Canceled GoDaddy Auction Win Results in Lawsuit

Namebio reported that Calor.com was sold for $20,440 at GoDaddy Auctions this past March. According to a lawsuit filed in Arizona, the winning bidder did not pay, giving the opportunity to an underbidder who completed the purchase for $11,427.17. Two months after completing the purchase and receiving the domain name, GoDaddy reportedly removed the domain name from the buyer’s account after proceeding to use the domain name. The buyer filed suit to regain control of the domain name.

As a domain investor who often buys domain names to re-sell, this is always something that has worried me regardless of the auction venue. This situation sounds similar to what GoDaddy referred to in the past as an “edge case” where a domain name was won in auction and was later removed from the account of the buyer due to an error.

My fear has been that I win an auction, and I re-sell the domain name to another buyer. At some point in the future, GoDaddy or other registrar related to an expiry auction platform where I bought the domain name removes the domain name from that buyer’s account due to an edge case situation, and that buyer comes after me. That would put me in a difficult position – another problem would be if the buyer has already started to use the domain name for a business or made plans to use the domain name.

Fortunately, an edge case situation like this seems to be very rare, as I don’t hear of this happening often. However, the ramifications of a situation like this could be severe, particularly if the buyer of the domain name has utilized it for a business or has sold it to someone else.

At the present time, it does not like like the defendants in this case have responded to the litigation. I am told GoDaddy has an arbitration clause in its agreements with auction participants, so I wouldn’t be surprised if the company tries to get this case dismissed in favor of arbitration.

I will keep an eye on this to see what comes of it.