Opinion ID: 783938
Heading Depth: 3
Heading Rank: 2

Heading: Effect of the First Action

Text: 52 Accordingly, the question to which we now turn is whether Cello is barred by the res judicata effect of the First Action from arguing that Storey's registration is unlawful under the ACPA; if so, Storey is entitled to an order that the domain name be returned to him. If not, however, Storey is entitled to the relief he seeks only if Cello's ACPA claim fails on its merits. 53 Claims arising subsequent to a prior action need not, and often perhaps could not, have been brought in that prior action; accordingly, they are not barred by res judicata regardless of whether they are premised on facts representing a continuance of the same course of conduct: 54 That both suits involved `essentially the same course of wrongful conduct' is not decisive. Such a course of conduct ... may frequently give rise to more than a single cause of action .... While the [prior] judgment precludes recovery on claims arising prior to its entry, it cannot be given the effect of extinguishing claims which did not even then exist and which could not possibly have been sued upon in the previous case. 55 Lawlor v. Nat'l Screen Serv. Corp., 349 U.S. 322, 327-28, 75 S.Ct. 865, 99 L.Ed. 1122 (1955); see also Maharaj, 128 F.3d at 97 (as a matter of logic, when the second action concerns a transaction occurring after the commencement of the prior litigation, claim preclusion does not generally come into play); SEC v. First Jersey Securities, Inc., 101 F.3d 1450, 1464 (2d Cir.1996) (If the second litigation involved different transactions, and especially subsequent transactions, there generally is no claim preclusion.). 56 Application of this unremarkable principle is complicated by the at-times-difficult determination of what degree of conduct is necessary to give rise to a new claim, particularly where ongoing conduct is involved. Where the facts that have accumulated after the first action are enough on their own to sustain the second action, the new facts clearly constitute a new claim, and the second action is not barred by res judicata. See, e.g., Lawlor, 349 U.S. at 328, 75 S.Ct. 865 (noting that the conduct presently complained of was all subsequent to the [prior] judgment); Interoceanica Corp. v. Sound Pilots, Inc., 107 F.3d 86, 90 (2d Cir.1997) (holding that ocean voyages occurring after an initial suit based on previous voyages were distinct transactions giving rise to a separate cause of action for breach of contract); First Jersey Secs., Inc., 101 F.3d at 1464 (The claim that First Jersey defrauded customers in the sale, purchase and repurchase of certain securities in 1975-1979 is not the same as the claim that First Jersey defrauded customers in the sale, purchase, and repurchase of other securities in 1982-1985.). 57 Slightly more problematic are those situations involving claims under statutes that regulate ongoing conduct. In those circumstances, prior actions may not have res judicata effect on subsequent actions where the subsequent actions address new factual predicates, even when the legal issues raised in both actions are closely related. Cf. Cellar Door Prods., Inc. v. Kay, 897 F.2d 1375, 1378 (6th Cir.1990) (concluding that [e]ach time [an allegedly anticompetitive] arrangement precluded [plaintiff] from competitively bidding for an event, a cause of action may have accrued to plaintiff); Harkins Amusement Enters., Inc. v. Harry Nace Co., 890 F.2d 181, 183 (9th Cir.1989) (noting that [f]ailure to gain relief for one period of time does not mean that the plaintiffs will necessarily fail for a different period of time and that [t]he defendants by winning [the prior action] did not acquire immunity in perpetuity from the antitrust laws); Spiegel v. Continental Illinois Nat'l Bank, 790 F.2d 638, 644-46 (1986) (refusing to bar a second suit which, like the first suit, was based on allegations of mail fraud when two letters were mailed after the first action had been filed). 58 Finally, however, claim preclusion may apply where some of the facts on which a subsequent action is based post-date the first action but do not amount to a new claim. In Waldman v. Village of Kiryas Joel, 207 F.3d 105, 112-14 (2d Cir.2000), for example, this Court recently held that a plaintiff did not allege sufficient post-first-action conduct to avoid claim preclusion in a second action, where the first action was between the same parties and had been dismissed with prejudice. In his first action, the plaintiff sued the village for discriminatory enforcement of the zoning code, id. at 107; in his second action, he sought total dissolution of the village under the Establishment Clause, id. at 108. The plaintiff included allegations of some conduct that occurred after the first action and argued that his second action was really `based upon' things that have happened since the filing of the prior suit[]. Id. at 112-13. Although recognizing that legally significant acts occurring after the filing of a prior suit will prevent the application of res judicata, id. at 113, we held that the facts post-dating the first action did not create a `new' cause of action that did not exist when the prior suits were brought, id. at 112, because [t]he new allegations made in the present complaint do not, either by themselves or to any degree not already demonstrated by the overlapping facts, establish the sort of pervasive and otherwise irremediable entanglement between church and state that would justify a drastic remedy like the dissolution of the Village, id. at 113. Thus, we concluded, it is simply not plausible to characterize Waldman's claim as one based in any significant way upon the post-[first-action] facts. Id. at 113. Cf. NLRB v. United Techs. Corp., 706 F.2d 1254, 1260 (2d Cir.1983) (concluding that res judicata turned in part on whether facts essential to the second [action] were present in the first). 59 Applying these principles, it is clear that had Cello not alleged any facts subsequent to the First Action on which to premise its § 1125(d) claim, the res judicata issue could be quickly resolved in favor of Storey. 12 Cello, however, argues that its ACPA cybersquatting claim against Storey is premised at least in part on Storey's new act of cybersquatting embodied in the September 25 Letter, and that res judicata does not apply because the letter was sent after final judgment in the First Action. The district court dismissed this argument by reasoning that [t]he September 25th Letter was not an act of `cybersquatting,' Cello had already given up any claim to rights in the domain name in question, and the Instant Action was simply a reassertion by Storey of his rights to the domain name.' Storey, 182 F.Supp.2d at 363. 60 In so holding, the district court erroneously conceived of the lawfulness of a domain-name registrant's use of a domain name to be a permanent determination that, once made, cannot be disturbed. 13 Section 1125(d)(1)(B)(i)(VI) demonstrates, however, that Congress intended the cybersquatting statute to make rights to a domain-name registration contingent on ongoing conduct rather than to make them fixed at the time of registration. If another party has trademark rights in a mark that is similar to the domain name, the domain-name registrant must use the name without a bad faith intent to profit, § 1125(d)(1)(A)(i), to maintain its registration rights. Although many of the factors included in § 1125(d)(1)(B)(i)(I)-(IX), which provide a non-exhaustive list of nine factors to consider in arriving at a finding of fact concerning the registrant's bad faith intent to profit from the trademark owner's mark, call the court's attention to facts as they existed at the time the domain name was registered, subsection (VI) focuses the court's attention on the domain-name registrant's ongoing use of the domain name: 61 In determining whether a person has a bad faith intent ... a court may consider... the person's offer to transfer, sell, or otherwise assign the domain name to the mark owner or any third party for financial gain without having used, or having an intent to use, the domain name in the bona fide offering of any goods or services, or the person's prior conduct indicating a pattern of such conduct. 62 § 1125(d)(1)(B)(i)(VI). 63 The September 25 Letter, then, presents a fact that a court may consider in determining whether Storey has a bad faith intent to profit from Cello's mark: the letter is a targeted offer to sell cello.com to the mark owner or a third party for financial gain. As this Court held in Waldman, however, the question is not merely whether Cello alleges some facts subsequent to the First Action that are relevant to its claim. Rather, the question presented is whether the September 25 Letter constitutes the basis for a new cause of action, and whether it is plausible to characterize Cello's § 1125(d) implicit claim demonstrating the unlawfulness of Storey's use of cello.com in the Instant Action as one based in any significant way on the September 25 Letter. Waldman, 207 F.3d at 113. We hold that such a characterization is possible because Storey's right to use cello.com was not permanently fixed by the dismissal of the First Action; instead, it is contingent on his ongoing legal use of that domain name. Thus, Cello may bring an ACPA cause of action based on the September 25 letter and is not barred by res judicata, even though the legal theory on which the new ACPA claim is based is similar to that on which the First Action was premised. 14 We emphasize, however, that we do not determine that the September 25 Letter alone is legally sufficient to establish a bad faith intent to profit. 15 This question must be addressed by the district court on remand. 64 While our holding makes a prior judgment in favor of a domain-name registrant a less powerful tool to stave off subsequent suits by a trademark owner than if we held that res judicata barred Cello's arguments in the Instant Action, we do not leave domain-name registrants without recourse to the tools of preclusion that lessen the burdens of successive litigation. In cases where the merits of the first action were actually litigated and resolved in the domain-name registrant's favor, collateral estoppel may apply to bar relitigation of the confusion issue in § 1125(d)(1)(A)(ii), even if res judicata does not apply to bar the entire claim. Cf. United Techs. Corp., 706 F.2d at 1260-64 (holding that collateral estoppel barred subsequent suit even when res judicata did not apply). Moreover, we do not anticipate that our decision today will create substantial uncertainty for settling litigants, because even claims based on ongoing conduct ordinarily can be extinguished so long as the settlement agreement is clearly drafted. 16