Is ICANN Liable for Failing to Rescind Registerfly's Accreditation?

There is a lot of commentary among registrants and watchers that ICANN is also responsible for the losses being incurred by those victimized by Registerfly.  The issue of whether class action litigation can be brought against Registerfly, eNom and/or ICANN is also being hotly debated. 

Traverse Legal attorneys are analyzing these issues on behalf of its clients.  These issues are complicated and this web site is not meant to provide legal advise or create an attorney-client relationship.  If you have a claim against Registerfly, you should contact and retain an attorney so that your specific situation can be analyzed.

ICANN Responsibility: ICANN is responsible for accreditation of registrars.  Registerfly reports on its web site that it is an ICANN accredited registrar, although it appears that for part of its existence, it resold domain registrations through another accredited registrar, eNom.

The Registrar Accreditation Agreement between ICANN and Registerfly provides as follows:
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5.3 Termination of Agreement by ICANN. This Agreement may be terminated before its expiration by ICANN in any of the following circumstances:        

5.3.1 There was a material misrepresentation, material inaccuracy, or materially misleading statement in Registrar's  application for accreditation or any material accompanying the application.  

5.3.2 Registrar:

5.3.2.1 is convicted by a court of competent jurisdiction of a felony or other serious offense related to financial  activities, or is judged by a court of competent jurisdiction to have committed fraud or breach of fiduciary duty, or is the subject  of a judicial determination that ICANN reasonably deems as the substantive  equivalent of those offenses; or

5.3.2.2 is disciplined by the government  of its domicile for conduct involving dishonesty or misuse of funds of others.  

5.3.3 Any officer or director of Registrar is convicted of a felony or of a misdemeanor related to financial activities, or is judged by a court to have committed fraud or breach of fiduciary duty, or is the subject of a judicial determination that ICANN deems  as the substantive equivalent of any of these; provided, such officer or director is not removed in such circumstances.

5.3.4 Registrar fails to cure any breach of this Agreement (other than a failure to comply with a policy adopted by  ICANN during the term of this Agreement as to which Registrar is seeking,  or still has time to seek, review under Subsection 4.3.2 of whether  a consensus is present) within fifteen working days after ICANN gives Registrar notice of the breach.

5.3.5 Registrar fails to comply with a ruling  granting specific performance under Subsections 5.1 and 5.6.

5.3.6 Registrar continues acting in a manner  that ICANN has reasonably determined endangers the stability or operational integrity of the Internet after receiving three days notice of that determination.

5.3.7 Registrar becomes bankrupt or insolvent.

This Agreement may be terminated in circumstances described in Subsections  5.3.1 - 5.3.6 above only upon fifteen days written notice to Registrar  (in the case of Subsection 5.3.4 occurring after Registrar's failure to cure), with Registrar being given an opportunity during that time to initiate arbitration under Subsection 5.6 to determine the appropriateness of termination under this Agreement. In the event Registrar initiates litigation or arbitration concerning the appropriateness of termination         by ICANN, the termination shall be stayed an additional thirty days to allow Registrar to obtain a stay of termination under Subsection 5.6 below. If Registrar acts in a manner that ICANN reasonably determines endangers the stability or operational integrity of the Internet and upon notice does not immediately cure, ICANN may suspend this Agreement for five working days pending ICANN's application for more extended specific performance or injunctive relief under Subsection 5.6. This           Agreement may be terminated immediately upon notice to Registrar in circumstance described in Subsection 5.3.7 above.

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5.10 No Third-Party Beneficiaries. This Agreement shall not be construed to create any obligation by either ICANN or Registrar to any non-party to this Agreement, including any Registered Name Holder. 

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THE FULL Registrar Accreditation Agreement  CAN BE FOUND HERE.

What does this mean?  It means that ICANN took potentially took responsibility for monitoring whether Registerfly was meeting its accreditation requirements.  However, there is a provision in this particular agreement which limits ICANN's liability to consumers for its own failures to ensure compliance.  It has already been reported that the ICANN has known for a long time that Registerfly was not complying with its accreditation requirements.  While the accreditation obligations imposed on ICANN  create potential liability for ICANN, the third-party liability disclaimer may limit the ability of registrants to include ICANN in a complaint for relief or damages. Of course, if liability can be imposed outside the contract terms (for instance negligence), then it may be possible to get around 5.10.

If you’ve been bitten by the RegisterFly bug, there is a gripe site which has become the source of information about longstanding registerfly problems found at Registerflies.com

Comments

[Registry Cleaner Reviews]

Yes, I agree with Dave here. ICANN is powerless in that respect.

[Dave Zan]

ICANN's dilemma here is they can only take away Registerfly's registrar accreditation as the "worst" punishment. They'll have to sue in court under contract law to possibly force them to do more (e.g. turn over domain registration data).

Unfortunately a lot of people don't fully understand what ICANN won't and can do. I posted in their blog hoping to help them try to grasp, but I know many of them won't accept it anyway.