<html><head></head><body style="word-wrap: break-word; -webkit-nbsp-mode: space; -webkit-line-break: after-white-space; color: rgb(0, 0, 0); font-size: 14px; font-family: Calibri, sans-serif;"><div>Forwarding on Counsel’s behalf. </div><div><br></div><span id="OLK_SRC_BODY_SECTION"><div style="font-family:Calibri; font-size:11pt; text-align:left; color:black; BORDER-BOTTOM: medium none; BORDER-LEFT: medium none; PADDING-BOTTOM: 0in; PADDING-LEFT: 0in; PADDING-RIGHT: 0in; BORDER-TOP: #b5c4df 1pt solid; BORDER-RIGHT: medium none; PADDING-TOP: 3pt"><span style="font-weight:bold">From: </span> "McNicholas, Edward R." <<a href="mailto:emcnicholas@sidley.com">emcnicholas@sidley.com</a>><br><span style="font-weight:bold">Date: </span> Friday, October 16, 2015 at 8:23 PM<br><span style="font-weight:bold">To: </span> "McNicholas, Edward R." <<a href="mailto:emcnicholas@sidley.com">emcnicholas@sidley.com</a>>, León Felipe Sánchez Ambía <<a href="mailto:leonfelipe@sanchez.mx">leonfelipe@sanchez.mx</a>><br><span style="font-weight:bold">Cc: </span> ACCT-Staff <<a href="mailto:acct-staff@icann.org">acct-staff@icann.org</a>>, Holly Gregory <<a href="mailto:holly.gregory@sidley.com">holly.gregory@sidley.com</a>>, "Rosemary E. Fei" <<a href="mailto:rfei@adlercolvin.com">rfei@adlercolvin.com</a>>, Sidley ICANN CCWG <<a href="mailto:sidleyicannccwg@sidley.com">sidleyicannccwg@sidley.com</a>>, ICANN-Adler <<a href="mailto:ICANN@adlercolvin.com">ICANN@adlercolvin.com</a>>, Accountability Cross Community <<a href="mailto:accountability-cross-community@icann.org">accountability-cross-community@icann.org</a>><br><span style="font-weight:bold">Subject: </span> RE: Question on binding IRP<br></div><div><br></div><div xmlns:v="urn:schemas-microsoft-com:vml" xmlns:o="urn:schemas-microsoft-com:office:office" xmlns:w="urn:schemas-microsoft-com:office:word" xmlns:m="http://schemas.microsoft.com/office/2004/12/omml" xmlns="http://www.w3.org/TR/REC-html40"><!-- Template generated by Exclaimer Mail Disclaimers on 02:23:12 Friday, 16 October 2015 --><meta http-equiv="Content-Type" content="text/html; charset=utf-8"><style type="text/css">P.5aefe298-f7db-430c-afb7-8abcc411c29d {
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</o:shapelayout></xml><![endif]--><div lang="EN-US" link="blue" vlink="purple"><p class="5aefe298-f7db-430c-afb7-8abcc411c29d"></p><div class="WordSection1"><p class="MsoNormal"><span style="color:#1F497D">Please use this version.</span></p><p class="MsoNormal"><span style="font-size: 11pt; font-family: Calibri, sans-serif; color: rgb(31, 73, 125);"><o:p> </o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif; color: black;">León –<o:p></o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif; color: black;"><o:p> </o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif; color: black;">Holly and Rosemary asked me to respond to the question about whether an entity that has no legal personhood ( i.e., is not an unincorporated association,
partnership, corporation or natural person) can enter into binding arbitration under California law or applicable federal law</span><span style="font-family: Calibri, sans-serif; color: rgb(31, 73, 125);">. It
</span><span style="font-family: Calibri, sans-serif; color: black;">is important to emphasize that the issue involves
<i>binding</i> arbitration. Nonbinding arbitration and mediation proceedings can involve any sort of entity. Ultimately they are not intended to be binding or enforceable, and so there is no significance to whether an entity could be bound or bind another
entity in that context.<o:p></o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif; color: black;"><o:p> </o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif; color: black;">In contrast, if arbitration is intended to be binding, then the entity involved must be subject to be being bound itself and be able to bind the other
entity. Unless the losing party complies after the arbitrator’s decision, arbitral awards must be taken into a court and recognized in a court judgment in order to enforced. Ultimately, arbitration relies upon the courts for enforcement; and courts must
examine whether they are dealing with a legal entity. The legally significant point is whether a non-legal person can enforce an arbitration award, and the answer to that question is “no.” Federal Rule of Civil Procedure 17(b) (3)(A) provides that “a partnership
or other unincorporated association with no . . . capacity under that state's law may sue or be sued in its common name to enforce a substantive right existing under the United States Constitution or laws.” This Rule does not – and cannot – bestow capacity
to sue on a non-legal person when that non-legal person tries to enforce a substantive right, and we are not aware of any case that stands for that proposition. SO/ACs will need to demonstrate legal personhood to enforce an arbitration agreement (assuming
that they are either parties themselves to the arbitration agreement or third-party beneficiaries).<o:p></o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif; color: black;"><o:p> </o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif; color: black;">There was a question about whether some case law suggests that even if an entity lacks legal personhood
<i> </i>and therefore cannot enforce an arbitration award under state law, Federal Rule of Civil Procedure 17(b) permits that entity to sue in federal court because arbitration is a “substantive right.”
<i> </i>Specifically, some case law indicates that an entity lacking capacity to compel arbitration or enforce an arbitration award in its own name under state law may in some circumstances do so under Rule 17(b).
<i>See, e.g.</i>, <i>O & Y Landmark Assocs. of Va. v. Nordheimer</i>, 725 F. Supp. 578, 581 (D.D.C. 1989) (finding that a partnership seeking to compel arbitration had capacity even though D.C. law did not recognize such);
<i>Local 4076, United Steelworkers of Am. V. United Steelworkers of Am., AFL-CIO</i>, 327 F. Supp. 1400, 1403 (W.D. Pa. 1971);
<i>see also Day v. Avery</i>, 548 F.2d 1018, 1022 (D.C. Cir. 1976) (recognizing arbitration as a substantive right),
<i>Laundry, Dry Cleaning & Dye House Workers Int’l Union v. Mahoney</i>, 491 F.2d 1029 (8th Cir. 1974) (enforcing arbitration in an equally divided concurring opinion). None of these cases, however, suggest that an entity entirely lacking legal personhood
may file suit in federal court simply because the right to arbitrate is at issue. Rather, Rule 17(b) lets the partnership, union, or other unincorporated association<i> </i>– each a legal person – sue in its name, as opposed to forcing its members to sue
in theirs. It bears emphasis that in each instance these entities were legal persons. For instance, in
<i>Local 4076</i>, Pennsylvania law did not allow the local union to sue in its own name because its charter had been cancelled, requiring instead that the suit be filed in the name of a member or members as trustees
<i>ad litem</i> for the association. 327 F. Supp. at 1403. Rule 17(b) overrode this pleading requirement.
<i>Id.</i> <i>Mahoney</i> dealt with a similar issue. In each of these cases, an entity with legal personhood existed at some point; the question was whether the entity itself or the individual members must be the nominal party in the suit.
<o:p></o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif; color: black;"> <o:p></o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif; color: black;">The question of legal personhood is a key enforcement issue for any model that relies on individual SOs and ACs for enforcement. It would be necessary
for the SO/ACs to show that they are unincorporated associations (or some other type of legal person) to enforce any arbitrator’s award. In California, that is an uncertain test: whether there is a “group of two or more persons joined by mutual consent for
a common lawful purpose, whether organized for profit or not.” Cal. Corp. Code § 18035(a);
<i>see also </i>Cal. Code Civ. P. § 369.5. “The criteria applied to determine whether an entity [is capable of suing or being sued as] an unincorporated association are no more complicated than (1) a group whose members share a common purpose, and (2) who
function under a common name under circumstances where fairness requires the group be recognized as a legal entity.”
<i>Barr v. United Methodist Church</i>, 90 Cal. App. 3d 259, 266 (Cal. Ct. App. 1979). And at least some courts have recognized that an “organization” that “has no charter, by-laws or articles, no office or place of business, no mailing address, no bank account,
no assets or obligations, and has never transacted business” as an entity – is not an unincorporated association with capacity to sue or be sued.
<i>Cal. Clippers, Inc. v. U.S. Soccer Football Ass’n</i>, 314 F. Supp. 1057, 1068 (N.D. Cal. 1970). In our case, some SO/ACs have indicated that they do not view themselves as unincorporated associations, and, in that case, it would involve a significant risk
to enforceability to suggest that they could enforce an arbitration award. Of course, if an unincorporated association exists or is timely created, it is a legal person and there will be no problem with lack of personhood; this email is only to be clear that
<i>lack</i> of personhood is problematic.<o:p></o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif; color: black;"><o:p> </o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><i><span style="font-family: Calibri, sans-serif; color: black;">Please note that, as a general matter, this legal analysis is provided on a level in keeping with the question posed. Our legal analysis is tailored
to the context in which the particular question arises. It is provided to inform and help facilitate your consideration of the governance accountability models under discussion and should not be relied upon by any other persons or groups for any other purpose.
Unless otherwise stated, our legal analysis is based on California law and in particular the laws governing California nonprofit public benefit corporations (California Corporations Code, Title 1, Division 2). In our effort to respond in a limited time frame,
we may</span></i><i><span style="font-family: Calibri, sans-serif;"> not have completely identified, researched and addressed all potential implications and nuances involved.</span></i><span style="font-family: Calibri, sans-serif;"><o:p></o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif;"><o:p> </o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif;">Please let us know if there are any questions or concerns.<o:p></o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif;"><o:p> </o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif;">All the best,<span style="color:#1F497D"><o:p></o:p></span></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif; color: black;"><o:p> </o:p></span></p><p class="MsoNormal" style="margin-left:.5in"><span style="font-family: Calibri, sans-serif; color: black;">Ed<o:p></o:p></span></p><div><p class="MsoNormal" style="mso-margin-top-alt:auto;mso-margin-bottom-alt:auto;margin-left:.5in"><b><span style="font-size: 10pt; font-family: Arial, sans-serif; color: rgb(31, 73, 125);">EDWARD</span></b><span style="font-size: 10pt; font-family: Arial, sans-serif; color: rgb(31, 73, 125);"> <b>R. McNICHOLAS</b></span><span style="color:#1F497D"><br></span><span style="font-size: 9pt; font-family: Arial, sans-serif; color: rgb(31, 73, 125);">Partner \ Privacy, Data Security & Information Law Practice Co-Leader<br></span><b><span style="font-size: 10pt; font-family: Arial, sans-serif; font-variant: small-caps; color: rgb(31, 73, 125);">Sidley Austin llp</span></b><b><span style="font-size: 10pt; font-family: Arial, sans-serif; color: rgb(31, 73, 125);"><br></span></b><span style="font-size: 9pt; font-family: Arial, sans-serif; color: rgb(31, 73, 125);">1501 K Street, N.W.<br>
Washington, DC 20005<br>
202 736 8010 office</span><span style="font-size: 10pt; font-family: Arial, sans-serif; color: rgb(31, 73, 125);"> </span><i><span style="font-size: 11pt; font-family: Calibri, sans-serif; color: rgb(31, 73, 125);"><o:p></o:p></span></i></p></div><div><div style="border:none;border-top:solid #B5C4DF 1.0pt;padding:3.0pt 0in 0in 0in"><p class="MsoNormal" style="margin-left:1.0in"><b><span style="font-size: 10pt; font-family: Tahoma, sans-serif;">From:</span></b><span style="font-size: 10pt; font-family: Tahoma, sans-serif;"> León Felipe Sánchez Ambía [<a href="mailto:leonfelipe@sanchez.mx">mailto:leonfelipe@sanchez.mx</a>]
<br><b>Sent:</b> Friday, October 16, 2015 2:49 PM<br><b>To:</b> Gregory, Holly; Rosemary E. Fei<br><b>Cc:</b> ACCT-Staff; Sidley ICANN CCWG; ICANN-Adler; Accountability Cross Community<br><b>Subject:</b> Question on binding IRP<o:p></o:p></span></p></div></div><p class="MsoNormal" style="margin-left:1.0in"><o:p> </o:p></p><p class="MsoNormal" style="margin-left:1.0in"><span style="font-family: Calibri, sans-serif;">Dear Holly, dear Rosemary,</span><o:p></o:p></p><div><p class="MsoNormal" style="margin-left:1.0in"><o:p> </o:p></p></div><div><p class="MsoNormal" style="margin-left:1.0in"><span style="font-family: Calibri, sans-serif;">One key question that has been in the air and I believe is important to answer is the following:</span><o:p></o:p></p></div><div><p class="MsoNormal" style="margin-left:1.0in"><o:p> </o:p></p></div><div><p class="MsoNormal" style="margin-left:1.0in"><span style="font-family: Calibri, sans-serif;">Does an entity that has no legal personhood ( i.e., is not an unincorporated association, partnership, corporation or natural person) can enter into binding arbitration
under California law or applicable federal law?</span><o:p></o:p></p></div><div><p class="MsoNormal" style="margin-left:1.0in"><o:p> </o:p></p></div><div><p class="MsoNormal" style="margin-left:1.0in"><span style="font-family: Calibri, sans-serif;">Could you please guide us on this issue. This, of course, certifies this question for you to work on it.</span><o:p></o:p></p><div><p class="MsoNormal" style="margin-left:1.0in"><o:p> </o:p></p></div><div><p class="MsoNormal" style="margin-left:1.0in"><o:p> </o:p></p><div><div><p class="MsoNormal" style="margin-left:1.0in">Best regards,<o:p></o:p></p></div><div><p class="MsoNormal" style="margin-left:1.0in"><o:p> </o:p></p></div><div><p class="MsoNormal" style="margin-left:1.0in"><o:p> </o:p></p></div><div><p class="MsoNormal" style="margin-left:1.0in">León<o:p></o:p></p></div></div><p class="MsoNormal" style="margin-left:1.0in"><o:p> </o:p></p></div></div></div><p></p><p class="5aefe298-f7db-430c-afb7-8abcc411c29d"> </p><p>****************************************************************************************************<br>
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