS NOTICE IS TO INFORM YOU ABOUT THE STATUS OF THE LAWSUIT, INCLUDING A STATEMENT OF YOUR RIGHTS WITH RESPECT TO A PROPOSED SETTLEMENT OF THE CASE; YOUR ESTIMATED SHARE OF THE SETTLEMENT; YOUR OPTION TO FILE WITH THE COURT ANY OBJECTIONS YOU MAY HAVE TO THE SETTLEMENT; AND YOUR OPTION TO EXCLUDE YOURSELF FROM THE PROPOSED SETTLEMENT BY “OPTING OUT.”

II. DESCRIPTION OF THE LAWSUIT


On February 25, 2008, a complaint was filed by plaintiff Chris McElroy against Network Solutions and Internet Corporation for Assigned Names and Numbers in the United States District Court for the Central District of California (the “Court”) (Case No. CV 08-01247). A first amended complaint was filed by Chris McElroy and Todd Matzke on April 14, 2008. A second complaint was filed in the Court by plaintiff James Lee Finseth against Network Solutions on March 5, 2008 (Case No. CV 08-01537), and a first amended complaint was filed on April 18, 2008. The two cases were deemed related cases and are hereinafter referred to as the “Litigation.” Through the respective and operative complaints in the Litigation, the plaintiffs allege on behalf of a putative class comprised of certain users of Network Solutions’ domain name services that Network Solutions, through its Customer Protection Measure, committed unfair business practices prohibited by California Business and Professions Code §§ 17200 et seq,, fraud, deceit and negligence and benefited from unjust enrichment during the Class Period, December 14, 2007 through March 15, 2008.

Network Solutions denied and continues to deny each of the claims alleged by Plaintiffs and the Class. Network Solutions has asserted and continues to assert defenses thereto, and has expressly denied and continues to deny any wrongdoing or legal liability arising out of any of the facts or conduct alleged in the Litigation. There has been no finding of any wrongdoing by Network Solutions, and Network Solutions does not admit to any liability. Network Solutions wishes to settle to avoid further costly, disruptive, and time-consuming litigation. This settlement is the result of extensive negotiations between Network Solutions, the Plaintiffs, and the Plaintiffs’ attorneys (“Class Counsel”). Class Counsel believe that the settlement is fair, reasonable, and in the best interests of the Plaintiffs and the Class.

On April 3, 2009, 2009, the Court preliminarily approved the settlement. This NOTICE was sent to you because Network Solutions’ records indicate that, during the Class Period, you searched for one or more internet domain names through Network Solutions’ web site, had the searched-for domain name reserved by Network Solutions, subsequently registered that domain name through Network Solutions within four days of having conducted the original domain name search, and have not already received a full refund for the registration. If you are included in the Class described above, this settlement may affect your rights.


III. SUMMARY OF TERMS OF THE SETTLEMENT AGREEMENT


The Class is comprised of all people who purchased a Settlement Registration, who have not already received a full refund for the Settlement Registration. The term “Settlement Registration” as used herein shall have the same meaning as the proposed Settlement Agreement and Stipulation, and shall mean a domain name registration purchased through Network Solutions where the domain name was (a) searched for on the Network Solutions web site on or between December 14, 2007 and March 15, 2008; (b) reserved by Network Solutions; and (c) then registered with Network Solutions either within the same session that the domain name was searched for or within four days of the domain name having been searched for via Network Solutions’ web site. The Class consists of two sub-classes. One sub-class, referred to as the Same-Session Purchasing Sub-Class, consists of all users who purchased a Settlement Registration during the same internet session in which the user searched for the domain name’s availability through Network Solutions. Network Solutions has agreed to provide credits for Network Solutions services to members of this Same-Session Purchasing Sub-Class, with a value of up to $375,966, to resolve all claims of those customers who are within this sub-class. A second sub-class, referred to as the Four-Day Purchasing Sub-Class, consists of all users who purchased a Settlement Registration within four (4) days of having conducted a search for that domain name’s availability with Network Solutions, but not within the same session in which they conducted the original search. Network Solutions has agreed to pay up to $500,000 to members of this Four-Day Purchasing Sub-Class to resolve all claims of those customers who are within this sub-class. Approximately 113,094 Settlement Registrations were registered during the Class Period and are subject to this settlement, approximately 62,661 of which fall within the Same-Session Purchasing Sub-Class and approximately 50,433 of which fall within the Four-Day Purchasing Sub-Class.

According to Network Solutions’ records, you are a member of the Four-Day Purchasing Sub-Class.

The proposed settlement provides that Class Counsel may apply to the Court for reasonable compensation for their work in this matter, in an amount up to $171,995 (up to 12.5% of the value of service credits provided to the Same-Session Purchasing Sub-Class plus up to 25% of the settlement amount provided to the Four-Day Purchasing Sub-Class), inclusive of their expenses and costs.

A $6 credit applicable to any Network Solutions service purchased on the Network Solutions website, valid for one year from the date of the issuance of the credit, shall be issued to each member of the Same-Session Purchasing Sub-Class who does not “opt out” (see Section V below) for each Settlement Registration purchased by such member within the same internet session. For example, if a participating class member purchased two Settlement Registrations during the Class Period in the same internet session within which he or she conducted searches for the availability of those domain names through Network Solutions’ website, he or she can expect to receive two separate credits for Network Solutions’ services, each valued at $6.

A payment of $9.91 shall be made to each member of the Four-Day Purchasing Sub-Class who does not “opt out” (see Section V below) for each Settlement Registration purchased by such member within four (4) days of having conducted the availability search, but not within the same internet session. For example, if a participating class member registered two Settlement Registrations through Network Solutions during the Class Period within four (4) days of having also conducted searches for the availability of those domain names through Network Solutions’ website, he or she can expect to receive payment of $19.82.

The summary of the proposed settlement agreement in this NOTICE does NOT include all of the terms and conditions of the settlement. The only complete statement of the terms of the proposed settlement is in the actual Settlement Agreement and Stipulation (“the Settlement Agreement”), that has been tentatively approved by the Court. The proposed Settlement Agreement is available for inspection at the Office of the Clerk of the United States District Court for the Central District of California, Western Division, which is located at 255 East Temple Street, Los Angeles, CA 90012. PLEASE DO NOT CALL THE COURT OR JUDGE.

IV. BINDING EFFECT AND CLASS RELEASE


If approved by the Court, the proposed Settlement Agreement will be binding on all members of the Class who do not timely “opt out” of the settlement, and such members of the Class who do not timely “opt out” of the settlement will fully and finally release and discharge Network Solutions, and each of its past or present officers, directors, shareholders, members, employees, agents, principals, heirs, representatives, accountants, auditors, consultants, executors, insurers and reinsurers, and its and their respective successors and predecessors in interest, subsidiaries, affiliates, parents and attorneys from any and all claims, known and unknown, arising from Network Solutions’ automatic registration, for a limited time, of any domain name for which a name availability search was made (referred to by Network Solutions as its Customer Protection Measure) under any state or federal statute, ordinance, regulation, common law, or other source of law, whether or not such claims are in the nature of damages, penalties, attorneys’ fees or injunctive or other equitable relief, whether in contract, tort or pursuant to a statutory remedy, related to or arising out of any claims stated in the underlying litigations, including but not limited to any of the following: (1) any claims for unfair business practices (including unlawful, deceptive or unfair business practices prohibited by the California Business and Professions Code §§ 17200, et seq.); (2) any claims for fraud or deceit; (3) any claims for negligence; (4) any claims for unjust enrichment or restitution; and (5) any claims for aiding and abetting the aforementioned alleged unlawful acts.

These releases include any unknown claims, as set forth above, that the releasing members of the Class do not know or suspect to exist in their favor at the time of this Notice which, if known by them, might have affected their decision not to object to or opt-out from the settlement of the Litigation. Those members of the Class not objecting to, or opting out from, the settlement of the Litigation shall be deemed to have, and have, expressly waived and relinquished, to the fullest extent permitted by law, the provisions, rights and benefits of Section 1542 of the California Civil Code to the extent it is applicable (or any other similar provision under federal, state or local law, to the extent any such provision is applicable). Section 1542 provides:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.

Thus, if members of the Class hereafter discover facts in addition to or different from those they know or believe to be true with respect to the subject matter of this release, they shall be deemed to have, and have, fully, finally and forever settled and released any and all of the claims released herein, whether known or unknown, suspected or unsuspected, contingent or non-contingent, which now exist, or heretofore have existed under any theory of law or equity now existing or coming into existence in the future with respect to the subject matter of this release as described above, including but not limited to conduct that is negligent, intentional, with or without malice, or a breach of any duty, law or rule without regard to the subsequent discovery or existence of such different or additional facts.

V. OPT-OUT PROCEDURE


If you choose to not participate in this lawsuit and this settlement (“opt-out”) (a) you will have no right to receive any money or credits under the settlement of this case, as detailed in the Settlement Agreement; (b) you will not be bound by the settlement in this lawsuit and the Settlement Agreement; and (c) you may bring or participate in a separate lawsuit against Network Solutions. If you opt out of this lawsuit and this settlement and bring or participate in a separate lawsuit, you may lose your case and receive nothing, or you may obtain less money or service credit than you could get under this lawsuit even if you prevail, and it may take several years to obtain any such money. To opt out of this lawsuit, you must submit a written notice stating that you want to opt out of this settlement. This written notice must contain your name, address and telephone number. The written notice must also state:

“I wish to opt out of the settlement of McElroy v. Network Solutions, et al. (United States District Court for the Central District of California, Case No. CV 08-01247) and Finseth v. Network Solutions (United States District Court for the Central District of California, Case No. CV 08-01537). I understand that by requesting to be excluded from the settlement I will receive no settlement award under the terms of the Settlement Agreement entered into by Network Solutions. I understand that if I am excluded from the class settlement, I may bring a separate action. I understand that in any separate lawsuit, I may receive nothing or less than I would have received if I had not opted-out out of receiving a settlement award pursuant to the Settlement Agreement.”

This written opt-out statement must be sent by U.S. mail to counsel for Network Solutions pursuant to Paragraph VIII, below. To be timely, this opt-out statement must be postmarked no later than June 22, 2009. Please retain a copy of the envelope depicting the post-mark for your records.

VI. OBJECTIONS TO THE PROPOSED SETTLEMENT

If you believe that the proposed Settlement Agreement should not be finally approved by the Court for any reason, you may object to the proposed Settlement Agreement. If you want to object to the proposed Settlement Agreement, you must file an objection in writing with the Court (see Section III, above, for the Court’s location) and serve a copy of your written objection on counsel for the parties (see Section VIII, below, for counsels’ contact information). This written objection must state the basis of your objection and include an indication of your intent to appear at the hearing scheduled for August 10, 2009 at 1:30 p.m. in Courtroom 790 at 255 East Temple Street, Los Angeles, California, 90012, to have your objection heard by the Court. If you object to the proposed Settlement Agreement, you or your counsel must appear at this hearing.

Any written objection to the proposed Settlement Agreement must be filed with the court and served on counsel for the parties, at the addresses included in Section VIII below, no later than June 22, 2009. Objections not previously filed in writing in a timely manner will not be considered.

All objections or other correspondence must state the names and numbers of the cases, which are: McElroy v. Network Solutions, et al. (United States District Court for the Central District of California, Case No. CV 08-01247) and Finseth v. Network Solutions (United States District Court for the Central District of California, Case No. CV 08-01537).

VII. ATTORNEYS’ FEES AND COSTS

You will not have to pay Class Counsel for representing you in this lawsuit. As noted above in Section III, the Court will consider and award at the time of final hearing an amount to be paid to Class Counsel as reasonable compensation for their time incurred in this matter and for their actual expenses and costs incurred, which will be paid by Network Solutions from the Settlement Amount.


VIII. FURTHER INFORMATION AND ADDRESS OF CLASS COUNSEL

PLEASE DO NOT CALL OR CONTACT THE COURT. If you have any questions about the Settlement Agreement, you may contact Class Counsel listed below for more information:

Brian S. Kabateck
Richard L. Kellner
Alfredo Torrijos
Kabateck Brown Kellner LLP
644 South Figueroa Street
Los Angeles, CA 90017

and

Daniel G. Whalen
Paul A. Traina
Gregory P. Waters
Engstrom, Lipscomb & Lack, P.C.
10100 Santa Monica Boulevard, 12th Floor
Los Angeles, CA 90067

Any question you may have about the Settlement Agreement should be addressed to the above Class Counsel. However, in the event that you need to contact Network Solutions (such as to serve an opt-out statement pursuant to paragraph V or a written objection pursuant to paragraph VI, above), you should contact Network Solutions’ counsel:

Valerie M. Goo, Esq.
Orrick, Herrington and Sutcliffe LLP
777 South Figueroa Street, Suite 3200
Los Angeles, CA 90017

IX. IF THE SETTLEMENT AGREEMENT IS NOT APPROVED

If the Settlement Agreement is not approved by the Court, or if any of its conditions are not satisfied, the conditional settlement will be voided, no money or credits will be paid, and the case will revert to litigation. However, if that happens there is no assurance: (a) that any decision at trial would be in favor of Class members; (b) that a favorable trial decision, if any, would be as favorable to the Class members as this settlement; or (c) that any favorable trial decision would be upheld if an appeal was filed.

X. NO OPINION EXPRESSED AS TO THE MERITS OF THE CASE

On April 3, 2009, the Court preliminarily approved the Settlement Agreement and found that the Settlement Agreement is fair and reasonable. However, the Court has expressed no opinion regarding the merits of the Plaintiffs’ claims or Networks Solutions’ liability. DO NOT WRITE OR CALL THE COURT REGARDING THIS SETTLEMENT.


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10 Comments

Todd Mintz

April 29, 2009 @ 12:56 pm EDT

$6 or $10 credits for domains that sell for $34.99 is essentially nothing since all but the terminally dim don’t pay more than $10 for new registrations elsewhere.

[…] DNN and Traverse […]

Adam Strong

April 29, 2009 @ 3:36 pm EDT

I agree Todd. Pretty lame settlement too imho. I actually got a copy of the letter today saying I was in the 4 day sub-class. It must have been during my bout with terminal dimness. Thankfully I’ve recovered. I sure don’t remember registering anything with them. Maybe there’s brainwashing involved too

Steve M

April 30, 2009 @ 7:42 pm EDT

…an’ if the history of these types of so-called “settlements” are any indication (and they are), NSI’ll end up paying out something less than 30% of the estimated maximums.

They ought to give back ALL the money they charged for these regs.

Reece Berg

May 1, 2009 @ 6:31 am EDT

@ Todd : LOL

I still can’t believe NetSol tried to pass off their front-running as being in the interest of their customers… If I read the article right (6am here haha), seems like Netsol is the real winner here, coming out far, far ahead. I guess front-running does pay.. And pretty well might I add :(

Beggars Liars Thieves.

May 2, 2009 @ 6:39 pm EDT

It should be noted that a lot of trademarked domains were searched during that time and NSI was registering them to profit from a potential illegal act under the cybersquatting laws.

Anyone trying to get NSI should remember this.

David

May 4, 2009 @ 1:59 pm EDT

NetSol may be hoping for as many domain credits as possible being used since as a result of their very high prices they still end-up making more profit per domain than places such as GoDaddy for example.

This is one more example of how so many of these big Class Action suits earn the attorneys a lot of money but the customers get basically nothing worthwhile from the settlements.

Alexander Dombroff

May 7, 2009 @ 1:45 pm EDT

Sure am glad I don’t have a case of terminal dumbness…who pays over $10 for a domain…sheesh.

[…] over something with artificial scarcity.  The Domain Registrars actually tried it themselves and got sued. Now, private people (or is it just a shell company owned by the registrars, hmmm?) are pulling […]

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