On April 12, 2013, the domain name MD.org sold at a record setting NameJet.com auction for $555,650.00 to the high bidder ID of ‘Winters”
Today the seller of the domain name, Privacy LLC, (Privacy) filed a lawsuit along with NameJet, LLC (“NameJet”) against Scott Ross and “Does defendants 1-3” which “may include Ari Goldberger, Esq. and Larry Fischer”, for breach of contract, in refusing to pay for the domain name.
The suit was filed in the Circuit Court of Fairfax County Virgina.
Here are the relevant allegations as stated in the complaint:
“”Defendant Scott Ross (“Ross”) is a citizen of the United States who upon information and belief resides in the State of Florida.
Although Ross was the buyer who agreed to purchase the domain name at issue, Plaintiffs believe Ross was a straw man acting as a proxy, agent, and co-conspirator with and for other undisclosed parties who are named as Does in this complaint.
Defendants Does 1-3 are the agents, principals, and/or co-conspirators of Ross who directed Ross, or acted in common control and concert with Ross, to enter into and breach the contract discussed in this complaint.
Plaintiffs believe Does 1-3 may include Ari Goldberger and Larry Fisher, but without discovery Plaintiffs have not confirmed their involvement.
After Plaintiffs confirm the identities of the Does, Plaintiffs will seek leave to amend this complaint to name them properly.
On or about July 26, 2008, Ross created an account with Internet domain auction platform Namejet.com. Upon doing so, Ross agreed to the NameJet Terms.
Based upon information and belief, Plaintiffs understand that Ross created the account with NameJet in concert with agents and principals, who by their active conspiracy and partnership with Ross are equally liable as the domain name buyer
The NameJet Terms state that the highest bidder at the end of an auction held on NameJet.com is obligated to complete the transaction with the seller for the amount of the highest bidder’s bid.
The NameJet Terms also state that all payments associated with using the Namejet.com service are due immediately upon demand.
From April 10, 2013 to April 12, 2013, an auction was held on NameJet.com for MD.ORG and Ross—together with his co-conspirators, partners, and principals—placed the highest bid, $555,650.00, at the time the auction ended.
NameJet, as the sales venue for transactions conducted through its website, receives a portion of the sales price as a commission for each transaction completed through its service.
On April 24, 2013, NameJet sent a letter to Ross demanding payment of the full amount owed by April 26, 2013.
On April 26, 2013, Ross’ counsel sent a letter to NameJet indicating that Ross did not intend to pay the agreed upon amount.
At the time of the filing of this Complaint, Ross has not paid the amount of the highest bid or further indicated a willingness to pay the full amount of the highest bid.
Ross, upon accepting the NameJet Terms while creating an account on NameJet’s website, entered into a valid agreement to tender payment to Privacy LLC upon placing the highest bid in a NameJet auction.
The NameJet Terms constitute a legally enforceable obligation between Ross and NameJet.
NameJet has performed all acts required of it under the NameJet Terms, but has been rebuffed by Defendant.
Ross breached his contractual obligations to NameJet by failing to pay the amount of the highest bid at the auction upon demand and also by clearly indicating an unwillingness to pay that amount.
As a direct and proximate result of Ross’s breach of the NameJet Terms, NameJet has been damaged in the amount of its commission due, and its reputation has and will continue to be damaged.
Section 3.4 of the NameJet Terms provides, in pertinent part, Should you fail to substantially prevail in any lawsuit brought against NameJet, NameJet will be entitled to recover its reasonable attorneys’ fees and costs from you.”
As a direct and proximate result of Ross’s breach of the Terms Agreement, Privacy LLC has been damaged in an amount of at least $555,650.00.
As a direct and proximate result of Ross’s breach of the Auction Agreement, NameJet has been damaged in the amount of its commission, and its reputation has and will continue to be damaged.
The Plaintiffs asked the court to award General compensatory damages of “not less than $300,000″, the $555,650 representing the winning bid placed under Scott Ross’ NameJet Account, Attorneys fees and costs of the suit, and Pre- and post-judgment interest.””””
I obviously don’t know if the allegations contained in the complaint are true or not and we remind everyone that allegations are just that at this point.
However the allegations are shocking especially considering the parties allegedly involved.
We do know that the domain name MD.org sold at the April auction for $555,650 and the bidding came down to two bidders.
At the time we guessed that one of the bidders could have been the group that launched MD.com just a few week prior to the auction as was reported by Ron Jackson’s DnJournal.com.
We have reached out to Scott Ross and each of the named Does Defendants to see if they have any statement and we will update this story when and if we get any such statements.
This is only the second lawsuit I’m aware against an allegedly non-paying bidder arising out of a domain name auction.
In 2009 Ad.com sold at a Moniker.com auction for $1.4 Million.
The seller of the domain name ad.com and Moniker.com sued the non-paying bidder and the case was resolved last year.
I do think its good for the industry for sellers and auction house to enforce bidding and sales agreements against sellers and buyers as we have seem way too many instances of non-paying buyers and non-transferring sellers with the parties getting little to no support from the auction houses.
Nothing is guarantee until the money is in your hands!!
great article from one of the CEOs why you need to get a good domain:
http://www.geekwire.com/2013/dont-buy-10-domain-tips-hubspots-dharmesh-shah/
I wish Sedo followed the same approach towards non-paying auction winners, but no such luck of that happening. I must have totaled $50k in unpaid auctions over the years.
Great story! Love to see famous people be involved on scams 🙂
The other bidder – apparently National A1 – is not exactly a “Halverez”.
I hate to see this happen with names we all know but now it is time for NJ to enforce its own rules.
The attorney is going to laugh at this lawsuit. Namejet has to go after every non-paying bidder the same so when it’s proven that all Namejet does is cancel out the buyers account and never if rarely gets paid for the selling domain name Ross and his group will get off with not even a slap on the wrist and open up a new Namejet account in someone else’s name.
Excellent way to manipulate the market, dump a bunch of names that get overinflated and pay no penalty. Funny!
Ill ask the obvious not taking away from the principle allegation at hand, but what about bidder number two?
Are they no longer a candidate for the amount they bid?
My opinion has always been in auctions if the first party is unable to fulfill the obligation within period certain-Death, etc., that the last bid offered by party number two should be held acceptable for running.
Certainly the primary bidder should be accountable for possible damages, legal, termination etc., but there would be far less damage to the selling party as well as the auction house.
Why can’t they have something like ebay, you need a valid credit card to register so we know you are a serious buyer/seller?
Lance
I just went through this on a much cheaper domain auction for Formals.com which was a snapnames.com and which the high bidder defaulted on.
SnapNames wanted to have the second bidder buy the domain for the next highest bid which may sounds Ok in theory until you realize that your bid was being driven up by someone who didn’t pay
I believe the bidding on MD.org was between two parties from $80K up, the winning non-paying bidder and the second party
So if I was the second party I would want to throw out all bids of the non-paying bidder.
I mean why should a non-paying bidder bids drive up by price I should Pay?
Anyway in the Snapnames case both the second highest bidder and third highest bidder (me) told snap to just re-auction it which they did
@ mike
yes agreed to the point where the primary bidder entered and there was only one bidder left (shows no other bidder would go beyond that last bid)
i.e.
10k bidder 1
12k bidder 2
14k bidder 3
14.5k bidder 4
15k bidder 1
18k bidder 2
18.5k bidder 1
19k bidder 2
if bidder 2 shows win and defaults, last bid after last good bid (bidder 4) would be accepted after them but before the default= bidder 1 at 15k.
Is only an opinion but should be instituted last rwa bid(der) succeeding reserved.
@Lance
Here is the Namejet list for this auction and if I read you right that means they would have to accept $75,100 from freedotcom which is probably what this domain is really worth when looking at other 2 letter .org sales. I would almost bet they know they got fucked some how and was bid up on the price and now don’t want to pay for the name. It would be great for someone who knows these people first hand to get the truth about this.
http://www.namejet.com/Pages/Auctions/StandardDetails.aspx?auctionid=3474643&ts=1&cat=business
@ Todd – Just because NameJet doesn’t get litigious with everyone who backs out of a sale doesn’t get the bidder out of this. Judge isn’t going to base it on that. Let’s say even if that were correct, it only gets them off the hook from NJ, not the seller.
and logically Namejet damages should be the 15% of the $555K plus attorney fees
Not sure about other damages
I think Namejet is about to open a can of worms …
My forecast is either they will desist or “reach an agreement outside the court”
Can you imagine the details of how this Auction houses operate, “the bidding process”? who can bid? and other interesting details “cough cough” coming out in the limelight?
Halvarezgate Part deux?
🙂
Never a dull moment in this BS domain world!!
Pretty soon they gonna have a movie out for this.” The Dirty world of Domainers”
Formals.com was not an expired auction right?
Lance, the underbidders offer was not accepted. It is little different to a private sale, can’t go back and accept a bid you previously rejected. Most underbidders would walk from anything but a much lower price because the bidding wasn’t genuine.
Tony
Formals.com was a drop aucton, MD.org was a privately owned domain
There is nothing about the internals or history of NameJet which is going to be relevant to this claim. The only relevant things are the agreements of the parties to the terms under which the auction was conducted.
If the purchaser in default is betting on the auction having been crooked as a defense, that is some very weak tea. Show me an auction house anywhere – from Christie’s down the line – which isn’t suspected of being rigged, or which hasn’t run into things like title problems, forgeries, and so on.
If Mr. Ross was acting as an agent for other parties, then I hope he has a good agency agreement in place, or else that those other parties are really swell and honorable folks.
Oh! You mean, they knew in advance, and they’re going to stick Ross with the blame! Wow! That is a big risk for someone acting as an agent . . . I didn’t think about it, but it probably happens all the time. They’ll leave Ross holding the bag. Throw him under the bus. Nice!
In addition to the $83K in lost fees – In my opinion NJ has a reputation to uphold – based on the auctions I am in – I very very rarely see a re-auction – and says a lot about NJ and their policies and how they screen bidders.
And something else tells me an attempt to buy this domain – outside of auction – had already been made establishing a number around $500K. I find all non.com’s worthless – and was not in the auction – was there a reserve ?
“They’ll leave Ross holding the bag.”
If they do, we’ll know who they are. I hope they do not, and step up to the plate here and indemnify Mr. Ross.
“Namejet has to go after every non-paying bidder the same…”
That is nonsense.
Todd – there is no president that NJ has established by not going after all fraud / failed bidders.
If someone bails on a $20K sale – that is $3000 in lost fees for the auction house.
They probably need at least a $10K hickey in lost fees before even considering trying to recover them – probably more.
@John and Brian
This is right from Namjet’s TOS. Please tell me how Namejet can legally do anything about this except cancel their account? It says if I am a verified bidder I have 21 days to pay for a name from the day the auction closes and if not our only legal right against you (the winning bidder) is to close your account. Am I not reading this correctly?
2.2 In the event that you default on making payment to NameJet after being named the winning bidder, NameJet reserves the right to charge, and you agree to pay, a fee for defaulting on payment, the amount of which shall be determined by NameJet. You will be considered in default if you fail to pay within seven (7) calendar days from the date that the auction closes. After seven days, your account will be placed in “past due” status and you will be unable to bid for, or place any backorder on, any domain name on the NameJet Platform until you make payment. If you fail to make your payment within fourteen (14) days from the date the auction closes, your account will be closed permanently. Verified Bidders shall have an additional seven (7) days to make payment before their accounts are closed.
Todd –
“NameJet reserves the right to charge, and you agree to pay, a fee for defaulting on payment, the amount of which shall be determined by NameJet. ”
In this case NJ decided the “amount” was on the entire amount – maybe there were other terms between the seller and NJ – who knows – that is none of anybody’s business except the seller and NJ.
What do I know – I am just some private sector non-legal guy trying to make a buck investing and building 🙂
Brian
So tomorrow if I am the winning bidder on a $79 auction at Namejet and decide not to pay that means they can charge me a fee of $555,650 just because they feel like that fee is justified?
The real thing we have to ask ourselves is how in the world does a 2 letter .org sell for over $500,000 more than the previous best 2 letter .org sale? Doesn’t anybody think that is bullshit or am I the only skeptic in the room. Not only did it sell for an absurd amount of amount but it supposedly was bought as a defensive registration by the MD.com guys and lets say the second bidder freedotcom was really A1 advertising but why in the world would they spend over a half a million dollars on a .org when the .com was already in full use. It makes NO sense whatsoever. This story has bullshit written all over it. I can’t wait for the real truth to come out.
But Todd –
A civil claim for $500K+ over a $100 default would get thrown out court and the Complainant would likely have to pay all legal / filing fees and the counsel would likely get sanctioned – at a minimum.
I am just some guy who realizes life in not about winning – life is really about mitigating your loses.
AND
as Warren Buffett says – you only realize who is swimming naked when the tide goes out.
And on that note I agree with you:
“This story has bullshit written all over it. I can’t wait for the real truth to come out.”
Albeit – I would better day “auction” and also offer NJ (and its reputation) was merely drawn as a pawn
“So tomorrow if I am the winning bidder on a $79 auction at Namejet and decide not to pay that means they can charge me a fee of $555,650 just because they feel like that fee is justified?”
Todd, those are not the facts of this case, and Namejet is not the only plaintiff.
As far as your assessment of value goes, the auction went as high as it did because Mr. Ross bid to that amount. Are you saying that anyone who sells a name through a Namejet auction is not expecting the high bidder will perform? Or does this claim interfere with some business model of yours?
If you wanted to sell a name, would you now want Scott Ross as a bidder in that auction? No thinking person would.
Hmm, if not for Ross, the price would likely not have gone as high as it did in the first place… so personally, I’d just put the domain up for sale again. The lawsuit is just going to consume time and money. I understand the reasoning behind pursuing a lawsuit, but sometimes one just has to consider if it’s really worth it. In the end, even if Ross loses, he could still get out of paying by other legal means. Anyway, it will be interesting to see how it goes, and a good lesson for future litigation of this sort.
Todd
I don’t get your argument.
The bidder that bids on an auction is responsible for payment to the seller.
The auction houses commission is based on their contract and TOS.
This was an auction where the parties went back and forth for over an hour
To refresh everyone’s memory this is what the bidding looked liked from $75K up
Bidder Amount Date
winters $555,650 4/12/2013 1:45 PM
freedotcom $555,550 4/12/2013 1:45 PM
winters $525,100 4/12/2013 1:41 PM
freedotcom $525,000 4/12/2013 1:41 PM
freedotcom $508,400 4/12/2013 1:38 PM
winters $508,300 4/12/2013 1:38 PM
freedotcom $508,200 4/12/2013 1:35 PM
winters $508,100 4/12/2013 1:35 PM
freedotcom $508,000 4/12/2013 1:32 PM
winters $507,900 4/12/2013 1:32 PM
freedotcom $507,800 4/12/2013 1:29 PM
winters $507,700 4/12/2013 1:29 PM
freedotcom $507,600 4/12/2013 1:25 PM
winters $507,500 4/12/2013 1:25 PM
freedotcom $507,400 4/12/2013 1:22 PM
winters $507,300 4/12/2013 1:22 PM
freedotcom $507,200 4/12/2013 1:18 PM
winters $507,100 4/12/2013 1:18 PM
freedotcom $507,000 4/12/2013 1:15 PM
winters $506,900 4/12/2013 1:15 PM
freedotcom $506,800 4/12/2013 1:11 PM
winters $506,700 4/12/2013 1:11 PM
freedotcom $506,600 4/12/2013 1:07 PM
winters $506,500 4/12/2013 1:07 PM
freedotcom $506,400 4/12/2013 1:02 PM
winters $506,300 4/12/2013 1:02 PM
freedotcom $506,200 4/12/2013 12:58 PM
winters $506,100 4/12/2013 12:58 PM
freedotcom $506,000 4/12/2013 12:55 PM
winters $505,900 4/12/2013 12:55 PM
freedotcom $505,800 4/12/2013 12:51 PM
winters $505,700 4/12/2013 12:51 PM
freedotcom $505,600 4/12/2013 12:47 PM
winters $505,500 4/12/2013 12:47 PM
freedotcom $505,400 4/12/2013 12:44 PM
winters $505,300 4/12/2013 12:44 PM
freedotcom $504,300 4/12/2013 12:40 PM
winters $504,200 4/12/2013 12:40 PM
freedotcom $503,200 4/12/2013 12:36 PM
winters $503,100 4/12/2013 12:36 PM
freedotcom $502,100 4/12/2013 12:32 PM
winters $502,000 4/12/2013 12:32 PM
winters $500,100 4/12/2013 12:31 PM
freedotcom $500,000 4/12/2013 12:31 PM
winters $459,100 4/12/2013 12:31 PM
freedotcom $459,000 4/12/2013 12:31 PM
freedotcom $452,100 4/12/2013 12:31 PM
winters $452,000 4/12/2013 12:31 PM
winters $450,100 4/12/2013 12:30 PM
freedotcom $450,000 4/12/2013 12:30 PM
winters $435,100 4/12/2013 12:30 PM
freedotcom $435,000 4/12/2013 12:30 PM
winters $400,100 4/12/2013 12:29 PM
freedotcom $400,000 4/12/2013 12:29 PM
winters $375,100 4/12/2013 12:27 PM
freedotcom $375,000 4/12/2013 12:27 PM
freedotcom $351,100 4/12/2013 12:26 PM
winters $351,000 4/12/2013 12:26 PM
winters $350,100 4/12/2013 12:25 PM
freedotcom $350,000 4/12/2013 12:25 PM
winters $325,100 4/12/2013 12:25 PM
freedotcom $325,000 4/12/2013 12:25 PM
freedotcom $301,100 4/12/2013 12:24 PM
winters $301,000 4/12/2013 12:24 PM
winters $300,100 4/12/2013 12:24 PM
freedotcom $300,000 4/12/2013 12:24 PM
winters $275,100 4/12/2013 12:23 PM
freedotcom $275,000 4/12/2013 12:23 PM
winters $250,100 4/12/2013 12:22 PM
freedotcom $250,000 4/12/2013 12:22 PM
winters $225,100 4/12/2013 12:22 PM
freedotcom $225,000 4/12/2013 12:22 PM
freedotcom $201,100 4/12/2013 12:21 PM
winters $201,000 4/12/2013 12:21 PM
winters $200,100 4/12/2013 12:21 PM
freedotcom $200,000 4/12/2013 12:21 PM
winters $165,100 4/12/2013 12:20 PM
freedotcom $165,000 4/12/2013 12:20 PM
winters $150,100 4/12/2013 12:20 PM
freedotcom $150,000 4/12/2013 12:20 PM
winters $130,100 4/12/2013 12:19 PM
freedotcom $130,000 4/12/2013 12:19 PM
winters $120,100 4/12/2013 12:19 PM
freedotcom $120,000 4/12/2013 12:19 PM
winters $111,211 4/12/2013 12:19 PM
freedotcom $111,111 4/12/2013 12:19 PM
winters $100,099 4/12/2013 12:18 PM
freedotcom $99,999 4/12/2013 12:18 PM
winters $77,877 4/12/2013 12:18 PM
freedotcom $77,777 4/12/2013 12:18 PM
winters $75,655 4/12/2013 12:17 PM
freedotcom $75,555 4/12/2013 12:17 PM
winters $75,200 4/12/2013 12:16 PM
freedotcom $75,100 4/12/2013 12:16 PM
winters $75,000 4/12/2013 12:16 PM
time25 $35,000 4/12/2013 11:15 AM
conglomerate $20,100 4/12/2013 8:41 AM
shahram $20,000 4/11/2013 4:12 PM
johndoe $15,100 4/11/2013 11:39 AM
spybot83 $15,000 4/10/2013 8:18 PM
Namejet should not award a domain to the second, third or any bidder after a default. They should auction the domain aggain which is their common practice. The auction was rigged and as such it should be done a new one. Their could be other fake bidders…
Namejet can’t go out after every non payer. No business does that. They have however to make this hard to happen. But legally i am not sure if they have any kind of obligation to do so.
Namejet TOS doesn’t even acknowledge that they sell domains not expired priva
from domainers. They have nonetheless the necessary rules to open a law suit aggainst you if you don’t pay and if they want
And, Todd, regardless of what additional user account conditions may attach to defaulting, in section 2 of the terms which you quoted, Section 4 of the agreement is pretty unambiguous:
“As a buyer, you are obligated to complete the transaction with the seller:
if you purchase a domain name through one of our fixed price formats; or
if you are the highest bidder at the end of an auction”
What part of “obligated to complete the transaction” are you having trouble understanding?
“Or does this claim interfere with some business model of yours?”
I have never sold a name at Namejet but have bought many and not sure what you mean John so I won’t read into it to much. Also I am not saying to MHB, you or anyone else that it’s ok to break the contract with Namejet but what I am saying is that its going to be hard for a judge to rule in Namejets favor. Obviously you are the lawyer and understand contracts more than myself but this is just my opinion.
Ross is going to say that someone accessed my account without my knowledge or I accidentally put in a high proxy bid or whatever other excuse and get off with a small fee. I feel bad for Namejet being involved in this and losing the commission and hope it works out in their favor. Just curious did Namejet go after the high bidder in the Edoctor.com auction which ended up at $43,000 and later resold in a re-auction for only $18,000 because the first auction fell through? I also wonder how many times this happens on Ebay or other auction platforms and what they do about it. Understanding that contracts are normally binding when signed how do auction houses enforce their contract with buyers or sellers with no signed contracts but just a click of a mouse. Many times when we sign up for sites, or software etc….they list their TOS and we click agree and continue on but no one actually reads it. So I am curious how enforceable it is. Since you understand the law can you explain this to us so we can better understand the process.
Thanx for the response. Some of the commenters here say Mr. Ross is not as exposed as he appears.
Louise, let me be clear.
1. I’m not working for any party in this case.
2. I don’t think Mr. Ross should be “exposed” to any liability at the end of the day. If he was acting as agent for another party, then the other party should be cleaning up whatever mess was created by the situation. That’s not a “legal” analysis, but a moral one. (I know, silly me)
3. There will be very creative lawyering on both sides of this thing. But all that aside, if domain auctions are seen as some masturbatory exercise instead of something that people can premise reasonable expectations upon, then it is not a good result for anyone.
Isn’t it? “Profiteering from a flawed and creaky legal system” is a phrase which might apply here. David Segal used it in his blog post,
Has Patent, Will Sue: An Alert to Corporate America
http://www.nytimes.com/2013/07/14/business/has-patent-will-sue-an-alert-to-corporate-america.html
and it seems to apply to more than one current case . . . That’s why sending profits offshore to avoid taxes is a double advantage for corporations, when government agencies don’t have the funds be fixed. The better-funded companies have the legal upper hand. In the case of patents, there was a trend to award generally-worded patents based on concepts rather than inventions in the ’90’s. Now the consumer is paying the price, when innovation gets stifled.