Collections: Garnishing Joint Accounts

     The Fairfax County Circuit Court ruled in favor of a creditor in a unique garnishment action. The case was Umbro International, Inc. v. 3263851 Canada Inc. and Network Solutions, Inc. The Court in Umbro ruled that Umbro, an international sporting goods company that won a judgment against a “cybersquatter” who had staked a claim to the Internet domain name “umbro.com”, could garnish other domain names owned by the judgment debtor. 

     The issue in this case was whether the domain names registered by the judgment debtor with Network Solutions, Inc. (“NSI”) are the kind of property that is subject to garnishment. The court noted that Virginia Code §8.01-501 clearly states that a writ of fieri facias is a lien on all the intangible property of the judgment debtor. The lien, however, only attaches to the extent that the judgment debtor has a possessory interest in the intangible property subject to the writ. The Court, as a result, noted that it was required to determine if the judgment debtor had a possessory interest in the domain names it registered with NSI. 

     NSI argued that a writ of fieri facias could not extend to domain names because the contract rights set forth in the registration agreement were dependent on unperformed conditions. These conditions included NSI’s rights to indemnification and the registrant’s continuing obligation to maintain an accurate registration record. The Court found that this argument failed on several grounds. First, in the dispute policy NSI undertook to abide by any court order. Such orders have included mandatory injunctions that a registrant takes all actions necessary to transfer a disputed domain name to a third party. Thus in the dispute policy NSI had agreed to subject to other liens that affect the value of the property. There was no unperformed condition under the registration agreement that could prevent a registrant from the full use of the domain name registration.

     NSI also argued that the contract right to the performance of a service was not garnishable because, among other things, it would force NSI to perform services for those with whom it may not desire to do business. The Court found that this assertion was entitled to little weight, as in the short time of its existence, NSI had registered some 3.5 million domain names, and registration applications were made by e-mail without human intervention in 90 percent of registration transactions.

     The Court noted that until Umbro, domain names apparently had not been subjected to garnishment. Nevertheless, the court ruled that there was no reason to conclude that this new form of intellectual property was thus immune. The Court found no reason why a judgment creditor should be precluded from satisfying a valid judgment just because its creditor had a possessory interest in intangible intellectual property resulting from technology of recent vintage.

     The lesson of Umbro - sometimes you have to be inventive and think outside the box in order to collect on judgments.