Torres v. Universal Music Group N.V. and Universal City Studios L.L.C.

Background

John Adrian Torres sued Universal Music Group N.V. and Universal City Studios L.L.C. The complaint asserted a New York breach-of-contract claim and a claim for “reverse domain hijacking” under the Anticybersquatting Consumer Protection Act, involving the domain name “universalmusicgroup.com.” Torres alleged that he acquired the domain in 2003, developed it into a website, and had contractual rights to a 2% equity interest in the company.

The defendants had previously brought a proceeding under the Uniform Domain-Name Dispute-Resolution Policy seeking transfer of the domain. They maintained that the domain had been registered to a predecessor and then to Universal City Studios until its registration expired in 2016, after which an entity owned by Torres acquired it in 2017. The domain-dispute panel rejected Torres’s claims of trademark ownership, company equity, and 2003 acquisition of the domain, found that several submitted documents were obvious forgeries, and ordered the domain transferred to the defendants.

Motions and alleged fabricated evidence

The defendants moved to dismiss under the court’s inherent power to address fraud on the court and under Rule 12(b)(6), which permits dismissal for failure to state a legally sufficient claim. Torres moved under Rule 56(d) to deny or defer the motion so that he could take discovery.

The defendants submitted evidence questioning the authenticity of documents attached to Torres’s complaint, including purported United States Patent and Trademark Office records, domain-purchase and renewal records, a social-media screenshot, a purported magazine excerpt, and an alleged equity agreement. Among other points, the defendants argued that a listed trademark-registration number corresponded to a different mark, a listed application number did not appear to exist, the documents used company logos that were not used during the claimed period, and a purported Facebook advertisement contained a copyright notice predating Facebook’s founding. The opinion states that Torres disputed the allegations and had not yet been given an opportunity to testify.

Court’s reasoning

The court explained that it has inherent authority to conduct an independent investigation when it may have been deceived by fraud. Before dismissing a complaint for fraud on the court, the court must find intentional misconduct, material and prejudicial false evidence, falsity rather than merely disputed authenticity, and clear and convincing evidence of fraud. The court must also provide notice and an opportunity to be heard.

The court did not decide that Torres had committed fraud. Instead, it held that the defendants’ evidence, considered as a whole, justified further investigation. Because the case was at an early stage, the allegations were disputed, and Torres had not yet testified, the court concluded that a hearing was the prudent course. The court stated that it would schedule a conference to determine the hearing’s scope.

Disposition

The court granted the defendants’ motion to the extent it sought a hearing and independent investigation into fraud on the court. It denied without prejudice the defendants’ request to dismiss under the court’s inherent powers and denied without prejudice their Rule 12(b)(6) motion. It denied Torres’s Rule 56(d) motion. The order therefore did not resolve the breach-of-contract or anticybersquatting claims on their merits and left the case subject to the ordered investigation and hearing.