Re: [ifwp] Re: DNSO documents

["Bret A. Fausett" <baf@fausett.com>]

Kent Crispin wrote:

>Any comments on these points?
As follows...

>> I've stated a preference for incorporating because it gives dnso.org more 
>I have a slight preference the other way, but it seems to me that 
>the question needs a lot of exploration.
>> control over its legal status and does not leave important legal 
>> protection for its members to ICANN Board decisions that are beyond its 
>> control.
>What scenarios can you imagine where this would make a difference?
>How likely are they? Wouldn't a member of the DNSO always have the
>option of just leaving, if they thought the protections were
>insufficient? 

Yes, but maybe it's because I am a lawyer (IAAL) that I find many 
companies risk averse in this respect. Perhaps individuals and smaller 
companies would be willing to participate and assume the risk of making 
policy decisions subject to their own personal liability, but I suspect 
that many of my legal brethren would counsel their clients and/or company 
employees to avoid unincoporated, policy-making SOs like the plague. 
There's no reason to disenfranchise the risk averse.  But this may be an 
academic issue, because of the next question you present...

>Don't you imagine that the ICANN board will be very
>interested in maintaining as much legal insulation as it possibly can
>for ICANN and all its members?  Wouldn't it be the case that almost 
>all suits against ICANN would name the DNSOcorp as well?

Yes. I cannot imagine that ICANN will let an SO be hung out to dry on 
liablity issues. What they will likely do (based solely on my reading of 
the tea leaves and what seems logical) is bring an unincorporated 
association under the umbrella of ICANN's corporate form, require the SO 
to incorporate (and perhaps purchase its own liability insurance), or 
agree to defend and indemnity the SO for any liability.  

As to the fact that any lawsuit will be against both ICANN and the DNSO, 
you're correct. But this doesn't insulate the DNSO from its own liability 
if it remains an unincorporated association. 

>My feeling is that the "legal protection" argument is weak.  

Not weak, but something that can be controlled through an indemnity 
agreement, insurance, incorporation, or a combination of the above. Legal 
protections always seem like wasted steps until they're needed.

>A better argument, I think, is the "convenience to ICANN" argument:
>if the DNSO is a corp, then the recognition of the DNSO would
>presumably be a contract between the two corporations.  It would be
>simpler to enter into such a contract; and it would be easier to get
>out of such a contract.  [Maybe.  I am puzzled by the legal
>implications of the fact that the DNSO selects 3 board members, and
>I'm not sure how that fits into a contractual relationship.]

Yes. And another (better) argument in favor of a more formal approach 
(whether it's incorportion or just coming up with a tight, well-defined 
set of bylaws) is that it gives ICANN an established entity, with defined 
rules of governance, to tap as the DNSO. (But I've sounded this note so 
often I'm becoming a broken record.) If we're asking ICANN to tap a new, 
unknown association as the DNSO (requiring a large act of faith on the 
part of ICANN), we ought to at least give the Board a fully formed 
entity, with established rules of governance, to review and recognize.

>Three arguments against come to mind: first, we are creating a huge
>amount of unnecessary mechanism; second, by being a part if ICANN we
>automatically meet all the transparency etc requirements, but there
>are always possibilities of conflicting interpretation when there are
>separate corporations; and third, there are a bunch of additional
>issues involved in creation of a corporation -- eg, where should it
>be incorporated? [probably not the US...].

Let me address these in turn. First, I don't see incorporation as a huge 
deal. The hard part is drafting Bylaws that everyone can deal with (no 
small task), but the filing formalities are minimal, the cost nominal, 
and the corporate formalities that a new DNSO corp would need to follow 
throughout the year are easy to follow.

Second, ICANN transparency sets a minimal standard; the DNSO should be at 
least as transparent, and could even set a better example. As for the 
conflict issues, as I noted in a previous post, these may not be a 
concern in the present case, as the roles are clearly defined. ICANN is 
on top, and any conflicts are resolved in its favor.

Finally, there isn't really much to incorporating a non-profit other than 
what I've set out above. It's not rocket-science, and people have been 
known (so I hear) to do it successfully even without the assistance of a 
lawyer. Also, for a non-profit, I don't see much advantage to the choice 
of state of incorporation, though I'll defer to any corporate lawyers on 
the list.

   * * * * *

I agree with you comment that these issues need further exploration, and 
I make these comments in that spirit.

 -- Bret 



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   Bret A. Fausett
   Fausett, Gaeta & Lund, LLP
   E-Mail: baf@fausett.com
   http://www.fausett.com

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