1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26 ORDER – 1

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF WASHINGTON

AT SEATTLE

BRIAN R. CARTMELL, an individual; and as

attorney-in-fact and agent acting on behalf of the

shareholder REPRESENTATIVE for the former

eNIC Corporation shareholders,

Plaintiffs,

v.

VERISIGN, INC.,

Defendant.

CASE NO. C02-2411C

ORDER

This matter comes before the Court on Plaintiffs’ Motion for Partial Summary Judgment (Dkt.

No. 46), Defendant’s Motion for Partial Summary Judgment (Dkt. No. 56), and Defendant’s Motion to

Strike (Dkt. No. 85). The Court has carefully considered the papers filed by the parties and has

determined that oral argument is not necessary. For the following reasons, the Court hereby GRANTS

Plaintiffs’ Motion for Partial Summary Judgment, STRIKES Defendant’s Motion for Partial Summary

Judgment, and STRIKES Defendant’s Motion to Strike.

I. STATEMENT OF FACTS

On August 31, 2001, eNIC Corporation (“eNIC”) and VeriSign, Inc. (“Defendant”) entered into

an Agreement and Plan of Merger (“Merger Agreement”) in which Defendant agreed to acquire all shares

Case 2:02-cv-02411-JCC Document 94 Filed 06/21/05 Page 1 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

1

 In a letter to Brian Cartmell dated October 24, 2002, Defendant’s Associate General Counsel,

Paul Hudson, stated: “Per Exhibit A to the Merger Agreement, the shareholders are entitled to their pro

rata share of 13% of the earnout amount = $203,125.” (Cartmell Decl. Ex. 3.)

2

 The other conditions to payment of the Performance-Based Earnout amounts are: (1) an

Industry Governing Body has not redelegated the .cc top-level domain (“TLD”) to an entity other than

Defendant or one of Defendant’s affiliates; (2) Defendant’s control over the .ccTLD has not been

revoked, terminated, or materially impaired; and (3) the parties have not breached the non-competition

agreements. (Merger Agreement Ex. A., § 5.) 

ORDER – 2

in eNIC. The Merger Agreement required Defendant to pay eNIC’s shareholders (“Plaintiffs”) a lump

cash sum payment on August 31, 2001, and to pay “Additional Consideration” based on the occurrence

of certain events in the subsequent two-year period. 

Exhibit A to the Merger Agreement (“Exhibit A”) details the two types of Additional

Consideration: (1) “Performance-Based Earnout,” and (2) “Regulatory Goals Earnout.” Defendant was

to pay the Performance-Based Earnout in four installments of up to $1,562,500. The amount of each

quarterly payment was contingent on eNIC attaining certain revenue and registration targets. If eNIC did

not meet a target, Defendant reduced its payment to Plaintiffs according to a formula provided in the

Merger Agreement. 

Defendant made the first three quarterly Performance-Based Earnout payments. For the fourth

quarter ending August 31, 2002, Defendant calculated that Plaintiffs had earned $203,125.00 under the

Performance-Based Earnout provisions.1

 Defendant alleged that Brian Cartmell breached the Merger

Agreement and thus withheld payment.

Exhibit A states that Defendant shall pay the Performance-Based Earnout amounts as long as

there have been no material violations of the listed covenants (“the Covenants”).2 (Merger Agreement

Ex. A, § 5.) The Covenants include:

(a)(i) Regulatory Approvals. [Defendant], Brian Cartmell and Bart Mackay will

promptly execute and file, or join in the execution and filing of, any application,

notification or other document that may be necessary in order to obtain the

authorization, approval or consent of any Governmental Authority that may be

reasonably required, which [Defendant] has reasonably requested, in connection

Case 2:02-cv-02411-JCC Document 94 Filed 06/21/05 Page 2 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26 ORDER – 3

with achieving the Regulatory Goals in Section 6(a) of this Exhibit A. [Defendant,

Cartmell and Mackay] will use all commercially reasonable efforts to obtain, and to

cooperate with each other to promptly obtain, all such authorizations, approvals

and consents.

(a)(ii) Necessary Consents. [Defendant, Cartmell, and Mackay] will use all commercially

reasonable efforts to promptly obtain such written consents and authorizations of

third parties, give notices to third parties and take such other actions as may be

reasonably necessary in order to effect the Regulatory Goals specified in Section

6(a) of this Exhibit A.

(a)(iii) Top-level Domain Contact. [Cartmell and Mackay] shall take all reasonable and

necessary action to change the administrative contact for the .ccTLD to an

employee of [Defendant] or its Subsidiaries, as specified by [Defendant], provided

that such action shall not cause IANA/ICANN to initiate proceedings to redelegate

the .ccTLD name.

* * *

(Merger Agreement Ex. A., § 4(a).)

The Merger Agreement also provides a procedure by which Defendant is to notify Cartmell and

Mackay of any breach of the Covenants. First, the Covenants state that, upon becoming aware of a

breach of any of the Covenants, Defendant “will provide written notice to [Cartmell and Mackay] . . .

[Cartmell and/or Mackay], shall then have thirty (30) days to cure such breach.” (Id. § 4(c).) The

Merger Agreement further provides that: “All notices and other communications required or permitted

under [the] Agreement will be in writing and will be either hand delivered in person, sent by facsimile,

sent by certified or registered first class mail, postage pre-paid, or sent by nationally recognized express

courier service.” (Merger Agreement § 13.9.) The agreement then designates the individuals and

addresses to which such notices are to be sent. (Id.)

The Regulatory Goals that Plaintiffs must meet to obtain the Regulatory Goals Earnout, and that

are referenced in Exhibit A §§ 4(a)(i) and (ii), include: “[Defendant] has obtained the written consent and

other relevant assurances from IANA/ICANN delegation, each in form and substance satisfactory to

[Defendant], to [Defendant’s] or its Subsidiaries’ . . . administration of the [.ccTLD].” (Merger

Agreement Ex. A., § 6(a)(i).) The other goals include Defendant’s receipt of (1) assurances that ICANN

has changed its records to reflect Defendant as the sponsoring organization for the .ccTLD name; (2) a

Case 2:02-cv-02411-JCC Document 94 Filed 06/21/05 Page 3 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26 ORDER – 4

release of Island Internet Services as the sponsoring organization for the .ccTLD; and (3) assurances

from the governments involved that they support Defendant’s administration of the .ccTLD and the

parties’ merger. (Id. § 6.) 

Between April 12, 2002 and June 10, 2002, Cartmell and his supervisor, Adam Zimmerman,

exchanged a series of email messages and letters regarding the parties’ progress toward meeting the

Regulatory Goals. On June 7, 2002, Zimmerman sent Cartmell an email (“June 7 Message”). In this

message, Zimmerman suggests that Cartmell work cooperatively with people at VeriSign to develop a

strategy for meeting the Regulatory Goals. He then states: 

Equally puzzling is your continued assertion that the regulatory goal defined in section

6(a)(i) of the earnout agreement has been satisfied. Nothing has changed since my email

to you of May 3, 2002, in which I indicated that this goal has not been achieved. We have

not received appropriate written consent and other relevant assurances from ICANN of

VeriSign’s administration of the [.ccTLD]. Indeed, one of the primary reasons for the

May 14 conference call was to discuss a plan for obtaining such consent . . .

Please use the approach outlined above to facilitate support for each of your requests and

proposals . . .

(Zimmerman Decl. Ex. D.) 

Cartmell responded by email on June 10, 2002. In this message, he states: “You and I are of like

mind in that we want to proceed expeditiously and efficiently to meet the regulatory goals in the

agreement. My letter was an effort to make specific suggestions towards that end and to flesh out those

goals that Verisign may no longer have an interest in meeting.” Cartmell then disputes Zimmerman’s

interpretation of § 6(a)(i) and requests that Defendant put forward specific proposals for meeting the

Regulatory Goals. (Zimmerman Decl. Ex. G.)

II. PLAINTIFFS’ MOTION FOR PARTIAL SUMMARY JUDGMENT

Plaintiffs move the Court for an order granting summary judgment on their First Cause of Action,

Defendant’s breach of contract regarding the Performance-Based Earnout for the fourth quarter. They

also request that the Court enter a judgment of $203,125 plus accrued interest, attorney’s fees, and costs.

//

Case 2:02-cv-02411-JCC Document 94 Filed 06/21/05 Page 4 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

3

 The parties do not dispute that Plaintiffs fulfilled the other conditions to payment of the

Performance-Based Earnout.

ORDER – 5

A. Summary Judgment Standard

A party is entitled to summary judgment “if the pleadings, depositions, answers to interrogatories,

and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P.

56(c) (2003). In determining whether a genuine issue of material fact exists, the court must view all

evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in that

party’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986). Initially, the moving party

has the burden to establish that there is no genuine issue of material fact. British Airways Bd. v. Boeing

Co., 585 F.2d 946, 951 (9th Cir. 1978). Once the movant has met this burden, the non-moving party

then must show that there is in fact a genuine issue for trial. Anderson, 477 U.S. at 250.

B. Plaintiffs’ Alleged Material Violation of the Covenants

Under the terms of Exhibit A, Defendant is to pay Plaintiffs $203,125.00 unless Plaintiffs

materially violated one of the Covenants.3

 To assert a material violation as an affirmative defense to

payment of the Performance-Based Earnout, Defendant must have provided Cartmell and Mackay with

written notice once it became aware of the breach and have given them thirty days in which to cure the

breach. 

The Court does not reach the question of whether Plaintiffs breached the Covenants because it

finds that Defendant did not fulfill its obligation to provide Plaintiffs with notice of the alleged breach and

an opportunity to cure it. Defendant argues that the June 7 Message constitutes the requisite notice. 

Rather than state that Cartmell has breached one of the Covenants, however, the message simply provides

a process by which the parties are to work to complete the Regulatory Goals. While the message

indicates that Zimmerman and Cartmell do not agree on what the Covenants and Regulatory Goals

require, it does not state that Cartmell has failed to fulfill his obligations. 

Case 2:02-cv-02411-JCC Document 94 Filed 06/21/05 Page 5 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

4

 Pursuant to the terms of the Merger Agreement, Delaware law governs this dispute.

ORDER – 6

Even if the June 7 Message had contained an accusation of breach and provided an opportunity

for Cartmell to cure, it would still fail to serve as proper notice. Notice provisions in agreements are

enforceable according to their terms. See Harper v. Del. Valley Broadcasters, 743 F. Supp. 1076, 1083-

84 (D. Del. 1990), aff’d, 932 F.2d 959 (3d Cir. 1991).4 The Merger Agreement requires that all notices

must be delivered by one of several enumerated means and served on a set of listed individuals. (Merger

Agreement § 13.9.) Zimmerman sent the June 7 Message by email rather than by one of the listed

methods and delivered it only to Cartmell. Thus, pursuant to the terms of the Merger Agreement, this

message was insufficient to provide Cartmell with the required notice of breach.

C. Repudiation of the Covenants

Defendant argues that even if it did not provide the required notice, Cartmell repudiated the

Merger Agreement, and therefore Plaintiffs are precluded from recovering the Performance-Based

Earnout. Repudiation is an “outright refusal” by a party to perform a contract or its conditions that

entitles the other party to treat the contract as rescinded. One party’s statement that it will not perform

unless terms different from those in the original contract are met also constitutes a repudiation. See

CitiSteel USA, Inc. v. Connell Ltd. Partnership, 758 A.2d 928, 931 (Del. Supr. 2000).

Defendant has not produced evidence that Cartmell refused, outright, to complete his obligations

under the Merger Agreement. The correspondence that Defendant submits shows that the parties

disagreed about what certain terms of Exhibit A required, and how best to fulfill those requirements; it

does not indicate that Cartmell refused to work toward meeting his commitments. Further, Defendant

has not shown that Cartmell stated he would not perform unless Defendant met terms independent of

those in the Merger Agreement. Even assuming he advocated for terms different than those to which he

had originally agreed, Cartmell did not state that he would not act unless Defendant recognized those

alternate terms. Thus, Defendant has not met its burden to show there is a genuine issue of material fact

Case 2:02-cv-02411-JCC Document 94 Filed 06/21/05 Page 6 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26 ORDER – 7

as to whether Cartmell repudiated the Merger Agreement.

Defendant did not provide Cartmell with the required notice of breach and therefore cannot

invoke Cartmell’s alleged breach of the Covenants as an affirmative defense to its obligation to pay the

Performance-Based Earnout amount due for the fourth quarter. Additionally, Defendant has not shown

that Cartmell repudiated the Merger Agreement, thereby voiding its obligation to pay this amount. 

Accordingly, the Court hereby GRANTS Plaintiffs’ Motion for Partial Summary Judgment and directs

the Clerk to enter judgment for $203,125.

D. Plaintiffs’ Request for Attorney’s Fees and Interest

Plaintiffs request that the Court grant reasonable attorney’s fees and costs associated with filing

this motion. Section 13.8 of the Merger Agreement provides:

Attorneys’ Fees. Should suit be brought to enforce or interpret any part of this

Agreement, the prevailing party will be entitled to recover, as an element of the costs of

suit and not as damages, reasonable attorneys’ fees to be fixed by the court (including

costs, expenses and fees on any appeal). The prevailing party will be entitled to recover

its costs of suit, regardless of whether such suit proceeds to final judgment.

(Merger Agreement § 13.8.) The Court considers the “suit” referred to in § 13.8 to be the action as a

whole, rather than individual motions filed during the course of the action. The current Motion for

Partial Summary Judgment is one piece of Plaintiffs’ underlying action. Thus, the Court finds that an

award of attorney’s fees is premature and therefore hereby DENIES Plaintiffs’ request.

Plaintiffs also seek an award of interest accrued on the fourth quarter Performance-Based Earnout

amount. The Court declines to address Plaintiffs’ request at this time. Parties are directed to file papers

with the Court regarding an interest payment within thirty (30) days of this order.

III. DEFENDANT’S MOTION FOR PARTIAL SUMMARY JUDGMENT

Defendant moves the Court for an order finding that the term “IANA/ICANN delegation” in §

6(a)(i) of Exhibit A means ICANN and not eNIC or any of its related entities. Such a finding is not

warranted at this time. Although the parties dispute the meaning of “IANA/ICANN delegation,” and the

term may be central to a determination of whether Plaintiffs breached elements of the Merger Agreement,

Case 2:02-cv-02411-JCC Document 94 Filed 06/21/05 Page 7 of 8
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

5

 Defendant argues that this term is central to whether payment is due under the PerformanceBased Earnout clause. The Court, however, has found that regardless of whether Plaintiffs violated the

Regulatory Goals and/or the Covenants, Defendant did not provide the notice of breach required under

the Merger Agreement, and Plaintiffs did not repudiate the agreement. Thus, it is unnecessary for the

Court to determine the meaning of the term “IANA/ICANN delegation” at this time.

6

 CR 7(g) provides, in part: “Requests to strike material contained in or attached to submissions

of opposing parties shall not be presented in a separate motion to strike, but shall instead be included in

the responsive brief, and will considered with the underlying motion.”

ORDER – 8

Defendant has not shown that it is a proper subject for summary judgment.5 At this time, it is unclear

how a finding that the term either does or does not mean ICANN rather than eNIC and its subsidiaries

will affect the pending causes of action. Therefore, the Court STRIKES Defendant’s motion. Defendant

may refile the motion in conjunction with a motion for summary judgment on a cause of action at a later

date.

IV. DEFENDANT’S MOTION TO STRIKE

Defendant’s Motion to Strike seeks to strike portions of declarations Plaintiffs filed in support of

their Response to Defendant’s Motion for Partial Summary Judgment. Not only is Defendant’s motion

improperly filed pursuant to CR 7(g),6

 but also the Court has stricken the related summary judgment

motion. Accordingly, the Court hereby STRIKES Defendant’s Motion to Strike. 

SO ORDERED this 21st day of June, 2005.

AUNITED STATES DISTRICT JUDGE

Case 2:02-cv-02411-JCC Document 94 Filed 06/21/05 Page 8 of 8